Brazil outlines phased expansion of national carbon market sectors
The Brazilian Ministry of Finance has presented a preliminary proposal to expand the sectoral coverage of the country’s regulated carbon market, marking a key step in the development of the Brazilian Emissions Trading System and its gradual implementation across the economy.
The proposal, developed through the Extraordinary Secretariat of the Carbon Market, sets out a phased approach for introducing monitoring, reporting and verification (MRV) obligations across major industrial and transport sectors, beginning in 2027 and expanding through to 2031.
In the first phase, starting in 2027, the system would cover emissions from paper and pulp, iron and steel, cement, primary aluminium, oil and gas exploration and production, refining, and air transport. A second phase, scheduled for 2029, would extend coverage to mining, recycled aluminium, electricity generation, glass, food and beverages, chemicals, ceramics and waste management.
A third and final phase, beginning in 2031, would bring road, waterway and rail transport into the regulated system, significantly broadening the scope of Brazil’s carbon pricing framework across the wider economy.
Officials said the proposal is based on international benchmarking and sector-specific criteria, including emissions intensity, trade exposure, monitoring feasibility and the readiness of companies to comply with reporting requirements.
Each phase is designed to include a four-year transition period, with the first year dedicated to preparation of monitoring systems, followed by two years of emissions reporting and a final year focused on developing national allocation rules. During this initial period, companies will be required to report emissions but will not face financial penalties or mandatory reductions.
The government confirmed that the first National Allocation Plan will distribute emission allowances free of charge, in line with legislation passed in 2024 establishing the national carbon system.
According to the Ministry, the phased design is intended to ensure a predictable and gradual transition for industry while building the technical and institutional capacity needed to operate a fully regulated carbon market.
The proposal will now be reviewed by the Permanent Technical Advisory Committee before moving to public consultation expected in July 2026, with a final version due later in the year.
Officials said the approach reflects Brazil’s broader strategy to align economic competitiveness with decarbonisation goals, while enabling a structured expansion of carbon pricing across key sectors of the national economy.
