On November 13, 2024, the Brazilian Senate approved the foundational text of a bill regulating the carbon market in Brazil. This legislation allows for the buying and selling of carbon credits based on greenhouse gas emissions and reductions.
The bill, designed by Deputy Jaime Martines and reported by Senator Leila Barros, aims to establish the Brazilian System for Trading Greenhouse Gas Emissions (SBCE). This system will enable the federal government to set emission limits and impose costs on companies that exceed these thresholds.
The Brazilian government is prioritizing this proposal as it prepares for the 29th United Nations Climate Change Conference (COP29) taking place in Baku, Azerbaijan, from November 13 to 22, 2024.
Under the SBCE, companies and governments that manage to reduce their emissions below a designated limit will be able to obtain and trade credits representing the emissions avoided or captured. This approach is intended to encourage overall emission reductions and combat deforestation.
Credits can also be generated through the acquisition of green areas and projects promoting renewable energy. This regulatory framework is part of Brazil's strategy to meet its commitments under the Paris Agreement, which aims to halve greenhouse gas emissions by 2030 compared to 2005 levels.
Entities emitting over 10,000 tons of CO2 annually will need to submit monitoring plans, while those exceeding 25,000 tons must provide additional documentation regarding environmental compliance. Penalties for non-compliance can reach up to 3% of a company's gross revenue, with fines for individuals and entities ranging from R$50,000 to R$20 million.
While the agricultural sector, which significantly contributes to Brazil's emissions, will not be mandated to participate, its involvement will be voluntary. Funds generated through the SBCE will primarily support the National Climate Change Fund and compensation for indigenous peoples and traditional communities.
The bill introduces two types of tradable assets: the Brazilian Emission Quota (CBE) and the Verified Emission Reduction or Removal Certificate (CRVE). The CBE allows a company to emit one ton of CO2, while the CRVE represents a reduction or removal of one ton of CO2, generated by entities demonstrating effective emission mitigation actions.
These assets will be traded in auctions or on the stock exchange, allowing companies that exceed emission limits to purchase credits from those that pollute less. Certification entities will determine the quantity of credits generated by each green area or project.