Carbon Credits in Brazil

In recent years, the carbon credits market has emerged as one of the most promising tools for mitigating climate change and promoting a more sustainable future. 2024 has brought significant advances for the carbon market and global sustainability: at COP29 in Azerbaijan, the global carbon credits market was regulated, a crucial step for financing green projects and reducing emissions.

Brazil, with its rich biodiversity and vast natural resources, is strategically positioned to become a major player in this sector. Now, with the implementation of the Brazilian Greenhouse Gas Emissions Trading System (SBCE), regulated by new legislation signed by President Luiz Inácio Lula da Silva, the carbon credits market has entered a new phase of maturity.

What is a Carbon Credit?

Carbon credits are certificates issued to entities that have reduced or avoided the emission of one tonne of CO2 or its equivalent in other greenhouse gases (GHG). These credits can be traded on regulated or voluntary markets, offering financial incentives for sustainable practices.

How Does the New Carbon Credits Market Work in Brazil?

The SBCE legal framework divides the market into two main sectors:

Regulated Sector

Aimed at large emitters, such as industries releasing more than 10,000 tonnes of CO2 equivalent per year. These organisations must comply with specific standards and report to a management body.

Voluntary Sector

Enables flexible transactions between companies and individuals wishing to offset their emissions, promoting sustainable initiatives across various sectors.

This structure reinforces Brazil's commitments under the Paris Agreement, stimulating the economic valuation of sustainable projects and improving market transparency.

Benefits of Investing in Carbon Credits in Brazil

Environmental Preservation and Combating Deforestation

Brazil possesses one of the world's largest forest reserves, and carbon credit projects focused on REDD+ (Reducing Emissions from Deforestation and Forest Degradation) can significantly contribute to the conservation of the Amazon and other biomes.

Attraction of Foreign Investment

The global carbon market is expanding, and Brazil has the potential to attract investors interested in financing renewable energy, reforestation, and low-carbon agriculture projects.

Competitive Advantage for Companies

Companies investing in carbon credits can enhance their reputation with consumers, investors, and partners whilst preparing for future climate regulations.

Job Creation and Local Development

Sustainable projects in rural and forest areas can create new employment opportunities and strengthen local economies.

Resource Mobilisation for Developing Countries

Carbon credit markets can provide essential climate financing for vulnerable economies. By facilitating investment in natural and technological climate solutions, the SBCE helps bridge funding gaps whilst offering economic opportunities to local communities. For example, REDD+ and renewable energy projects can generate income for regions still dependent on natural resource exploitation.

Conclusion

Investing in carbon credits in Brazil offers a unique opportunity to combat climate change, generate economic value, and promote sustainable development. With legislative advances and strengthening global markets, the strategic advantages and long-term benefits make this market a promising prospect for visionary investors committed to a greener future.

As lawyers specialising in investment funds and sustainability, we are ready to assist investors in navigating this emerging market, structuring projects, and ensuring regulatory compliance. We welcome the opportunity to work together to transform climate challenges into profitable and sustainable business opportunities.