Climate Change Regulation 2024 Comparisons

Brazil’s Participation in the UN Climate Regime

Brazil is one of the parties to the United Nations Framework Convention on Climate Change (UNFCCC), adopted in 1992 in Rio de Janeiro, and related treaties: the 1997 Kyoto Protocol and the 2015 Paris Agreement (hereinafter, altogether, the “UN Climate Regime”). As explained in 2.1 National Climate Change Policy, Brazil not only ratified such treaties, but also incorporated them into domestic law, giving the UN Climate Regime national justiciability.

Brazil has been an active negotiator in international conferences, playing key roles – both as an individual party and as a member of the negotiation group created with Argentina and Uruguay (ABU).

As a developing country, Brazil has been a leading advocate for the implementation of differentiation mechanisms between developed and developing countries, based on the principle of common but differentiated responsibilities. Yet, acknowledging the need for global efforts to tackle the climate crisis, Brazil strongly supported, during the Paris Agreement negotiations, a wide application of this principle, according to the countries’ capabilities, in the light of their different national circumstances – which helped shaping the Paris Agreement architecture, where all parties are urged to mitigate greenhouse gas emissions through nationally determined contributions (NDCs).

At COP28, held in Dubai in 2023, Brazil was represented by its President, Luiz Inácio Lula da Silva (“Lula”), who delivered a speech with great emphasis on the goal of zero deforestation by 2030 in the Amazon region.

The United Nations had confirmed that the Brazilian city of Belém, in the State of Pará, located in the Amazon Region, will host the COP30 in 2025. An Extraordinary Advisory Office for COP30 was created within the Ministry of the Environment and Climate Change, to represent the government at preparatory meetings preceding the 2025 Conference (Decree No 12,043/2024).

Roadmap for the OECD Accession Process for Brazil

Brazil does not participate in any regional climate change legal regime. However, it is worth noting that, in January 2022, the Organisation for Economic Co-operation and Development (OECD) Council decided to open accession discussions with Brazil and five other candidates (Argentina, Bulgaria, Croatia, Peru and Romania).

Although the OECD is not a climate-oriented organisation per se, climate change has been a critical issue in the analysis of the Brazilian case. In this regard, on 10 June 2022, the OECD Council adopted the “Roadmap for the OECD accession process for Brazil”, which “set out the terms, conditions, and process for accession to the OECD”. The Roadmap presented a “list of accession principles for OECD committees”, which include, inter alia, the following measures, established by the Environment Policy Committee:

• “developing and implementing effective and ambitious environmental and climate strategies and policies aimed at achieving net-zero greenhouse gas emissions by 2050 and commensurate medium-term targets in line with this pathway, while demonstrating actual implementation through robust transparency systems and no backsliding in ambition”; and
• “assuming a similar level of obligations and commitments in relevant Multilateral Environmental Agreements, as those accepted by most or all OECD member countries – eg, the Paris Agreement on climate change and the Convention on Biological Diversity, and setting national policy objectives in accordance with these obligations and commitments”.

In 2024, Brazil’s hosting of the G20 meetings presents a potential opportunity for the country to advance its accession talks with the OECD.

Overview of Brazil’s Legal System

To better understand Brazil’s climate change law, it is worth explaining key aspects of the country’s legal system.

Legislative branch

Brazil is rooted in the civil law tradition, thus, its laws emerge primarily from a body of written acts (laws) adopted by legislative assemblies, to which the Constitution, the country’s supreme law, grants exclusive law-making powers. At the federal level, Brazil adopts a bicameral system, with two separate chambers, namely, the Senate and the House of Representatives, which, together, form the National Congress.

Executive branch

Although the executive is not a law-making branch per se, the Constitution vests in the President some limited regulatory powers, exercised mainly through Executive Decrees, within the boundaries established by the legislative branch. For urgent and relevant matters, the Executive may also enact Provisional Measures, with the status of Law, which shall be approved by the National Congress within the maximum of 120 days (otherwise, the Provisional Measure will no longer be in force). Administrative agencies, bodies, and councils may also enjoy some normative prerogatives, if duly authorised by a legislative act (“delegated powers”).

Judicial branch

Following the civil law tradition, the judicial branch does not create laws, but rather construes the laws and regulations passed by the legislative and executive branches, ordering their application according to its interpretation. Yet, despite its basis in the civil law tradition, Brazil’s judicial system has been influenced to some extent by the common law’s use of precedents. In this regard, case law has contributed to the development of the Brazilian environmental law in the last few decades and is likely to influence the shaping of climate change law (which is generally understood within the broader context of environmental law, as discussed in 2.2 National Climate Change Legal Regime).

The UN Climate Regime as Part of Brazil’s Domestic Law

Brazil has incorporated the UN Climate Regime into the domestic legislation through the following acts:

• the UNFCCC – Executive Decree No 2,652/1998;
• the Kyoto Protocol – Executive Decree No 5,445/2005; and
• the Paris Agreement – Executive Decree No 9,073/2017.

Therefore, the UN Climate Regime is part of Brazil’s domestic law, and its provisions are binding at all levels of the Brazilian federation (ie, federal, state and municipal).

Furthermore, “the commitments undertaken by Brazil through the UNFCCC, the Kyoto Protocol, and other climate change-related documents to which it eventually becomes a signatory” must be taken into account, as framework directives, in the interpretation and implementation of the 2009 National Policy on Climate Change (NPCC) – as prescribed in Article 5, I, of Law No 12,187/2009, which established the NPCC. Such commitments include the obligations laid down in the Paris Agreement and the Brazilian NDC.

