For some civil society organizations, the proposal could compromise the country's efforts to combat climate change. Project now goes to the Senate
Text updated at 18:30 pm on 22/12/2023
In the last session of the year, the plenary of the Chamber of Deputies approved, late on Thursday night (21), by 299 votes to 103 and one abstention, the main text of bill (PL) 2.148/2015, which provides for the implementation of a formal carbon credits market in the country (Find out more in the table at the end of the report.).
Some civil society organizations and experts criticized the final wording, which, in their assessment, could put at risk part of the country's efforts to combat climate change (read more below). Together with parliamentarians from different parties, they also condemned the fact that the project was proposed by the president of the Chamber, Arthur Lira (PP-AL), at the end of the legislative year.
The final opinion was announced minutes before the vote, without there being enough time for debate. In recent weeks, and even throughout the day, successive reports, with new changes, circulated among parliamentarians. The government base voted heavily in favor of the proposal, with the exception of the PSOL-Rede federation (see the votes of the deputies and the orientation of the benches).
The project now goes to senators for consideration. If it is changed, it can be reviewed by deputies. The same topic had already been analyzed by the Senate Environment Committee, with the approval of PL 412/2022, in October. Theoretically, this House would have the final say on the matter, but, in the same vote yesterday, the project was rejected and replaced by PL 2.148, in a maneuver that aims to give the Chamber this prerogative.
Through an agreement between the parties, the highlights (excerpts of the text that could be amended) were removed, with the exception of one of them, from PSOL, which intended to include agribusiness among the economic sectors that will be regulated by the new law and which ended rejected. The rapporteur, deputy Aliel Machado (PV-PR), would have committed to once again evaluating some suggestions for changes when the project returns to the Chamber.
PL 2.148 is part of the “green package” that Lira had been trying to approve, to present as a political asset at COP-28, the UN Conference on climate change, held at the beginning of the month, in Dubai, in the United Arab Emirates. He was unsuccessful in the case of the “Carbon PL”, but continued to press for its approval.
What are carbon credits?
The commercialization of carbon credits allows companies, institutions or people to offset greenhouse gas emissions resulting from undertakings and economic activities, through the acquisition of credits generated by projects to reduce these emissions or to capture carbon from the atmosphere. An initiative to restrict pollutants from an industry, reforestation or conservation of an area with native vegetation are examples of this type of project.
Brazil's main source of greenhouse gas emissions, accounting for around half of the total, is deforestation. On the other hand, the large extent of the Amazon forest in the country makes it a great candidate for initiatives and policies to generate forest carbon credits. The creation of a regulated carbon market in the country has been planned since 2009, when the National Policy on Climate Change (PNMC) was created, but the issue has not been regulated to date.
Indigenous and traditional communities
Since the beginning of the discussion on the topic in Congress, one of the biggest concerns has been the rights of indigenous and traditional populations. Mainly in the Amazon, they have been harassed by companies to implement forest carbon credit projects, for sale in the so-called “voluntary market”, which has existed for several years and is independent of national standards. Some of the initiatives proved to be opaque, dubious or even fraud.
The PL provides, in a generic way, that the rights of these populations need to be guaranteed, socio-environmental safeguards respected and their consent to initiatives to generate carbon credits in their territories, obtained through prior, free and informed consultation.
The version approved by the Senate, in October, provided that bodies managing protected areas would give authorization for the implementation of carbon projects. In the case of Conservation Units (UCs), they would also need to be included in the management plans. According to one technical note of ISA, the requirements would bureaucratize the implementation of the initiatives and, at the same time, restrict the decision-making power and autonomy of these communities.
Machado ended up accepting some proposals to resolve the problem over the last few weeks. Shortly before the vote, he said that he accepted all the suggestions from the Ministry of Indigenous Peoples (MPI) and that, through a PT amendment, he extended to riverside dwellers, extractivists, quilombolas and settlers the guarantees and safeguards that he had already assured to original populations . However, the suggestion by the Articulation of Indigenous Peoples of Brazil (APIB) that these communities' right to veto was possible at any stage of development of carbon credit projects was not accepted.
