Brazil has a major opportunity to improve the livelihoods of the 28 million Brazilians who call the Amazon region home

John James

<h2>Brazil&rsquo;s bioeconomy history</h2>
The bioeconomy in Brazil has witnessed significant development over the years, driven by its abundant natural resources and agricultural prowess, with the classic example being the development of ethanol biofuel. As in Costa Rica, the Ministry of Science, Technology, and Innovation (MCTI) leads the agenda, but the Ministry of Agriculture, Livestock and Food Supply (MAPA) with the Brazilian Agricultural Research Corporation (EMBRAPA) also is a significant institution in the area. From a public policy perspective, Brazil has tended to focus on the development of bioresources, biofuels and genetic modification of agricultural products through EMBRAPA. During the oil crises of the 1970s, public policies (e.g., Proalcool program) and EMBRAPA&rsquo;s agricultural research led to the expansion of sugarcane in Brazil and the development of <a href="https://www.alice.cnptia.embrapa.br/alice/bitstream/doc/904882/1/ThebrazilianethanolTORRESMARTHA.pdf">sugarcane based ethanol</a> during the 1970s demonstrated the country&rsquo;s leadership in this area.
In the early 2000s, interest in biofuels resurfaced with soaring oil prices. One crucial milestone in Brazil's bioeconomy history was the creation of the National Program for Biodiesel Production and Use (PNPB) in 2004. This program aimed to diversify the country's energy matrix, reduce dependence on fossil fuels, and provide economic opportunities for small farmers. The PNPB established targets for blending biodiesel with conventional diesel and implemented supportive policies, such as tax incentives and funding programs, to stimulate biofuel production. This policy framework has contributed to Brazil becoming one of the world's largest <a href="https://www.statista.com/statistics/271472/biodiesel-production-in-selected-countries/#:~:text=Biodiesel%20producer%20countries,gallons%20of%20biodiesel%20by%202025.">biodiesel producers</a>.
The conceptions of the bioeconomy by MCTI and MAPA have tended to fall within the bioresource and biotechnology approaches. Brazil's approach to the bioeconomy has been characterized by a combination of regulatory frameworks, incentive programs, and strategic investments. The government has implemented measures to foster research and innovation, promote sustainable land use, support small-scale farmers, and encourage private sector engagement. These efforts have contributed to the growth of bio-based industries, job creation, and the establishment of sustainable value chains.
The end of 2022 saw a <a href="https://www.camara.leg.br/proposicoesWeb/prop_mostrarintegra?codteor=2221184&amp;filename=PLP%20150/2022">National Bioeconomy Policy</a> proposal (bill 150/2022), which, is currently making its way through Congress. This bill would create the Bioeconomy Sectoral Council (CNBio), a governing body composed of relevant ministries and members of society to oversee the National Bioeconomy Strategy. If passed into law, this policy would help overcome the current silos in which different ministries act on this issue. However, challenges remain in Brazil's bioeconomy development. Issues such as deforestation, land conflicts, and regulatory complexity pose obstacles that need to be addressed. The government's ability to effectively enforce regulations and ensure sustainable practices across the value chain is crucial for the long-term success of the bioeconomy in Brazil.
<h2>Developments in Brazil&rsquo;s Amazon bioeconomy strategy</h2>
Often presented as an expansive wilderness, the Brazilian Legal Amazon is home to 28 million Brazilians and 198 indigenous ethnic groups and it covers 60% of the total Amazon Basin. Development in the region has historically focused on the conversion of forest to other land uses (especially agricultural and livestock) for the production and export of low-value commodities. This development paradigm has resulted in approximately 23% of the original area being deforested and together with warmer temperatures caused by climate change is pushing the biome towards a <a href="https://www.science.org/doi/10.1126/sciadv.aat2340">&lsquo;tipping point&rsquo;</a> of degrading into a savannah, known as &lsquo;savannahization&rsquo;. The expansion of soybean cultivation and cattle ranching are the leading causes of deforestation in the region, a region that continues to be among the <a href="https://repositorio.ipea.gov.br/bitstream/11058/6217/1/Desenvolvimento%20humano%20nas%20macrorregi%C3%B5es%20brasileiras.pdf">least developed in the country</a>, using the human development index. Levels of deforestation fell dramatically in the first decade of the 21st Century from their highs in the 1990s only to rise again under the recent Bolsonaro Administration, which led to international outcry, bans on Brazilian products associated with deforestation, the freeze of the long-anticipated EU-Mercosur trade deal, and the isolation of Brazil on the international stage.