The domestic effects and enforceability of the Paris Agreement and the NDC have already been recognised by the Brazilian Judiciary. On 19 April 2022, in a case challenging an “updated” version of Brazil’s NDC (discussed below), the 4th Panel of the 3rd Region’s Court of Appeals held that:

• the Paris Agreement, since its incorporation into the Brazilian law by Executive Decree No 9,073/2017, has been granted the status of law under the national legal system; and
• the NDC, rather than being exclusively a diplomatic act to which Brazil would be bound in the international sphere, is primarily an internal act, enforceable and justiciable at the domestic level (Federal Union v Silva et al, Interlocutory Appeal No 5016374-49.2021.4.03.0000).

On 4 July 2022, Brazil’s Supreme Court (the country’s highest court in constitutional matters) issued a landmark decision on the legal status of environmental law treaties (such as the Paris Agreement) in the Brazilian legal system. The case (ADPF No 708) refers to a lawsuit brought by four political parties against the government due to alleged negligence in the management of the National Fund on Climate Change (the “Climate Fund”), regulated by Executive Decree No 9,578/2018. The Court held that environmental law treaties are a type of human rights treaty and, therefore, must enjoy a “supra-legal” status, which places them above ordinary laws passed by the legislative branch.

The Evolution of Brazil’s NDC

Since 2015, Brazil has submitted to the UNFCCC secretariat four versions of its NDC.

2016 NDC

On 28 September 2015 – thus, nearly two months before the adoption of the Paris Agreement at the 21st Conference of the Parties (COP21), which took place from 30 November to 11 December 2015 – Brazil, under the Rousseff administration, communicated to the UNFCCC secretariat its intended Nationally Determined Contribution (iNDC). On 21 September 2016, under the Temer administration, Brazil submitted to the secretariat its instrument of ratification of the Paris Agreement, thereby converting its iNDC into an NDC, pursuant to paragraph 22 of Decision 1/CP.21. In this first NDC, Brazil took into account the estimated levels of greenhouse gas emissions in 2005 (2.1 gigatons of carbon dioxide-equivalent or GtCO₂e) to commit to pursue an economy-wide reduction of 37% by 2025 (thereby reaching the amount of 1.3 GtCO₂e) and, as an indicative contribution, of 43% by 2030 (1.2 GtCO₂e).

2020 NDC

On 9 December 2020, under the Bolsonaro administration, Brazil submitted to the UNFCCC secretariat an “updated” version of its NDC, replacing the first one. This new document also established economy-wide targets based on the 2005 emissions. The 2025 target (37% reduction) was reiterated, and the 2030 target (43% reduction), rather than an indicative contribution, became a commitment. Moreover, the new NDC stated that these goals would be “compatible with an indicative long-term objective of reaching climate neutrality in 2060.” On 31 October 2021 – ie, on the first day of COP26 in Glasgow – Brazil announced the bringing forward of this 2060 net-zero pledge to 2050.

2022 NDC

On 7 April 2022, Brazil, still under the Bolsonaro administration, submitted a “second update” of the NDC to the UNFCCC secretariat. Based on the 2005 emissions, it reaffirmed the 2025 mitigation pledge (37% reduction), raised the 2030 target (to 50% reduction), and highlighted its “long-term objective to achieve climate neutrality by 2050”. These are economy-wide absolute targets, which, as pointed out in the NDC, “will be translated into policies and measures to be detailed and implemented.”

2023 NDC

On 27 October 2023, Brazil, under the Lula’s administration, submitted a new “update” version of the NDC to the UNFCCC secretariat. Based on the 2005 emissions, it reaffirmed (i) the commitment of reaching the total amount of 1.3 GtCO₂e by 2025 (48.4% reduction) and of 1.2 GtCO₂e by 2030 (53.1% reduction); and (ii) its “long-term objective to achieve climate neutrality by 2050”. It is the most ambitious NDC submitted by Brazil.

NDCs Approvals

The Interministerial Committee on Climate Change (ICCC – see 2.4 Key Policy/Regulatory Authorities) is responsible for approving new NDCs (Decree No 12,040/2024). A new NDC will be submitted to the UFFCCC in 2025, in the context of COP30, which will take place in Brazil.

Climate Change and Environmental Law

In Brazil, climate change issues have been incorporated, explicitly and implicitly, into national and subnational legislation, as either a central or incidental element. Although some laws and regulations address climate change as a core subject, climate change law is (still) generally understood within the broader context of environmental law.

Direct climate legislation

The NPCC (passed by the Law No 12,187/2009, discussed below) is the most obvious example of “direct climate legislation”, as defined by Eloise Scotford and Stephen Minas, for its “primary purpose... is to achieve climate policy objectives” (RECIEL, 2018, 28(1), 67–81). But direct climate legislation also comprises laws that explicitly take into account climate change issues, even though they were designed for non-climate purposes. The 2012 Forest Code (Law No 12,651/2012), one of Brazil’s main environmental laws, is such an example. It includes, amongst its guiding principles, Brazil’s sovereign commitment to preserve the integrity of the climate system for the benefit of present and future generations (Article 1-A, sole paragraph, I).

Indirect climate legislation

Other environmental laws “intersect with climate change but [do] not address it explicitly”. Thus, according to the definition established by Scotford and Minas, they may be regarded as “indirect climate legislation”. This is the case, for example, of the 1981 National Environmental Policy – NEP (Law No 6,938/1981), which laid down a nationwide framework for comprehensive protection of the environment. The NEP provides for, inter alia, a strict civil liability regime (ie, regardless of fault) for environmental damages, whereby direct and indirect polluters may be compelled to bear the cost of repairing environmental damages and compensating those thereby affected (see 6.2 Directors’ Climate Change Liability and 6.3 Shareholder or Parent Company Liability).

Despite being an environmental law per se, the NEP is the legal foundation for Brazil’s main climate change lawsuits concerning loss and damage. Therefore, in climate change litigation, the Brazilian courts are likely to consider the environmental case law, where the legal concepts of damages, causation and liability have been extensively examined in disputes involving pollution.

