It is strategic to establish a regulated carbon market, observing international standards and practices, robust governance and climate integrity, in order to create a market mechanism that inserts the country into this global context.

By Marina Grossi*

The scientific community's messages regarding the urgency of addressing climate change have been increasingly emphatic. Global temperatures have already risen 1.2°C compared to pre-Industrial Revolution levels, and unless we correct our course, we are on track to face the dramatic effects of global warming exceeding 2.5°C by the end of this century, as shown in the final part of the 6th Assessment Report (AR6) of the UN Intergovernmental Panel on Climate Change (IPCC), published in March of this year. It will be necessary to roll up our sleeves so that countries can, in the coming years, set themselves on the path to a cleaner, ecosystem-regenerative economy centered on low-carbon activities.

Brazil is a key player in this scenario. We have comparative advantages in this race, such as an energy matrix with over 40% of renewable sources, vast biodiversity, and the need to reforest our biomes. However, the country already faces the impacts of extreme weather events and is exposed to physical risks and the risks of the transition to a low-carbon economy itself. One of the paths to enabling this journey is the carbon market, which, with clear and well-established rules, will be fundamental for mobilizing financial resources for the transition, with opportunities in various sectors, such as energy, agribusiness, and industry.

Carbon pricing is a path of no return. Currently, there are 70 regulations on the topic worldwide, whether through taxation or emissions trading, covering 47 countries and 36 subnational jurisdictions. Together, these projects cover approximately 23% of global greenhouse gas emissions. Brazil has already benefited from a voluntary carbon offset market, but it needs to go further. It is strategic to establish a regulated carbon market, adhering to international standards and practices, robust governance, and climate integrity, to create a market mechanism that inserts the country into this global context.

This has been a flagship initiative of the Brazilian Business Council for Sustainable Development (CEBDS) since 2016, and some steps have been taken toward collectively building a model with our member companies and experts in the field. In 2017, we presented a carbon market proposal to the then Ministry of Economy, which was supported by the PMR (Partnership for Market Readiness) project, a partnership between the Brazilian government and the World Bank. Subsequently, we actively participated in the development of Bill 528/2020, which was later appended to Bill 2148. We also commented on Decree 11.075/2022, published in May of last year by the Executive Branch and about to expire. We continue to actively participate in the advancement of other proposals currently under consideration in the National Congress, such as Bills 412/2022 and 2229/2023.

In the current political climate, CEBDS believes there is room for progress on this issue. The Council, together with the business sector, has been working with federal government representatives, both in the Executive and Legislative branches, to advance this issue. Between late March and early April, we held meetings with the Ministries of Development, Industry, Commerce, and Services; Environment and Climate Change; Agriculture; and the Chief of Staff's Office. On these occasions, we detailed how the business sector and civil society organizations can collaborate to advance this agenda. One of these meetings was attended by 135 people, including representatives from large companies associated with CEBDS and organizations such as iCS (Climate and Society Institute), IDS (Democracy and Sustainability Institute), Biomas, and the Talanoa Institute.

It is in the national interest that a strategic proposal for a regulated carbon market be implemented quickly. During meetings between the business sector and the federal government, the Ministry of Education and Culture's Green Economy Secretariat advocated for the urgent approval of a proposal that incorporates the most strategic elements of the bills currently under consideration in Congress on this topic. Further meetings will be held to advance convergence on this regulatory agenda, and we hope that the new framework will be approved in the coming months so that it can finally be presented at the 28th United Nations Climate Change Conference, COP 28, to be held in November in Dubai, United Arab Emirates.

The Brazilian business sector is engaged in formulating the regulatory framework for the carbon market, with a willingness to contribute technically and in-depth to the matter. Sectoral plans will need to be established, which will define emissions reduction targets for each economic sector, as well as robust governance with predictability and an intersection with the objectives of the NDC, the country's commitment under the Paris Agreement. CEBDS advocates for a market ecosystem that includes a registration system for the voluntary market, a 'cap and trade' system for the regulated market, the gradual implementation of mechanisms, and the protection of business competitiveness and national sovereignty. This discussion is already mature, and the time has come for it to become a reality, with legal certainty for all and definitively placing Brazil on the path to a low-carbon economy with all the opportunities it will bring.

* Marina Grossi is president of CEBDS (Brazilian Business Council for Sustainable Development), an entity with more than 100 associated companies whose combined revenue is equivalent to almost 50% of Brazilian GDP