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PTStudy analyzes demand for carbon credits in Brazil
Press release – Brazil has unique conditions to become one of the protagonists of the low-carbon economy. This is one of the conclusions of the study “Opportunities for Brazil in Carbon Markets”, released by ICC Brazil during COP30, in partnership with WayCarbon and sponsored by Braskem, Cielo, Bayer, Itaú, SAP and Shell. The document analyzes possibilities of the carbon market segments, focusing on the national potential of supply and demand for carbon credits.
The document details the opportunities for the country in the three carbon market environments, from a view of demand vectors: the mechanisms of Article 6 of the Paris Agreement, the Voluntary Market and the Brazilian Emissions Trading System (SBCE).
The study highlights that the country is already one of the largest emitters of carbon credits in the voluntary market, with 148 million tons of CO₂ equivalent generated. Moreover, in a scenario of international cooperation to reduce global warming, if Brazil unlocks its decarbonization potential beyond its Nationally Determined Contribution (NDC), it would have the potential to be a leader in the sale of internationally transferred mitigation results (ITMOs), corresponding to about 33% of global demand – under Article 6 of the Paris Agreement, mechanism that regulates the global trade of credits between countries.
Another point of the study also indicates that the regulation of the SBCE represents a decisive milestone for the consolidation of this credit market. According to the survey, from 2030 onwards, the SBCE may become the largest demand vector in the national carbon markets and may grow by up to 530%, from 13.5 million in 2024 to about 85 million tons of CO₂ equivalent generated, in a scenario in which 20% of carbon credits (Certificates of Reduction or Verified Removal of Emissions – CRVEs – as the credits accepted in the SBCE are called) are accepted for the reconciliation of SBCE obligations. And, from 2050 onwards, the achievement of global net-zero becomes the most influential factor for demand in carbon markets. In the long term, the main opportunity for the Brazilian market would be related to the full functioning of the Paris Agreement.
“Carbon markets are important transition mechanisms and can drive a new model of global competitiveness. We need a favorable business environment and legal certainty to transform Brazil’s natural potential into strategic value and international protagonism. The low-carbon economy should not be seen as a future trend, it can be the pillar of the economy of the present”, highlights Gabriella Dorlhiac, executive director of ICC Brazil.
The report also points out that the Agriculture, Forestry and Other Land Use and Energy sectors are responsible for the largest volume of credits generated and retired in Brazil, within the scope of the voluntary market. The most common sectors of beneficiaries of Brazilian carbon credits are Logistics (24%), oil and gas (20%) and Consumer goods and services (15%).
“Braskem believes that the industry can be part of the solution to tackling climate change and supports initiatives that promote sustainable development. For more than ten years, the company has defended the importance of carbon pricing as a strategy to accelerate the transition to a low-carbon economy. And it is essential to have studies that generate knowledge and, in partnership with the industry, enable the construction of public policies that encourage technological innovation and ensure competitiveness in a fair and inclusive transition,” says Jorge Soto, director of Sustainable Development at Braskem.
Future challenges
Among the challenges to consolidate this leadership, those persist, especially on the demand side and in the structure of the markets. In the case of Article 6 of the Paris Agreement, for example, there is the fragmented infrastructure and greater clarity regarding the process of authorizing credit sales with corresponding adjustments. For the voluntary market, there are still complex methodologies and uncertainty regarding future demand. The lack of standardization of credits and inconsistent quality also emerge as challenges to be overcome.
For the SBCE, the risk of late regulation may reduce the window of opportunity in this market. There is still a need to advance in definitions regarding a robust infrastructure of technical transparency and supervision, in addition to the possible interoperability of credits between regulated and non-regulated sectors.
“The market, and its agents, seek transparency, accounting convergence and regulatory certainty. The moment we are living in is one of adjustments in the voluntary market and the implementation of the SBCE and the mechanisms of Article 6. By addressing priority elements that create uncertainty today, we hope to see a strengthening of demand and a resumption of carbon prices to levels that, in fact, create incentives for investments at scale for decarbonization projects,” says Henrique Pereira, COO of WayCarbon.
“The opportunities of the carbon market highlight the challenge of ensuring a just climate transition in Brazil. The involvement of the retail sector is essential in this process. Cielo has acted as a strategic partner, driving inclusive and sustainable businesses. At COP30, we reinforced our commitment to emissions neutralization and sustainable development. The ICC Brazil study is an important milestone, as it shows that Brazil has the potential to take a leading role in the low-carbon economy, as long as it advances in regulations and infrastructure and has its integrity and socioeconomic development as its objectives”, says Daniel Poli, Executive Manager of Sustainability and Impact at Cielo.
By aligning environmental conservation, innovation and profitability, Brazil can position itself as the great hub of the new global green economy, in order to connect economic growth and sustainability in the same agenda. The challenge is to consolidate carbon markets that are reliable, high in integrity, and capable of generating prosperity with a positive impact.
