Brazil has passed a law to cap on greenhouse gas emissions from companies and set up a nationwide system to trade carbon credits. President Luiz Inácio Lula da Silva signed the landmark bill Dec. 12.
“The main goal of the law is to position Brazil as a leader in protecting the climate system for the benefit of our population,” said senator Leila Barros, who led the bill in the Senate.
With the law now sanctioned, Brazil will join the short list of countries, which includes China, Mexico and Kazakhstan and most EU member states, with a nationwide regulated carbon emissions system.
The Brazilian government and the law’s proponents in the industrial sector say a regulated market will encourage companies to adopt low-carbon technologies and innovate toward greener production methods. The market will also generate an estimated $7 billion a year, Brazil’s Green Party said.
Each carbon credit is worth 1 metric ton of emissions, and any company that emits more than 10,000 metric tons of carbon dioxide, or the equivalent in other gases, will need to report their emissions to the newly formed Brazilian Emissions Trading System, which has six years to be set up.
If companies exceed their emissions quota, they will need to buy carbon credits from companies that are below their allocated limit and submit a plan to reduce emissions.
Fines for not complying will be largely rerouted toward Brazil’s national climate change fund and administrative costs, with 5% of the fines destined to compensate Indigenous communities for their role in preserving the nation’s several ecosystems, including the Amazon Rainforest and the Cerrado savanna.
Notably, Brazil’s powerful agribusiness industry was left out of the bill after a 2022 amendment excluded agricultural activity from the regulated market, citing difficulties in properly quantifying emissions from agriculture. Critics say it is a “major flaw” in the law, given that agriculture is the leading source of emissions in Brazil.
“It is unacceptable and inconceivable that the agricultural sector is left out of the emissions reduction targets,” Beto Mesquita, director of public policy and forests at environmental finance nonprofit BVRio, previously told Mongabay.
The amended law received widespread support from both houses and was approved, after being held up in Congress for a decade. But not everyone was on board. Right-wing Senator Márcio Bittar spoke out against the law in the Senate, claiming that climate change doesn’t exist and that the measure would unnecessarily hinder Brazil’s economic production.
But the Brazilian Green Party congressman Aliel Machado, the bill’s rapporteur, said it will create thousands of “green” jobs, especially in the most underserved regions of the country.
Banner image: Brazil’s President Luiz Inácio Lula da Silva with Environment Minister Marina Silva in July. Image courtesy of Agência Brasil.
