What to Expect from Brazil’s Regulated Carbon Market

On 4 August, during São Paulo Climate Week, I attended an event organised by the National Confederation of Industry (CNI) and the São Paulo State Federation of Industries (FIESP) on the convergence of Brazil’s carbon market instruments. During the event, I found myself thinking back to a course from my PhD programme.

It was 2002, and the course was Environmental Economics, taught by Prof. Maurício Tolmasquim. The textbook was Economics of Natural Resources and the Environment (1990), by David W. Pearce and R. Kerry Turner. I revisited it recently and found it still very useful, even for non-economists like me. I recommend it. The authors were already discussing economic instruments such as taxes and tradable pollution permits, the basis of a regulated carbon market. They also addressed the importance of public policy in tackling climate change, despite the scientific uncertainties of the time, and had already set out the concept of the “circular economy”.

Above all, the course and the book helped me understand the importance of integrating externalities into business cost structures as a tool for promoting sustainable development.

Fast forward to December 2024, 22 years after that course, when the President of Brazil signed Act 15,042, establishing the Brazilian Greenhouse Gas Emissions Trading System (SBCE, Sistema Brasileiro de Comércio de Emissões). It took time, and it took effort.

In Brazil, several business organisations working on sustainability, and on climate change in particular, played an important role. A collective initiative, the Business Climate Initiative (IEC), brought together CEBDS, the Ethos Institute, the UN Global Compact, FGVces, CDP and Envolverde, and adopted a position in favour of carbon pricing in 2016.¹ Sector organisations also engaged. Abiquim, the Brazilian Chemical Industry Association, took an important step when it published a position in favour of a carbon market in 2020.² CNI, FIESP and others later took a favourable position as well. Globally, the World Bank’s Carbon Pricing Leadership Coalition played an important role, and the World Bank continues to track the subject in its annual State and Trends of Carbon Pricing report.

I was personally engaged with these organisations in supporting the implementation of a system like the SBCE in Brazil. I confess it was not easy to argue that a system putting a cost on greenhouse gas emissions would benefit industry. Fortunately, reason prevailed, these organisations continue to work on the system’s implementation, and the federal law was finally enacted at the end of 2024.

In 2026, with the first steps of Act 15,042 being implemented, Brazil’s carbon market is entering a new phase. The country already has an operating voluntary carbon market, with a strong presence of forestry, restoration and nature-based solutions, and it now has the legal framework to build a national regulated market.

Today, the voluntary market is the main channel for trading carbon credits, but this will change significantly in the coming years as the SBCE is implemented.

From 2030 onwards, the SBCE will allocate emission allowances to the sectors with the highest greenhouse gas emissions, including oil and gas, pulp and paper, cement, steel, aluminium, chemicals and transport, through the National Allocation Plan (PNA). Primary agribusiness was explicitly excluded from the system, which drew considerable criticism. Even so, Act 15,042 is an important step, and business organisations remain engaged in the discussion of its regulation because they have a direct interest in it.

One element of the SBCE will be crucial: the National Allocation Plan. If the plan is demanding, there will be demand for credits and economic incentives to reduce emissions. If it is weak, there will be neither.

Several Brazilian companies have been preparing for this moment. Companies in regulated sectors that emit more than 10 kt CO₂e per year will be included in the system, at least to report their emissions. In Brazil, companies with annual electricity consumption above 150 GWh (about 12,500 MWh per month) are very likely to exceed that threshold.³ Companies that emit more than 25 kt CO₂e per year will also be included in the cap-and-trade system: they must comply with the limits set by the PNA and will be able to trade emission allowances.

Until 2030, the voluntary market will continue to look for its place, supplying companies that buy carbon credits as part of their business strategies. In recent years this market has gone through ups and downs for many reasons, mainly changes in legal requirements outside Brazil and differences in project quality. With the full implementation of the regulated market in 2030, requirements in the voluntary market are expected to rise, with a stronger focus on integrity. Part of the voluntary market’s credits will therefore be able to meet demand in the regulated market, if the National Allocation Plan is demanding, but not all of them.

