Bill 412/2022 was approved by the Federal Senate’s Environment Committee on October, 4. Responsible for regulating the Brazilian Emissions Reduction Market, the main objective of the Bill is to “encourage the reduction of greenhouse gas emissions by means of an emissions trading system that internalizes the costs of carbon emissions for companies”.

The regulatory structure discussed aims to implement a carbon pricing system to limit greenhouse gas emissions in Brazil. If companies exceed emission limits, they have two options: to buy carbon credits or to reduce emissions. The Bill deals, among other issues, with:

• principles and characteristics of the Greenhouse Gas Emissions Trading System (“Emissions Trading System”);
• bodies and committees that will make up the Emissions Trading System;
• assets that will be traded in the Emissions Trading System: Brazilian Emissions Quota and Verified Emissions Reduction or Removal Certificates;
• taxation of assets under the Emissions Trading System: the gain on the sale of carbon credits and the aforementioned assets will be subject to income tax, and the sales revenue will not be subject to the Social Integration Program (PIS) and/or the Contribution to the Financing of Social Security (COFINS);
• penalties for non-compliance with the rules: there are six and they can be applied cumulatively or separately: warning; publication of a condemnatory decision; fine; embargo of activity, unit or installation; partial or total suspension of activity; and restriction of rights;
• the transitional period for the implementation of the Emissions Trading System: subdivided into 5 phases, from the publication of the Bill’s regulations to the full implementation of the Emissions Trading System.

By André Martin and Leonardo Baroni.