Legal Aspects of Emission Reductions and Carbon Credits under Evolving Climate Finance Mechanisms in Brazil

Brazil broke some ground by submitting an absolute GHG-reduction goal under the Paris Agreement, but the country must now cope with implementing the needed regulatory tools promote public and private climate action. Climate financing has evolved substantially in the past years, ranging from crediting systems, to results-based payments, to carbon pricing instruments. However, Brazil still lacks clear-cut legal guidance applicable to mitigation activities and resulting emission reductions (ERs), requiring practitioners to turn to existing legal institutes and interpret these in accordance with current practices and mechanisms. In this sense, attributing to ERs the legal status of a civil law fruit could be a move towards overcoming a number of practical legal issues (although admittedly not solving all of them). For REDD+ activities in particular, additional legal complexities associated with federate entities’ constitutional prerogatives, diffuse interests in environmental goods, as well as public versus private law considerations come to the fore and will demand careful and balanced regulation. At subnational level, State of Acre is currently attempting to strike that regulatory balance in implementing its REDD+ jurisdictional programme. Whether other Brazilian states will follow suit and advance with their REDD+ regulations will partly depend on the next moves of the recently created REDD+ Commission. Meanwhile, at national level, the country is now expected to turn its attention to fleshing out the design of a legally binding carbon pricing regime in the form of a cap-and-trade, a carbon tax or a hybrid instrument. While the current political environment is certainly not conducive to passing any laws on the matter, there is convergence in that Brazil can no longer be expected to act merely as an ‘exporter’ of carbon credits through a CDM-like mechanism and that the country is now required, in the face of the Paris Agreement, to define long-term and predictable policy instruments to bring about the pledged GHG reductions by 2025 and 2030.