Brazil Passes Federal Law Enabling Carbon Credit Projects and Other Environmental Services in Conservation Units
On May 24, 2023, the Brazilian federal government passed Federal Law No. 14,590/2023, which amended Laws No. 11,284/2006 (the Public Forests Management Act) and No. 11,516/2007 (the ICMBio Creation Act) to enable the development of carbon credit projects and other environmental services in conservation units, through concession agreements.
This new legislation revokes a provision from the Public Forest Management Act which prohibited the trading of carbon credits generated from avoided emissions in native forests, preventing the development of REDD+ projects in public forests. In addition, the new legislation establishes that the concession contract may stipulate that the ownership of carbon credits and environmental services can be transferred from the granting authority to the concession holder, ensuring legal certainty to such projects. The new legislation also modifies the ICMBio Creation Act to provide for the possibility of conceding environmental services in conservation units in general, expanding the scope of such concessions beyond visitation services.
Federal Law No. 14,590/2023 grew out of Provisional Measure 1,151, enacted on December 27, 2022, whose original wording was changed throughout the legislative process. In the House of Representatives, members of Congress chose to eliminate the provision that classified native vegetation environmental assets as financial assets. In the Senate, the text remained unchanged, but when submitted for presidential approval, the President vetoed an article pertaining to legal reserves1, understanding that it could authorize the creation of legal reserves in areas that cannot be considered as such.
In addition to such changes, the new legislation also adjusts existing rules on bidding processes and concession contracts applicable to conservation units.
The Environmental and Climate Change Team of Tauil & Chequer Advogados in association with Mayer Brown is available for further information.
1 In Brazilian legislation, legal reserve is a percentage of a private rural property that must be protected.