The voluntary carbon market

The voluntary carbon market in Brazil remains relevant, but it is more selective than in past years. Data from the Ministry of Finance’s Extraordinary Secretariat for the Carbon Market point to a market of about 9 million credits traded, an average price close to US$16 per credit and an economic potential of around R$800 million (about US$160 million).⁴ Prices have varied widely around this average. High-integrity credits have traded at US$25 to US$45, and low-integrity credits at US$4 to US$10.⁵ Evaluation criteria include additionality, robustness of the baseline, quality of monitoring, permanence, risk of reversal, leakage, double counting and socio-environmental safeguards.⁶

As a result, the market no longer treats credits as a homogeneous product.

There is now a clear distinction between premium credits, with greater traceability and lower reputational risk, and cheap credits, with greater methodological uncertainty or lower market confidence.

In Brazil, the least trusted credits have been those from reducing emissions from deforestation and forest degradation (REDD+). The most trusted have been removal credits from the restoration and recovery of degraded areas, with good documentation, a solid baseline and ongoing third-party verification. Restoration projects in the Amazon have recorded transactions in the range of US$55 to US$74 per tonne.⁷

On the supply side, several developers have gained scale with forest-related projects, including Systemica, brCarbon, re.green and Mombak.⁸ On the demand side, the market has been driven by large companies, mainly multinationals, such as Eni, Natura, EY, Bayer, Petrobras, Localiza and Telefônica.⁹

The market is expected to grow from US$2.7 billion in 2025 to US$25.2 billion in 2034, an annual growth rate of more than 28%.¹⁰

The regulated market and the implementation of the SBCE

Act 15,042 created the SBCE and defined the basic structure of Brazil’s regulated carbon market. Its full implementation, however, still depends on secondary regulation, the construction of its governance, a monitoring, reporting and verification (MRV) system and, above all, the publication of the first National Allocation Plan.

The official schedule published by the Ministry of Finance organises implementation in five phases:¹¹

1. 2025–2026Regulation
2. 2027MRV system becomes operational
3. 2028–2029Monitoring plans and first reports
4. 2030First National Allocation Plan
5. 2030 onwardsFull operation of the SBCE

Legally, the SBCE already exists, but the regulated market should only be fully functioning by 2030, or later.

The PNA will define the emissions cap, the number of Brazilian Emission Quotas (CBEs), the allocation rules, the maximum share of Certificates of Verified Emission Reduction or Removal (CRVEs) that can be used, and price stabilisation mechanisms.¹¹

The Ministry of Finance has also proposed a staggered entry of sectors into the system, starting with monitoring, reporting and verification. The proposal was open for public consultation until 28 August 2026:¹²

2027

Pulp and paper · integrated iron and steel · cement · primary aluminium · oil and gas exploration and production · oil refining · air transport

2029

Mining · recycled aluminium · semi-integrated iron and steel · electricity · glass · ceramics · food and beverages · chemicals · waste and sewage treatment

2031

Road, waterway and rail transport

Once the SBCE is fully operational, these sectors are likely to be among the main buyers of credits if a demanding emissions reduction curve is defined, or sellers of surplus allowances if the curve is less demanding.

Voluntary reforestation projects that recover degraded areas are expected to become credit suppliers, provided their methodologies are accepted by the regulated system. This is an important caveat, as the SBCE has not yet defined any methodologies.

How the voluntary and regulated markets will relate

The design of the SBCE is likely to reorganise the voluntary carbon market. Experience in Europe suggests the voluntary market will continue to exist, but at a much smaller scale than the regulated one.¹³ The main expected change is a clearer hierarchy between credits that can interact with the regulated market and credits that remain restricted to voluntary use. Project integrity will be decisive in setting the value of credits in the voluntary market.

Act 15,042 establishes that voluntary credits can only be used in the SBCE if they are converted into CRVEs. That requires an accredited methodology, adequate measurement and reporting, independent verification, registration in the SBCE Central Registry and compliance with the limits defined by the PNA.

In other words, not every voluntary credit will be able to migrate to the regulated market.

This point is crucial to understanding how prices will form. If the SBCE comes with a demanding emissions cap and a tight limit on offsets, high-integrity voluntary credits may gain value. If, on the contrary, the PNA brings a very loose allocation, with excess allowances or flexibility, demand pressure on the market should fall.

