Government studies the creation of a carbon market involving the electricity sector

The Ministry of Mines and Energy proposed this Friday (21) a series of guidelines to create a carbon market involving the Brazilian electricity sector, which has the potential to become an important provider of credits due to the predominance of renewable generation sources and low emission of greenhouse gases.

The government’s proposal fulfills a requirement of Law 14.120/2021, which put an end to subsidies from renewable sources but forced the implementation of mechanisms that value the “environmental benefits” of the electricity sector.

In a report released this Friday, the government pointed out some possibilities on how to price these environmental benefits, with the carbon credit market being the main option.

In the government’s analysis, commissioned to Empresa de Pesquisa Energética, the carbon market will be better used in a multisectoral scope than if it is restricted to the electricity sector.

This is because, as the sector already has a high share of renewable generation in the matrix, there would be much more supply of credits than demand, generating a downward trend in the price of the certificate and little incentive to reduce emissions.

“When considering this potential role of ‘seller’ or ‘supplier’ of carbon credits in a broader market, the Brazilian electricity sector as a whole would benefit from cross-sectoral or comprehensive carbon market mechanisms and, above all, international mechanisms” , says the document.

The government also suggested the creation of a regulated carbon market, in the form of an Emissions Trading System (SCE), similar to the one used in the Renovabio program, in the biofuels sector.

The report was formulated after debates and workshops organized by the EPE with associations, companies and specialists in energy, financial institutions and agents of the productive sector during the past year.

The government’s proposal is up for public consultation until February 7.