Lula must negotiate sale of ‘license to pollute’ to China – 03/31/2023 – Environment

When he finally meets Chinese President Xi Jinping in Beijing, Brazilian president Luiz Inácio Lula da Silva should try to convince China to buy the equivalent of up to US$ 10 billion (or R$ 51 billion) per year in carbon credits generated for Brazil. Carbon dioxide is one of the gases responsible for global warming.

Carbon credits are a mechanism created by the Kyoto Protocol, in 1997, through which countries that emit less carbon dioxide into the atmosphere than their targets receive credits that they can sell to other countries that are struggling to reduce their own pollution.

In practice, it is as if China bought from Brazil a kind of license to pollute a given limit in addition to its own original emissions target.

The negotiation between Brazil and China takes place in a context in which the environmental agenda has become a priority on the international agenda of the new Lula government. In recent years, Brazil has seen its emissions rate exceed the target established in the Paris Agreement by more than 30% and has become the fifth largest polluter in the world, behind only China (1st), USA (2nd), India (3rd) and Russia (4th).

But unlike the other countries on the list — whose emissions are generated by using fossil fuels for energy, in Brazil, deforestation is responsible for about half of the carbon released into the atmosphere.

While promising to eliminate illegal deforestation in the Amazon by 2030 —which would bring down Brazilian carbon indices, Lula has already shown frustration at not seeing the instruments created in multilateral forums, such as an international carbon market, being implemented.

“One of President Lula’s agendas is carbon trading between the two countries. This ‘strategic partnership’ relationship with China should generate opportunities such as an agreement to face the climate crisis in which China, which has the highest emissions, can to join with Brazil, a country that has the greatest biodiversity and in this combination they create the largest carbon market in the world, fundamental for this transition to a decarbonized production and consumption model”, said, in Shanghai, Jorge Viana, former senator and current president of the Brazilian Trade and Investment Promotion Agency (Apex Brasil).

After the cancellation of his trip to Beijing because of pneumonia, the Brazilian president tries to reschedule his agenda with Xi Jinping for the first half of April. Brazilian diplomacy took the initiative to include climate change as one of the central themes of the bilateral meeting and there is the prospect of creating an unprecedented bilateral environmental cooperation mechanism between Brazil and China along the lines of those already established by Brazilians with Europeans.

“Brazil now has the opportunity to bring in US$ 10 billion annually with the creation of a regulated international carbon market. Brazil provides biosystemic services to the world”, stated Pablo Machado, executive director of Suzano in China.

With the planting of 1.2 million tree seedlings per day, the Brazilian pulp company has a carbon surplus and could benefit from the creation of an international credit market. Machado, however, declined to estimate the size of Suzano’s earnings because the company is listed on the stock exchange.

The company has just opened an innovation laboratory in Shanghai. China currently buys 45% of all Suzano’s eucalyptus pulp production.

New relationship axis

Although it is currently the largest carbon emitter in the world, China has invested in solutions to adapt its economy to a more sustainable development. The country is a world leader in the production of photovoltaic panels for solar energy generation and in the manufacture of electric cars.

In 2021, the Chinese regulated their national carbon credit market (with 4 billion tons of CO_two), which is already the largest in the world. But they still do not have an international framework of the kind, something that would be relevant for the country since, despite the internal effort, China remains dependent on an extremely polluting energy matrix, based on coal and oil.

At a seminar promoted by the Apex with Chinese businessmen, in Beijing, the Brazilian ambassador to China, Marcos Galvão, made a point of generically announcing the launch of “a new axis of Brazil-China relations”.

“Building an ever stronger partnership for the sustainable development of both our countries, (with) partnership in the energy transition, decarbonization, in the carbon credits market, combating climate change, designing and sharing new technologies, preservation of biodiversity and establishment of economic activities that offer prosperity alternatives in areas threatened by practices harmful to the environment,” said Galvão.

Brazilian businessmen heard by BBC News Brasil privately said that, although the Chinese still do not exert pressure similar to that of European buyers for clean production, this is already a concern of the country, which buys Brazilian raw material to manufacture and export to Europe and therefore it is also subject to the environmental regulations of the European Union.

“China is adopting very strong measures to decarbonize”, says Viana, who defended in China that Brazil cannot hide its recent deforestation past, in a statement that displeased representatives of Brazilian agribusiness, often related to deforestation practices.

Viana apologized for “any misunderstanding” caused by his statements and stated that his considerations referred to the government of Jair Bolsonaro, who “stimulated deforestation in the country”.

China welcomes Rousseff

This Friday (3/31), Viana had a meeting with former president Dilma Rousseff, who had just taken over the leadership of the BRICS bank (a bloc composed of Brazil, Russia, India, China and South Africa) to propose that the total of financing destined for agricultural production to jump from US$ 200 million to US$ 500 million. The financing line, with interest of 7%, would be exclusive to exporters.

“I’m here to value these (agribusiness) companies. I talked to President Dilma so that we can try to expand or bring back a portfolio that agribusiness had for the Brazilian government. The BRICS Bank is an opportunity”, said Viana .

Dilma assumed the position of rotating president of the banking institution that belongs to Brazil until 2025, replacing Marcos Troyjo.

“As the host country, China welcomes Rousseff to take up her new role, will continue to deepen overall cooperation with the NDB, and will fully support her in her good performance of her duties in China,” he said on Thursday, 3/30 , government spokesman Mao Ning.

This text was originally published on the BBC News Brasil website.

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