City of Rio creates ISS Neutral to encourage carbon credit

The city of Rio de Janeiro will provide tax incentives for companies in the carbon credit chain to settle in the capital. The Neutral Tax on Services of Any Nature (ISS) Law, authored by the City Hall, was sanctioned this Monday (12) by Mayor Eduardo Paes, who was accompanied by the Secretary of Finance and Planning, Andrea Senko, and the Secretary of Economic Development, Innovation and Simplification, Chicão Bulhões (photo).

According to city hall calculations, the promotion will reach R$ 60 million a year. The amount may be deducted from the ISS for buyers of carbon credits. If you consider data from 2021, the total is equivalent to 1.2% of the approximately U$S 1 billion traded in the global voluntary carbon market.

Pursuant to the law, the ISS rate applied on activities for the development and audit of carbon credit projects will be reduced from 5% to 2%. Also included are “the activities of registering carbon credits and providing platforms for carbon credit transactions”.

The new legislation is temporary and will be in effect until the end of 2030. The efficiency and effectiveness of the benefits granted will be evaluated each year, according to annual performance criteria and targets.

For the Secretary of Finance, this is one more of the actions that reinforce Rio’s vocation of being the country’s green capital. “With the creation of the Neutral ISS, our objective is to encourage the installation of the carbon credits market in the city of Rio and also that other companies are willing to neutralize carbon emissions”, she highlighted.

According to Eduardo Paes, the city hall has made a permanent effort to identify the natural vocations of the city. “We seek to identify all sectors of the economy, when we bring a Web Summit (considered the biggest technology event in the world), when we have legislation stimulating innovation, because we understand that an important and significant part of Brazilian intelligence it’s here in Rio de Janeiro, which has an enormous capacity to innovate”, he said during the ceremony.

In his view, even the oil and gas sector can benefit from the ISS Neutral legislation. “I have no doubt that this is a sector that the city needs to encourage, it needs to encourage Rio as the capital of energy”, he added.

According to the mayor, the environment in Rio is an economic asset. “People and companies decide to live and invest in Rio de Janeiro for its economic assets, or decide not to live and not invest if these assets are not treated properly,” he said.

The application of the ISS Neutral Law will allow the achievement of the goals set out in the Rio 2021-2024 Strategic Plan. The forecast is that the measure will also help to achieve the goals of the Sustainable Development and Climate Actions Plan, to neutralize the emission of carbon dioxide – from 5% by 2024, from 20% by 2030, in relation to 2017, and to be carbon neutral until 2050.

Secretary Chicão Bulhões informed that the City Hall will publish the announcement in July with the rules on how companies can request the exemption.

“In these R$ 60 million, we expect to have several activities and companies in any sector, be it law, oil and gas, any economic activity, (so that it) pays the city’s ISS and goes to the market to make this purchase of credit of carbon. You can, by presenting your certificates at the Treasury or Economic Development secretariats, make your reduction of up to R$ 3 million”, said the secretary.

The secretary added that the measure serves both companies that pay this tax already established in the capital, and those that are still arriving in the city. Bulhões informed that the clean company benefits from placing the credits on the platform in Rio de Janeiro, and for that the project has to be in the city, because the city government wants to reduce local emissions.

“This company will put this on these platforms and then obviously we are creating an incentive for the polluter to buy the credits for this project. We are encouraging both ends to enter this carbon credit market”, he pointed out.

Bulhões added that the certification bodies accepted by the city hall and which are already known by the United Nations (UN) and international organizations will be included in the regulation. “We are not going to accept any adventure, because we know that in this sector there are still a lot of people trying to do what is called greenwash, which are operations that are not exactly non-polluting and end up benefiting from something. We will put in the regulation exactly which certificates we will accept, it could be more than one, but we will follow international standards.”

For Suzana Khan, deputy director of the Alberto Luiz Coimbra Institute for Graduate Studies and Research in Engineering (Coppe), at the Federal University of Rio de Janeiro (UFRJ), there are no doubts regarding the risks of global warming and, for having led the climate agenda with the world climate conference in 1992, Rio de Janeiro should have a leading role.

“What the city of Rio does has repercussions around the world. Having innovative measures like this sends a very important signal of all the ways we can take to reduce greenhouse gas emissions. When you offer an economic advantage, such as tax breaks, you make activities migrate to those with less environmental impact”, he pointed out.

*Collaborated by Tatiana Alves, from Radiojournalism