The Brazilian Greenhouse Gas Emissions Trading System was established; Implementation will take place in 5 phases and may take more than 5 years
It was published in this Thursday’s edition (Dec 12, 2024) of (Official Gazette of the Union) Law No. 15,042, which establishes the SBCE (Brazilian Greenhouse Gas Emissions Trading System), which will deal with the regulated carbon market in Brazil. Here is it (PDF – 371 kB).
The text is signed by the president (PT) and the vice-president and minister of Development, Industry, Commerce and Services (PSB). Also, by ministers Paulo Teixeira (Agrarian Development), Fernando Haddad (Finance) and Marina Silva (Environment and Climate Change).
The SBCE establishes, among other things, limits on greenhouse gas emissions. From this limit, it will be possible to negotiate so-called CBE (Brazilian Emission Quotas) and the issuance of CRVE (Certificate of Verified Emission Reduction or Removal), certificates of verified reduction or removal of emissions.
The CBE is a type of license for pollution. Each quota allows for an emission limit of up to one tCO2e (ton of carbon dioxide equivalent). CRVE indicate the amount of carbon removed from the atmosphere. Each certificate is equivalent to one tCO2e captured from the atmosphere.
In practice, the law regulates the greenhouse gas emissions trading system. Activities will have to acquire credits. If they emit less, they will be able to sell them on the regulated market with those who have exceeded the limits.
Agriculture is left out of this regulation. Indirect emissions of carbon dioxide and other gases related to global warming resulting from the production of agricultural inputs or raw materials will not be considered in the obligations to contain gas emissions.
The permitted emission level will be defined in the National Allocation Plan, which will be reviewed periodically. This plan will impose the maximum emissions limit, the number of CBEs to be allocated among operators and the maximum percentage of CRVE admitted in the periodic reconciliation of obligations, for example.
Countries, companies, organizations, among others, can be sellers and buyers.
The assets comprising SBCE and carbon credits, when traded on the financial and capital markets, are securities subject to regulation by the CVM (Securities Commission).
The gain arising from the sale of carbon credits and assets will be taxed according to the applicable rules:
- to the regime in which the taxpayer falls, in the case of developers who initially issued such assets;
- to net gains, when earned in operations carried out on stock, commodity and futures exchanges and in organized over-the-counter markets;
- to capital gains, in other situations.
Activities that emit more than 10,000 tCO2e per year are subject to some type of control.
Those with emissions above this level and up to 25,000 tCO2e must submit an emissions monitoring plan to the SBCE management body. Furthermore, submit an annual report on gas emissions and removals and meet other obligations provided for by this management body.
The activity that operates activities with emissions above 25,000 tCO2e per year must also send to the management body an annual report of periodic reconciliation of obligations (emission equal to capture).
The SBCE will be implemented in 5 phases:
- phase 1 – period of 12 months, extendable for another 12, to “the publication of the regulations of this law, counting from its entry into force”, this Thursday (12th December);
- phase 2 – period of 1 year “for operationalization, by operators, of instruments for reporting emissions”;
- phase 3 – period of 2 years, in which operators will only be subject to the duty of submitting a monitoring plan and submitting a report on emissions and removals to the SBCE management body;
- phase 4 – validity of the 1st National Allocation Plan, with non-onerous distribution of CBEs and implementation of the SBCE asset market;
- phase 5 – full implementation of the SBCE.
