The Carbon Market and its Regulation in Brazil
By Gabriel Wedy, Weber Amaral and Cacia Pimentel,
At present, the global geopolitical scenario is based on an economy undergoing a post-pandemic recovery, with inflation unleashed in various developed countries and a war conflict in Europe, which entails an overall increase in energy prices, food insecurity and a breakdown of supply chains. Under such circumstances, the outlook is one of enormous pressure on the mitigation and adaptation plans of the United Nations, which seeks to revert climate warming caused by human actions in the post-industrial revolution era. The watchword is decarbonizing the global economy by reducing greenhouse gas (GHG) emissions and changing carbon-intensive production regimes. Indeed, countries, companies, and organizations need to increase energy efficiency, reduce or eliminate the use of fossil fuels and increase rates of carbon sequestration and long-term carbon storage. While there is consensus that decarbonization is imperative for human survival, post-pandemic realities and international conflicts have created energy and food insecurity that obstruct the path to a low-carbon or even zero-carbon economy.
In the world, the economic sectors with the greatest emissions are the Fossil Industry, Agriculture and Transportation. Changes in the production cycle in order to include new technologies that can mitigate emissions do not occur fast enough to reap their benefits, especially because of the economic costs involved in these changes. With a focus on the agricultural sector, this chapter will demonstrate how the carbon market is an effective and economically fundamental way to enable the implementation of protocols, public policies and legal strategies—taking into account the constitutional principles and the most progressive and sustainable precedents laid down by two Brazilian Superior Courts (i.e., the Supreme Federal Court and the Superior Court of Justice, which recognize a balanced environment as a third generation fundamental right or as one of a very new dimension—that will reduce emissions from the agricultural sector while minimizing the costs of these changes, ultimately giving shape to a virtuous economic and environmental circle.
Agriculture encompasses human activities for the production of food and fiber that are essential to sustain life on Earth. Because of its capacity to simultaneously emit and sequester carbon, it is necessary to choose appropriate legal strategies and agricultural technologies that encourage and provide neutral or negative emissions. However, there is a cost associated with such changes in these complex production cycles. Data made available by the Intergovernmental Panel on Climate Change (IPCC) show that global population growth and changes in per capita consumption after the Second World War, especially for food, feed, fiber, wood and energy, caused an unprecedented increase in water and land use, with a major expansion of agriculture over forested areas and the loss of ecosystems.
On the one hand, there is illegal deforestation within the context of land use, technically defined by the IPCC as the unsuitable management practices of Agriculture, Forestry and Other Land Use (AFOLU) causing erosive and predatory degradation and responsible in themselves for approximately 13 percent of total carbon dioxide and 44 percent of methane (CH4) emissions in the period 2007-2016, i.e., an average of roughly 24 percent of total emissions. On the other hand, sustainable agricultural activities make up an important GHG sink, assuming a central role in decarbonizing the economy. And, in this regard, Brazil can contribute more quickly to carbon sequestration through strict measures against deforestation and the adoption of increasingly advanced and sustainable techniques to replace more carbon-intensive farming practices. As we will see below, a correct regulatory framework can help agriculture put into force new production processes adapted to a low carbon reality and, furthermore, it can also assign a compensatory monetary value for new practices that will generate social and environmental benefits due to emissions mitigation. This new mechanism is called the carbon market.