Brazil’s Law 15.042 established the Brazilian Emissions Trading System (Sistema Brasileiro de Comércio de Emissões de Gases de Efeito Estufa – SBCE) and set out general provisions for the country’s emissions trading system. Additionally, the law defined a Verified Emission Reduction or Removal Certificate (CRVE), or carbon offsets, as a tradable asset representing the actual reduction or removal of one tonne of CO2 equivalent (tCO2e) from the atmosphere. The CRVEs can be used for offsetting emissions in national allocation quotas or in the transfer of Internationally Transferrable Mitigation Outcomes (ITMOs) under Article 6 of the Paris Agreement.

While the law determines that reductions or removals must follow accredited methodologies and be recorded in a national registry, it does not provide many specifics for the supply side including which project types and methodologies would be permitted as well as the criteria for assessing the quality of projects, nor for the demand side in terms of the quantity of CRVEs that are allowed for a company to meet its compliance obligation.

It is expected that these details will be defined, at the latest, by the end of 2026. According to Article 50 of the law, there is a 12 to 24-month period for developing and implementing regulations including the definition of the former specifications and the establishment of the SBCE’s managing body, which will be responsible for accrediting the national and international certification standards.

New Recommendations for the Brazilian Government on CRVEs

To guide the Brazilian Government’s decisions for the implementation of the SBCE on the specifics not yet defined in the law, the United Kingdom’s capacity building program—UK PACT (Partnering for Accelerated Climate Transitions) developed an initiative (Carbon Market Framework to support the Federal Government), in partnership with Brazil’s Ministry of Development, Industry, Trade, and Services (MDIC), specifically related to the acceptance and registration of offsets.

The first technical report for the initiative was published on February 13, 2025, “Output 1 – Recommendations for the accreditation of independent carbon certification standards for the acceptance of offsets in the Brazilian Emissions Trading System.” Developed by technical partners, ICC Brasil and WayCarbon, the report’s recommendations are based on an analysis of emissions trading schemes in other jurisdictions, including California and China, interviews with global experts, and workshops with private sector and civil society representatives that commenced in October 2023. The recommendations of this report can be broken out into four main themes:

1. General Offsets Policy: Limiting the use of offsets to meet compliance obligations, national-boundary restrictions for the location of carbon projects, and alignment with sectors to ensure project activities are not regulated by SBCE.
2. Project Specifications: Eligible project scopes and the criteria for approving methodologies.
3. Integrity and Quality of CRVEs: Coupling project development and monitoring methodologies with additional layers of SBCE verification processes to ensure the quality and integrity of credits.
4. Social Impact: Safeguarding and including local communities as well as co-benefits of carbon projects.

Offsets Limits and Sector-Specific Considerations

The report suggests that the regulations should introduce a quantitative limit on offsets within the SBCE once the system’s objectives are clearly defined. Aligned with other international requirements, a low offset limit would be recommended if the primary goal is to decarbonize sectors already covered by the SBCE. Alternatively, a higher offset limit would be appropriate if the goal is to target emissions in unregulated sectors. Moreover, the prioritization of CRVEs should center on carbon projects generated within Brazil’s territory.

Eligible Project Scopes

Another aspect of the recommendations was to focus on sectors not traditionally regulated by most emissions trading systems, such as Afforestation, Reforestation, and Revegetation (ARR), Reducing Emissions from Deforestation and Forest Degradation (REDD+), Improved Forest Management (IFM), agriculture, and waste management. These sectors account for the largest share of emissions in Brazil, especially emissions from Agriculture, Forestry, and Other Land Use (AFOLU). It should be noted that in regards to REDD+, the SBCE, and the technical report refer to eligibility of jurisdictional programs in addition to project activities.

Maintaining Cost-Effectiveness and Methodological Rigor

To maintain the highest levels of quality, as well as to keep operational costs in check, the report recommends that the regulatory framework should prioritize a select set of robust and well-established methodologies. In addition, regular revalidation of these methodologies would ensure that they stay aligned with Brazil’s specific needs and international standards, particularly those under Article 6.4 of the Paris Agreement.

A Holistic Approach to Emission Reductions

The report advocates for a holistic framework that focuses on reducing or removing emissions and considers the social impacts of project development. For the early stages of the SBCE, it suggests internationally recognized standards such as Verified Carbon Standard (VCS) or Gold Standard, both of which are widely used in Brazil and can include additional social certification labels.

Looking ahead, the report envisions incorporating independent standards endorsed by the International Carbon Reduction and Offset Alliance (ICROA), with a particular focus on jurisdictional approaches. In this sense, reforestation programs should look to go beyond on-the-ground actions to include national or state-level initiatives that protect large forest areas from deforestation.

Looking to the Future

If the recommendations from this report are adopted, the SBCE could set a global precedent for carbon markets by ensuring strong social considerations are integrated into the development and ongoing implementation of carbon projects. If successful, the Brazilian market could serve as an example for other ETSs to follow in balancing climate and environmental impacts with the well-being of local communities, making CRVE carbon offsets more valuable and ensuring lasting positive effects on the environment.

As Brazil continues to navigate its transition to a sustainable future, the Carbon Market Framework to support the Federal Government initiative and this technical report’s insights and recommendations will continue to play a pivotal role in shaping the success of its emissions trading system.

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