The region has enormous potential for generating credits with the forest standing, which can boost socio-environmental development
Two pieces of data stand out in the report “State and Trends of Carbon Pricing 2022”, published in May by the World Bank. Global revenue generated by carbon pricing increased by almost 60% last year, reaching US$$ 84 billion. For the first time in history, the total amount accounted for by the 32 systems for buying and selling carbon credits in various regions of the planet exceeded that generated by the 36 systems spread across the world that tax carbon emissions in some way. The document now indicates that the balance is R$$ 56 billion versus R$$ 28 billion generated by tax collections.
These are billions of dollars in resources generated by initiatives that aim to prevent greenhouse gas emissions. In other words, it is new money to combat global warming, which has already caused extreme weather events – such as severe droughts, strong floods and large-scale storms, which lead to the death of people, the loss of homes and crop failures, for example.
In this carbon market, the Amazon has great potential for generating credits. Standing forests remove greenhouse gases from the atmosphere and can therefore become a source of credits. In contrast, felling and burning trees emit these gases. In 2020, for example, while the global average of greenhouse gas emissions fell by 7% due to the economic slowdown caused by the COVID-19 pandemic, Brazil saw an increase of 9.5% (the main culprit was deforestation).
An example of how the Amazon can generate carbon credits are projects called REDDs (Reducing Emissions from Deforestation and Forest Degradation). These are actions to combat deforestation that result in a reduction in emissions generated by deforestation and degradation, combined with the conservation of forest carbon stocks, sustainable forest management and an increase in forest carbon stocks.
This is the case of the Jari Pará Project, a partnership between Biofílica Investimentos Ambientais SA and Grupo Jari, formed by Jari Celulose and Fundação Jari, which aims to prevent deforestation and minimize socio-environmental impacts, promoting benefits for the climate, biodiversity and communities in the region of the municipality of Almeirim (PA).
In the case of the project in the interior of the Amazon, there are 496 thousand hectares under protection. Every year, 517 thousand tons of carbon equivalent are stopped from polluting the atmosphere of the forest, and the planet.
The Jari Pará area of operation, on the border with Amapá, is an important Amazonian biodiversity corridor that is threatened by deforestation. Project technicians estimate that 340 species of flora (54 of which are at risk of extinction) and 2,070 species of fauna (133 at risk) are protected.
In terms of socioeconomic development, 303 families from 7 different communities are being impacted. The project's resources – obtained through the sale of carbon credits on the voluntary market – help to train local producers. This includes the implementation of agroforestry systems with production diversity, as well as courses on cooperatives, leadership and financial management, among many other activities.
There are several initiatives like this underway in the North of the country, organized by other business groups. But trading carbon credits is not the only path in the search for a decarbonized economy. There are other ways in which the private sector can act.
Companies like Siemens have been developing both external and internal actions to help society combat the effects of global climate change. According to Márcia Sakamoto, Sustainability Specialist at Siemens, the commitment to climate neutrality in operations assumed to be achieved by 2030 was brought forward to 2025, and almost 90% of the goal has already been met. “Today, we are a technology company that develops paths for more effective energy management, also collaborating in the transition to cleaner sources and energy storage,” says Márcia.
Siemens was one of hundreds of companies that signed a manifesto in 2020 expressing concern about the country's environmental policy. The document, which was presented to Vice President Hamilton Mourão, can be found here: https://cebds.org/wp-content/uploads/2022/07/Comunicado_Setor_Amazonia_v8-1-1-1.pdf.
Regulated carbon market
In Brazil, in recent months and years there has been a move, both by organized society and by the government itself, to continue in the direction of strengthening carbon credit markets instead of opting to create an emissions tax system.
CEBDS advocates, in a public and transparent manner, the creation of a regulatory framework, created by law, to give credibility and liquidity to carbon credit emission rights. The text needs to define principles, review criteria that include national mitigation objectives, paths for integration with subnational, international and voluntary markets, in addition to other equally important items. For example, it needs to define which government agency of the federal executive will implement and coordinate the regulatory framework. CEBDS argues that there are three principles that cannot be waived. The regulated market needs to be implemented gradually, competitiveness needs to be preserved, as does good governance.
The fact that Brazil needs to consolidate the regulated carbon market does not mean that there is no room for the so-called voluntary market. In this system, companies can close transactions with each other, independently. In the so-called regulated markets, however, each country will have to approve, through specific legislation, the rules of the game. This means that national or subnational governments can create emissions trading systems that follow a specific logic. The sectors and entities that will enter the game are defined and a limit is set for the emissions of these players, in other words, the “cap”.
Under this model, if a company or entity exceeds the emissions cap, it will need to compensate for this overshoot by purchasing permits from companies that fell below the target and therefore have surplus permits to emit. In other words, this is the “trade” of the process known worldwide by the acronym cap and trade.
This is a zero-sum system; the market does not reduce emissions, it only allows this to happen at the lowest possible cost. Thus, companies that reduce their emissions can sell permits to those who have not managed to pollute less or who need to invest a lot to achieve this goal.
Furthermore, Article 6 of the Paris Agreement provides a framework for the trade of carbon credits between countries in a very simplified manner. The rules for the functioning of this part of the Climate Treaty agreed in 2015 in the French capital, which do not apply to the voluntary carbon market, were defined at COP26 in Glasgow last year.
“The carbon market, especially in terms of regulations and how to account for credits, has made significant progress, including in Brazil,” says Plínio Ribeiro, CEO of Biofílica Ambipar Environment. The specialist founded the pioneering company in carbon credit transactions in 2008, and in 2021, more than half of the group was acquired by Ambipar. “This trend in the carbon market highlighted, for example, by the World Bank report will not stop. And, in the case of land use, which is not very regulated, the voluntary market is the tool that will be most important,” says Plínio.
The experience at the helm of Biofílica supports the expert's statement, who also argues that there will be a lot of complementarity between the regulated and voluntary carbon markets. In addition to the corridors and rooms of the major UN climate conferences, and following the debates at the Congress in Brasília, Biofílica's experts have had experience of what happens in the real world since the beginning. The company is the world leader in the amount of area available for certification of carbon credits from forestry sources.
According to Plínio, there is no doubt that Brazil needs to increasingly get the rules of the game right in order to attract investors and not waste its potential, whether in the Amazon or in other biomes, such as the Atlantic Forest. There are currently two fronts to regulating the country's carbon market.
In May, the federal government published decree 11,075, which seeks to regulate the national carbon market. And since last year, there has been Bill 528 in the National Congress, which also aims to regulate the purchase and sale of carbon credits in the country. While the first initiative was carried out without the participation of society, the second is the result of an agreement between academia, politicians and representatives of the private sector. For most experts on the subject, both the regulated and voluntary markets have a chance to coexist in parallel.
