Brazil weighs carbon market law ahead of COP26

Brazilian lawmakers are rushing to approve new carbon market legislation to avoid going empty-handed to COP26 climate talks in Glasgow in November.

Congressmen in Brasilia held public hearings on 17 September to advance a bill under consideration in the lower house that would create and regulate a national carbon market.

Local industry and agriculture have been pressuring lawmakers to improve Brazil's international image on the climate front for fear of retribution in the form of trade restrictions on Brazilian exports.

The country has drawn heavy criticism for a surge in Amazon deforestation and a presidential response seen as tepid at best, chilling diplomatic relations with countries in North America, Europe and Asia. Speaking at the UN General Assembly yesterday, President Jair Bolsonaro said that Brazil has preserved 84pc of its forests, and claimed that the country has the world's most comprehensive environmental legislation.

Under the current legislative proposal, Brazil would have a voluntary carbon market for the first five years and would slowly adopt decarbonization targets for specific segments of the economy over that period. The bill also aims to monetize standing forests by issuing credits for environmental preservation.

Roughly half of Brazil's greenhouse gas emissions come from deforestation, according to a recent study presented by former Brazilian finance minister Joaquim Levy.

"For Brazil to cut emissions significantly, it has to reduce deforestation," Levy said in a recent webcast, adding that on nearly all other fronts, Brazil is far ahead of the rest of the world toward decarbonizing its economy.

Brazil's leading industry association CNI favors the establishment of a domestic regulated carbon market as the next step toward meeting the country's pledge established after the 2015 Paris climate talks. Brazil set a goal of reducing its CO2 emissions by 43pc from 2005 levels by 2030.

In a study commissioned by the International Chamber of Commerce, Latin American sustainability consultants WayCarbon estimated that Brazil could generate up to $100bn in carbon credits by 2030, equivalent to the removal of 1bn tons of CO2 equivalent over the next decade from the agriculture, forestry and energy sectors.

The author of the carbon market bill, Amazonas state congressman Marcelo Ramos, says he hopes the legislation will pass by November to show the world that the Brazilian legislature is concerned about climate change. Opposition to the bill is expected to be limited, as the legislation already has solid support from the business community.