What is the Brazilian Regulated Carbon Market?

The provision for the establishment of an Emissions Trading System has been present in Brazilian legislation since 2009, with the National Policy on Climate Change (Law No. 12,187/2009), which included among its instruments the creation of a national system for trading greenhouse gas emissions.

The approval process for the law that created the regulated carbon market in Brazil extended over almost four years, with discussions intensifying from 2023 onwards, when the Federal Government established a Temporary Working Group to deliberate on a draft text that was later incorporated into discussions in the National Congress.

After successive rounds of debate in the Chamber of Deputies and the Federal Senate, the text was approved in a final deliberation in the Plenary on November 19, 2024, during COP29, held in Baku, Azerbaijan.

With the enactment of Law No. 15,042, of December 11, 2024, which establishes the SBCE (Brazilian System for the Control of Electronic Invoices), the country entered the phase of regulation and gradual implementation. The managing body, the allocation methodology, the mandatory issuance records, and the regulated operators have already been defined; the next step will be the operationalization of the system within the sectors covered.

Why does it matter for your company?

The Brazilian Emissions Trading System (SBCE) represents a milestone for the business sector, establishing limits on greenhouse gas (GHG) emissions, creating a regulated market for carbon quotas and credits, and encouraging the decarbonization of the Brazilian economy. The system offers regulatory predictability and legal certainty, fundamental elements for business decision-making in a global context of energy and climate transition.

In addition to promoting the effective reduction of emissions, the SBCE strengthens access to sustainable capital by aligning business practices with ESG criteria and decarbonization targets. This convergence increases the attractiveness of Brazilian companies to national and international investors, expanding the flow of resources destined for the green economy.

Another strategic point is integration into the global carbon market: by adapting to SBCE rules, Brazilian companies align themselves with international decarbonization requirements, such as CBAM. Asset certification and system traceability can enable international recognition and integration with other carbon markets, especially benefiting exporters subject to climate tariffs.

The SBCE will operate under a cap-and-trade logic, in which the government defines a total emissions ceiling (cap) for specific sectors of the economy. Based on this limit, Brazilian Emission Quotas (CBEs) are distributed among regulated companies.

  • Companies that issue less than the limit will be able to sell their excess quotas;

  • Companies that exceed the limit will have to purchase additional CBEs or use CRVEs (Verified Emission Reduction or Removal Credits).

All transactions will be recorded in a centralized digital system, ensuring transparency, traceability, and environmental integrity. This structure ensures the system's credibility, promotes fair competition among sectors, and encourages continuous investment in decarbonization.

The Bill establishing the SBCE (Brazilian System for Monitoring and Controlling Emissions) stipulates that facilities and sources emitting more than 25,000 tCO₂e within the national territory will be subject to regulation. For mandatory participation in the MRV (Monitoring, Reporting and Verification) system for GHG emissions, the threshold is 10,000 tCO₂e. The text also provides that these thresholds may be adjusted by a specific act of the managing body, considering cost-effectiveness criteria and compliance with climate targets and commitments.

WHAT DOES CEBDS THINK ABOUT THIS?

 Based on the understanding that establishing a national carbon pricing mechanism is one of the most effective instruments for transitioning to a low-carbon economy, CEBDS has been working since 2016 towards establishing an Emissions Trading System in Brazil.

CEBDS's contribution to the process was achieved through extensive advocacy work with public authorities, joint coordination with different stakeholders from the private sector, academia and civil society, knowledge production and capacity building for its member companies.

Since then, we have worked in constant dialogue with the Public Authorities from a multi-sectoral perspective, seeking to ensure the implementation of an instrument that guarantees robust governance, gradual implementation, and preservation of business competitiveness.

The Market we want

That it be instituted through specific law, as a State policy, with legal predictability, being regulated by decrees only to the extent necessary for detail.
That it is based on the adoption of a carbon budget, as a way of developing and managing the emissions mitigation policy in Brazil for the purposes of fulfilling the Brazilian state's obligations under the Paris Agreement and the UNFCCC, including the Brazilian NDC
That it is built with typical elements of a “cap and trade” Emissions Trading System, which require a solid and qualified institutional architecture, an efficient compliance cycle and robust enforcement measures.
That has transparent and technical governance, qualified for the assigned functions, after listening to the sectors involved and the technical and scientific community competent in the subject in Brazil.
To adopt decisions on regulatory design based on technical, transparent and participatory studies and analysis, including the definition of sectors to be regulated over time and the criteria for allocating emission rights.
That brings legal certainty in relation to the voluntary carbon market in Brazil, including through the accreditation of methodologies and the possibility of using offsets.
That clearly defines the legal nature and taxation of emission rights.
That it is consistent with the principles, concepts and obligations of the UNFCCC and the Paris Agreement, and that it has synergy with the market instruments provided for in article 6 of the Paris Agreement.