Carbon market forces drivers to buy credits – 12/22/2023 – Market

The bill that regulates the carbon market in the country approved by the Chamber of Deputies this Thursday (22) obliges motor vehicle owners to purchase carbon credits to offset greenhouse gas emissions from their vehicles.

The legislation still needs to be discussed in the Senate, but if it is approved in this way, it will include owners of cars, trucks and motorcycles.

The excerpt was included in the report during the plenary discussions that preceded the vote on the project. The amendment came from deputy Marangoni (União Brasil-SP) and was accepted by the proposal’s rapporteur, Aliel Machado (PV-PR).

The article says that it will be up to state traffic agencies to regulate this system. In other words, in this case, Detrans (State Traffic Departments) will need to set emission limits for each car model, and those drivers who are unable to meet their obligations will need to purchase carbon credits.

These credits are generated from deforestation reduction or forest restoration projects. Thus, for each ton of carbon that is no longer emitted, a credit is generated. Generally, these projects are developed by large companies.

It is not certain, however, what the penalties will be for those drivers who do not compensate for their vehicle’s emissions. The charge, according to the proposal, will come into effect in the same year that the text comes into force.

“I was surprised by this last-minute amendment, it seemed very strange to me. It was like a tortoise, because we haven’t seen this in any discussion; there hasn’t been anything like it”, says Antonio Reis, environmental law and climate change partner at Mattos Filho office.

“It seems to me like there is a need to force demand for credit at the top,” adds the expert.

In October, the Senate approved a project that also regulates the carbon market in the country. The text, however, did not contain this obligation.

Analysts believe that it is practically impossible to put this model into practice. This is because the amount of carbon emitted into the atmosphere depends not only on the model of each vehicle, but also on how often each driver drives.

“This is totally surreal. You imagine that for every car that exists in the country, there will have to be a measurement of how many emissions were produced. And this, of course, depends on how much the driver drives, if it is a person who only drives at the end week or if you are a person who uses the car every day”, says Tatiana Falcão, environmental taxation consultant.

“You will have to take into account the type of car and, if it is a hybrid car, you will need to know whether the person uses more alcohol, more gasoline or some other biofuel. From a practical point of view, this is absolutely impossible”, she says.

It is uncertain whether the standard will apply to electric vehicles, as they do not directly emit carbon. Today, in Brazil, there are around 38 million cars, 84% of which are flex models, that is, they run on gasoline or ethanol, a less polluting fuel.

There are apparent contradictions between this section and the rest of the project. This is because one of the first articles of the proposal states that it will be exclusively up to the Union to establish carbon emission limits for regulated sectors. In the case of vehicles, however, this responsibility would lie with state agencies.

The project that regulates the carbon market was approved this Thursday, more than two months after the Senate concluded voting on a similar proposal. The initial intention of the federal government and the president of the Chamber, Arthur Lira (PP-AL), was to approve the matter by the start of COP28, on November 30, but subsequent disagreements delayed the process.

In general, the regulated carbon market stipulates limits on greenhouse gas emissions for companies, which will need to submit emissions reports to the managing body, linked to the central government. Those companies that do not meet their targets may suffer penalties, such as fines.

The project determines that all companies that emit more than 10 thousand tons of carbon per year will be subject to the regulated market. Emission limits will be stipulated for companies that emit more than 25 thousand tons.

In the case of solid waste management companies, other floors will be stipulated, and agriculture, as in the project approved in the Senate, will not enter the carbon market at least at this time, as it was left out of both proposals.

This last point, in fact, is one of the most divergent. Environmentalists demanded the inclusion of agriculture in the matter, as it is the sector that emits the most greenhouse gases in the country, if emissions related to deforestation are included in their data.

The sector, on the other hand, claims that there are currently no methodologies capable of measuring the balance of its emissions.

During the plenary discussion, PSOL presented a highlight that would exclude from the report the section that removes agriculture from the market. The proposal, however, was rejected.

Even before the approval of the carbon bill in the Chamber, the Brazilian Climate, Forests and Agriculture Coalition, with more than 350 representatives from the private and financial sectors, academia and civil society, released a statement asking for the vote to be postponed.

Among the reasons was what he called the lack of dialogue with civil society and the non-inclusion of agriculture in the text.

The rapporteur of the text in the Chamber, Aliel Machado (PV-PR), even made a proposal to include agribusiness within the regulated market, providing the sector with a series of special conditions and a longer period to adapt to the new rules, but there was no agreement.

During the session, the deputy argued that the project was widely debated, and tried to defend himself from criticism. “The project has been discussed for a long time. We had more than 200 meetings. All sectors that approached us had hearings,” he said.