In this context, states in the Brazilian Amazon began to develop their own bioeconomy strategies in the absence of federal leadership. In 2021, the state of Amazonas released a <a href="https://www.sedecti.am.gov.br/wp-content/uploads/2021/07/NT_Bioconomia_01_SECTI-SEDECTI-AM_Bioeconomia_no_Amazonas.pdf">technical note</a> that offers guidance on the development of a state bioeconomy along 3 categories: socio-biodiversity, forest, and commodities. However, it does not offer operational policy guidance. The state of Par&aacute; developed its <a href="https://leisestaduais.com.br/pa/decreto-n-1943-2021-para-institui-a-estrategia-estadual-de-bioeconomia-do-para-reconhece-o-grupo-de-trabalho-interinstitucional-para-estrategia-estadual-de-bioeconomia-gteeb-e-da-outras-providencias-leia">bioeconomy strategy</a> in 2021 and subsequently a Bioeconomy Plan (<a href="https://www.semas.pa.gov.br/wp-content/uploads/2022/11/Plano-da-Bioeconomia-vers%C3%A3o-FINAL_01_nov.pdf">PlanBio Par&aacute;</a>). The strategy establishes nature-based solutions, and integrates traditional knowledge production systems, environmental conservation, research, and innovation for production based on biodiversity preservation, in order to support sustainable and low-carbon production chains. It focuses on 3 strategic axes: research, development, and innovation; cultural heritage and genetic heritage; and sustainable production chains and businesses. Its subsequent PlanBio Par&aacute; has designated funding and institutions to implement projects along these axes. Yet, Par&aacute; is also home to the <a href="https://www.globalforestwatch.org/dashboards/country/BRA/14/?category=summary&amp;location=WyJjb3VudHJ5IiwiQlJBIiwiMTQiXQ%3D%3D&amp;map=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%3D%3D&amp;showMap=true">highest levels of deforestation</a> in the country.
Currently, the bioeconomy in the Amazon is nascent, characterized by small-scale operations. Yet, it has demonstrated promising results, with products such as A&ccedil;ai, Brazil nuts, cacao, and others being <a href="https://www.nytimes.com/2020/10/02/opinion/amazon-rainforest-climate-change.html">more profitable</a> on a per hectare basis than soybean or cattle. The A&ccedil;ai berry has been the poster child of an Amazonian product gaining international fame, with the industry worth over <a href="https://www.marketdataforecast.com/market-reports/acai-berry-market">$1 billion in 2023</a>. The industry has provided jobs to over 300,000 producers in the Amazon. However, the regional bioeconomy struggles with a lack of supporting infrastructure and finance that could attract the necessary investors. Care must be taken to avoid the use of monocultures of these alternative crops, which would have similarly devastating effects on biodiversity and crucial ecosystem services such as carbon sequestration. Scaling, capacity-building, and finance should focus on the local solutions already under development that often combine traditional knowledge with novel technologies.
<h2>Conclusion</h2>
Brazil's Amazon bioeconomy strategy can learn several valuable lessons from Costa Rica's bioeconomy strategy. While Costa Rica and Brazil have different contexts and challenges, there are important principles and approaches that Brazil can adopt to enhance its Amazon bioeconomy strategy. As with other countries in the Global South, Brazil must emphasize sustainability. Costa Rica has successfully placed sustainability at the core of its bioeconomy strategy. Brazil can learn from this by prioritizing sustainable practices that ensure the long-term health and productivity of the Amazon rainforest. This includes promoting responsible land use, biodiversity conservation, and sustainable harvesting of forest resources.
Next, federal and state authorities in Brazil should engage local communities. Costa Rica has actively involved local communities in decision-making processes and shared benefits with them. Brazil can learn to prioritize the participation and empowerment of indigenous communities and traditional forest dwellers in shaping the bioeconomy strategy. By including their perspectives, knowledge, and sustainable practices, Brazil can build a more inclusive and equitable approach.
