Brazil is advancing in the discussion on the creation of a regulated carbon market, aiming to arrive with a legal framework approved for COP28, the UN climate conference to be held in December in the city of Dubai, in the United Arab Emirates.
Since COP26, held in 2021, the country has been committed to establishing a legal framework for the Brazilian Market for Emissions Reduction (MBRE), but still without success.
The mandatory character of the emissions trading system is considered fundamental to drive the market towards a low-carbon economy. The federal government is developing a bill based on the “cap and trade” already adopted in other jurisdictions, such as the ETS (Acronym for Emissions Trading System) of the European Union.
During a public hearing in the Senate, the director of Mitigation Policies at the Ministry of the Environment and Climate Change (MMA), Aloisio de Melo, stated that there is a group in the government evaluating the various initiatives related to the carbon market to define which one should be the minimum legal framework.
“This limit is not defined individually by company or sector, but for a set of regulated entities in this system, establishing emission reduction targets over a period of five or ten years. Each regulated entity will be able to choose the best strategy, either reducing its own emissions or acquiring assets that allow offsetting these emissions”, explains Melo.
The issue of the carbon market has been discussed in different bills both in the Chamber of Deputies and in the Senate. In November 2022, the Economic Affairs Commission (CAE) approved a substitute for PL 412/2022, which provides for the organization of the carbon credit market, focusing on the management of greenhouse gas emissions.
In addition to establishing a regulated carbon market, regulation will bring significant benefits to Brazil. According to a recent study, the implementation of this market could add up to R$ 2.8 trillion to the Brazilian GDP by 2030. In addition, a reduction of 50% in CO2 emissions is expected in the same period.
The creation of a regulated carbon market will bring a series of opportunities to the country. Regulated companies will receive greenhouse gas emission allowances and could use them to meet their emission reduction targets or trade them within the system established by law.
This emissions trading system will allow companies that exceed their emission limits to offset these emissions by purchasing carbon credits from other companies that manage to reduce their emissions below the established limits. This will encourage a collaborative approach, where more polluting companies will have a financial incentive to reduce their emissions and invest in cleaner technologies.
Furthermore, the creation of this regulated carbon market will strengthen Brazil's position in the global context of climate change. The country would become a protagonist in the fight against greenhouse gas emissions, contributing significantly to global efforts to mitigate and adapt to climate change.
However, despite the government's advances and intentions to establish a regulated carbon market before COP28, it is important to emphasize that there are still challenges to be overcome. The approval of comprehensive legislation requires political support, dialogue between the sectors involved and overcoming potential obstacles in the National Congress.
