Brazil is progressing in regulating its carbon market with a public consultation on the Monitoring, Reporting, and Verification (MRV) of emissions. Sectors such as oil, cement, and aviation will be among the first to be included, starting in 2027.
Brazil has taken a significant step towards the full operationalization of the Brazilian Emissions Trading System (SBCE), which forms the country’s regulated carbon market. On Tuesday (28), the Ministry of Finance opened a public consultation on the draft detailing the Monitoring, Reporting, and Verification (MRV) obligations for greenhouse gas emissions. This initiative is crucial for establishing the foundation of a robust and transparent system, guiding the country towards a greener economy.
The core of the proposal is the staggered implementation of MRV, which will gradually include various sectors of the national economy. This strategic planning aims to ensure an efficient and organized transition, without overburdening companies and regulatory bodies, while advancing the commitment to decarbonization and sustainability. The measure is seen as essential for Brazil to effectively price carbon and stimulate emission reductions.
Pioneering Sectors in Decarbonization
The implementation of MRV will be divided into three phases, starting with sectors that are major carbon emitters and heavily dependent on fossil fuels. This is a strategic move to first focus on areas where the reduction impact can be most significant.
Starting in 2027, the first wave of sectors to integrate the SBCE will include activities such as primary aluminum, integrated iron and steel mills, cement, oil and natural gas exploration and production, oil refining, pulp and paper, and air transport. These segments will face the challenge of adapting their operations to accurately monitor and report their emissions.
In 2029, the second phase will expand the system’s scope to incorporate secondary aluminum, semi-integrated iron and steel mills, the chemical industry, mining, the food and beverage industry, waste and sewage management, ceramics, glass, and the electricity sector. Finally, in 2031, the system will be completed with the inclusion of waterway, rail, and road transport, covering virtually all major emitters in the country.
Monitoring and Verification Process
Each stage of sector inclusion in the SBCE will be divided into three well-defined annual phases. Initially, there will be the submission of a monitoring plan, detailing how emissions will be tracked. Subsequently, companies will enter the phase of effective monitoring of their greenhouse gas emissions and removals. Finally, they must submit a GHG Emissions and Removals Report, which will be subject to an independent verification process.
The draft ordinance will remain open for contributions from civil society and the private sector until August 28, through the Brasil Participativo platform. This consultation period is fundamental for refining the rules and ensuring the system’s legitimacy and effectiveness.
Impact and Future Outlook
The MRV system will be the backbone for defining crucial regulatory parameters, such as emission caps and carbon allowance allocation rules. Initial reporting obligations are directed at companies with emissions exceeding 10,000 tons of CO2 equivalent per year. In the future, companies exceeding 25,000 tons of annual emissions will be required to comply with established emission caps by acquiring or trading allowances in the market.
The federal government estimates that the group of large emitters, which will be the main focus of the regulated market, represents a tiny fraction of Brazilian companies, less than 0.1%. This indicates that the system will be highly focused on the largest polluters, aiming for a significant impact on the country’s total emission reductions.
The implementation of these regulations is a priority for the government, which plans to finalize the entire regulatory framework by December 2026. The objective is to establish a carbon market that functions efficiently, avoiding supply distortions and ensuring that the price of carbon truly drives climate action and investments in clean energy and sustainable technologies. This is an essential step for Brazil to meet its climate goals and position itself as a leader in the global energy transition.
The establishment of a regulated carbon market in Brazil promises to redefine the economic landscape for high-emission sectors, encouraging innovation and the search for more sustainable solutions. It’s an opportunity for companies to rethink their production models and invest in low-carbon technologies, aligning economic growth with environmental protection and climate change mitigation. The success of this initiative will be fundamental for the future of Brazil’s green economy.