Third, value chains should be diversified. Costa Rica has diversified its bioeconomy beyond traditional sectors like agriculture and forestry. Brazil can take inspiration from this by exploring innovative and value-added uses of Amazon's natural resources. This could involve promoting sustainable tourism, supporting eco-friendly products with certification processes, and fostering bio-based industries. Costa Rica has invested significantly in education, research, and capacity building to support its bioeconomy. Brazil can enhance its Amazon bioeconomy strategy by prioritizing education and training programs that focus on sustainable resource management, conservation practices, and innovative uses of bioresources. Strengthening research institutions and promoting knowledge-sharing networks can also contribute to the development and implementation of effective strategies.
A crucial element discussed in this article is the need to foster policy coherence and long-term planning. Costa Rica has demonstrated the importance of coherent policies that align different sectors, such as agriculture, forestry, environment, and tourism, under a unified vision and over a long period of time that has provided institutional and regulatory stability. Brazil can learn from this by promoting policy coherence, establishing clear regulatory frameworks, and developing long-term plans that integrate social, economic, and environmental goals. Consistency in policy implementation will provide stability and encourage private sector investments. By drawing lessons from Costa Rica's successful bioeconomy strategy, Brazil can enhance its Amazon bioeconomy strategy and contribute to sustainable development, biodiversity conservation, and the well-being of local communities in the Amazon region.
illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability &amp; Energy writers, their opinions do not necessarily represent those of illuminem.

Brazil’s Amazon bioeconomy strategy: look to your neighbor!

Countries in the Global South are embracing the bioeconomy to foster regional development, but they should take care to adapt the concept to their peoples’ particular needs and the context in which they operate

<h2>What is the bioeconomy?</h2>
 The bioeconomy is not a new concept, but one that continually evolves, and has gained prominence as a strategy for sustainable development within the last decade, especially in the Global South. While there is no standardized definition, the <a href="https://gbs2020.net/wp-content/uploads/2020/11/GBS-2020_Global-Bioeconomy-Policy-Report_IV_web.pdf">International Advisory Council on Global Bioeconomy</a> defines it as, &ldquo;the production, utilization and conservation of biological resources, including related knowledge, science, technology, and innovation, to provide sustainable solutions (information, products, processes and services) within and across all economic sectors and enable a transformation to a sustainable economy.&rdquo; Yet this definition represents a much more holistic vision than the resource transition vision that developed in Europe and the United States.&nbsp;
Bioeconomy strategies in Europe and the United States have made significant strides in promoting sustainable economic development by leveraging renewable resources and fostering innovation. These strategies have been based largely on what is known as the <a href="https://www.mdpi.com/2071-1050/8/7/691">bioresource vision</a>, i.e., developing bio-based materials, such as biomass, in the areas of energy and food to substitute the use of nonrenewable fossil materials. However, these strategies assumed sustainability without always articulating this connection, which sometimes resulted in unsustainable outcomes, such as the impacts of US ethanol subsidies on corn prices in Mexico known as the <a href="https://portalantigo.ipea.gov.br/agencia/images/stories/PDFs/rtm/130726_rtmv3_ingles02_cap5.pdf">2007 Tortilla Crisis</a> and the <a href="https://news.mongabay.com/2023/06/palm-oil-the-crop-that-cuts-into-southeastern-mexicos-jungles-and-mangroves/">expansion of bio-fuel monocultures</a> into tropical forests. Such sustainability challenges highlight the <a href="about:blank">water-food-energy nexus</a> that any bioeconomy must consider in order to avoid unwanted tradeoffs.
In Europe, the <a href="https://research-and-innovation.ec.europa.eu/news/all-research-and-innovation-news/adoption-bioeconomy-strategy-progress-report-2022-06-09_en">EU bioeconomy strategy</a> envisions a transition towards a low-carbon, resource-efficient economy. It focuses on leveraging biomass, fostering research and innovation, and promoting sustainable production and consumption. Europe's strengths lie in its strong policy frameworks, robust research and development infrastructure, and collaborative networks. However, limitations include the need for improved coherence among diverse policy areas, scaling up bio-based industries, and addressing potential conflicts between food and non-food uses of biomass.
