Regulated carbon market can move BRL 128 billion in revenues in Brazil

The regulated carbon market has the potential to generate around R$128 billion in revenues in Brazil, according to a study carried out by the Brazilian government in partnership with the World Bank. In addition, the initiative shows expectations of growth in the Gross Domestic Product (GDP) and a reduction in unemployment. The carbon market is a system adopted by several countries with the aim of reducing greenhouse gas (GHG) emissions.

Due to the environmental and economic relevance of the issue, the National Confederation of Industry (CNI) is going to present to the federal government, this Tuesday (20), a proposal for the implementation of a regulated carbon emissions trading system in Brazil. The executive manager of Environment and Sustainability at CNI, Davi Bomtempo, explains that the document is a strategy for the emissions trading system based on three components: National Allocation Plan; GHG Emissions Monitoring Program; and Regulated Emissions Market.

“The carbon market needs to be thought of jointly as a strategy for reducing emissions. In other words, Brazil today has its reduction target and the carbon market will form part of this entire strategy. Together with the reduction of illegal deforestation, with the expansion of renewables such as solar, wind and biomass, the strengthening of the National Biofuels Policy, the carbon market will compose this strategy”, he points out.

Davi Bomtempo highlights that the participation of the industrial sector in the discussion of the theme is fundamental, since the industry will be directly impacted by the regulation. He states that the CNI’s proposal aims to arrive at legislation capable of allowing connection with the international market and legal certainty.

“It is yet another initiative that will compose an emission reduction strategy. What is being sought is a carbon market that communicates with the international environment, that is, that we have a connection with more mature and established markets in the international context, such as Mexico, the European Union, California and Canada, South Korea and to smaller markets, such as the Tokyo metropolitan area,” he explains.

The document will be delivered to the federal government at the event “Dialogue: Regulated Carbon Market and Industrial Competitiveness”, this Tuesday, in Brasília.

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Discussion in the legislature

Projects for the regulation of the carbon market are under discussion in the National Congress. Among them is the PL 2148/2015, under analysis in the Chamber of Deputies. The proposal, among other points, establishes a reduction in taxes for products suitable for the low-carbon green economy. In the Senate, the PL 412/2022 regulates the Brazilian Emissions Reduction Market. The text foresees market mechanisms that allow achieving targets for reducing emissions of harmful gases.

What is carbon market

The carbon credit market is a carbon emission compensation system. It works like this: each company has a certain limit to emit greenhouse gases. Those that emit less keep credits, which can be sold to those who have exceeded the limit. The carbon credit is equivalent to 1 ton of carbon dioxide (CO²) or other gases that are no longer emitted into the atmosphere.

Carbon markets began to gain more emphasis around the world since the signature, by countries of the United Nations (UN), of the Kyoto Protocol, in 1997. The agreement between the nations established the goal that developed countries should reduce by 5.2% its emissions of gases that cause the so-called greenhouse effect. The reduction should take place by 2012. In 2015, with the signing of the Paris Agreement, the targets were renewed and now include incentives for the private sector.

Decarbonization

Decarbonization is one of the four missions foreseen in the Industry Resumption Plan, presented by the National Confederation of Industry — digital transformation; defense and national security and health and health security are the other three missions. The document establishes the creation and implementation of the regulated carbon market as one of the programs to develop a low-carbon economy.

“It is essential to establish a robust and transparent institutional and legal environment, with the participation of the productive sector, for the creation and implementation of the Regulated Carbon Market in Brazil. To do so, it is necessary to approve a legal framework establishing the regulated market”, defends the CNI.

In 2022, Brazil formalized the commitment to reduce its greenhouse gas emissions by 37% by 2025; and by 50% by 2030; in addition to achieving climate neutrality by 2050.