Ruralists fail to comply with the agreement and manage to impose changes to the text at the last minute. The proposal now returns to the Chamber
*With information from Oswaldo Braga de Souza
The Senate plenary approved, on Wednesday night (13), by 52 to 16 votes, the Senator Leila Barros' (PDT-DF) substitute for Bill 182/2024, which regulates the carbon credit market in Brazil. The proposal originated in the Chamber of Deputies, where the vote was concluded in the last plenary session of last year. Because it has undergone changes, the project will be analyzed again by the deputies and, if approved, will be sent for presidential sanction.
Read more: Chamber approves ‘Carbon Market PL’ in its last session of the year
In the last two plenary sessions, the ruralist caucus broke the agreement made with the rapporteur and requested that the vote be postponed. Initially, it was scheduled for last week and was later moved to last Tuesday. The impasse also coincided with the start of the United Nations Climate Change Conference (COP-29), which began on Monday and will continue until November 22, in Baku, Azerbaijan. The government and Barros expected to announce the approval of the proposal during the international event.
The project creates the Brazilian Greenhouse Gas Emissions Trading System (SBCE) and defines a regulatory framework for the sale of carbon credits from environmental preservation and climate change initiatives (Find out more in the table at the end of the report.).
In defending her vote, Senator Leila explained that her substitute report, prepared after hearing several deputies and senators, maintains "more than 80% of the text that came from the Chamber". She reinforced that the project is an important tool to combat climate change and help the country meet its greenhouse gas emission reduction targets, as per the international treaty on the subject, the Paris Agreement.
“It was a text that was written collectively and I would like to thank everyone who contributed. This project is not only important for Brazil, but it is historic for our legislature,” said the senator.
What are carbon credits?
The commercialization of carbon credits allows companies, institutions or people to offset greenhouse gas emissions resulting from undertakings and economic activities, through the acquisition of credits generated by projects to reduce these emissions or to capture carbon from the atmosphere. An initiative to restrict pollutants from an industry, reforestation or conservation of an area with native vegetation are examples of this type of project.
Brazil's main source of greenhouse gas emissions is deforestation, accounting for 46% of the total, according to the Greenhouse Gas Emissions Estimation System (Seeg) from the Climate Observatory (OC). The agricultural sector accounts for 28%. Therefore, rural production represents about 3/4 of national emissions.
On the other hand, the large area of the Amazon rainforest in the country makes it a great candidate for initiatives and policies to generate forest carbon credits. The creation of a regulated carbon market in the country has been planned since 2009, when the National Policy on Climate Change (PNMC) was created, but the matter has not been regulated to date.
Agricultural interests on the table
With the government's prospect of using the approval of the project as a political trump card at COP-29, ruralist senators tried to prevent the vote until the last minute, raising controversies on items already agreed upon between the two legislative houses.
One of the main points of tension was related to the participation of rural landowners in the financial revenues from state programs for projects to Reduce Emissions from Deforestation and Forest Degradation (REDD+). The intention of the ruralists was to guarantee the participation of rural producers in the division of these resources, which was assured after an agreement signed with the rapporteur and members of the government's base.
Another point of impasse was the mechanism for reducing emissions from the fossil fuel sector implemented through the so-called Brazilian Emissions Quotas (CBEs), which ruralists began to condemn as a form of cumulative taxation for companies in the sector. In this case, the rapporteur did not accept the suggestions for changes to the text.
Advances and challenges
At the end of the vote, according to the assessment of civil society organizations that follow the agenda, in general terms the project approved by the Senate ended up bringing considerable advances in relation to the proposal that came from the Chamber.
One of the positive changes is that it allows traditional peoples and communities to communicate in advance with the management bodies of their lands about carbon credit generation projects and, if they wish, request support for the development of the project.
According to Ciro Brito, climate policy analyst at Socioenvironmental Institute (ISA), the approved substitute addresses some of the main concerns of civil society organizations, indigenous peoples and traditional communities.
“The proposal approved by the Senate guarantees some socio-environmental safeguards for carbon credit projects and programs in the territories of indigenous peoples and traditional peoples and communities, such as the right to prior, free and informed consultation, the fair and equitable sharing of benefits and the inclusion of a contractual clause that provides for compensation to communities for collective, material and immaterial damages", he assesses.
According to Brito, it was also important to define that the prior, free and informed consultation must be paid for by the party interested in developing the project, which needs to be monitored and supervised by public authorities, such as the 6th Chamber of the Federal Public Prosecutor's Office, in the case of indigenous peoples and traditional communities, in addition to the National Foundation for Indigenous Peoples (Funai) and the Ministry of Indigenous Peoples, in the case of indigenous peoples in particular.
Brito also believes that there has been progress in defining the responsibilities of the National REDD+ Commission. “CONAREDD+ will have a consultative role in the accreditation of methodologies in relation to safeguards, should develop a national registry of jurisdictional carbon credit programs and receive information from generators of ongoing carbon credit projects or potential generators of projects,” he says.
“The board will be responsible for facilitating the exclusion of property owned or used by third parties who wish to have the respective area excluded from the accounting of non-market state or jurisdictional REDD+ result programs,” he adds.
