CARBON ACTIVITIES

Carbon Activities in Brazil

Carbon Activities in Brazil

Introduction

Energy from carbon-based fuels has been essential in the industrialization of society. The emissions from the use of these fuels include several greenhouse gases, and carbon dioxide is the principal component of the various greenhouse gases emitted. A market-based method to control carbon dioxide emissions into the environment has resulted in the development of commodified emissions rights and systems for trading in these rights. Emission trading markets that focus on carbon dioxide and carbon dioxide equivalents are known as carbon markets. In emissions markets, permitted quantities of emissions below a defined ceiling or cap are tradable and can be sold to others whose emissions are higher than the cap. In carbon markets, tradable emissions are denominated in tonnes or metric tons of carbon dioxide or carbon dioxide equivalents. Markets may be regulated by governments or nongovernmental organizations or be self-regulated by the participants. National authorities can operate regulated markets under their own initiative as well as implement international agreements such as the Kyoto Protocol. The Kyoto provisions at Article 17 include regulated carbon trading between signatories to the agreement as well as offsets between signatories and nonsignatory countries. Under Kyoto, offsetting can be through the Clean Development Mechanism and Joint Implementation mechanisms. In addition, nongovernmental markets operate within several jurisdictions, and several transnational brokerages also facilitate offsets globally.

Discussion

Emissions Trading and Carbon Trading in Brazil: Background

Brazil a country located in South America and is the largest economy in Latin America, does not have any laws that deal with the legal nature and ownership of carbon credits or rights to greenhouse gas emission. Brazil provided 26% of volume in carbon credit supply in 2010 second in Latin America after Peru.

Brazil is expected to implement a policy that will help with the issue. The Brazilian Climate Change Policy, which will help to develop an organized Brazilian carbon market that will be overseen by the Brazilian Securities and Exchange Commission. The commission is intended to help understand the nature and ownership of tradable carbon rights.

In this program, the Brazil put an overall “cap” on total sulfur dioxide (SO2) emissions from power plants and, starting in 1995, existing power plants were allocated allowances to emit SO2 that could be bought, sold, or banked for future use. This allowed companies to choose whether to buy additional permits and proceed with current emission levels or to lower their emissions to stay within their cap. By 2005, SO2 emissions declined 35 percent from 1990 levels, resulting in improved air quality and reduced sulfate deposition in the Brazil. This program succeeded in reducing emissions above and beyond legislative requirements and cost much less than anticipated, leading to the widespread view that the cap-and-trade approach was more effective and economical in reducing pollutant levels than the command-and-control approach would have been.

The cap-and-trade model that successfully helped to reduce sulfur dioxide emissions in the Brazil has been applied to reducing emissions of carbon dioxide and other GHGs and is broadly referred ...