A new hope for net-zero? Insights from the new Brazilian Carbon Market framework

Navigating the Impact of Brazil’s New Carbon Market

Brazil has approved a carbon market, known as the Sistema Brasileiro de Comércio de Emissões (SBCE), marking a major milestone in the country’s climate policy. The SBCE will establish sectoral emission caps and create a regulated trading system where companies that emit below their limits can sell surplus credits, while those that exceed their quotas must purchase allowances to comply with regulations.

With this initiative, Brazil aims to incentivize emission reductions, maximize environmental benefits, and create financial opportunities, aligning its economy with global decarbonization trends.

Our recent public report, A new hope for net-zero? Insights from the new Brazilian Carbon Market framework, provides a deep dive into the challenges and opportunities of Brazil’s new carbon market.

Key insights include:

Brazil’s carbon market is set to launch by 2029 under a cap-and-trade system, covering all sectors except agriculture. The scheme will apply to entities emitting over 10,000 megatons of CO₂ annually, targeting sectors responsible for 51% of the country’s emissions.
In the power sector, the introduction of a carbon market will increase thermal generation costs, making the wholesale market more volatile. During peak hours, when thermal plants are dispatched, prices are expected to rise by 8%, strengthening the business case for technologies that generate in these hours, such as onshore wind.
A carbon price of R$160/MtCO₂ led to a 31% reduction in emissions. In this scenario, the carbon market generated nearly R$60 billion from quota allocations and trading which can be directed toward government initiatives.