In this regard, it is worth noting that, according to Resolution No 433/2021 of the National Council of Justice, “when holding one liable for environmental damage, the judge must consider, amongst other aspects, the impact of this damage on global climate change”.

Constitutional Protection of the Climate

Brazil’s Constitution, promulgated in 1988, does not make explicit reference to the protection of the climate, but it enshrines fundamental, intergenerational environmental rights. In this regard, its Article 225 states that “all have the right to an ecologically balanced environment, an asset of common use and essential to a healthy quality of life, and both the government and the society have the duty to defend and preserve it for present and future generations.”

Furthermore, the Constitution’s Article 170 sets forth that “the economic order, founded on the appreciation of the value of human labour and on free enterprise, is intended to ensure everyone a dignified existence, according to the imperative of social justice, with due regard for the following principles: (...) VI – environment protection.”

Notwithstanding the lack of explicit reference in the Constitution to the protection of the climate system, the Supreme Court has already recognised the government’s constitutional duty to protect it (ADPF No 708).

Nevertheless, the Proposal for Constitutional Amendment No 233/2019 aims to include:

• amongst the economic principles of Article 170, maintaining climate stability and carrying out mitigation and adaptation measures; and
• amongst the governments’ environmental duties prescribed in Article 225, carrying out mitigation and adaptation measures.

This Proposal is still under review by the legislative branch, and it is difficult to forecast how it will evolve.

The 2009 National Policy for Climate Change

On 30 December 2009 – in the aftermath of the 15th Conference of the Parties (COP15), which took place in Copenhagen, from 7 to 19 December 2009 – Brazil passed Law No 12,187/2009, which, as discussed in 2.1 National Climate Change Policy, established the NPCC. This act is regulated mainly by the Executive Decrees No 9,172/2017 and No 9,578/2018.

The NPCC created a comprehensive framework for tackling climate change in Brazil, providing for key concepts, principles, guidance, objectives, directives, instruments, and institutional arrangements.

It aims at achieving, inter alia:

• a balance between socio-economic development and the protection of the climate system;
• a reduction of anthropogenic emissions of greenhouse gases regarding their different sources; and
• increments of anthropogenic removals through greenhouse gas sinks (Article 4).

Article 3 enshrines in its chapeau (the introductory text) the principles of precaution, prevention, participation, sustainable development, and common but differentiated responsibilities – the latter gesturing towards climate action at the international level.

Article 3 also determines that, when carrying out measures to achieve the NPCC’s goals, the government will take into account a general duty to act on reducing the impacts deriving from anthropogenic interference with the climate. In addition, the government is required to take measures to anticipate, prevent and minimise human contributions to climate change, where there is reasonable scientific and technical consensus. Such measures must take into consideration:

• the different socio-economic contexts in which they are implemented;
• the different burdens suffered by corporations and affected communities; and
• the individual responsibilities of those who emit greenhouse gases and those who suffer the impacts of climate change.

Climate restoration package

In September 2023, the ICCC endorsed a comprehensive “climate restoration package” comprising several resolutions. In addition to its internal regulations (Resolution No 1/2023), the collegiate body approved the following acts.

• Resolution No 2/2023 – determined the elaboration of a proposal to update the NPCC (Law No 12,187/09).
• Resolution No 3/2023 – ordered the updating of the National Plan on Climate Change (Climate Plan).
• Resolution No 4/2023 – determined the elaboration of a proposal for the regulation of the Brazilian Emissions Trading Scheme (BETS).
• Resolution No 5/2023 – re-established Brazil’s mitigation target for green-house gas emissions set in the 2015 NDC.

The Climate Emergency Bill

On 28 July 2020, the House of Representatives received Bill No 3,961/2020, which seeks to declare a climate emergency in Brazil, stipulating that the executive branch must elaborate a National Plan for Climate Emergency Response. Discussions on the proposal are still ongoing and it is difficult to predict its outcome.

Brazil has not yet performed any Internationally Transferred Mitigation Outcomes (ITMO’s) transactions under Article 6.2 of the Paris Agreement and there is no framework for incorporating Articles 6.2, 6.4 and 6.8.

According to Decree No 11,550/2023, it is the responsibility of the Ministry of the Environment and Climate Change to perform the role of the Designated National Authority and other functions related to the instruments established under Article 6 of the Paris Agreement, in co-ordination with the Ministry of Foreign Affairs.

The Senate is currently deliberating on Bill No 182/2024, which aims to implement the Brazilian Emission Trading Scheme (BETS), establishing a comprehensive cap-and-trade system. This act will provide for basic concepts about internationally transferrable mitigation outcomes (ITMOs).

Brazil, Argentina and Uruguay (ABU)

In 2023, Brazil, Argentina and Uruguay have jointly presented their views on some topics under the Paris Agreement, including on Articles 6.2 and 6.4, stating, for example, their opinion that emissions avoidance does not fit into the mechanism of the Article 6.4, considering methodological challenges and environmental integrity and transparency.

Brazil and Japan

In July 2022, Brazil and Japan signed a Declaration of Intent aiming to promote the development of the regulated carbon market and, afterwards, enter into a bilateral agreement pursuant to Article 6 of the Paris Agreement. Both countries were the first to conclude such an arrangement since COP26.

The main goal of the Declaration is to exchange information and experiences regarding the regulated carbon market and encourage the Brazilian and Japanese private sectors to invest in climate mitigation projects.

Brazil and China

In April 2023, the Brazilian and Chinese presidents gathered in Beijing and performed a joint statement on fighting against climate change, whereby the countries recognised that the climate emergency is one of the biggest challenges of our time.

