By: Ana Paula Chagas and Carina Cancela*

Brazil has published Federal Decree No. 11.075 which establishes the procedures for Sectorial Plans for Mitigation of Climate Change and institutes Sinare, the National System for the Reduction of Greenhouse Gas Emissions.

Since Brazil created its National Policy on Climate Change in 2009, stakeholders have been waiting for regulations that establish a domestic carbon market reflecting international standards, capable of creating an environment conducive to carbon credit negotiations and underpinned  by legal certainty.

The announcement of the Decree’s publication in May was welcomed with enthusiasm.  Importantly, however, the National Regulated Carbon Credit Market is still not a reality.  Before it can be operationalized, much work remains in the form of implementing regulations.  

By establishing procedures for the creation of gradual targets for the reduction of anthropogenic emissions and its removal by greenhouse gases sinks, through Sectoral Plans, and the creation of a National System for the Reduction of Greenhouse Gas Emissions in which, once the registration, trade and transactions related to carbon credits are carried out, Decree nº 11.075/2022 has laid the foundation for a regulated market.

To move forward, Brazil needs the participation of the productive segment and the largest players in the Brazilian economy – first of all, to establish goals for the carbon market. The ultimate goal is  a single system to register and trade carbon credits; meeting that goal will certainly create an environment of greater confidence as well as tangible results in emissions reduction. However, keep in mind that this scenario will only come about after the creation of compulsory targets and governance instruments as well as regulations supporting the Brazilian System of Emissions Trading – SBCE.  Only when those goals are met will we be able to talk about a Brazilian regulated carbon market.

The publication of the Decree clearly shows that the SBCE is high on the government’s agenda.  The Decree does not replace the Bills of Law (Projeto de Lei- PL) which aim to regulate SBCE.  Indeed, in May, Federal Representative Carla Zambelli submitted a new Bill of Law replacement for PL 528/2021, which was seen as the true creator and regulator of the National Carbon Market. Currently, other bills, PLs 10,073/2018, 5,710/2019, 290/2020 and 528/2021, are still under analysis by the National Congress. Quite possibly these bills will bring new guidelines to the SBCE and possibly enable its implementation.

In sum, while Decree No. 11,075/2022 still needs a good deal of regulation, it should be seen as an important step towards fulfilling the commitments Brazil made in the Paris Agreement.

Ana Paula Chagas is a partner and Carina Cancela is an associate in the Environmental, ESG and Climate Change practice of independent Brazilian law firm Campos Mello Advogados.