In the United States, the <a href="https://crsreports.congress.gov/product/pdf/R/R46881">US economy strategy</a> emphasizes the economic potential of bio-based products, energy, and manufacturing. It aims to drive rural development, reduce dependence on fossil fuels, and promote environmental sustainability. The strengths of the U.S. strategy include its innovation-driven approach, strong private sector engagement, and abundant biomass resources. However, challenges stem from fragmented governance across states and inconsistent policy support.
<h2>What is the bioeconomy in a Global South context?</h2>
Many countries developing bioeconomy strategies in the Global South have high levels of social and biological diversity that are necessary assets for developing a rich and equitable economy. For Global South countries, the adoption of bioeconomy strategies faces difficulties due to various reasons. Limited financial resources, inadequate infrastructure, and competing development priorities pose challenges to implementing comprehensive bioeconomy initiatives. Additionally, Global South countries may face hurdles in establishing strong regulatory frameworks, building research and innovation capacities, and accessing international markets for bio-based products. Furthermore, concerns regarding land tenure, social equity, and sustainable resource management must be addressed to ensure inclusive and sustainable bioeconomy development.&nbsp;
It is for these reasons that bioeconomy strategies in the Global South, such as Brazil, must explicitly be anchored in a <a href="https://sustainabledevelopment.un.org/content/documents/6569122-Pelenc-Weak%20Sustainability%20versus%20Strong%20Sustainability.pdf">strong sustainability</a> paradigm, combining alternative visions of the bioeconomy, alongside the bioresource vision; these include the biotechnology and bioecology visions. The former emphasizes the application of advanced biological technologies, including genetic engineering and synthetic biology, to develop innovative bio-based products, processes, and services for various sectors.&nbsp;
The bioecology vision focuses on the integration of ecological principles and sustainability considerations in the bioeconomy, aiming to optimize resource use, protect biodiversity, and enhance ecosystem services while meeting human needs. Development of bioeconomies in these regions offers opportunities for sustainable growth that harness existing human and social capital but must be done so while respecting and protecting local cultures and ecosystems. In fact, such a bioecology vision is often viewed as a complementary strategy for conservation in some of the most biologically diverse ecosystems on the planet. The development of sustainable economic alternatives for local communities provides a means for socio-economic development and the maintenance of standing forests and flowing rivers.
<h2>Costa Rica, a successful case of bioeconomy strategy in the Global South</h2>
Costa Rica is a sustainability leader. It successfully <a href="https://www.frontiersin.org/articles/10.3389/fenvs.2020.580724/full">restored forest cover</a> from approximately 25% in the 1980s to over 50% today, won the <a href="https://www.unep.org/news-and-stories/press-release/costa-rica-named-un-champion-earth-pioneering-role-fighting-climate">2019 Champions of the Earth Award</a> (the flagship UN environmental award), and at the end of 2022 generated <a href="https://www.bnamericas.com/en/news/costa-rica-exceeds-98-renewable-electricity-generation-for-the-eighth-consecutive-year#:~:text=Costa%20Rica%20exceeds%2098%25%20renewable%20electricity%20generation%20for%20the%20eighth%20consecutive%20year,-Bnamericas%20Published%3A%20Thursday&amp;text=Costa%20Rica%20added%20in%202022,electricity%20with%20five%20renewable%20sources.">98% of its electricity from renewable sources</a> for the 8th consecutive year. Costa Rica is an ecological hotspot with <a href="http://www.costarica-embassy.org/index.php?q=node/12">6% of the world&rsquo;s wildlife</a> whilst occupying 0.03% of its surface area. Since 1996 when it passed its biodiversity law, the country has passed a series of policies to substitute fossil fuels with biofuels, reduce the carbon footprint of livestock, and encourage organic agriculture.&nbsp;
<a href="https://gbs2020.net/wp-content/uploads/2020/09/PolicyBrief-Bioeconomy-Strategy-Costa-Rica.pdf">Costa Rica</a> developed its bioeconomy strategy in 2020 with a clear 10-year implementation window that involves proving tests of concepts, scaling, and maturing. It is led by the Ministry of Science, Technology and Telecommunication, but its development was an inter-ministerial effort. It developed a holistic conception of the bioeconomy that considers both modern as well as traditional knowledge of biological resources and their processes in the development of new products and services. Its strategy covers five strategic areas: rural development, biodiversity, biorefinery, biotechnology, and urban bioeconomy. The aim is the sustainable use of its biodiversity to become a leader in these areas.
