Today is Monday, December 25, 2023.
Towards the regulation of the Brazilian emissions reduction market, the carbon market, in October of this year, the Federal Senate had approved PL 412/2022 and now in December it was the Chamber of Deputies that approved PL 2148/2015.
In the Brazilian bicameral system, bills (PL) usually begin in the Chamber of Deputies and are finalised in the Federal Senate. So what is happening with the regulation of the Brazilian carbon market?
We would say the following:
Internally, it is a complex and visible political legislative process on a topic that arouses significant interests from different parts of society, including antagonistic ones;
Externally, pressure for acceleration, both due to the fact that there are already mature and established markets for decades, such as the European ETS, and more and more countries regulating their markets. From neighbor Paraguay to fellow BRICS member South Africa. In addition to several in Asia, including quite interesting innovations, such as India's Green Credit Program.
Internally and externally, for all the forestry potential that Brazil represents in the NBS-type, nature based solutions, of carbon credits, especially in association with Indonesia and Congo. While carbon credits of technological/engineering origin are also developing, especially in countries with lower forestry potential.
Since 2021, the Chamber of Deputies has been debating the regulation of the carbon market, through PL 528/2021. For this reason, and in compliance with the rules, the recent approval of PL 412/2022 had to be attached - linked - to an older one.
What was approved in the final minutes of the 2023 legislative year of the Chamber of Deputies was PL 2148/2015, to which no less than 11 other bills were attached. Around 49 pages and 57 articles, which now goes for another round in the Federal Senate in 2024, before returning to the Chamber for the final word.
Certain media channels even indicated that the Chamber had approved a PL “Frankenstein for the carbon market” (see the names of each of the 11 bills). And giving the impression that it had been final approval.
This is not the case and certainly a lot can still happen between the end of the year break and February, the real beginning of the year in Brazil, after Carnival.
Anyway, here are some highlights from this most recent approved text:
Regulated market, "cap & trade" model.
Includes rules for voluntary markets carbon credits.
Brazilian Greenhouse Gas Emissions Trading System (SBCE), to be developed in five phases over six years.
Companies with emissions above 10 thousand tCO2e and special requirements for those that emit more than 25 thousand tCO2e.
Brazilian Emissions Quotas (CBE) will be distributed to regulated companies initially free of charge. It is a “fungible, tradable asset”.
Regarding the allocation of SBCE resources - auctions of CBEs, fines, agreements, etc. - 15% for its operationalisation, 80% for research and innovation in the regulated sector and 5% for sustainable tourism.
Carbon credits: "tradable, autonomous asset, representing the effective reduction of emissions or removal of one ton of equivalent carbon dioxide, with the legal nature of civil fruit, obtained from projects or programs... with a market approach, submitted to national or international methodologies that adopt criteria and rules for measuring, reporting and verifying emissions, external to the SBCE, including forestry maintenance and preservation, carbon retention in the soil or vegetation, reforestation, sustainable forest management or the restoration of degraded areas, among others;"
According to rapporteur Aliel Machado, who was also at COP28 in Dubai "... regarding PL 412/2022, we see that there is a lot to be taken advantage of, as there are many positive points, and there are also some improvements that need to be made . We seek to make the most of the contributions from PL 412/2022, as well as the contributions from the mother project that heads the list of added projects - PL 528/2021 - and the important contributions... PL 7578/2017..." .
It is worth reading the rapporteur's full opinion (in Portuguese). There are several interesting parts, such as the legal nature of carbon credits and the "confusion between market and non-market approaches" to REDD+. Check it out.
And if you want to follow the progress of PL 2148/2015, which "Establishes the Brazilian Greenhouse Gas Emissions Trading System (SBCE) and provides other measures", click here (also in Portuguese).
