Rule requires 600 large companies to report emissions - Valor International

The Finance Ministry issued an ordinance Thursday (29) defining the industries covered by Brazil’s regulated carbon market. The measure identifies the sectors subject to greenhouse-gas emissions monitoring, reporting, and verification (MRV) requirements and establishes a timetable for phased implementation. The rules will begin applying in 2027 to companies emitting more than 10,000 tonnes annually.

The Special Secretariat for the Carbon Market estimates that fewer than 600 large companies will have to begin reporting emissions, meaning they must provide precise information on how much carbon dioxide they release. The government aims to build an official database before Brazil’s regulated carbon market begins operating in 2030. The final text differs from the proposal submitted for public consultation on July 28 after several industries requested changes to the allocation of activities among the three implementation stages.

In an interview with Valor, Special Secretary for the Carbon Market Cristina Reis described the public consultation outcome as positive. The plan retains 17 sectors, without adding any new ones, but redistributes some activities among the timetable’s stages.

Reis argued that retaining the scope validates the federal government’s original proposal. The decision to move some industries into the first phase demonstrates that “the sectors already consider themselves mature and prepared and understand the value of regulation,” she noted.

Under the regulated market, greenhouse-gas emissions will be measured, reported, and limited by law. Companies emitting more than 10,000 tonnes a year will be required to monitor and report their emissions. Those emitting more than 25,000 tonnes annually will be subject to emissions caps.

The policy seeks to reduce greenhouse-gas emissions and encourage the development of low-carbon technologies. The overall emissions cap and rules for distributing Brazilian Emission Allowances (CBEs) are scheduled for 2030, when the National Allocation Plan (PNA) begins. The ordinance does not require immediate report submission, establish emissions caps, or impose costs on companies. Until the PNA takes effect, the Finance Ministry recommends monitoring regulatory developments.

Deputy Secretary José Pedro Bastos Neves believes the regulations could also create opportunities for Brazilian decarbonization solutions. The initiative offers a chance to promote technologies and decarbonization pathways developed in Brazil, he observed.

The first MRV stage begins in 2027 and covers aluminum, iron, and steel production at integrated mills; cement; oil and natural-gas exploration and production; pulp and paper; glass; selected chemical-industry activities; and iron-ore and bauxite mining.

Compared with the preliminary proposal, glass, iron-ore and bauxite mining, and some chemical-industry activities were moved forward to the initial stage. Oil refining and air transportation were removed from this phase.

The second stage, scheduled to begin by 2029, will cover ceramics, iron and steel production at semi-integrated mills, chemical-industry activities not included in the first stage, food and beverage manufacturing, mining of other mineral resources, oil refining, and the electric-power sector. Recycled aluminum, glass, solid waste, and sewage treatment are no longer included in the second phase.

The third stage remains scheduled for 2031 and includes road, rail, and water transportation, unchanged from the original proposal. Each stage provides a four-year preparation and adjustment period before the data is consolidated.

During the first year, companies must prepare a monitoring plan and submit it to the governing body of the Brazilian Emissions Trading System (SBCE) for approval. Effective monitoring begins in the second and third years, when companies measure and collect data on greenhouse-gas emissions and removals. In the fourth year, they will consolidate the data and submit an emissions report under the PNA.

According to Reis, removing solid-waste and sewage-treatment activities from the general timetable reflects the understanding that the law itself exempts activities proven to have sustainable-production attributes from direct obligations.

“To encourage decarbonization—and here we are talking mainly about methane emissions from the waste sector—the best approach is for these activities to operate in the voluntary market by generating carbon credits,” she explained.

Reis added that the mechanism could also help expand waste treatment and encourage the elimination of open-air dumps.

The Finance Ministry also granted an aviation-industry request to align its MRV timetable. “Instead of placing air transportation in stage one, we determined that the requirement will take effect when ProBioQAV, a program focused on the sustainable aviation fuel market, is regulated,” she summarized.

Taciana Stec, an expert at the Talanoa Institute, considers the change to the first-stage timetable positive. She cautioned, however, that it remains unclear how forest carbon credits will be integrated into the regulated market. Marta Salomon, a senior expert at Talanoa, argued that once emissions caps take effect, the system will begin fulfilling its goal of reducing emissions from carbon-intensive industries.