Criticisms and points of attention
For the advisor of ISA Ciro Brito, another point of attention regarding the approved text is the provision that the Union guarantees ownership of credits on federal lands “as long as there is no overlap with the area owned or enjoyed by third parties”. In the case of areas that have been expropriated, but have not yet been duly compensated, the Public Authority is authorized to carry out projects and allocate the resources from these projects to pay compensation.
“This bill creates confusion between public and private law by introducing a new form of compensation payment for legitimate occupants of public areas based on the regulation of the carbon market. Today, the rule is that this payment must be made in cash and, if there are differences between the initial and final valuation values of the land, it must be made through a court order, according to a recent decision by the STF”, explains Brito.
Some environmentalists and researchers had already criticized the text that came out of the Senate because, under pressure from the ruralist group, it excluded agribusiness from the list of economic segments that will be regulated by the new law. The sector is responsible for around 75% of greenhouse gas emissions in Brazil, considering deforestation plus agricultural activities themselves.
Machado maintained the proposal on the grounds that there would currently be no appropriate methodologies to measure emissions from these activities. “I understand that soon, as soon as this system [of metrics] is improved, it will be a natural path for agribusiness to enter, within the regulated system in our country”, he defended.
But the deputy went further and included in his report the possibility that rural producers benefit from market mechanisms to conserve, for example, Legal Reserves and Permanent Preservation Areas of their properties. “They are already required to do this by the Forest Code. In practice, they may be paid simply for complying with the law”, warns Ciro Brito.
REDD+
Another problem highlighted in the final draft is the multiplication and confusion of definitions and models of Reducing Emissions through Avoided Deforestation and Conservation (REDD+) projects and policies. The report approved by the Chamber foresees private, state, market and non-market initiatives.
On its website, the Climate Observatory (OC) classified the proposal as a “legal mess” and stated that it opens up a loophole for double counting of forest carbon credits, that is, the possibility of “the same forest being counted twice in the effort to mitigate” climate change. In the network's assessment, this could put the credibility of REDD+ and emissions measurements in the country at risk, compromising the attraction of resources for the future carbon credits market and conservation financing in general.
“If the PL is approved as law, each farmer in Brazil will be able, through a letter, to remove their property from national accounting (which is unique and federal) and generate credits from it for the market – even if the property has illegal deforestation. In addition to diluting the national effort to reduce emissions from deforestation, the proposal floods the market with forest credits that have no additionality – since maintaining a legal reserve and APP is an obligation –, no environmental integrity, no credibility”, warned the OC.
What will the carbon market be like, according to PL 2.148?
The regulated carbon market seeks to induce the decarbonization of the economy and works through the mechanism known in English as “cap and trade”, that is, the limitation of emissions (“cap”) and the trading of emission permits generated by those who reduce it beyond the limit established by law (“trade”).
The PL creates the Brazilian Greenhouse Gas Emissions Trading System (SBCE), which will have a management body, a deliberative body and a permanent advisory committee. Another problem highlighted by environmentalists is the lack of civil society participation in this management body.
Two types of actors can participate in the SBCE: companies that emit more than 10 thousand tons of CO2 equivalent (tCO2e) per year they must report their emissions obligatorily, but will not have a reduction target. Already emitters of more than 25 thousand tCO2and annual emissions into the atmosphere will be forced to reduce their emissions.
Also according to the PL, the National Allocation Plan will define the Brazilian Emissions Quotas (CBEs), which are the amount of CO2 equivalent to which each market operator will be entitled. They can be purchased by those who do not meet their emission targets.
In addition to CBEs, there is another tradable asset: the Certificate of Verified Emission Reduction or Removal (CRVE). It will be generated when there is a reduction in emissions and can also be sold so that countries meet their targets in the international treaty on climate change, the Paris Agreement, that is, in international transactions. Each quota or CRVE represents 1 ton of CO2 equivalent.