Interview: WayCarbon and ICC support the regulation of the Brazilian carbon market
On October 4th, the Senate approved Bill 412/2022, which regulates the Brazilian carbon market. According to Bill 412/2022, companies and individuals that emit more than 10,000 tons of carbon dioxide equivalent (tCO2e) per year will be subject to the Brazilian Greenhouse Gas Emissions Trading System (Sistema Brasileiro de Comércio de Emissões de Gases de Efeito Estufa – SBCE), with the exception of the agribusiness sector. The next steps for this matter include passage through the Chamber of Deputies, unless there is a request for a vote in the plenary.
In this context, ICC Brasil and WayCarbon will work in partnership with the Ministry of Development, Industry, Trade, and Services (MDIC) to develop recommendations for the design of the MRV system for the national regulated carbon market. The organizations will also work on the processes and criteria related to the interaction between the regulated market and the voluntary market. The project is funded by the UK PACT (Partnering for Accelerated Climate Transitions), a UK initiative to combat climate change.
MRV stands for Measurement, Reporting and Verification and is a fundamental step in the implementation of any climate action plan. Its main objective is to manage the results and impacts of climate change response actions. In addition, this methodology can be used to make investment decisions, generate carbon credits, and set targets and metrics.
Bruna Araújo, Sustainable Finance Manager, and Letícia Gavioli, Senior Consultant at WayCarbon, were interviewed by the blog about the project and the importance of public-private partnerships in combating climate change.
- What is the goal of the project?
The project aims to support the federal government in integrating the voluntary carbon market into the future regulated Brazilian carbon market. To achieve this, we will analyze international experiences with regulated markets and carbon project registration programs, and provide recommendations for the accreditation of registration programs (standards) to accept offsets within the Brazilian Greenhouse Gas Emissions Trading System (SBCE) and for the integration of these offset registrations into the Central Registry to be created within the SBCE.
- What are the phases involved?
The project is organized into five main activities, which including the preparation of technical documents to support government decision making and the conduct of engagement, training, and knowledge dissemination activities for government officials and market participants on relevant topics related to carbon market regulation in Brazil. We will provide recommendations for the accreditation of registration programs (standards) for the acceptance of offsets within the SBCE, based on a benchmark of available international registration programs such as Verra, Gold Standard, and ART Trees. The goal is to evaluate eligible sectoral scopes that are more aligned with the Brazilian reality, as well as the quality criteria for these carbon projects, including a focus on gender equality and social inclusion, to be incorporated into the Brazilian market.
Next, we will work on the integration of offset registries into the Central Registry to be established under the SBCE. To this end, we will identify synergies with other projects under development/implementation related to the operation of the Central Registry and conduct a comparative assessment of how offset registries are integrated into Central Registries in regulated markets where such a system has already been implemented. The objective is to identify key elements and characteristics for the integration of offset registries into the regulated carbon market in Brazil.
The other three main products of the project are aimed at training on the subject and working with the government, private sector and civil society organizations to disseminate the content produced by the project.
- How will the MRV methodology be applied in the project?
Monitoring, reporting, and verification within the SBCE will take place through the system’s Central Registry. Information on greenhouse gas emissions and removals will be consolidated in this Central Registry, including all transactions related to the SBCE, as well as international transfers of mitigation results and the accounting of results to meet Brazil’s Nationally Determined Contribution (NDC) targets. The project will provide recommendations for the integration of offset registries into the Central Registry, as these assets will only be recognized under the SBCE through their inclusion in the Central Registry.
- How can the regulated and voluntary markets interact?
Voluntary market carbon credits can be used as flexibility mechanisms (offsets) in the regulated market, providing additional potentially lower-cost abatement options for regulated entities while encouraging abatement activities in other unregulated sectors. In general, with some limitations, including quantity and sectoral scope of the project, offsets can be used to meet part of the obligations of regulated entities in the regulated market, thereby reducing the system’s compliance costs.
- How important is the public-private partnership in addressing climate change?
In the context of a climate emergency, all efforts are needed, whether they come from the public or private sector. Beyond private sector voluntary commitments and public sector-only mitigation actions, it is critical for public policy to channel private sector mitigation actions to help the country meet its climate change commitments by providing cost-effective mechanisms, such as the regulated carbon market. Such mechanisms offer lower compliance costs compared to command and control mechanisms, as they allow carbon-intensive sectors/entities with higher abatement costs to meet their targets with the help of mitigation results from sectors/entities with lower abatement costs through carbon market transactions.