Several politicians, corporations, researchers and environmentalists believe that the carbon market is the surest bet to combat climate change in the 21st century.
It is a mechanism to remunerate companies capable of reducing the release of carbon dioxide into the atmosphere, as well as other gases that potentiate the greenhouse effect.
In a state-regulated market, there would be a maximum carbon emissions cap allowed for each company or sector.
Companies emitting more carbon than allowed could compensate for the excess by buying carbon credits from companies that emit less gases than the ceiling throughout the production process.
Estimates point to extensive economic gains: according to the business consultancy McKinsey & Company, with so many areas of forest, especially in the Amazon, Brazil can generate up to R$ 26 billion per year in carbon credits. Practice-oriented forestry projects may create 1.5 million jobs by 2030.
In the Amazon, most carbon credit projects are focused on forest preservation, as deforestation is the main source of carbon emissions in the region.
Likewise, the "sequestration" of carbon, aims at the recovery of degraded areas through reforestation processes.
However, this market is still not regulated in Brazil. Meanwhile, the alternative is the so-called voluntary market, operated by companies interested in the environmental agenda and without arbitration by public entities.
João Daniel Macedo Sá – lawyer and expert in environmental law – recalls that Brazil already has a national policy to combat climate change since 2009, and it’s also a signatory to the Paris Agreement, a global pact to reduce emissions.
“We had, in the previous government (of former President Jair Bolsonaro), a certain turbulence in what concerns environmental goals and financing in contrast with other countries, due to the lack of resources allocation in public policies to face the climate crisis. But now I see that Brazil is once again treating the environmental agenda as a priority", evaluates Macedo Sá, who is a professor in the graduate program at the Law School of the Federal University of Pará (UFPA).
In his view, the challenge now is to approve a well-defined policy, which determines what will remain in or out the ‘regulated market’, since most current projects in the voluntary market are financed by international organizations.
He alerts there are several obstacles ahead. Public policies still lack incentives as well as explicit directions from the government.
"Moreover, many people do not know how the authenticity of credits works. The big challenge is to show we are able to develop projects and make people aware that they are paying for something valid. This is a little costly, but it has economic return. Both companies and individuals are a little afraid of making investments in something that is not regulated, because nobody knows how long it will be worth, or how. The carbon credit is a financial and environmental asset", he says, also pointing out the generation of profit through carbon credits must also result in taxation.
According to Isabela Morbach, founder of CCS Brasil, an organization focused on sustainable development via carbon capture, Brazil is starting to run into losses.
She recalls, however, that although there is a positive atmosphere surrounding the issue, the political cost of setting gas emission ceilings for companies can be very high.
"Despite of being done in a cautious way, going through a transition, a ceiling will be defined. So, there must be an effort from different sectors to avoid such low ceilings for emissions in each industry, for example. But it is good to harp on the same string that having an emissions ceiling does not necessarily define a lower production. It, in fact, defines a higher cost according to the emissions. That is, those who do not produce sustainably will have a more costly production, as they will need to buy credits from carbon. Those who invest in clean production will incur lower costs", she points out.
Experiences around the world can guide Brazil
Isabela Morbach, who holds a PhD in regulation of carbon capture and storage at Imperial College, London, believes that observing international experiences comparatively can work as a compass for Brazil to initiate regulation.
According to her, the European carbon market system is interesting and advanced, as it already shows results in terms of reducing emissions, in addition to being structured through very clear governance, that is, with certifications, inspection, penalties and definition of responsible agency.
"Another lesson to learn is that, as the market can increase production costs at first, we will have to be very careful not to lose competitiveness in the international market. Europe has defined a border tax, as European companies that already had an obligation to reduce emissions were losing space for companies that export to Europe, originating from countries without regulation on the subject that produce cheaper and not as clean. The United States has a local market in California focused on biofuels. It is an interesting example that can be stimulated here as well", she affirms.
João Daniel Macedo Sá recalls that most countries that regulated carbon emissions put public pressure on companies to adapt. However, Brazil already has one of the highest tax burdens in the world, thus worsening the challenge.
"We are going to impact the industrial park and this may also impact the consumer. It is a good example of what we call the internalization of externalities, because elements that do not seem to be included in the production account will cost us dearly. We know that this can create a domino effect or take companies out of the country. Therefore, it is important to discuss in depth, and broadly, as it is an inevitable and irreversible process".
Prototypes from other countries are used as models
For Cinthia Caetano, vice president of Future Carbon, a specialized company in carbon projects, there are good models implemented in New Zealand, for example, with ‘land use’ holding a central position in the debate, that is what might happen in Brazil.
Other countries in Latin America, such as Costa Rica, Peru and Colombia, are already developing experiences.
