The climate crisis is one of the greatest global challenges today, requiring a coordinated and multifaceted response. In addressing this crisis, Brazil enacted Federal Law No. 15,042 on December 11, 2024, which establishes the Brazilian Greenhouse Gas Emissions Trading System (SBCE). This system lays the foundation for the Brazilian Regulated Carbon Credit Market, introducing various economic, legal, and operational implications for Brazilian companies. This article aims to provide a detailed understanding of this new legislation, its implications, and how companies can align with international standards, such as the Paris Agreement and European regulations impacting supply chains.
To truly understand the importance of this law, it is essential to analyze the global carbon market, both regulated and voluntary. The Paris Agreement and the Nationally Determined Contributions (NDCs), which are commitments made by each country to reduce greenhouse gas (GHG) emissions, serve as the foundation of this market.
Adopted in 2015, the Paris Agreement is a global treaty that aims to limit the increase in the global average temperature to well below 2°C above pre-industrial levels, with efforts to further restrict the rise to 1.5°C.
On a global scale, Europe, China, and the United States are the dominant players in the carbon market. Their policies and decisions significantly impact these markets, influencing the implementation of new instruments or the revision of pre-established targets. The regulatory landscape is complex and fragmented, posing additional challenges. However, the global movement toward decarbonization is inevitable, despite occasional setbacks in climate multilateralism.
The European Union is at the forefront of global efforts to combat climate change. The European Green Deal outlines a roadmap to make Europe the first carbon-neutral continent by 2050. The EU Emissions Trading System (EU ETS) is the world’s largest carbon market and serves as a model for other emissions trading systems worldwide.
The enactment of Federal Law No. 15,042 on December 11, 2024, aligns with Brazil’s commitment to fulfilling its international obligations under the Paris Agreement, particularly the NDCs. Additionally, the new law aims to promote innovation and encourage the adoption of low-carbon technologies.
This law imposes several obligations on companies, including developing emissions inventories, submitting monitoring plans, and reporting annual GHG emissions and removals. While compliance with the SBCE may lead to additional costs, it also presents significant opportunities: the potential to sell surplus carbon credits and the ability to position companies as sustainability leaders.
According to Article 2, VII of the new law, carbon credits are defined as marketable securities linked to the reduction or removal of GHG emissions, quantified in CO₂ equivalent, and intended to mitigate global climate change.
Carbon credits are tradable assets representing the reduction or removal of 1 ton of CO₂ equivalent. Their legal nature is considered civil assets, except when originating from jurisdictional programs or traded within financial and capital markets (stock exchange).
The SBCE is designed to be interoperable with other international emissions trading systems, such as the EU ETS. This means that Brazilian carbon credits can be recognized and traded in international markets, enhancing global integration, liquidity, and market efficiency.
The core principles underpinning the SBCE, as outlined in Article 4 of Law No. 15,042, include legality, transparency, efficiency, security, competitiveness, sustainability, and equity.
In practice, the SBCE will not be implemented automatically. Instead, there will be five phases of implementation.
Companies regulated by the SBCE must ensure environmental compliance:
- by preparing an Emissions Inventory,
- submitting monitoring plans for approval by the SBCE managing authority,
- reporting annual emissions and removals,
- reconciling their emissions with CBEs (Brazilian Emission Allowances) or CRVEs (Verified Reduction or Removal Certificates) at the end of each commitment period.
According to Article 10 of the law, the SBCE market instruments must be registered in the Central Registry System to be officially recognized. The main assets include Brazilian Emission Allowances (CBEs), which represent the right to emit 1 ton of CO₂ equivalent and can be traded on the Stock Exchange, and Verified Reduction or Removal Certificates (CRVEs), which represent the reduction or removal of 1 ton of CO₂ equivalent and can be transferred internationally.
Although the full impact of the SBCE on companies will only be fully understood after complete regulation, there are several actions that businesses can take to prepare. From developing emissions inventories and monitoring plans to assessing risks and opportunities, engaging with stakeholders, and building internal capacity, these preliminary measures will help companies be ready to meet future regulatory obligations. Additionally, aligning with international standards and preparing for interoperability with other emissions trading systems can provide competitive advantages and new market opportunities. Early preparation is essential to ensure compliance and maximize the economic and environmental benefits of the SBCE.