Assessing Costa Rica&rsquo;s strategy&rsquo;s impacts on the environment, it emphasizes sustainability, especially through the preservation of biodiversity, sustainable land use and reducing greenhouse gas emissions. Its strategy is directly linked to its decarbonization plan that aims to make the country carbon neutral by 2050, as well as within the Sustainable Development Goals (SDGs). Costa Rica's bioeconomy strategy emphasizes social inclusion, equitable access to bio-based products and services, and improving livelihoods in rural areas. Through its Women Nature and Rural Women Credit, its strategy attempts to encourage female entrepreneurship and reduce the gender gap.&nbsp;
While the strategy recognizes the importance of research and innovation, it lacks specific indicators or targets related to patents, R&amp;D investments, or academia-industry collaboration. Nevertheless, the bioeconomy strategy aims to promote economic growth, job creation, and improve income distribution, especially for rural communities. Importantly, this has included training programs, such as the <a href="https://www.iica.int/en/press/news/good-practices-and-public-private-partnerships-are-positioning-agriculture-engine">Descubre program</a>, for farmers, providing guidance on crop selection and how to effectively target different markets. It has become a <a href="https://www.investmentmonitor.ai/sponsored/how-costa-rica-is-placing-biomaterials-at-the-very-heart-of-its-knowledge-based-economy/">leader in agritech and biomaterials</a>, adopting resource efficiency and circular economy principles, such as upcycling, through the reuse of over 20 million tonnes of plant waste per year. A successful example of this approach is the startup <a href="https://www.investmentmonitor.ai/sponsored/how-costa-rica-is-placing-biomaterials-at-the-very-heart-of-its-knowledge-based-economy/">Yellow Pallet</a>, which produces industrial pallets from banana fibers, reducing emissions by 50%, as compared to conventional wood pallets. This case highlights the success of public-private partnerships that the bioeconomy strategy in Costa Rica has enabled.
A crucial challenge for the scaling of the bioeconomy is finance. Costa Rica&rsquo;s strategy includes the <a href="https://biofin.cr/en/financial-solutions/biobusinesses/">Bio-Business Financing Platform</a> and has so far supported 80 projects with credit requirements tied to reducing the environmental impacts of selected businesses. Overall, Costa Rica has a bioeconomy strategy that prioritizes its biodiversity, economic viability (especially in rural areas), and social equity with strong institutional support and access to financing. Other countries in the Global South, especially in Latin America, can look to adopt aspects of Costa Rica&rsquo;s success to their context in order to develop their own bioeconomies sustainably.
illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability &amp; Energy writers, their opinions do not necessarily represent those of illuminem.

Bioeconomy strategies in the Global South should not copy those of the Global North

Brazil has an enormous opportunity to become a major source of carbon credits in both the voluntary carbon market and internationally regulated carbon markets

<h2>Introduction</h2>
The impacts of climate change have begun to cause sufficient damage to people&rsquo;s lives and the natural environment that has led to impacts on the operations of numerous companies that are part of global value chains in the form of yearly record-breaking temperatures, <a href="https://www.c2es.org/content/drought-and-climate-change/">longer droughts</a>, <a href="https://www.epa.gov/climate-indicators/climate-change-indicators-wildfires#:~:text=Multiple%20studies%20have%20found%20that,wildfire%20frequency%2C%20and%20burned%20area.&amp;text=The%20wildfire%20season%20has%20lengthened,and%20drier%20soils%20and%20vegetation.">increased number and intensity wildfires</a>, and <a href="https://www.nature.com/articles/s41590-020-0648-y">increased geographic spread of vector-borne diseases</a>, among others. This has led to many leading firms to <a href="https://mneguidelines.oecd.org/Building-more-resilient-and-sustainable-global-value-chains-through-responsible-business-conduct.pdf">reassess the impacts</a> of their value chains on the environment and vice versa. Public and private initiatives in the form of carbon markets provide frameworks that offer the promise of reducing GHG emissions via market mechanisms in a flexible manner and at the least cost.
