Following the discussions on the terms of the Paris Climate Change Agreement (PCCA) agreed upon in December 2015, Baker McKenzie will be an event partner and will exhibit at the trade fair called “Innovate4Climate”. The event will be held in Barcelona from May 22 to May 25 with the aim at creating a new global dialogue of government, business, banking and finance leaders focused on shaping the next generation of climate finance and policy instruments. Among the many subjects included in the agenda of the event is a market analysis and jurisdictional implementation (pitfalls and opportunities) concerning REDD+ projects.
In Brazil, new opportunities for business development will certainly arise in view of the fact that Brazil has reserved its position in relation to the possible use of any market mechanisms that may be established under the PCCA and that it proposed to achieve its goals mainly through: (1) the increase of renewables in the energy sector; and (2) actions related to the forestry sector (including REDD+). Due to the current legislative vacuum with respect to REDD+ projects, discussions at federal level and decisions under the UFCCC demonstrate that this is the right moment for relevant players to contribute, as much as possible, with authorities in the development of laws and regulations at federal level related to climate change.
Currently, it is the National Policy on Climate Change (Law No. 12,187/2009) that establishes the goals, guidelines and instruments regarding climate change projects in Brazil. Although not defining or even mentioning REDD+ projects, this Law is the main instrument of the Brazilian legal system when it comes to climate change matters. The Brazilian Government is yet to regulate such law and implement its instruments, including the Brazilian market of emission reductions and eligibility requirements for carbon projects.
Specifically regarding REDD+, Brazil has well advanced in efforts to consolidate a legal framework in order to provide support to REDD+ projects. In this sense, federal Bill of Law No. 212/2011 proposed by the Senate has been widely discussed in the country. This Bill, in general terms, foresees the implementation of a National System of REDD+ in line with the National Policy on Climate Change, through an integrated approach including the Federal Government, States and Municipalities in order to avoid double counting of emission reductions. At the House of Representatives, Deputy Tripoli has also proposed an initiative to implement a REDD+ system (Bill of Law No. 225/2015), which is very similar to the project submitted by the Senate. This Bill is yet to be discussed by the commissions of the Congress.
Despite the lack of a robust legal framework on the matter, Federal Decree No. 8,576/2015 established an Environmental Commission to coordinate and monitor the implementation of the so-called National Strategy on REDD +. The major objective of this Strategy is to enhance the monitoring and the analysis of the impacts of public policies for the achievement of REDD+ results and to contribute with the mobilization of resources for compliance with the National Policy on Climate Change, among others.
In parallel, the Ministry of Environment created multidisplicinary groups of discussions to elaborate on major aspects of REDD+ (CONAREDD+’s Resolutions 1 to 4). A specific chamber called “Safeguard Chamber” was created to assist the National Committee on REDD+ with the definition of guidelines, rules and criteria related to safeguard matters within the national strategy on REDD+.
The Chamber is coordinated by the Brazilian Foreign Ministry and the National Council on extractive communities and the members are mainly the Environmental Departments of Amazonian States, NGOs (such as WWF), the National Bank on Economic and Social Development (BNDES), the National Foundation on Indigenous Peoples (FUNAI). Baker McKenzie is the only law firm joining the group of discussion and has been providing contributions to the elaboration of these safeguards. Brazil should present to the UNFCCC a second summary of the REDD+ projects implemented in the country from 2011-2015 in order to receive payment for such activities. Therefore, the major objective of the “Safeguard Chamber” is to provide the Environmental Ministry with inputs on compliance with safeguards matters (e.g. permanence, leakage, biodiversity, transparency, prior and informed consent of the communities, etc.) so that this Ministry may prepare referred summary. Another goal of the “Safeguard Chamber” is to develop a national system on safeguard information.
Initiatives of the States have brought some legal certainty for the matter. However, under the Brazilian legal system, Decrees issued by the State Governors and regulations issued by State Agencies cannot create new obligations not previously foreseen by a State Law – meaning that other than reporting, it is unlikely that State regulations will bring any additional obligations with legal or commercial implications to holders of VCUs and carbon credits.
Considering this scenario, one of the challenges facing REDD+ which remains in countries like Brazil is the need to create opportunities for the development of projects prior to 2020 by addressing the legal uncertainties connected to REDD+ and attracting governmental and private investments. In this sense, the National Fund on Climate Change and the Brazilian Carbon Market established by the National Policy on Climate Change could increase the amount of funds available for the control of deforestation, in addition to contributing to the modernization and competitiveness of industry.
In summary, Brazil currently lacks specific laws and regulations that govern REDD+ initiatives and private carbon projects. However, there is a movement towards developing a national policy framework for climate change and REDD+ in Brazil, with the potential to impact the rights of the project to generate VCUs and sell them offshore to voluntary carbon markets. Finally, as a result of the Paris Agreement, the business environment around the globe is already changing and companies that succeed in contemplating the policy measures that are proposed in the National Policy on Climate Change and implementing their own strategies accordingly will be at an advantage.
In view of the current legal scenario, we strongly recommend clients which have interest in REDD+ initiatives in Brazil to actively participate in discussions with authorities and relevant players in the establishment of regulation and monitor discussions connected to climate change and REDD+ implementation at a state, national and international levels. By doing that, we understand that not only will they be able to stay ahead of the increasing regulatory frameworks that regulate emission reductions, but they may also be able to find new opportunities for business development.