ENVIRONMENTAL MINISTRY DETAILS THE IMPLEMENTATION OF THE FOREST+ CARBON PROGRAM AND DISCLOSES THE BRAZILIAN GOVERNMENT POSITION ON NEGOTIATIONS REGARDING THE PARIS AGREEMENT

On April 5, 2021, the Secretariat of the Amazon and Environmental Services of the Environmental Ministry (MMA) enacted the Technical Note No. 353/2021. The Technical Note elaborates on the implementation of the Forest+ Carbon program and discloses the Brazilian Government position regarding to the implementation of Article 6 of the Agreement Paris, which addresses market instruments aimed at reducing greenhouse gas emissions.

Please find below the main aspects contained in the Technical Note:

(i) MMA instituted the Forest+ Program to stimulate the market for payments for environmental services related to the conservation and recovery of native vegetation. The modality Forest+ Carbon was created aiming to engage the private sector in the conservation of native forests by offsetting emissions in the voluntary market.

(ii) The voluntary carbon market arose in parallel with regulated markets to allow resources to flow from companies and individuals (buyers) to project developers and implementers (sellers) that produce measured, reported and verified mitigation climate change results, under the logic that the acquired emission reductions will offset emissions from buyers. Based on the identified opportunities, the projects are developed, the results are quantified, certified and audited, generating credits that can be sold and retired in the voluntary market.

(iii) The denomination “voluntary carbon market” highlights the eminently voluntary nature of these transactions and aims to meet the demand of companies, institutions and individuals that independently and voluntarily determine their own goals for offsetting GHG emissions, without legal or formal with regulated markets.

(iv) REDD+ is one of the main sources of international fundraising for the development of national and subnational public policies to combat deforestation and represents an opportunity for Brazil to attract international public investments for the conservation of Brazilian forests.

(v) In this scenario, there is no relationship between REDD+, public policy financing for climate change based on the results of reducing deforestation and degradation and Forest+ Carbon, which is a voluntary market for carbon credits from native forests based on payment for environmental services that result in the increase and/or carbon stock in native forests.

(vi) The implementation of the Forest+ Carbon Program involves three distinct phases:

(a) Recognition: approval of the resolution about the National Commission for REDD+, which recognizes the contribution of the voluntary forest carbon market to reduce deforestation and degradation of native vegetation;

(b) Registration: development of a digital platform to start the registration of projects, with a high degree of demand in relation to the co-benefits of the projects and compliance with safeguards, with their specific characteristics, following the strategy of disseminating the initiatives for their enhancement and monitoring of the voluntary market. In the first two phases, there will be no provision for any obligation related to the discount, adjustment or registration with the accounting in the national emissions inventory by the Federal Government; and

(c) Regulation: developed from the future consolidation of the regulation of international regulated markets possibly based on the criteria of Article 6 of the Paris Agreement, but which is still pending consensus between the Parties.

(vii) For the future integration of the voluntary project markets into international compensation systems, it is necessary to evaluate the measurement, reporting and verification methodologies aiming at credibility. Accounting for voluntary carbon credits when it becomes regulated should avoid “double counting”, promote harmonization between the National REDD+ FREL (Forest Reference Emissions Level) and make appropriate discounts. Finally, it should also make corresponding international adjustments when necessary, thus building a path to guarantee the best harmonization between voluntary corporate policies and regulated markets on emission’s reduction.

(viii) The advent of the Paris Agreement, however, presents new challenges for GHG accounting with the definition, by means of NDC, of ​​mitigation targets for all countries and the definition, still pending, of the new framework for international trade in emissions. The rules, sectors and activities eligible to participate in these internationally regulated markets are not yet defined.

(ix) The next UNFCCC Conference of the Parties (COP), to be held in November 2021, will bring a new round of negotiations in order to establish how and if this regulated market will work. In view of the fundamental misconceptions referring to Article 6 of the Paris Agreement, any definition by the Brazilian government about an accounting system at this time would be inopportune.

(x) MMA, as the Executive Secretariat of the National Commission for REDD+ (CONAREDD +), has closely followed all relevant Article 6 discussions or possible bilateral agreements. In due course, MMA will conduct relevant measures to facilitate the country’s best participation in carbon markets, both in international regulations and in volunteers.

Our environmental law team is available for further clarification.