Sectors of Brazilian society concerned about combating global warming see a well-structured carbon market as a powerful tool to move Brazil towards the so-called low-carbon economy. In general terms, when it comes to buying and selling carbon credits, there are two trails to consider. There is the voluntary market (which can be between companies, for example, located even in different countries) and the regulated market. Where the federal government, for example, can officially organize the entire system.

The federal government published decree 11,075 in May, which attempts to regulate the national carbon market. And since last year, there is pl 528 in the National Congress, which also aims to regulate the purchase and sale of carbon credits in the country.

"A carbon market is a zero-sum game. One side emits and the other reduces, avoids or removes (carbon from the atmosphere)," explains Shigueo Watanabe Jr, a researcher at Climainfo.

To be an effective tool for tackling climate change, explains the physicist, it is necessary that the market tool has a general objective tied to the national targets presented to the UN under the Paris Agreement.

What fraction of the national commitment to reduce greenhouse gas emissions will be achieved by the carbon market? According to Watanabe Jr, this is a central answer. Because, after the definition of this number, the official regulation of the carbon market can slice this figure between the various productive sectors.

In the Chinese case, which created in February 2021 what is the largest carbon market in the world, the focus of reduction is on the country's 2,200 largest coal-fired and gas-fired power plants. Companies received free emission permits based on their track records, energy production and carbon-intensive use.

Those who cut emissions quickly will be able to sell the permits for profit and, of course, those who throw more carbon into the atmosphere will have to buy new permits to emit more carbon or pay a fine. The Brazilian decree, for example, defined neither sectors nor clear emission reduction targets for each of them.

One of the changes made in Congress in the processing of PL 528, for example, prevented certain systems from being created creatively to help reduce emissions, says economist Ronaldo Seroa da Motta, a researcher at UERJ (State University of Rio de Janeiro) and one of the leading experts in carbon economics in Brazil.

"RenovaBio, made for the biofuels sector could be replicated to other sectors," says the economist who also participated in the drafting of the PL under way.

Created in 2016 by the Ministry of Mines and Energy, RenovaBio aims to increase the production of biofuels in the country and, by table, help reduce greenhouse gas emissions led by the use of fossil fuels. The government has set national emission targets for the fuel sector by 2029.

RenovaBio, however, allows the purchase of Decarbonization Credits (CBIO) marketed in its own market. These credits represent precisely the carbon emissions avoided from the use of less polluting products by companies producing biofuels. Distributors, by purchasing CBIOs, can offset carbon dioxide emissions from the fuels they sell.

This year, the government's goal is to retire from the market almost 36 million certificates (which occurs when the emission reduction is achieved). By April, 9.2 million had been withdrawn from circulation, a number considered positive by analysts.

In general terms, explains Seroa da Motta, in addition to not being able to close the door to smart exits, legislation on the carbon market also needs to focus on transparency, governance and especially accurate accounting of purchases and sales of carbon credits.

"Something that can't exist, for example, is the so-called double counting," says the expert referring to projects that, in the wrong way, account for the reduction in carbon that has ceased to be emitted twice.

Carbon pricing, according to Watanabe Jr, only makes sense within a larger context, an efficient flight plan, as Seroa da Motta snakes. "If industries realize that the price of carbon is low, and that it makes more sense to buy permits than to invest in cleaner technologies, it won't change anything," says climainfo researcher.

In Europe, explains the scientist, carbon prices have begun to rise quite a lot from about three years ago. "And now you hear more and more talk about green steel, green cement and hydrogen," he says.

Source: Terra