On December 12, 2024, President Luiz Inácio Lula da Silva enacted Law 15.042/2024, creating the Brazilian Greenhouse Gas Emissions Trading System (SBCE). This law formalizes a formal framework for the management of environmental assets, such as Brazilian Emissions Quotas (CBEs) and Certificates of Verified Emission Reduction or Removal (CRVEs), integrating Brazil into global climate change mitigation efforts.
The SBCE adopts a cap-and-trade model, similar to those in California and the European Union, which allows Brazilian companies to trade emission surpluses and encourages investment in sustainable practices. Oversight is provided by the Interministerial Committee on Climate Change (CIM), ensuring transparency and legal reliability crucial for stakeholder engagement.
Brazil’s Position in the Global Carbon Market
Brazil is noted for its biodiversity and forest regeneration capabilities, enhancing its role in the voluntary carbon market. The new legislation also promotes integration between voluntary and regulated markets (SBCE), allowing locally generated credits to satisfy international demands for verified environmental solutions.
Effective Communication with International Markets
In the United States, where no unified federal carbon market exists, the trade in sustainable assets is vigorous and supported by the Securities and Exchange Commission (SEC) regulations. Law 15.042/2024 introduces mechanisms for the international trade of CRVEs, aligning Brazilian assets with standards demanded by institutional investors and American ESG funds.
Financial Innovation and Growth Opportunities
The regulatory framework supports the development of financial products based on carbon credits and enables financial institutions to act as intermediaries in trading these credits. This initiative helps diversify and economically bolster national companies while facilitating investment in sustainable business practices.
Domestic Impact and Promotion of Innovation
Building on global advantages, Law 15.042/2024 also drives local innovation. It enables companies developing emission reduction technologies or investing in forest restoration not only to comply with environmental regulations but also to enhance their competitiveness locally and globally. Additionally, the law sets forth a specialized tax regime for environmental assets, thereby bolstering legal certainty for market participants.
Brazil as an Active Participant in the Global Carbon Market
The establishment of a carbon market in Brazil signifies a major stride in the country’s involvement in global sustainability efforts and opens new pathways for economic growth aligned with environmental conservation. Equipped with a robust system that meets international standards, Brazil emerges as an active player in the global carbon market.
Glossary:
Carbon Market – A system in which carbon emission allowances or credits are traded, allowing companies to buy or sell emissions permits to comply with climate regulations.
Law 15.042/2024 – Brazilian legislation that establishes the country’s greenhouse gas emissions trading system (SBCE) and regulates the trade of carbon credits.
SBCE (Brazilian Greenhouse Gas Emissions Trading System) – Brazil’s cap-and-trade system designed to regulate and facilitate carbon credit trading, integrating the country into global climate mitigation efforts.
CBEs (Brazilian Emissions Quotas) – Tradable units representing emission allowances within Brazil’s carbon trading system.
CRVEs (Certificates of Verified Emission Reduction or Removal) – Certifications issued for verified reductions or removals of greenhouse gas emissions, which can be traded in carbon markets.
Cap-and-Trade System – A regulatory framework that sets an overall limit (cap) on emissions while allowing companies to trade allowances, incentivizing reductions in pollution.
Interministerial Committee on Climate Change (CIM) – A Brazilian governmental body responsible for overseeing the SBCE, ensuring regulatory transparency and compliance.
Voluntary Carbon Market – A market where companies and individuals can trade carbon credits voluntarily, outside of government-mandated compliance markets.
Regulated Carbon Market – A government-controlled system in which companies are required to comply with emissions limits, purchasing or selling credits as necessary.
Securities and Exchange Commission (SEC) – The U.S. regulatory body overseeing financial markets, including sustainable asset trading.
ESG (Environmental, Social, and Governance) Funds – Investment funds that prioritize companies and projects with strong environmental, social, and governance practices.
Financial Products Based on Carbon Credits – Market instruments derived from carbon credits, such as bonds or derivatives, which allow investors to participate in carbon markets.
Specialized Tax Regime for Environmental Assets – A tax framework introduced under Law 15.042/2024 that provides legal certainty and financial incentives for participants in Brazil’s carbon market.
Forest Regeneration Capabilities – Brazil’s natural capacity to restore forests, which enhances its competitive edge in carbon credit markets.
Institutional Investors – Large entities such as pension funds, insurance companies, and hedge funds that invest in financial markets, including carbon credits.