The joint statement established a set of goals for addressing climate change, such as:

• promoting political dialogue and sharing experiences related to climate investments and finance;
• deepening the bilateral co-operation between both jurisdictions; and
• joining efforts to improve global governance within the UNFCCC.

Brazil and China highlighted the principle of common but differentiated responsibilities, stating that, as developed nations have historical responsibilities for greenhouse gas emissions, they should lead the way towards climate neutrality before 2050.

The countries also established an Environment and Climate Change Subcommittee under the China-Brazil High Level Co-operation and Co-ordination Committee (COSBAN) and announced the development of an advanced technology satellite able to monitor the Amazon rainforest in adverse weather conditions.

Brazil and United Kingdom

In May 2023, Brazil and the United Kingdom launched a new partnership for green and inclusive growth. They have declared their commitment to address the global climate crisis and promote sustainable development and an equitable ecological transition.

The partnership aims to foster a strengthened dialogue and co-operation between both countries, focusing on five pillars: climate, forests, agriculture, energy and finance.

Amazon Fund

The Amazon Fund, proposed by the Brazilian government in COP12, 2006, was created to raise voluntary contributions from other nations to help fund projects that seek to prevent, monitor, and fight the Amazon rainforest deforestation. Amongst its attributions, the following are noteworthy:

• management of public forests and protected areas;
• environmental control, monitoring and inspection;
• sustainable forest management; and
• the recovery of deforested areas.

Most of the Amazon Fund’s resources are originated from developed countries’ donations, especially Norway and Germany, which have, respectively, contributed BRL3.2 billion and BRL200 million. Since the beginning of President Lula’s government in January 2023, France, Spain, the EU, the US, and the UK have also signalled interest in donating to the Fund.

In early 2023, in the beginning of Lula’s third term, the Brazilian environmental governance structure went through remarkable changes. Climate change acquired special visibility, being placed in a prominent position in the new administrative structure. For example:

• The “Ministry of Environment” was transformed into the “Ministry of Environment and Climate Change”.
• The National Climate Change Secretariat was created (Decree No 11.349/2023), integrating the Ministry of Environment and Climate Change and being responsible for, inter alia, supporting the administrative bodies responsible for NPCC and UNFCCC implementation.
• Several ministries, some not even directly related to the environment, now have bodies, attributions, and obligations concerning climate change, including the Ministries of:
1. Agriculture and Livestock;
2. Development, Industry, Commerce and Services;
3. Cities;
4. Indigenous Peoples;
5. Foreign Affairs;
6. Finance;
7. Mines and Energy; and
8. Science, Technology and Innovation.
• The Union’s General Attorney Office (AGU) instituted the National Prosecutor’s Office of Climate and Environment Defence (Decree No 11,328/2023), which aims at assisting the Union’s General Attorney in climate matters, as well as forming and standardising administrative jurisprudence related to the subject.

President Lula and the Ministry of the Environment and Climate Change also signalled the future creation of (i) the Climate Change Council, headed by the Republic’s President and composed of representatives from all ministries, states, municipalities and civil society; and (ii) the National Climate Security Authority, to regulate and monitor the implementation of the NPCC’s actions and the international commitments undertaken by Brazil.

On the 2023’s Global Environment Day, the following new authorities were created.

• Low Carbon Industry Technical Committee (Decree No 11.547/2023) – advisory body for public policies, initiatives and projects that stimulate the transition to a low-carbon economy in Brazil’s industrial sector.
• National Commission for Reducing Greenhouse Gas Emissions from Deforestation and Forest Degradation, Conservation of Forest Carbon Stocks, Sustainable Management of Forests, and Enhancement of Forest Carbon Stocks – REDD+ (Decree No 11.548/2023) – execution and advisory body aimed at co-ordinating, tracking, monitoring, and reviewing the National REDD+ Strategy and developing REDD+ payment results access requirements.
• Interministerial Committee on Climate Change – ICCC (regulated by Decree No 11,550/2023) – institutional instrument of the Federal Executive Branch focused on articulating government actions and public policies arising from the UNFCCC and NPCC. Amongst its attributions is proposing NPCC’s updates related to sectorial mitigation and adaptation plans and the Brazilian NDC.

Amongst other institutional bodies and authorities somewhat connected to climate change concerns in Brazil, the following are also noteworthy.

• The Brazilian Institute for the Environment and Renewable Natural Resources (IBAMA) is the agency responsible for, inter alia, the enforcement of the national environmental policy and the federal environmental permitting processes (pursuant to Law No 7,735/1989). As discussed in 3.1 Policy/Regulatory Instruments and Spheres of Government/Sectors, in such processes, the IBAMA must evaluate the need for climate-related measures.
• The Brazilian Forum on Climate Change (regulated by the Executive Decree No 9,082/2017) aims at raising awareness on climate change and encourages public participation in discussions about the subject. The Forum is composed of representatives of the public, private, academic, and third sectors.

Finally, it is worth noting that the cross-cutting incorporation of climate in the most diverse decision-making instances indicates that the subject is likely to be the target of special attention under the new Administration. Therefore, the proliferation of climate legislation, mainly regarding the carbon market regulation, and an increase in climate litigation, especially lawsuits filled by NGOs and the Public Prosecutor’s Office, are expected.

Climate Change Mitigation in the NPCC

The NPCC’s framework directives include (i) the implementation of climate change mitigation actions in line with sustainable development, which, whenever possible, must be measurable for proper quantification and subsequent verification (Article 5, II), as well as (ii) the use of financial and economic instruments to promote climate change mitigation actions (Article 5, VII).

Sectorial Plans for Climate Change Mitigation

The NPCC’s Article 11, sole paragraph, orders the executive branch to establish sectoral plans for mitigation and adaptation to climate change seeking to consolidate a low-carbon economy.