Maurício Terena, legal coordinator of the Articulation of Indigenous Peoples of Brazil (Apib), also points out some advances in the amendment approved by the senators. “The approved text incorporates indigenous ownership of carbon credits developed on traditionally occupied indigenous lands, respect for the autonomy of indigenous peoples and the exclusive use of natural resources located on our lands,” he explains.
“With regard to safeguards, there is express mention of the mandatory prior, free and informed consultation under the terms of ILO Convention 169, guaranteeing the participation of the Ministry of Indigenous Peoples, Funai and the MPF, and, finally, there is attention to minimum percentages of benefits to be reverted to indigenous peoples”, he assesses.
However, he draws attention to some challenges in implementing the law and criticizes the stance of the Parliamentary Front for Agriculture (FPA). “The same ruralist caucus that approved the time frame for demarcations, to advance on our traditional lands, excludes itself, the largest sector that emits greenhouse gases, from the legal obligations approved today, given that primary agricultural production and indirect emissions related to agricultural inputs and raw materials were expressly excluded from Bill No. 182/2024,” he warns. “Thus, the ruralist caucus managed to ‘self-pardon’ the biggest polluters, preventing their inclusion in climate mitigation measures,” he criticizes.
REED, Brazilian market and signaling
The Public Policy Coordinator at the Climate Observatory (OC), Suely Araújo, draws attention to the need to ensure that the rules are effectively complied with in REDD+ programs.
“The text reported by Senator Leila Barros is clearer than the one approved by the Chamber of Deputies, but it still contains excessive rules on REDD+, relating to forest carbon stocks, which tend to create difficulties in the operationalization of the future law. In general, it can be said that this is undoubtedly a relevant law, which regulates instruments that can assist climate policy, but that the emissions market cannot be seen as a panacea”, he warns.
Araújo questions whether the future legislation will be sufficient to address the severity of the climate emergency. “In the midst of the climate crisis, with the increasing frequency and intensity of extreme events, market instruments will not solve important problems in this area of public policy. It is hoped that, when it returns to the Chamber of Deputies, the text will not be changed for the worse. Finally, it should be emphasized that a great deal of transparency must be ensured in the regulation and implementation of the Brazilian Greenhouse Gas Emissions Trading System, so that its purposes are not distorted,” he emphasizes.
Daniel Porcel, Talanoa's Mobilization and Dialogue specialist, comments that the approval of PL 182/2024 on the same day that the Brazilian government announced the new nationally determined contribution (NDC) at COP29 represents an important signal from Brazil at the international level.
“We could not wait any longer, and we ran the risk of not being able to approve the SBCE with the urgency that it requires. Although the text from the Senate is not ideal, nor is it the best version presented in this long and tortuous process of processing, it is important to say that it tried to reduce the damage from the text coming from the Chamber of Deputies. The latest version is the one that proved possible, given so many tensions that threatened to stall the process. Therefore, timing is crucial. This is yet another important signal given by Brazil on the international stage, on the same day that its NDC was submitted at COP 29 in Baku,” he highlights.
Regarding the gaps left by the text, Porcel believes that they can be addressed in the process of regulating the law. “We will need to pay special attention to the issue of governance to ensure the credibility of our SBCE, especially regarding the role of the Interministerial Committee on Climate Change and its relationship with the system’s management body, which is yet to be defined.”
What will the carbon market be like, according to PL 2.148?
The regulated carbon market seeks to induce the decarbonization of the economy and works through the mechanism known in English as “cap and trade”, that is, the limitation of emissions (“cap”) and the trading of emission permits generated by those who reduce it beyond the limit established by law (“trade”).
The PL creates the Brazilian Greenhouse Gas Emissions Trading System (SBCE) and defines a regulatory framework for the sale of carbon credits based on environmental preservation and climate change initiatives.
According to the proposal, these new rules cover both local and jurisdictional (state) programs for Reducing Greenhouse Gas (GHG) Emissions and those resulting from Deforestation and Forest Degradation, Conservation of Forest Carbon Stocks, Sustainable Forest Management and Increase in Forest Carbon Stocks, a mechanism known as REDD+.
The SBCE will have a management body, a deliberative body and a permanent advisory committee. Another problem highlighted by environmentalists is the lack of civil society participation in this management body.
Two types of stakeholders will be able to participate in the SBCE: companies that emit more than 10 tons of CO2 equivalent (tCO2e) per year will be required to report their emissions, but will not have a reduction target. Emitters of more than 25 tCO2e per year into the atmosphere will be required to reduce their emissions.
According to the bill, the National Allocation Plan will define the Brazilian Emissions Quotas (CBEs), which are the amount of CO2 equivalent to which each market operator will be entitled. They can be purchased by those who do not meet their emission targets.
In addition to CBEs, there is another tradable asset: the Verified Emissions Reduction or Removal Certificate (CRVE). It is generated when there is a reduction in emissions and can also be traded so that countries can meet their goals under the international treaty on climate change, the Paris Agreement, that is, in international transactions. Each quota or CRVE represents 1 ton of CO2 equivalent.
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