Summary
Details
- Brazil
Operators responsible for installations and sources that emit above the defined thresholds.
Threshold logic (two compliance tiers):
Above 10,000 tCO₂e/year triggers certain SBCE obligations;
Above 25,000 tCO₂e/year triggers a broader set of obligations
The law also allows the SBCE managing authority to raise thresholds via specific act, based on cost-effectiveness and climate commitments considerations.
Primary agricultural production and associated on-farm assets directly linked to it are not considered within scope for SBCE purposes (as stated in Art. 1, §2).
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What’s Required
1) Determine whether you are an SBCE “operator” and within scope
The law applies to activities, sources, and installations in Brazil that emit or can emit GHGs, under the responsibility of “operators” (natural or legal persons). It sets emissions thresholds that trigger SBCE regulatory obligations.
2) Implement monitoring, reporting, and verification (MRV) capabilities
During the transition phases, operators must be able to:
submit a monitoring plan and maintain evidence supporting emissions and removals accounting
prepare and submit emissions and removals reports to the SBCE managing authority within the required timelines
These MRV obligations are explicitly positioned as the initial compliance backbone before full market operation (the law’s phased approach makes MRV readiness the first compliance gate).
3) Participate in allocation and market mechanisms once activated
The SBCE is designed to move from MRV-only duties to allocation and trading:
Phase IV introduces the first National Allocation Plan, with non-onerous distribution of SBCE assets (allowances) and implementation of the SBCE asset market
Phase V provides for full implementation after the first Allocation Plan term
4) Contracting and asset treatment interfaces
The law also amends the securities law framework to include SBCE assets and carbon credits when traded in financial and capital markets, creating potential compliance overlap with CVM-supervised market conduct rules.
5) Special governance safeguards for land-based carbon credit activities
Beyond SBCE, the law addresses crediting programs and projects and sets procedural safeguards for activities involving Indigenous peoples and traditional communities, including consultation and benefit-sharing clauses (relevant for developers and buyers conducting due diligence on project origination and contracts).
Important Deadlines
Adoption: 11 December 2024 (Law No. 15,042/2024).
Entry into force: on the date of publication (Art. 58).
Implementation phases (counted from entry into force):
Phase I: 12 months (extendable by 12 months) for regulation issuance
Phase II: 1 year for operators to operationalize emissions reporting instruments
Phase III: 2 years with duties limited to monitoring plan submission and emissions/removals reporting
Phase IV: first National Allocation Plan and market start
Phase V: full implementation after Phase IV
Current Status
In force as a federal law, implementation is explicitly phased and dependent on secondary regulation and the rollout of MRV and allocation instruments.
Penalties for Non-Compliance
The SBCE establishes an administrative enforcement ladder that can be applied cumulatively or separately, including:
warning
fines
publication of a condemnatory decision extract (in recurrence of serious infractions)
embargo or suspension of activity/source/installation
rights restrictions such as license/registration suspension or cancellation, loss of incentives, financing restrictions, and prohibition on contracting with public administration (up to 3 years)
Fine calibration:
For legal entities: capped generally at 3% of gross revenue (potentially up to 4% in recurrence), subject to conditions and revenue disclosure obligations; if revenue is not provided, the authority may estimate it.
For entities without revenue (or certain persons): R$ 50,000 to R$ 20,000,000.
Process safeguards: Penalties are imposed through an administrative sanctioning process with defense rights and a 30-day defense period, plus appeal steps.
Examples of Known Violations
Because SBCE is newly established and still in phased implementation, “known violations” should be understood as high-probability failure modes in ETS rollouts that regulators typically sanction once enforceable:
Scope misclassification: operators incorrectly concluding they are below 10,000/25,000 tCO₂e thresholds due to boundary errors (outsourced utilities, shared facilities, leased assets).
MRV control failures: incomplete monitoring plans, missing activity data, inconsistent emission factors, or inability to reproduce calculations during inspection.
Late submissions: failure to submit monitoring plans or emissions/removals reports within the deadlines that will be set in the regulation.
Governance gaps: no accountable officer, weak internal sign-off, or inadequate documentation retention, leading to an inability to defend data under administrative proceedings.
Market integrity issues (once trading starts): inaccurate asset records, unauthorized transfers, or misleading disclosures when SBCE assets/carbon credits are treated as financial instruments under the CVM perimeter.
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