"Brazil has incomparable proportions and territorial differences regarding other countries. Brazil, along with Congo and Indonesia will be the great leaders to inspire the surrounding countries, as they are leaders in their respective basins. Fundamentally, we need to include everyone in the debate. When the “Reducing Emissions from Deforestation and forest Degradation” program (REDD+) emerged, I think it excluded private actors. Carbon market is perhaps the best tool to include the logic of buying and selling with a counterpart economy that generates sustainability", she argues.
Caetano points out that, currently, around 40% of the Brazilian carbon market is focusing on renewable energies and almost 60% on forests. Agribusiness, on the other hand, accounts for a very small portion, less than 1%, but it has enormous potential. "We can develop renewable energy projects in partnership with rural producers. Agribusiness is still underused from the point of view of the carbon market. There are many solutions based on nature that promote regenerative chains. In the area of energy, there are also many innovations, such as green hydrogen, a next market frontier with great possibilities in the Amazon", she says.
She states that despite the effervescence moment involving this issue, especially in the National Congress and in the sphere state governments, there are legit concerns about the carbon market, such as the fear that the production of commodities would be stagnated in Brazil. Cinthia claims that it is possible to increase production without deforesting and without polluting the atmosphere even more. "The cost of not changing the way we live and produce will be much higher".
Carbon market demands precaution in the Amazon
With so much money and publicity involved, fears emerge that the carbon market could generate a rush to buy territories in the Amazon.
Researcher Brenda Brito, from the Institute for Man and Environment in the Amazon (Imazon), alerts that the search for regional areas where projects will be installed is still disorderly conducted, most of the times.
According to her, there are increasing reports of community leaders and indigenous peoples led to sign contracts with unequal advantages in relation to companies.
"As there is no regulation, we have seen these practices. A community may live in an agroextractivist project within a state government area and negotiate directly with a company or with an intermediary part. We have recently witnessed a public hearing of the Public Prosecution Office on the subject in Portel, Marajó, where harassment of local communities was reported. This fact resulted in the cancellation of several registers of the Rural Environmental Registry, which, as we know, is self-declaratory. There is demand for the carbon market and this can generate income for our population by means of conservation. But, without regulation, I don't see how this could be managed in an equitable way and effectively benefiting those ones who were born here and take care of the forest. We need to build and disseminate more information about how it works, what fair values are, etc", she points out.
Brito affirms that the logic of several private projects linked to the private sector will not reduce carbon emissions as urgently as the planet demands. The researcher defends the creation of broad multisectoral guidelines defined by the State.
"There are several methodological problems in carbon projects, literature shows some inefficiency. The Guardian published a series of essays indicating problems that could greatly impact the Amazon. For instance: it is necessary to show that the area is under pressure from deforestation. Then you prospect how that area could be in 10 years from now and sometimes they inflate the projections, which generates more emission reduction credits. It is bound to generate fictitious reductions. Another problem is “leaking”, when the cause of deforestation migrates to another place far from the project of carbon, opening new sites of destruction. Therefore, it is important to think on macro strategies. Just look at the deforestation figures in the Amazon between 2004 and 2012, when we experienced a vertiginous reduction in the number of trees felled and burned. It is the result of a broad strategy, for sure, one of the greatest climate contributions worldwide. It did not generate carbon credits for companies to increase profits, but it generated other benefits that reached the end chain of those producers who preserve, such as the Amazon Fund", she points out.
Inclusion of peoples from the region is essential
Isabela Morbach highlights that there is a race to access and buy areas in the Amazon. According to her, once a corporation invests money to combat deforestation or to reforest an area, this investment needs to be shared with governments, states, municipalities and the surrounding communities.
"We always have to remember that in addition to the forest itself, the Amazon is home to almost 30 million Brazilians. If a preservation project is made viable, perhaps the place will no longer be exploited economically and we will give up a series of activities that generate income for the forest peoples. I see a movement by the states, including Pará, to create legal structures that force companies to share the benefits of the carbon market. But everything is still in its initial stages", she says.
In Cinthia Caetano's opinion, the way to include Amazonian peoples in the carbon market lies in encouraging the bioeconomy. According to her, creating mechanisms that value the productive chains related to forest products should be a priority.
"The issue of land occupation in the Amazon has always been complex and we will need the government to define rules and remuneration well. Historically, we had programs to encourage land grabbing in the past. We live in different times and we need to respect the rights of people in the region. It is not an easy topic and it needs to be evaluated on a case-by-case basis. Our main challenge with a project in the Amazon is to know if the area is correct, documented, with irrefutable property and to guarantee a close relationship with the project in a positive way", she highlights.
For Morbach, the Amazon population needs to anticipate and seek leadership.
"Local professionals and Amazon society need to qualify and prepare for this new moment. We need consultants and professionals who are from the region, studied the subject and know how to contextualize and understand the complexities of the Amazon. We cannot let a lot of people from outside came here to explain to us how to do it. We need to avoid falling into the same mistakes of the past".