What Changes with Brazil’s Regulated Carbon Market?
By Juan Carlos Neves Pereira (CFC-GS/UFPA) The creation of the Brazilian Emissions Trading System (Sistema Brasileiro de Comércio de Emissões de Gases de Efeito Estufa – SBCE) through Federal Law No. 15,042 of December 11, 2024, represents one of the most significant advances in Brazil’s national climate policy. The new legislation introduced a regulated carbon market, replacing the previous system based primarily on voluntary participation with a mandatory compliance framework for specific economic sectors. As a result, Brazil joins a growing number of economies that use market-based instruments to reduce greenhouse gas emissions and fulfill their commitments under the Paris Agreement. The SBCE was designed based on the understanding that greenhouse gas emissions generate environmental and economic impacts that should be incorporated into production and investment decisions. This principle is closely associated with the concept of the Social Cost of Carbon, which seeks to quantify the damages imposed on society by atmospheric emissions and justify assigning an economic value to emitted carbon. Consequently, companies are provided with financial incentives to invest in cleaner technologies and adopt strategies aimed at reducing their emissions. To implement this policy, the legislation adopted the internationally recognized cap-and-trade system. Under this model, the government establishes a maximum emissions cap for regulated sectors and allocates emission allowances known as Brazilian Emission Allowances (Cotas Brasileiras de Emissões – CBEs). Each allowance authorizes the emission of one metric ton of carbon dioxide equivalent (CO₂e). Since the emissions cap is expected to decrease gradually over time, the system creates continuous incentives for economic decarbonization. Companies emitting less than their allocated allowances may sell their surplus permits, while those exceeding their limits must purchase additional allowances to comply with regulatory requirements. Beyond establishing the operational rules of the carbon market, Law No. 15,042/2024 also sought to address tax uncertainties that have historically discouraged investments in environmental assets. Among the measures adopted is the exemption from PIS/Pasep and Cofins contributions on revenues derived from the trading of CBEs, CRVEs, and carbon credits. The law also establishes that converting credits generated under the voluntary carbon market into instruments recognized by the regulated system does not trigger immediate income tax liability. In addition, prevailing legal interpretations exclude the application of ICMS, ISS, and IPI taxes to these transactions, providing greater legal certainty and predictability for carbon market participants. Within this context, Brazilian forests assume a strategic role. The country’s potential to generate carbon credits through forest conservation and reduced deforestation places Brazil in a privileged position in the international carbon market. Projects developed under the REDD+ mechanism become particularly relevant by creating an economic alternative based on maintaining forest cover, transforming environmental conservation into a source of revenue generation. The legislation also establishes mechanisms to integrate environmental projects with the regulated carbon market, allowing certain assets generated through conservation initiatives to contribute toward compliance obligations imposed on regulated entities. At the same time, the law includes safeguards for rural landowners, ensuring they may continue developing independent projects even when their properties are associated with jurisdictional programs, provided that all legal requirements are met. Despite these positive prospects, the successful implementation of the SBCE still depends on overcoming several important challenges. These include the detailed regulation of operational procedures, the development of robust methodologies for emissions monitoring and verification, the integration of environmental and land information systems, and the resolution of legal uncertainties that continue to affect certain segments of the financial sector. Another important challenge concerns strengthening the credibility of the Brazilian carbon market. In recent years, concerns regarding the quality of some forest carbon projects—together with allegations of fraud, greenwashing, and abusive contractual practices—have undermined the confidence of both investors and international buyers. This situation highlights the importance of adopting robust mechanisms for transparency, oversight, and governance to ensure the environmental integrity of traded carbon credits. Against this backdrop, the Brazilian Emissions Trading System (SBCE) has the potential to accelerate Brazil’s transition toward a low-carbon economy. However, the expected benefits will ultimately depend on the effectiveness of its regulatory framework, the legal certainty provided to market participants, and the credibility of its environmental monitoring and enforcement mechanisms. If these conditions are met, Brazil will be well positioned to transform its natural advantages—particularly its forest resources and relatively clean energy matrix—into strategic assets that enhance its competitiveness in the emerging global low-carbon economy. References ALENCAR, Monalisa Rocha. Repercussões tributárias do mercado de crédito de carbono no Brasil: análise crítica face à Lei federal nº 15.042/2024. 2025. 115 p. Master’s Dissertation (Master of Laws) – Faculdade de Direito, Universidade Federal do Ceará (UFC), Fortaleza, 2025. ALIANÇA BRASIL NBS. 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