The ICCC is currently debating a Climate Plan, which will consolidate “the strategies, plans, and goals of the federal Executive Branch for the achievement of the objectives of the National Policy on Climate Change and for the achievement of the NDC goals”.

The mitigation section will include:

• the National Mitigation Strategy, with goals for 2030 and indicative goals for 2035, compatible with the achievement of Brazilian climate neutrality by 2050; and
• Sectoral Mitigation Plans, including, at least:
1. land use and forests;
2. agriculture and livestock;
3. cities, including urban mobility;
4. energy, including electricity and fuels;
5. industry;
6. mining;
7. waste; and
8. transportation.

Climate Risks Assessment in Environmental Permitting Processes

Brazil has solid regulation on environmental impact assessment and permitting processes. Under the NEP, effective or potential polluting projects, capable of causing environmental degradation, are subject to prior environmental permitting processes (Article 10). Should such projects involve risks of significant environmental damages, their environmental permitting processes must be grounded on environmental impact assessment, regulated by the Resolution No 1/1986 of the National Environmental Council (CONAMA).

Neither the NPCC nor the NEP have explicit rules on the assessment and management of climate risks within environmental permitting processes. The NPCC has only included, amongst its policy instruments, the “environmental impact assessment on micro-climate and macro-climate” (Article 6, XVIII).

However, in 2010, the IBAMA (the federal environmental agency) enacted its Normative Act No 12/2010, determining that, in environmental permitting processes of activities capable of emitting greenhouse gases, mitigation measures must be considered, in compliance with the commitments undertaken by Brazil in the UNFCCC.

Despite the explicit terms of this norm, at the federal level climate-related risks have not been properly dealt with in environmental permitting processes. But this is likely to change, with climate litigation being one of main drivers of transformation.

For example, in INGA et al v IBAMA et al (Public Civil Action No 5030786-95.2021.4.04.7100), the 9th District Court of Porto Alegre compelled the IBAMA to include climate-related directives in the scoping phase of the environmental impact assessment of a mining project (which would involve the open pit extraction of coal for the construction of the largest thermoelectric plant in the state of Rio Grande do Sul).

State-Level Regulation on Environmental Permitting Process

All the Brazilian states have laws and regulations on environmental matters, such as permitting processes. Most of them, however, have not addressed climate-related risks in such processes, or dealt with it rather insufficiently.

In the State of Paraná, nevertheless, the environmental agency enacted a specific norm on the matter (Ordinance No 42/2022, of 24 February 2022), determining that the environmental impact assessment of any project that may cause significant environmental impacts must provide for a “Climate Diagnosis”, which will be updated annually and made available online.

The “Climate Diagnosis” shall comprise measures regarding the assessment and management of climate risks from (i) a global perspective, which requires the elaboration of greenhouse gas inventories and implementation of mitigation/offsetting measures; and (ii) a local perspective, which requires the evaluation of climate-related ecosystem services loss and mitigation/compensation measures.

It should be highlighted that the enactment of this norm in the state of Paraná was triggered by a recommendation issued by the State Public Prosecutor’s Office. This initiative was part of a broader plan (the “Climate Change Policy in Action”), led by the Brazilian Association of Members of Environmental Public Prosecutor’s Offices (ABRAMPA), to promote, inter alia, improvements in the evaluation of climate risks in environmental permitting processes. Accordingly, other states are likely to pass similar acts.

Climate Change Adaptation in the NPCC

The NPCC’s framework directives include (i) adaptation measures to reduce the adverse effects of climate change and the vulnerability of environmental, social and economic systems (Article 5, III) as well as (ii) the use of financial and economic instruments to promote climate change adaptation actions (Article 5, VII).

On 11 May 2016, the Ministry of Environment created the National Adaptation Plan (Ordinance No 150/2016), which aims to identify and put forward actions to promote adaptation and reduction of risks associated with climate change.

The enforcement of this Plan was intended to follow four-year cycles. The first cycle (2016–20) focused on 11 sectors:

• agriculture;
• water resources;
• food and nutritional security;
• biodiversity and ecosystems;
• cities;
• disaster risk management;
• industry and mining;
• infrastructure;
• vulnerable populations;
• health; and
• coastal zones.

In December 2021, the government issued a final monitoring report of the first cycle, highlighting, inter alia, key developments and lessons learned.

While the measures to be taken in the second cycle are still unclear, Bill No 4,129/2021 (on the establishment of framework directives for the elaboration of climate change adaptation plans at all federal levels) was approved by the legislatures and is expected to be published shortly.

Sectorial Plans for Climate Change Adaptation

The Climate Plan under elaboration by the ICCC will contain an adaptation section, which will entail (i) the National Adaptation Strategy, with goals for 2030 and indicative goals for 2035, and (ii) Sectoral Adaptation Plans, including, at least:

• agriculture and livestock;
• biodiversity;
• cities, including urban mobility;
• risk and disaster management;
• industry;
• energy;
• traditional peoples and communities;
• black population;
• indigenous peoples;
• water resources;
• health;
• food and nutritional security;
• ocean and coastal zone; and
• transportation.

Adaptation in Environmental Permitting Process

As mentioned in 3.1 Policy/Regulatory Instruments and Spheres of Government/Sectors, climate change has not been properly addressed in environmental permitting processes. However, with the enactment of new regulations on the subject at all federal levels and the rise of climate litigation, the number of mitigation and adaptation obligations in environmental permits is tending to increase.

Clean Development Mechanism

Brazil was the first country to register a Clean Development Mechanism (CDM) project under the Kyoto Protocol in 2004, even before this treaty entered into force. Several CDM projects have since been developed in Brazil, resulting in transactions of a significant number of Certified Emissions Reductions (CERs) with developed countries. In 2012, against the backdrop of the European Union’s announcement of restrictions on the acquisition of CERs from major emerging countries, Brazil started focusing on CERs transactions in the voluntary market.