The effect of the SBCE on the voluntary market is therefore still unknown, all the more so because regulated sectors may push for a “palatable” reduction curve that does not undermine their competitiveness against imports from countries without a similar system. Looking at what the European Union is doing, border carbon adjustments may also be part of the solution for Brazilian companies to avoid that loss of competitiveness.

Perspectives for the coming years

In the coming years, Brazil should establish itself as one of the main carbon markets among developing countries. With the SBCE, the trend is towards greater institutionalisation, through legal governance, and stricter integrity requirements, with a sharper separation between high- and low-quality climate assets.

In the voluntary market, demand for higher-integrity credits is expected to continue, especially for restoration, removal and forestry projects with strong traceability, social and environmental benefits, and good governance. Lower-quality credits should continue to face strong competitive pressure, reputational scrutiny and significant price discounts.

In the regulated market, the decisive factor will be the content of the first National Allocation Plan. It will set the stringency of the system, the pace at which sectors enter, the volume of allowances in circulation and the real room for using voluntary carbon credits.

The issue deserves the attention of Brazilian companies, especially industrial ones. Large companies have already been reporting their emissions, mainly through the GHG Protocol, and should have no difficulty adopting the SBCE’s MRV system. However, reporting will be required of any company that emits more than 10 kt CO₂e per year, and companies emitting more than 25 kt CO₂e per year will also enter the cap-and-trade system, which calls for a sector-level strategy and engagement. That requires coordination.

The most plausible future is a two-tier ecosystem: a regulated market focused on compliance, and a voluntary market increasingly polarised between high-integrity and lower-integrity credits.

The first and most important tier will be a regulated carbon market focused on compliance, with clear rules and emissions reconciliation. The second will be a voluntary carbon market that will probably continue to exist, but increasingly divided between high-integrity credits with premium prices and lower-integrity credits with lower economic and reputational value.

Strategic implications

For large Brazilian emitters, the potential buyers, the main implication is that using carbon credits will no longer be a reputational decision. Positioning themselves as buyers or sellers of credits will require a sophisticated technical analysis of mitigation options (using marginal abatement cost curves, or MACCs, for example), the eligibility of carbon credit projects, regulatory risk, methodological quality and the cost of compliance.

For Brazilian developers of carbon credit projects for the voluntary market, the challenge will be to demonstrate the integrity of their projects over time and, ideally, to adapt them to the requirements the SBCE will define.

For Brazil, which already has a relevant voluntary carbon market and a regulated market under construction, there is another strategic question: the integration of its national systems with the multilateral system. Depending on how this integration, or interoperability, is designed, the local consequences could be significant. Brazil may have an opportunity to become a credit supplier to the multilateral system, or it may not.

This deserves a separate analysis.

Notes and sources

1. Plataforma Net Zero, position on carbon pricing mechanisms. plataformanetzero.com.br, accessed 3 September 2026. ↩
2. Abiquim. abiquim.org.br, accessed 3 September 2026. ↩
3. Based on the 2025 average electricity emission factor published by EPE in the National Energy Balance 2026 Synthesis Report (67.4 kg CO₂e/MWh). If the electricity comes from a specific source, the value may be very different. ↩
4. Extraordinary Secretariat for the Carbon Market, Ministry of Finance (2026), introductory presentation. ↩
5. zsassociados.com, accessed 2 September 2026. ↩
6. ICVCM, The Integrity Council for the Voluntary Carbon Market (2024), Core Carbon Principles, Assessment Framework and Assessment Procedure. ↩
7. decarbonfuse.com, accessed 2 September 2026. ↩
8. carbonherald.com and carboncredits.com, accessed 2 September 2026. ↩
9. sylvera.com, accessed 2 September 2026. ↩
10. imarcgroup.com, accessed 2 September 2026. ↩
11. Ministry of Finance and others (2024), SBCE Implementation Roadmap. ↩
12. Ministry of Finance, public consultation on the proposed MRV schedule for the regulated carbon market. gov.br, accessed 3 September 2026. ↩
13. The European voluntary market is estimated at US$215 million (marketdataforecast.com), while the regulated market (EU ETS) reached about US$887 billion, or €777 billion (2eu.brussels), around 0.02% of its size. Accessed 3 September 2026. ↩