Environment

New decree intensifies tensions in the carbon credits market

The Bolsonaro government has issued a decree pushing back carbon credit targets for fuel distributors, and causing discontent in the biofuels sector

carbon credits Natural gas plant São João, Bahia. Photo: Joa Souza/Shutterstock
Natural gas plant São João, Bahia. Photo: Joa Souza/Shutterstock

In late July, the Brazilian government issued a decree regulating the postponement of targets for the purchase of carbon credits, called CBios. While the measure was applauded by fuel distributors, for whom it came as a relief given the high prices of these credits recently, it was harshly criticized by representatives from the sugar and ethanol production sector. 

The decree, however, is only the latest development in an escalating tug-of-war between the two sectors.

The text issued by the Jair Bolsonaro administration stipulates that fuel distributors will exceptionally have until September 2023 to prove that they met their 2022 carbon credit goals. In subsequent years, the deadline for this, which had initially been set at December of the same year, will be pushed back to March 31 of the following year.

For ethanol and biodiesel producers, this affects the stability and credibility of the RenovaBio program — a government policy created to help Brazil meet commitments made within the framework of the Paris Agreement on climate change. The CBios carbon credits are one of the pillars of the RenovaBio program.

According to the biodiesel sector, the decree will generate insecurity internationally regarding Brazil’s capacity to meet its goals on the mitigation of greenhouse gas emissions. 

Each CBios credit is equivalent to one ton of greenhouse gas emissions avoidance. They have been issued by biofuel producers and traded on the Brazilian stock exchange since 2020. 

The credits can be then acquired by anyone in a spontaneous purchase, as well as...

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