However, since the adoption of the Paris Agreement in 2015, the transition from the Kyoto Protocol’s CDM to the Sustainable Development Mechanism (SDM) established by Article 6.4 of that Agreement has been an open-ended issue. Despite the progress achieved at the COP26 in Glasgow, the future of the CDM is still under discussion.

Regulation of the Carbon Market

The Senate is currently deliberating on Bill No 182/24, which aims to implement the Brazilian Emission Trading Scheme (BETS), establishing a comprehensive cap-and-trade system (see the Brazilian Trends and Developments article in Chambers’ 2024 Climate Change Regulation Guide).

Concession of Public Forests

In 2006, Law No 11,284/2006 regulated the concession of public forests to private parties, for the development of sustainable services and products. This act prohibited the commercialisation of carbon credits associated with avoided emissions projects carried out in such areas. However, on 24 May 2023, Law No 14,590/23 was passed, allowing a broad issuance and commercialisation of carbon credits derived from public forests concessions, assuring the financial participation of local communities in the revenues of those transactions. On 6 June 2024, it was enacted the Decree 12,046/24 reinforcing the possibility of the issuance of credits for environmental services of the public forests, including carbon sequestration.

The CBAM’s Impact on Brazil

On 18 November 2021, Brazil submitted to the European Commission its comments on the CBAM proposed bill. In this document, the government expressed its concerns about potential discrimination and protectionism, which would be incompatible with WTO rules.

In addition, as stressed in the Brazilian comments, the CBAM would conflict with core principles of the Paris Agreement, “by unilaterally ranking countries according to its own perception of each one’s ambition and by singling out specific products based on their carbon content, calculated according to a methodology unilaterally established by the European Union”. In this vein, by disregarding the countries’ historical contribution to the accumulation of greenhouse gases in the atmosphere, the CBAM would be ignoring the Paris Agreement’s principle of common but differentiated responsibilities.

The National Confederation of Industry (CNI) also submitted comments to the European Commission, highlighting that the CBAM proposed bill disregarded the countries’ different levels of development and would impose considerable increases in transaction costs on Brazilian exporters.

The Bill No 2,088/2023, which is still under discussion, aims to include in the NPCC a mechanism somewhat comparable to CBAM: if the Bill passes, only countries with GHG emissions levels equal to or less than those of Brazil will be able to sell their goods in the Brazilian market.

The TCFD and the Financial Sector

After conducting a public consultation process, the National Monetary Council (NMC) and the Brazilian Central Bank (BCB) passed, on 16 September 2021, a package of norms binding for all financial institutions operating in Brazil. Amongst other issues, this set of rules regulated the following financial institutions’ duties:

• to elaborate “Social, Environmental, and Climate Responsibility Policies” laying down principles and directives to inform their activities and decisions (NMC Resolution No 4,945/2021); and
• to manage and disclose climate-related risks and opportunities connected to their activities, according to TCFD’s recommendations (NMC Resolution No 4,943/2021, BCB Resolution No 139/2021, and BCB Normative No 153/2021).

The BCB Resolution No 139/2021 regulates the “Report on Social, Environmental, and Climate Risks and Opportunities”, in which the financial institutions shall include information on the following issues:

• governance of risk management, including the attributions and responsibilities of the institution’s bodies involved with the management of social, environmental, and climate risks, such as the board of directors, when existing, and the institution’s executive board;
• effective and potential impacts, when deemed relevant, of the identified risks in the strategies adopted by the institution in their business and in the risk and capital management in the short, medium, and long-term horizons; and
• risk management processes.

It is also worth noting that, in 2014, following the first NMC regulation on the matter (Resolution No 4,327/2014), the Brazilian Federation of Banks (FEBRABAN) published its Normative Act SARB No 14/2014, setting forth the banking sector’s self-regulation programme for the development and implementation of socio-environmentally responsible policies. After an amendment that took place in 2020 (by means of FEBRABAN’s Deliberation No 31/2020), the obligation to follow the TCFD’s recommendations was incorporated into that Normative Act.

The TCFD and the Securities Market

On 23 December 2021, the Brazilian Securities and Exchange Commission (CVM) enacted its Resolution No 59/2021 (reissued with amendments on 1 April 2022, through Resolution No 87/2022), establishing substantial innovations on the informational regime for issuers of securities. This norm was also enacted after a public consultation process conducted by the CVM.

This new regime requires the issuers of securities to disclose information on ESG aspects. According to the Resolution, issuers of securities shall inform the CVM on a regular basis:

• whether their ESG reports consider the TCFD’s recommendations, or financial-disclosure recommendations from other recognised entities that are related to climate issues; and
• whether they carry out greenhouse gas emissions inventories, indicating, if applicable, the scope of emissions and the website where additional information on this subject can be found.

If they fail to meet these disclosure standards, the issuers of securities must present proper justifications.

The Directors’ Duty of Care and Diligence

Article 153 of the Brazilian Corporation Act (Law No 6,404/1976) states that the companies’ directors must exercise care and diligence when carrying out their duties. The courts have not yet analysed this provision in light of climate change laws. However, given the regulatory directions in which the Brazilian financial and securities sectors are heading (see 6.1 Task Force on Climate-Related Financial Disclosures (TCFD)), it seems that the directors’ duty of care and diligence will not be interpreted without considering the proper management of social, environmental and climate risks.

The Directors’ Liability for Environmental Crimes

In 1998, the Brazilian Environmental Crimes Act (Law No 9,605/1998) laid down, inter alia, the following criminal acts:

• to cause pollution in levels that lead or may lead to damage to human health or that cause death of animals or significant destruction of biodiversity (Article 54);
• to fail to perform, in violation of the relevant authority’s order, precautionary measures in the case of a risk of serious or irreversible environmental damage (Article 54, paragraph 3);
• to operate polluting activities without the proper permit or in disregard of the applicable regulation (Article 60); and
• to fail to meet obligations, established either by contract or by law, of relevant environmental interest (Article 68).

