Congress in Brazil has passed a new bill allowing companies with forestry concessions to generate carbon credits, Reuters reported, calling the move a “first step” in the process of regulating the country’s voluntary carbon market.
The legislation could attract more investors by generating an additional revenue stream for concession owners, according to Jacqueline Ferreira, a portfolio manager at Instituto Escolhas, an environmental nonprofit which participated in consultations on the bill.
“This is an economic activity that will boost others that can be done in forestry concessions,” Ferreira was quoted as saying.
Brazil’s left-wing President Luiz Inacio Lula da Silva has 15 days to sign or veto the bill, or parts of it. Curbing deforestation has been a priority in his campaign as he seeks to reverse the policies of his right-wing predecessor, Jair Bolsonaro.
Currently, the government only leases publicly owned forests for sustainable logging that allows the land to regenerate, and private firms have shown little interest in the program since it was introduced in 2006.
Data shows that only about 1 million hectares (approx. 2.47 million acres) of Brazil’s 43 million hectares of eligible public forest are currently leased, Reuters said.
Escolhas has estimated that if the bill becomes a reality, a typical concession in the Amazon state of Rondonia could boost its revenue by 43% though carbon credit sales.
Overall, carbon credits could generate about $24 million per year, according to a wider study by the nonprofit covering 37 areas that could be leased in the Amazon region.
Ferreira noted that these very conservative estimates are based on carbon credit prices below the current market value.
She added that further regulation would be needed to detail the mechanism for generating carbon credits, and that it would be at least a year until the first concessions allowing the generation of carbon credits are leased.
Other potential hurdles include general criticism towards carbon credits generated by forestry projects in the Amazon region and elsewhere related to land rights issues and a lack of benefits for local communities, as well as competition from illegal logging.
Currently, Brazil has a small number of carbon credit projects considering its unique potential in terms of forested area, according to Daniel Vargas, coordinator of the Bioeconomy Observatory within Brazil’s FGV university.