Carbon Credits

The market for carbon credits consists of the international trade in emission quotas and certified greenhouse gas emission reductions, denominated carbon credits. Legislative Decree 144 of June 20 2002 ratified the text of the Kyoto Protocol which was opened for signature in Japan in 1997 and came into effect on February 16 2005.

Among the policies and programs under the Kyoto Protocol, worthy of mention is the flexibility mechanism known as the CDM described in Article 12. This is an instrument adopted as an alternative for countries unable to meet the necessary reduction in greenhouse gases. Under this system each metric tonne of carbon equivalent which is not emitted or ceases to be emitted into the atmosphere by a developing country, can be traded with developed nations with reduction targets to be met.

With the introduction of the CDM, companies that are unsuccessful in reducing their emissions may purchase CERs from developing countries (which have Greenhouse Gas emission reduction projects) and use these certificates to comply with their reduction obligations. Developing nations in turn use the CDM to promote sustainable development as well as benefiting from the currency inflows as a result of CER sales.

Note that specifically in relation to SHPs, Decree 5,882/06 determines that carbon credits generated by projects within the scope of the PROINFA scheme shall be held in the name of Eletrobrás.