Brazil & Southern Cone - December 2024

Boasting the world’s largest rainforest and one of the cleanest electricity sectors of any major economy, Brazil has long been seen as a natural leader in efforts to combat global climate change. But the country’s track record has been patchy, with ups and downs in combating deforestation and little progress in curbing emissions in the agriculture and energy sectors. Last year Brazil was the world’s fifth-largest emitter of greenhouse gases, according to 2023 data from the Emissions Database for Global Atmospheric Research. Now, coinciding with the COP29 United Nations (UN) climate conference in Azerbaijan and the leaders’ summit of G20 nations gathered in Rio de Janeiro in November, the government of President Luiz Inácio Lula da Silva managed to push through the chamber of deputies a long-stalled bill to establish a carbon market.

Similar to the carbon market operating in Europe, the Brazilian model aims to punish those who emit and reward those who capture greenhouse gases (GHG). The bill establishes an official market regulated by the Comissão de Valores Mobiliários (CVM), the Brazilian equivalent of the Security and Exchange Commission. There, emissions quotas, or CBDs by their Brazilian acronym, can be purchased by companies emitting beyond their assigned amount. The revenue from these certificates will help fund research and other measures to combat climate change. In a second, voluntary market companies can buy certificates of verifiable carbon capture (CRVE by their Brazilian acronym) to help offset part of their emissions.

The regulated market is important because it provides legal security and a mechanism to cap emissions by putting a price on them. The voluntary market provides an incentive and a financing mechanism for conservation. Without the legal framework carbon-trading projects have been operating without clear rules and cases of reported greenwashing have undermined confidence, which in turn slowed the funding for carbon capture projects such as reforestation in the Amazon.

The new rules include the need to consult indigenous peoples before any carbon capture project is launched and to establish clearly how revenues from the project will be distributed. “Most of the G20 countries already have specific laws on the carbon market and are already far ahead. We have a very great potential for reforestation projects,” said lawmaker Nilto Tatto, coordinator of the environmental caucus in congress.

The legislation was seen as a long overdue step for Brazil to catch up in terms of establishing a sound legal framework for a carbon market that would institutionalise the country’s haphazard efforts in combating climate change and reducing emissions, especially before hosting the COP30 UN climate conference in Belém next year.

Still, there is no guarantee if and when real progress will be made. For one, the government must still draft the bylaws and have them approved by congress within two years. Then, the emissions quotas for each sector and industry must be established, subject to public hearings, and a government watchdog must be created to enforce the new rules. In all, it will be six years before the market is fully implemented.

Perhaps the biggest problem with the new legislation is that it doesn’t cover the two biggest sources of GHGs in the country – deforestation and agriculture. The former accounts for 46% while farm emissions, which include fertilizers and methane from cattle digestion, account for 28%, according to GHG estimates made by Observatório do Clima, a network of climate action groups.  

Big polluters ‘self amnesty’

The powerful rural caucus in congress essentially delayed the bill in the lower house until the agribusiness sector was exempt from the official carbon regulations. “The ruralist bench managed to ‘self-amnesty’ the biggest polluters, preventing their inclusion in climate mitigation measures,” said Maurício Terena, legal coordinator at the Articulação dos Povos Indígenas do Brasil (Apib) indigenous network.