Such crimes do not make explicit reference to climate change, and the Brazilian courts have not yet analysed them from a climate-oriented perspective. For example, whether the above-mentioned concept of “pollution” should encompass climate change impacts is still an open-ended issue. However, in the event of breaches of climate-related preventive obligations undertaken by a company within the environmental permitting process for its activity, it seems that the above-mentioned Articles 54, paragraph 3, and 60 could be used as fundamentals for potential criminal claims.

It should be noted, nevertheless, that in May 2023, for the first time in Brazil, the Public Prosecutor’s Office asked in a judicial dispute for the surcharge of a criminal penalty of an offender responsible for illegal deforestation due to their conduct’s impacts on climate change. The climate impact resulted from any illegal act may be considered a circumstance capable of increasing the related criminal penalty.

Moreover, it should be stressed that, according to the Environmental Crimes Act (Article 3), “whoever in any way contributes to the practice of the crimes provided for in this norm is liable to the pertinent penalties to the extent of their fault, as well as the director, administrator, member of the board and technical body, auditor, manager, agent, or representative of a corporate entity who, being aware of the criminal conduct of others, fails to prevent such practice when it was within their power to do so.”

The Directors’ Civil Liability for Environmental Damages

As mentioned, according to Resolution No 433/2021 of the National Counsel of Justice, “when holding one liable for environmental damage, the judge must consider, amongst other aspects, the impact of this damage on global climate change.” Therefore, climate change impacts are likely to be dealt with in the context of environmental damages, hence, according to the Brazilian environmental civil liability regime.

Brazil’s environmental civil liability regime emerges fundamentally from the following provisions of the NEP.

• Article 4, VII, which recognises the polluter-pays principle as follows: “NEP shall seek to impose on the polluter and the environment aggressor the obligation to repair and/or indemnify the damage caused”.
• Article 14, paragraph 1, which adopts a strict liability regime whereby “the polluter shall, regardless of fault, indemnify or repair the damages caused to the environment and to third parties affected by its activity”.
• Article 3, IV, which defines “polluter” as “the natural or legal, public or private person, directly or indirectly responsible for an activity that causes environmental damage”.

Under such provisions, the Brazilian courts have largely reached the following understandings:

• environmentally strict liability disregards fault (intent or negligence) and is trigged by the demonstration of a causal connection between one’s conduct (act or omission) and the harmful result;
• causality must be given a wide interpretation, reaching remote “indirect polluters”;
• NEP’s strict liability should be informed by the absolute liability theory (teoria do risco integral), according to which causality is not breached by intervening acts (eg, third-party conduct or “acts of God”); and
• every person within the chain of events that results in the environmental damage (including “those who act, those who did not act when they should have, those who allow the action, those who do not care that others act, those who finance the action performed by others, and those who benefit when others act”, as defined by the Brazilian High Court in the Special Appeal No 650,728-SC) may be held liable, not only strictly, but also jointly and severally for the environmental damages.

Based on the understanding that NEP’s strict liability rule ought to be given a wide application, the companies’ directors may be held jointly and severally liable if their action or omission has caused the damage at issue. However, according to Article 4 of the Environmental Crimes Act, they should only be compelled to bear the costs of the damages if the corporate’s legal personality become an obstacle to compensation (in this regard, see the High Court’s Special Appeal No 647,493-SC).

Environmental Crimes

According to the Constitution, no penalty shall be imposed on any person other than the offender (Article 5, XLV). Therefore, the liability of shareholders and parent companies for environmental crimes committed by a subsidiary company can only be applied to the extent of their own faulty conduct.

Civil Liability for Environmental Damages

In Brazil, although the principle of separate legal personality is the rule (Article 1,024 of the Civil Code), the corporate veil may be lifted if the corporate’s legal personality becomes an obstacle to compensation of the damages caused to the environment (as explicitly prescribed by Article 4 of the Environmental Crimes Act). Therefore, a parent company may be held strictly liable for environmental damages when its subsidiaries, directly responsible for the harmful result, are unable to bear the respective costs.

However, should the shareholder’s or parent company’s conduct be proven to have contributed to the damage, they may be held liable as “indirect polluters”, jointly and severally, regardless of the subsidiary capacity of bearing the costs of compensation.

ESG Reporting in the Securities Market

As seen in 6.1 Task Force on Climate-Related Financial Disclosures (TCFD), the CVM’s Resolution No 59/2021 (reissued with amendments on 1 April 2022, through Resolution No 87/2022), requires the issuers of securities to disclose information on ESG aspects of those securities.

According to this Resolution, issuers of securities must regularly inform the CVM, amongst other issues:

• whether they disclose ESG information in an annual report or any other document;
• of the methodology and standard followed in the preparation of such report;
• whether the report is audited or scrutinised by a third, independent entity (which must be identified);
• of the website where the report can be found;
• whether the report considers key ESG performance indicators, and what the applicable material indicators are;
• whether the report considers the Sustainable Development Goals (SDGs) established by the United Nations and what the material SDGs for their businesses are;
• whether their reports consider the TCFD’s recommendations, or financial disclosures recommendations from other recognised entities that are related to climate issues; and
• whether they carry out greenhouse gas emissions inventories, indicating, if applicable, the scope of emissions and the website where additional information on this subject can be found.

If they fail to meet such disclosure obligations, the issuers of securities must present proper justifications.

