On May 19th, 2022, the Brazilian Federal Decree No. 11,075/2022 was published, establishing the procedures for formulation of so-called “Sectorial Plans for Mitigation of Climate Changes” (“Sectorial Plans”), provided by the sole paragraph of the Article 11 of the Brazilian Federal Law No. 12,187/2009. The Decree also established the National System for Reduction of Greenhouse Gas Emissions (“Sinare”), with the purpose of serving as the sole venue for trading of carbon credits in Brazil.
The Brazilian Federal Law No. 12,187/2009 also established the National Policy on Climate Change, determining that the Executive Branch must establish the Sectorial Plans aiming to consolidate an economy with low carbon consumption in the following sectors:
(i) generation and distribution of electrical energy;
(ii) urban public transportation;
(iii) modal systems of interstate transport of cargo and passengers;
(iv) manufacturing and consumer durables industry;
(v) fine and base chemical industry;
(vi) paper and cellulose industry;
(vii) mining;
(viii) civil construction industry;
(ix) healthcare services; and
(x) agriculture.
In turn, the Brazilian Federal Decree No. 11,075/2022 attributes to the Ministry of the Environment, Ministry of the Economy, and other sectorial ministries (as the case may be), the power to propose the Sectorial Plans, which must be approved by the Interministerial Committee on Climate Change and Green Growth (“CIMV”), created pursuant to the Brazilian Federal Decree No. 10,845/2021 (whose Article 1 determines that the CIMV has the purpose of establishing guidelines, and articulating and coordinating the implementation of Brazilian public actions and policies related to climate change).
The Sectorial Plans will establish gradually more restrictive targets for reduction of greenhouse emissions and their removal via carbon sinks, with observance of the long-term objectives assumed by Brazil as a signatory of the Paris Agreement. These targets will be monitored by means of periodic presentation of inventories by agents belonging to the listed sectors (“Sectorial Agents”), to be defined in the respective Sectorial Plans.
Furthermore, the time frames and rules for updating the Sectorial Plans must be in line with Brazil’s commitments assumed under the Paris Agreement. Nevertheless, the Sectorial Plans will be able to establish different timetables for adhesion of the Sectorial Agents that are members of the Sinare and define differentiated treatment to these agents, by considering, among other criteria: (i) the category of the companies and rural properties; (ii) the gross revenue; (iii) the emission levels; (iv) the characteristics of the economic sector; and (v) the region of location.
The Decree establishes also that the Brazilian Market for Reduction of Emissions will constitute an environmental management mechanism and will be the instrument to put the Sectorial Plans into operation, also serving as a tool for implementation of emission reductions through the use of trading of carbon credits that are registered with the Sinare (“Certified Credits”).
In this respect, the Sinare will function as a single venue for registration of emissions, removals, reductions and offsets of greenhouse gases and acts for trading, transfer and retirement of Certified Credits.
The Sinare will be operationalized by the Ministry of the Environment, through a digital tool with instruments for (i) the registration of emissions, reduction and removals of greenhouse gases and acts for trading, transfer and retirement of Certified Credits; (ii) the mechanisms for integration with the regulated international market; and (iii) the registration of inventories of emissions and removals of greenhouse gases.
Moreover, the Sinare will also enable, without the need to generate Certified Credits, the registration of (i) carbon footprints of products, processes and activities; (ii) carbon of native vegetation; (iii) carbon in the ground; (iv) blue carbon; and (v) carbon stock units.
Finally, the Brazilian Federal Decree No. 11,075/2022 specifies that the sectors subject to the Sectorial Plans will have 180 days counted from its publication date (extendable for an equal period) to present their proposals to establish reductions, considering the long-term goal of carbon neutrality assumed by Brazil according to the Paris Agreement.
More information, as well as the full text of the Brazilian Federal Decree No. 11,075/2022, can be found at the “Planalto” portal of the website of the Brazilian government (www.gov.br/planalto).
