Brazil to cap carbon emissions for large polluters

Brasilia: Brazil will create a cap on carbon dioxide emissions for large polluting companies as part of a broader green transition initiative meant to help the country reach CO2 neutrality by 2050, according to one of the plan’s architects.

President Luiz Inacio Lula da Silva’s plan will include the creation of a regulated carbon market, as well as measures to gradually end subsidies for fossil fuels and stimulate the use of electric public transportation vehicles, said Rafael Dubeux, who is coordinating the programme as a special adviser to Finance Minister Fernando Haddad.

“These are very deep changes that will involve all sectors of the economy,” Dubeux said during a Tuesday interview in Brasilia, the capital. “The plan means more jobs, higher gross domestic product and income for Brazilians.”

The regulated carbon market will affect around 5,000 companies that annually emit more than 25,000 tonnes of CO2 equivalent into the atmosphere. Sectors like steel and cement, the chemical industry and aluminium manufacturers are likely to face the most immediate effects.

The government has not yet determined a level for the cap. But it plans to gradually lower it each year until emissions are neutralised, Dubeux said.

“This encourages companies to invest in decarbonisation and innovation,” Dubeux said. “And there will be strong market surveillance. We are very concerned with ensuring that the Brazilian carbon credit has a lot of international credibility.”

The measures are the start of an “ecological transformation” of Latin America’s largest economy, Haddad said last week, that will seek to deliver on Lula’s campaign promises to simultaneously boost growth and enact an aggressive environmental agenda.

Brazil has long been at the centre of global climate change discussions. It is home to the majority of the Amazon Rainforest and boasts one of the world’s cleanest energy mixes based on hydroelectricity and renewable fuels for transportation.

But its overall emissions have bucked global trends and risen in recent years, its oil output is growing, and pollution from agricultural and industrial production has increased. Brazil has also been slow to join an international push toward electric vehicles, and is only now about to jump into booming sustainable bond markets for the first time.

The new initiatives will follow the broad contours of policies enacted by developed economies like the European Union, which leans on a cap-and-trade system as its key tool for cutting pollution and imposes decreasing emissions caps on thousands of facilities owned by utilities, manufacturers and airlines.

Lula’s government expects to send legislation to create the carbon credit market to congress, where it may face resistance from conservative lawmakers, in the coming days.

Other aspects of the plan, which according to Dubeux will also include concessions, credits and tax exemptions to promote decarbonisation, could come through presidential decrees or other measures. — Bloomberg