The Bill of Law No. 412/2022, which regulates the Brazilian Emissions Trading System (SBCE, in Portuguese acronym), was approved by the Federal Senate earlier this month and is currently before the Chamber of Deputies. The Coalition supports the bill’s final approval, which offers a clear opportunity for the country to rely on a properly structured carbon market, with well-defined guidelines and principles.
It is essential that the Bill’s structure is safeguarded, so as not to mischaracterize the draft, which is the long-term result of negotiations in the Senate. At this stage, while respecting the main elements already included in the proposal, the Coalition presents improvements aimed at a market with integrity and adapted to Brazilian specificities:
- The law must pave the way for all sectors to be part of the system, including primary agriculture. The agricultural sector, while responsible for a high proportion of Brazil’s greenhouse gas (GHG) emissions, is crucial to solutions to climate change and has shown its willingness to contribute through the increasing adoption of low-carbon techniques, such as integrated systems, no-till farming, crop rotation and other practices that promote the reduction of emissions or the removal of large quantities of GHGs. Therefore, it is opportune to discuss the requirements for enabling primary production to be included in the SBCE. It is known that the proposed regulatory model (cap and trade) has limited experience of including primary agricultural activity in other countries – such as in some provinces of China and in New Zealand, where this point is under development – but it is worth noting that the agricultural sector has shown significant technical and methodological advances in measuring its emissions. The consolidation of these methodologies could make it possible to perform scaled, low-cost, individualized analyses on a property-by-property basis, and once these technical advances are made, Brazil’s primary agricultural sector itself can take the lead in presenting them to allow it to join the SBCE. It is worth noting that this implementation of the regulated market must be done gradually, along with mechanisms to protect competitiveness.
- SBCE governance, which aims to establish guidelines within the Inter-Ministerial Committee on Climate Change (CIM) must ensure that decisions are inclusive of multiple sectors, including other federal and subnational levels, civil society, the private sector, and the academia. The governance currently envisaged in the project concentrates decision-making powers in the Executive branch.
- Creation of the regulated market should provide for harmonious and synergistic coexistence with the voluntary market, which will help multiply the impact on reducing emissions and increasing GHG removals. It is important to provide the foundation for the development of a large-scale voluntary market, paying attention to ensure that the taxation of activities that generate carbon credits does not become an obstacle, without undue barriers to the commercialization of credits and without restrictions on the use of widely accepted methodologies. We recall that the voluntary market has been an important channel for the development of forestry, farming, and low-carbon agriculture credits. This had already been emphasized by the Coalition in its analysis of the Bill sent to the Council for Sustainable Economic and Social Development (CDESS).
The Brazilian Emissions Trading System will provide important opportunities for Brazil in national and international markets and aligns the country’s responsibility within the global efforts to tackle the climate crisis. Reinforcing the relevance of its approval, the Coalition stands ready to contribute towards building convergence between multiple actors, aiming at positioning the SBCE as a key mitigation instrument with socio-environmental integrity, built in an articulated and complementary manner to other public policies related to climate and land use in Brazil.