Carbon market: text can be voted on until Tuesday – 12/18/2023 – Market

In search of consensus with the governors of the Legal Amazon, the rapporteur of the bill that regulates the carbon market, deputy Aliel Machado (PV-PR), removed an excerpt from the text that made it impossible for states to sell credits generated in all their territories, including in private areas, in the voluntary market.

In recent weeks, this was the main obstacle in the text’s processing in the Chamber of Deputies.

The expectation is that the text will go to the Chamber plenary by this Tuesday (19). On Monday afternoon (18), Machado met with the president of the House, deputy Arthur Lira (PL-AL).

The rapporteur had been resisting pressure from governors. A draft of the report to which the Sheet had access at the beginning of the month, for example, it said that states would have the right to develop projects only in public areas, such as conservation units.

In the previous document, the rapporteur determined that carbon credit programs for public entities “must respect the private property and enjoyment of others, with such programs being possible only in areas in which a given public entity has, cumulatively, possession, control and enjoyment, and as long as there is no overlap with the area of ​​possession, domain or usufruct of a third party”.

Now, the report that must be voted on by this Tuesday predicts that jurisdictional markets, as state carbon credit systems are called, can encompass the entire state territory.

The text determines that those owners or indigenous communities who want to develop private carbon credit projects must notify ConaRedd+, the federal body responsible for analyzing projects aimed at reducing greenhouse gas emissions from deforestation and forest degradation.

“Public entities [devem] refrain, immediately and in any form, from the sale of carbon credits related to such properties as soon as any potential credit generator from such properties communicates in writing to ConaRedd+, once and without any special formality required, that they are not interested in participating in the jurisdictional program, with any sale carried out by any public entity relating to such properties after such communication being null and void”, determines the current report.

One carbon credit is equivalent to one ton of CO_two which is no longer emitted into the atmosphere.

In practice, the change in the report allows the functioning of jurisdictional markets, assessed by the governors of the Legal Amazon as essential for raising resources for environmental policies.

As several of the conservation units in the Amazon are not yet regularized, the states argue that, if Machado’s report were approved as it was, the states would not be able to raise anything from the voluntary market.

Today, Acre and Tocantins already have projects of this type. In the Tocantins model, for example, the government measured the variation in deforestation from 2016 to 2020 in relation to the previous five years of each year across the entire territory and calculated that the state generated 40 million carbon credits.

The Tocantins government reached an agreement with the Swiss energy company Mercuria. Through it, the company will give R$40 million to the state for the validation and registration of credits. After this process, the company will purchase, at market price, all credits already generated.

The contract also provides that Mercuria will purchase all credits developed by 2030, when Brazil hopes to eliminate deforestation.

But Aliel’s report prohibits the advance sale or promise of sale relating to jurisdictional carbon credits for a future period, which would make this part of the contract unfeasible — this section still bothers governors.

According to the Tocantins government, 50% of the total collected will be directed towards structuring, monitoring, control and reorganization of environmental agencies. Another 20% will go to original and traditional peoples; 20%, for agribusiness; and 10%, for conservation units.

The amounts will be invested in public policies and will not reach any rural owner’s account directly. The government’s expectation is that the resources will be sufficient to reverse the current increase in the state’s deforestation rate.

In Tocantins, today, any owner who wants to develop their own project must notify the state government and submit to an analysis by the Department of the Environment. But, if the PL is approved as the report is today, the analysis will only be carried out by ConaRedd+.

By advancing on private lands, jurisdictional markets make it difficult for private carbon credit developers to operate. Rural landowners, for example, have already been developing private carbon credit projects in the country.

Although more expensive, these projects can generate much greater individual returns. Not surprisingly, agriculture has signaled that it is against jurisdictional markets.

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The discussion about the carbon market

What is debated in the Chamber

• Deputies have been analyzing a bill that regulates the carbon market in the country since October
• A similar proposal was approved in the same month in the Senate and sent to the Chamber
• The President of the House, Arthur Lira (PP-AL), attached the text approved in the Senate to that created in the Chamber
• Representative Aliel Machado (PV-PR) is the rapporteur of the proposal

What is the regulated carbon market

• The system, now under discussion in the Chamber, establishes limits on carbon emissions for companies
• Those that do not meet their limits need to buy shares auctioned by the market management body — linked to the federal government
• Those that managed to emit less than the limit gain shares that can be sold

What is the voluntary carbon market

• At least until now, there is no government management in this model
• Private companies contact landowners or indigenous communities and traditional peoples and measure how many carbon credits that area has generated in recent years or how many will be generated from a future project
• These credits are sold to companies that want to voluntarily offset their emissions

What does the regulated market have to do with the voluntary market

• The proposal under discussion in the Chamber today provides that credits generated in the voluntary market can act as shares in the regulated market, as long as they are analyzed by the managing body
• However, a purchase limit on the voluntary market will be stipulated for official emissions compensation.