Federal Decree nº 11.075/2022: Was the Brazilian Carbon Market, after all, created? 28 jun 2023

Federal Decree nº 11.075/2022: Was the Brazilian Carbon Market, after all, created?

On May 19th, 2022, bounded by great expectations and speculations, it was published the Federal Decree No. 10.075 which establishes the procedures for the elaboration of Sectorial Plans for Mitigation of Climate Changes and institutes the National System for the Reduction of Greenhouse Gas Emissions – Sinare.

Since the creation of the National Policy on Climate Change in 2009, the regulation of a domestic Carbon Market with international capillarity capable of creating an environment conducive to the negotiations of carbon credits guaranteed by the long-awaited legal certainty has been eagerly awaited.

With the announcement of the Decree’s publication, high expectations on the regulation were created, but the truth is that the National Regulated Carbon Credit Market still needs to be actually implemented and polished to be finally operationalized.

By establishing procedures for the creation of gradual targets for the reduction of anthropogenic emissions and its removals by greenhouse gases sinks, through Sectoral Plans, and the creation of a National System for the Reduction of Greenhouse Gas Emissions in which once the registration, trade and transactions related to carbon credits were carried out, Decree nº 11.075/2022 certainly started paving the road so that the Regulated Market can take its initial steps. The participation of the productive sector and the largest players in the Brazilian economy in the establishment of goals, and the forecast of creating a single system for carbon credits register will certainly create an environment of greater confidence and results. However, it is necessary to keep in mind that this scenario will only come true after the creation of compulsory targets, the institution of governance instruments, and the regulation of the Brazilian System of Emissions Trading – SBCE, when we will be able to talk about a Brazilian Regulated Carbon Market.

The publication of the Decree is a great signal for the progress of the topic on the Government’s agenda and does not replace the Bills of Law (“Projeto de Lei”- PL) aimed at SBCE’s regulation, so much so that on last May 19th, the Federal Representative Carla Zambelli submitted a new Bill of Law replacement for PL 528/2021, seen as the true creator and regulator of the National Carbon Market. Currently, PLs 10,073/2018, 5,710/2019, 290/2020 and 528/2021 are still under analysis by the National Congress, which, quite possibly, will bring new guidelines to the SBCE and, who knows, even, finally, enable its implementation.

The conclusion reached is that Decree No. 11,075/2022 still needs a good deal of regulation, but it should be seen as a step towards fulfilling the commitments assumed by Brazil in the Paris Agreement.

Main Contacts:

Ana Paula Chagas
E: ana.chagas@cmalaw.com

Paulo Bessa
E: paulo.antunes@cmalaw.com

Vilmar Gonçalves
E: vilmar.goncalves@cmalaw.com