While the effectiveness of carbon markets for reducing GHG emissions continues to be debated in <a href="https://www.cambridge.org/core/books/carbon-markets-in-a-climatechanging-capitalism/2799AE2678141AC4B9C91027EAD63520">scientific literature</a>, the world, through the Paris Agreement&rsquo;s <a href="https://unfccc.int/sites/default/files/english_paris_agreement.pdf">Article 6</a>, is betting on them to help meet GHG reduction targets in order to maintain global warming to below 1.5&ordm;C by 2100. Many regulated and voluntary carbon markets (VCM) have emerged around the world even before the Paris Agreement. <a href="https://icapcarbonaction.com/en/ets">There are currently</a> 28 regulated markets in force, another 9 under development, and a further 11 under consideration. Currently, voluntary market platforms are dispersed or project developers sell directly to buyers, but a <a href="https://www.mckinsey.com/capabilities/sustainability/our-insights/a-blueprint-for-scaling-voluntary-carbon-markets-to-meet-the-climate-challenge">McKinsey report</a> estimates that VCMs could be worth up to $50 billion by 2050. 
Regulated carbon markets tend to take the form of cap-and-trade, i.e., emissions trading system (ETS), whereby an initial quantity of tradeable carbon allowances are given or sold to companies that are regulated by the carbon market, which may then buy and sell these allowances as necessary. VCMs tend to function on the structure of baseline-and-credit, whereby carbon credits are assessed on a per project via the reduction or avoidance of GHG emissions against a counterfactual baseline scenario of GHG emissions. Latin America is positioned as <a href="https://www.whitecase.com/publications/insight/latin-america-focus-fall-2022-growth-carbon-markets">a potential leader</a> in the development of carbon markets as many national and subnational programs already exist and the continent is abundant in nature-based solutions potential. Brazil is the largest country and Latin America and is home to approximately 60% of the Amazon. There are ongoing debates around the implementation of a regulated carbon market and it would be wise to look around at other ETSs&rsquo; successes and failures and how aligning its carbon market with others could better position it to shape Article 6 debates of the Paris Agreement.
<h2>GHG emissions in Brazil</h2>
Brazil&rsquo;s GHG <a href="https://www.statista.com/statistics/1331595/greenhouse-gas-emissions-brazil-by-sector/">emissions profile</a> shows that the majority of emissions come from changes in land use followed by the agricultural sector. These two are not mutually exclusive, as the expansion of soybean and cattle ranching are the <a href="https://www.worldwildlife.org/magazine/issues/summer-2018/articles/what-are-the-biggest-drivers-of-tropical-deforestation#:~:text=The%20food%20behind%20deforestation,beef%20and%20other%20animal%20proteins.">leading causes</a> of deforestation in the Amazon. It is important to note that Brazil&rsquo;s electricity mix emits significantly less GHG than other major countries, this is due to approximately <a href="https://www.iea.org/countries/brazil">60% of its electricity generation coming from hydro</a> and renewable accounting for approximately 80% of total electricity generation. This means that the industrial sector is not a major source of Brazil&rsquo;s GHG emissions, unlike other major economies, but rather following land use change, agriculture, is the transportation sector.&nbsp;
Following the Paris Agreement in 2015, countries must submit updated NDCs every five years that are more ambitious. Unfortunately, Brazil&rsquo;s updated NDC in 2020 attempted to use some methodological tricks to present a more ambitious target but was actually <a href="https://www.wwf.org.br/?77508/New-Brazilian-NDC-reduces-the-country-s-climate-ambition-against-the-spirit-of-the-Paris-Agreement">less ambitious</a> compared to its original 2015 NDC, increasing net emissions from 1.3 GtCO2e in 2025 and 1.2 GtCO2e in 2030 to 1.8 GtCO2e in 2025 and 1.6 GtCO2e in 2030. This further undermined Brazil&rsquo;s reputation as an environmental leader, something it seeks to recover now.
