Coalition statement to the Council for Sustainable Economic and Social Development (CDESS) on the country’s carbon emissions trading system

The Brazilian Coalition on Climate, Forests and Agriculture congratulates the Federal Government’s current efforts in drafting a bill of law aimed at establishing a carbon emissions trading system in the country.

Throughout its history, the Coalition has emphasized and supported the adoption of a public policy to regulate the Brazilian market for emissions reductions, as provided for in Law No. 12.187/2009, which establishes the National Policy on Climate Change. Therefore, we were pleased to learn about this week’s amendment to Bill 412/2022, presented by Senator Leila Barros, which covers the Executive’s proposal to create a Brazilian Greenhouse Gas Emissions Trading System (SBCE, in Portuguese acronym), as well as other related provisions.

To enhance dialogue, this text stresses some relevant topics:

1. Regulated carbon markets is one of the mitigation instruments that contribute to achieve the goals set by our Nationally Determined Contribution (NDC) and, ultimately, the goals of the Paris Agreement. It must be conceived alongside with other mitigation policies to comprise a comprehensive greenhouse gas reduction strategy.
2. The establishment of a regulated market must carefully foresee a harmonious and synergistic coexistence with the voluntary market, thus helping to maximize its impact on reducing emissions and increasing greenhouse gas removals.
3. Credits from nature-based solutions – one of the country’s distinguishing features in this market – must be at the core of the SBCE.
4. In this respect, it is important that the SBCE recognizes differences and peculiarities within the voluntary market and its legal and tax implications, to avoid crippling this market, currently in its maturing process in Brazil.

With specific regard to the land use and forestry sector – the Coalition’s core business – we would like to make a few considerations:

1. SBCE must safeguard socio-environmental and climate integrity, including both reduction and removal of carbon from the atmosphere through forest maintenance and restoration, and low-carbon agriculture.
2. SBCE must also consider greenhouse gas reductions and removals, from forest areas and agricultural soils, related to regulated entities’ industrial and energy activities, enabling the use of offsets and insetting activities into the SBCE target.
3. It is crucial that socio-environmental safeguards are incorporated into law text, to allow traditional and local peoples and communities to be safely integrated into the carbon market opportunity. It is key to consider principles that ensure protection of these communities, while delegating details to future regulations, leaving room for amendments over time. Beyond ensuring the rights of communities, an effective social involvement in the governance bodies of the SBCE is crucial.

Taxation dimensions must be carefully assessed by the government at this time, in order to avoid excessive burdens on a newly emerging market. It is worth noting that the Executive recently announced the Ecological Transition Plan, in which the carbon market plays a vital role. The SBCE should avoid increasing charges and taxation, as well as establishing incentives on carbon credit generation.

Lastly, we stress the relevance of the Bill adopting a law framework, establishing clear principles, structures, and guidelines. This will send a meaningful message to both the national and international markets. Specific details on principles must be addressed in subsequent regulations.

These are key aspects aimed at encouraging further thoughts among the regulatory authorities, contributing towards improvement of current regulations. Once again, we congratulate the Executive Branch on its initiative to develop decarbonization measures in Brazil.

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The Brazilian Coalition on Climate, Forests and Agriculture is a movement comprised of more than 350 organizations, including agribusiness entities, companies, civil society organizations, the financial sector, and the academia.