Environmental laws and regulations that have been adopted in Brazil are very strict, however, a long-term effort will be required to improve their enforceability and effectiveness. In the past 50 years, Brazil has developed extensive environmental policies and regulation, promoting innovative solutions and technologies connected with sustainable development and actions to address global warming. Such new trends offer opportunities for socially responsible companies to make sustainable development a standard part of their business practices.
Brazil has developed one of the largest renewable energy programs in the world (PROALCOOL – for the production of ethanol and its use in replacing gasoline in light vehicles). The use of ethanol as fuel powering automobiles, introduced in the 70’s, has evolved incredibly in the last decade with the new flex-fuel light vehicle technology. In addition, the Brazilian government has adopted the Brazilian National Program of Production and Use of Biodiesel that establishes a mandatory addition of 5 percent of biodiesel into petroleum diesel by 2013. This decision provides a strategic mechanism to stimulate employment and income, to reduce greenhouse gas emissions, and to decrease dependence on fossil fuels.
Other policies include creation of PROINFA – a program with the purpose of increasing the amount of electrical energy generation from wind, small hydro plants, and biomass. Additionally,Brazil has instituted several recycling initiatives and programs to reduce the use of fossil fuels.
In one of the country’s most important environmental initiatives, in early December 2008, Brazil enacted its National Plan for Climate Change (PNMC), introducing ambitious targets for reducing deforestation, Brazil’s main source of greenhouse gases. The goal is to reduce deforestation by 72% in the Amazon by 2017. It is too early to know if these new targets are achievable in a country that faces serious problems with enforceability and effectiveness of environmental laws and policies. The PNMC is also intended to make Brazil a more influential player in global climate change debates, helping to push developed countries to agree to more ambitious emissions cuts and encouraging wealthy countries to essentially pay Brazil to preserve the forest for the benefit of all countries.
With respect to actions linked with the Kyoto Protocol, the country is, together with China and India,, one of the key players helping developed countries to attain their carbon reduction targets through the Clean Development Mechanism (CDM) of the Kyoto protocol. Many CDM projects have already been approved in Brazil and subsequently at the UN CDM Executive Board. The most representative Brazilian CDM projects are flaring of landfill gas and the use of biomass (e.g., sugar cane bagasse) as an energy source.
Brazil has an incomparable potential for CDM projects, which represents an opportunity for developed countries with obligations to reduce their emissions. The Kyoto Protocol has become part of the Brazilian legal system. The country was one of the first to create procedures to approve CDM projects by establishing a strong national authority with the participation of the most important Ministries – Inter-ministerial Commission on Climate Change (Comissão Interministerial de Mudança Global do Clima– “CIMGC”). The CDM projects are also an efficient way to provide the transfer of clean technologies to non-industrialized countries and a great opportunity for Brazil.
Since the negotiations prior to the adoption of the Kyoto Protocol, Brazil has been supporting proposals to include all forest and forestry projects in the CDM. However, due to the controversy associated with these issues, only afforestation and reforestation practices were accepted as possible CDM projects. The main concerns expressed were that forest and forestry activities are difficult to monitor, they provide cheap carbon credits inhibiting stronger domestic mitigation action, and the fear that those projects could lead to deforestation. However, CDM forest and forestry projects can provide benefits that overcome their downsides, such as positive revenue alternatives for local communities.
Besides the regulatory market for carbon credits (under Kyoto Protocol’s CDM and other flexible trading mechanisms), there has been renewed interest for credits from reducing emissions from deforestation and degradation (REDD) that are eligible for credits traded in voluntary carbon markets, operating outside international agreements. Brazil has a key role to play in developing future REDD projects that produce voluntary carbon credits. The benefits of carbon credits must always be analyzed in light of environmental benefits and not as an end in themselves. Emission trading programs cannot replace strong domestic policies toward ambitious emission reduction targets. At Thompson & Knight, we are involved with clients in developing carbon credit projects under the CDM and voluntary standards. Our projects include avoided deforestation projects, fuel switching, landfill gas projects, and other means of reducing emissions and monetizing those emissions in the form of carbon credits. Our Firm further provides advice as to existing and possible future local, national, and international environmental laws and treaties, including those relating to climate change and greenhouse gas emissions.
Thompson & Knight assists its clients in all of these areas whether involving transactions, financing, project development, carbon trading, and litigation or arbitration. Our experience extends to renewable energy projects as well. For further information on developments on Climate Change Law and Policy in Brazil, you may contact Luiz Gustavo Bezerra and Antonio Augusto Reis.