<h2>History of carbon market development in Brazil</h2>
Since the implementation of the Kyoto Protocol in 2005, which established the clean development mechanism (CDM), Brazil has seen many carbon credit projects developed, <a href="https://cdm.unfccc.int/Statistics/Public/CDMinsights/index.html">generating the third most CDM credits of any country</a>.&nbsp;
Importantly then, when Brazil introduced the concept of a national carbon market through the <a href="http://www.planalto.gov.br/ccivil_03/_ato2007-2010/2009/lei/l12187.htm">National Climate Change Policy</a> in 2009, this law covers, not just fixed sources, but also mobile sources such as public transportation, and importantly the agriculture sector. In the following years, there was little action from the public sector regarding the development of a carbon market, but the VCM continued to grow in Brazil through offset projects that were in large part accredited via Verra, the largest certification organization. The VCM in Brazil has rapidly increased since 2019 <a href="https://agro.fgv.br/sites/default/files/2023-05/ocbio_mercado_de_carbono_voluntario_no_brasil_na_realidade_e_na_pratica_en.pdf">ranking it fourth in the voluntary market</a> behind the US, India, and China.
Research and discussions around the Brazilian carbon market continued. The World Bank&rsquo;s Partnership for Market Readiness (PMR) provides technical assistance to Latin American countries. In the case of Brazil, <a href="https://www.thepmr.org/system/files/documents/Brazil%20PMR%20Project%20Implementation%20Status%20Report%202019_PA21.pdf">PMR worked</a> with the Ministry of the Economy to understand the impacts of a carbon tax or carbon market on relevant sectors, it found a carbon market under the cap-and-trade model to be the most appropriate mechanism. The Brazilian National Confederation of Industry also supports the establishment of a carbon market, since it will provide legal security and transparency without introducing an additional tax burden.&nbsp;
Importantly, the business sector began to recognize the opportunity around the VCM. In 2020, the Environmental Ministry implemented the <a href="https://www.biofilica.com.br/en/forest-carbon-ministry-of-the-environment-publishes-technical-note-on-program-implementation/">Forest+ Carbon Program</a>, which established the National Commission for REDD+ in Brazil, the development of a digital platform for project registration, and outlined acceptable methodologies that are aligned with the Paris Agreement. Then in 2021, the government passed the National Policy of Payment for Environmental Services (<a href="http://www.planalto.gov.br/ccivil_03/_ato2019-2022/2021/lei/L14119.htm">law 14,119/2021</a>) 2021. This national policy follows many state-level policies in Brazil.
<h2>Current debates around the carbon market in Brazil</h2>
In May of 2022, the Government issued <a href="https://www2.camara.leg.br/legin/fed/decret/2022/decreto-11075-19-maio-2022-792682-publicacaooriginal-165314-pe.html">Federal Decree 11075/2022</a>, which regulates the National Policy on Climate Change, making it a first step in establishing a carbon market. It outlined definitions of carbon credits, introduced the concept of sectoral plans for reducing emissions over time, and created the National Greenhouse Gas Emissions Reduction System (Sinare), which will be the central registry. However, it did not create the actual ETS, i.e., &lsquo;the rules of the game&rsquo;.
The election of Luiz In&aacute;cio Lula da Silva, popularly known as Lula, presented hope for Brazil to return to its leadership role in global environmental politics. Under his terms as president from 2003-2010, Brazilian deforestation fell dramatically due to increased funding and capacity for command-and-control style policy enforcement. Under the previous administration of Jair Bolsonaro, deforestation rose dramatically and environmental laws and regulations were undermined. Lula ran on an environmentally progressive ticket promising to restore the institutional capacity, but he cannot reuse the same formula as before since he faces a much less favorable global economic scenario and a conservative Congress that will not easily give in to his environmental agenda. The development of the Brazilian ETS is currently under debate by the government and Congress should consider the experiences of major ETSs and that of its neighbors in designing its own ETS.&nbsp;
