Brazil’s New ETS: What the AlliedOffsets Dashboard Reveals

COP30 has wrapped up in Belém, marking an important moment for climate ambition - and for Brazil’s participation in global carbon markets. At AlliedOffsets, we’re excited to launch our new Brazil ETS Dashboard, designed to help policymakers, investors, and corporate emitters understand Brazil’s progress toward implementing its Emissions Trading System and its potential integration with international carbon markets.

This dashboard brings together analysis of Brazil’s ETS Law No. 15,042/2024, its provisions for domestic and international carbon credit trading, and expected market behaviour as the SBCE transitions from design to full operation.

What Happened: Brazil Enacts Its National Emissions Trading System (ETS)

Brazil’s Climate Law No. 15,042/2024 established the Sistema Brasileiro de Comércio de Emissões (SBCE), a national cap-and-trade system regulating major emitting sectors including energy, industry, and transport - while explicitly exempting agriculture and deforestation. In practice, this means AFOLU-sector emissions remain outside the ETS cap, at least initially.

More recently, President Lula created the Extraordinary Secretariat for the Carbon Market, which will lead economic modeling, projections, and technical studies to support SBCE implementation. Together, these measures lay the institutional groundwork for Brazil’s long-awaited carbon market. Finally, the finance ministry recently published the SBCE Implementation Roadmap, which details the institutional, regulatory, and technical efforts required to launch Brazil’s national emissions trading scheme.

How Brazil’s SBCE Emissions Trading System Works

Under the law, regulated entities must hold Brazilian Emission Allowances (Cota Brasileira de Emissões - CBE) for every ton of CO₂e they emit. They may also use Verified Emission Reduction Certificates (Certificado de Redução ou Remoção Verificada de Emissões - CRVE) - authorized offset credits - to neutralize a share -not yet defined- of their emissions. Each CBE or CRVE equals one ton of CO₂e, and CRVEs can be surrendered in place of allowances within limits established in the National Allocation Plan.

The MRV (measurement, reporting, and verification) framework applies to:

• >10,000 tCO₂e/year - mandatory annual emissions reporting
• >25,000 tCO₂e/year - full compliance obligations, including allowance surrender

(Brazil ETS Scheme. Source: AlliedOffsets, based on information from the Brazilian Government) 

It is important to note that:

• CBEs (allowances) will be distributed either free or through auctions, according to the first National Allocation Plan (NAP). To be finalized approximately one year into Stage III (2026/2027). They can be traded in the secondary market or cancelled for compliance.
• CRVEs (offsets) under the SBCE will have a quantitative limit (maximum %) set by the Management Body and formalized in the NAP. Similar to the CBEs, they can also be traded or cancelled. 
• VCM credits are prohibited from direct conversion into CRVEs, especially if they originate from forest management activities. Requirements and procedures for accrediting CRVE generation methodologies will be developed, based on high integrity criteria (such as ICVCM).
• The SBCE Registry should be capable of tracing national and international transactions, including ITMOs, and must ensure interoperability with other international registries, such as the Article 6.

SBCE Phases: Timeline for Brazil’s ETS Rollout

The system is designed to expand gradually over five phases spanning roughly five years. Early years (Phases I-III) focus on rulemaking and capacity-building, followed by the first National Allocation Plan and initial allowance distribution around 2029 (Phase IV). By 2030, the system is expected to reach full implementation (Phase V), making Brazil one of the largest ETS jurisdictions globally.

The National Allocation Plan (Plano Nacional de Alocação - PNA) will define:

• the overall emissions cap,
• allowance allocation rules (free vs. auctioned),
• and the maximum share of CRVEs allowed for compliance - expected to be 10 - 20% of an entity’s emissions. These scenarios are aligned with offset use in other global ETSs and reflect consultations with Brazilian market stakeholders.

(Phases of the implantation of the SBCE. Source: AlliedOffsets, based on official reports)

How Many Offsets Will Brazil’s ETS Use? AlliedOffsets’ Projection

Based on official estimates, the SBCE will initially regulate ~15% of Brazil’s national emissions, or roughly 180 MtCO₂e/year, since AFOLU remains outside the cap.

Based on this, AlliedOffsets estimates that regulated companies will demand between 14 - 35 million CRVEs per year starting in 2031, depending on whether the offset limit is set at 10% or 20% of covered emissions. This is domestic demand, separate from potential Article 6 export volumes.

(Projected CRVE use under the SBCE. Source: AlliedOffsets & Expert consultations)

Our modeling assumptions include:

• Brazil’s latest NDC implies a 2035 emissions band of 0.85-1.05 GtCO₂e, while current-policies baseline sits slightly above the upper edge of that band (1.09–1.19 GtCO₂e).
• It is expected that the SBCE will initially regulate ~15% of Brazil’s national emissions, or roughly 180 MtCO₂e/year.
• Offset limit is set at 10% or 20% of covered emissions .
• Early-year market frictions limiting actual CRVE use to ~14 MtCO₂e in 2030, rising thereafter as implementation stabilizes.

Why this matters

Brazil is both a global emissions heavyweight - ranked 7th worldwide in 2024 (~1.3 GtCO₂e) - one of the world’s most crucial climate factors and home to vast forest and clean energy resources. The implementation of the SBCE is therefore a milestone not just for Brazil, but for global carbon markets.

A robust national ETS could position Brazil to:

• link more easily with Article 6 mechanisms,
• scale high-integrity credit generation,
• signal regulatory certainty to investors,
• and influence ETS design in neighbouring Latin American countries.

However, the exclusion of AFOLU from the initial cap remains a structural gap. Brazil’s long-term mitigation potential depends on eventually integrating land-use emissions - responsible for more than half of its historical emissions - into its carbon pricing architecture. A well-designed reduction and offsetting framework, including CRVEs aligned with Article 6 and CORSIA, will be essential to unlock this potential.

In addition to Brazil, contact us to explore more in-depth AlliedOffsets analysis and real-time market intelligence on emissions trading and carbon taxes schemes, including Australia, California, Chile, Colombia, Korea, Querétaro, Singapore, South Africa, Taiwan, and Washington.