Since the federal decree, debate in Congress has heated up around the creation and regulation of a national carbon market. One of the current bills discussed that could establish a carbon market is <a href="https://www.camara.leg.br/proposicoesWeb/prop_mostrarintegra?codteor=1965628">PL 528/2021</a>, it establishes an inventory system but leaves it up to the Ministry of the Economy to establish the design of the market, thus this bill does not establish GHG emissions limits, but rather suggests emission reduction plans per sector. Unfortunately, these laws do not clarify connections with the VCM or other international carbon markets. A more advanced bill is <a href="https://legis.senado.leg.br/sdleg-getter/documento?dm=9076235&amp;ts=1687447797525&amp;disposition=inline&amp;_gl=1*5sim62*_ga*MjA4MDkwMjU2NC4xNjg2MjY0NTY5*_ga_CW3ZH25XMK*MTY4NzUzNjM2Ni4zLjEuMTY4NzUzNzAwMC4wLjAuMA..">PL 412/2022</a>, which addresses aspects of integration with the VCM and provides an outline for a plan to develop the total amount of credits for the market. The current Brazilian government supports the creation of a carbon market and believes that an ETS could <a href="https://anba.com.br/en/carbon-market-could-increase-brazils-gdp-by-5/">increase the country&rsquo;s GDP by 5%</a> by 2030.&nbsp;
<h2>The Paris Agreement and carbon markets around the world</h2>
Under Article 6 of the Paris Agreement, an international carbon market will be established. One important tool of this article has become known as the sustainable development mechanism (SDM), the successor to the Kyoto Protocol&rsquo;s clean development mechanism (CDM), which is a means for the private sector to finance carbon-neutral or negative projects and receive carbon credits. Brazil is well-positioned to attract many projects in the areas of forest conservation, solar, wind, hydrogen, recycling, waste-to-energy, and energy efficiency.&nbsp;
Some of the major considerations when designing an ETS concern its cap level and here it is important to understand the country&rsquo;s emissions profile and which sectors should ultimately be included; in the case of Brazil, this must include the agriculture sector. The initial allocation mechanism, whether these will be marketed, based on historical emissions (&lsquo;grandfathered in&rsquo;), or benchmarking.
In addition, Brazil can look to its neighbors' endeavors to develop ETSs in similar social, political, economic, and environmental contexts. Mexico&rsquo;s ETS is currently finishing its pilot phase and beginning its fully operational phase. These ETSs of the region can provide important lessons for ETS design considerations such as pricing, GHG monitoring programs, impacts on sectoral competitiveness, and integration with other major ETS.&nbsp;
<h2>Conclusion</h2>
Brazil is back, as Lula declared at COP 27 in Egypt in 2022, but in order for the world to take him and Brazil seriously it needs to walk the walk and not just talk. Establishing a robust ETS that integrates with the strong VCM, and just as importantly, other major ETSs around the world will help reestablish Brazil as a green superpower which it can leverage in climate negotiations. The Brazilian government can reinforce its environmental bonafide by strengthening its GHG emissions reductions ahead of the next NDC update in 2025, not permitting new <a href="https://agenciabrasil.ebc.com.br/economia/noticia/2023-05/petrobras-vai-pedir-reconsideracao-de-licenca-na-foz-do-amazonas">offshore oil and gas development</a> at the mouth of the Amazon River,
In this context, the current debate around a market mechanism, such as an ETS offers a viable policy option to aid Brazil in meeting its GHG emissions reduction targets, shape the international debates surrounding Article 6 of the Paris Agreement, and help reestablish the country as an environmental leader. The establishment of a robust national carbon market will accelerate the decarbonization of important sectors of the Brazilian economy. This is crucial to these sectors&rsquo; competitiveness, especially in the wake of the <a href="https://taxation-customs.ec.europa.eu/carbon-border-adjustment-mechanism_en">EU&rsquo;s carbon border tax</a> and its <a href="https://environment.ec.europa.eu/topics/forests/deforestation/regulation-deforestation-free-products_en">deforestation regulation</a> aiming to rid supply chains of products associated with deforestation, the <a href="https://www.nytimes.com/2021/07/19/climate/democrats-border-carbon-tax.html">US is also considering a carbon border tax</a>.
The establishment of a national carbon market in Brazil will need to overcome confidence in the measuring, reporting, and validation (MRV) methodologies for the complex projects likely to be implemented in Brazil (e.g., questions of additionality and leakage in conservation projects). Still, Brazil has an enormous opportunity to become a major source of carbon credits in both the VCM and internationally regulated carbon markets. At this stage, it should prioritize integrating its carbon market with other major carbon markets and VCMs, and improve its skilled workforce. It will then be better positioned to shape the development of the international carbon market and the SDM.
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illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability &amp; Energy writers, their opinions do not necessarily represent those of illuminem.
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John James Loomis

John James Loomis

Brazil’s Amazon bioeconomy strategy: look to your neighbor!

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