ISSB standards on climate-related disclosures

In October 2023, CVM issued Resolution No 193. The regulation concerns the preparation and disclosure of sustainability-related financial information reports, based on the international standard issued by the ISSB (see the Brazilian Trends and Developments article in Chambers’ 2024 Climate Change Regulation Guide).

For now, the preparation and disclosure of reports based on ISSB standards will be voluntary. However, for publicly traded companies, this will become mandatory starting in 2026.

In Brazil, business transactions are guided by, inter alia, the principle of good faith (Articles 113 and 422 of the Civil Code), which encompasses the duties to be informed about relevant facts and to seek proper information for decision-making. This assessment is made by means of due diligence processes, in which prospective buyers must make all appropriate investigations to assess the risks of the transaction, and sellers must disclose adequate information. The directors’ duty to exercise due diligence in business transactions also derives from their fiduciary duty set forth in the Corporation Act’s Article 153 (discussed in 6.2 Directors’ Climate Change Liability).

Due diligence processes in business transactions typically investigate environment-related risks, and climate-related concerns are becoming more common. In the financial sector, for example, based on the new set of norms discussed in 6.1 Task Force on Climate-Related Financial Disclosures (TCFD), financiers ought to assess the climate risks of financial operations, which normally occurs via due diligence processes. But this duty to conduct risk assessments and management is not a one-size-fits-all measure. The exercise of this duty requires flexibility, for the risks and the proper way to handle them vary according to a wide, dynamic spectrum of credit operations. Thus, such exercise must be informed by the principles of relevance and proportionality.

Climate Due Diligence and Supply Chain

There has been growing concern worldwide about environmental and climate impacts in the supply chain context. To illustrate, on 24 May 2022, Executive Decree No 11,080/2022 added to the Environmental Infractions Regulation (Executive Decree No 6,514/2008) a new kind of infraction: “to acquire, intermediate, transport or sell a product or by-product of animal or plant origin produced on an illegally deforested area, located inside a protected area [unidade de conservação], after its creation” (Article 54-A).

Although this infraction does not refer to climate change explicitly, given that illegal deforestation is a major cause of greenhouse gas emissions in Brazil, this new rule has an important underlying climate justification.

Moreover, it is important to note that, despite its focus on irregular deforestation in a protected area, the new infraction recommends attention be paid by all sectors of the economy to the exercise of the duty of socio-environmental due diligence within their value chains and ESG policies.

Failure to exercise due diligence has already been challenged in court. In IBAMA v Siderúrgica São Luiz Ltd et al (Public Civil Action No 1010603-35.2019.4.01.3800, 15th Civil District Court of Minas Gerais), the plaintiff claimed that a steel company and its CEO failed to conduct proper due diligence regarding the origins of the charcoal used in the industrial process.

It is also worth noting that in May 2023, the Brazilian Bank Federation (FEBRABAN) announced a new regulation for the management of illegal deforestation risks in meat-packing plants’ credit operations.

Banks that join the self-regulation mechanism undertake to require from their clients the implementation of a monitoring and tracking system that demonstrates, by 2025, that any cattle acquired from the Legal Amazon and the state of Maranhão do not originate from illegal deforestation. No credit should be offered to companies linked – directly or indirectly, by means of their supply chain – to illegal logging. The banks will be periodically supervised and their conformity to the rules will be proved by reports and evidence submission. Any non-compliance will be punished with administrative sanctions.

Furthermore, in light of the developments of the EU’s laws on the consumption of “deforestation-free” products, further regulations on due diligence and supply chain are likely to be passed in Brazil, both at the national and subnational levels.

European Union Corporate Sustainability Due Diligence Directive (CS3D)

In April 2024, the European Parliament approved the CS3D, on the obligation for European companies to prevent, mitigate and remedy negative impacts on the environment and human rights violations – whether in their operations in the European Union or through their supply chain globally. The Directive can affect suppliers in Brazil.

In Brazil, Bill No 572/2022 was presented on 14 March 2022 before the House of Representatives with a similar objective, ie, imposing due diligence as an instrument of duty of care for environmental and human rights.

Overview of Brazil’s Energy Supply

The monitoring and analysis of Brazil’s energy supply is conducted by the Energy Research Office, a state-owned entity created in 2004 to provide the Ministry of Mines and Energy with relevant information for energy planning and policy (Law No 10,847/2004, Article 4, sole paragraph).

In this regard, the Energy Research Office publishes several reports, including the Ten-Year Energy Expansion Plan, which provides for assessments on the main aspects of Brazil’s energy sector, as well as prospects of this sector’s development within a ten-year horizon. The Energy Research Office is not empowered to make political decisions; thus, it does not set national priorities or goals for the energy sector. It rather produces technical material to support the government’s decision-making on energy-related matters, such as the low-carbon transition.

On 6 April 2022, the Ministry of Mines and Energy approved GM/MME Norm No 40/2022, the Energy Research Office’s 2031 Ten-Year Energy Expansion Plan (the 2032 Ten-Year Energy Expansion Plan is yet to be released). Its key findings include that in 2021, renewable sources (ie, hydropower, biomass, wind and solar) accounted for 83% of Brazil’s electricity supply, being 63% hydropower. However:

• renewables accounted for 47% of Brazil’s total energy supply – ie, 18% biomass, 12% hydropower, 9% firewood and charcoal, and 8% others (eg, wind, solar and biogas); and
• non-renewable sources represented 53% of the country’s energy supply mix – ie, 34% oil, 12% natural gas, 5% coal, 1% uranium, and less than 1% others).

Thus, in spite of the significant share of renewable sources in its electricity matrix (with the noteworthy participation of hydropower), Brazil’s total energy supply still depends on fossil fuels.

Alternative Renewable Energy Sources

Given the geographical limitations and vulnerability of the hydropower sector to extreme whether events (mainly droughts), energy planning should seek diversification of renewable sources; eg, wind, biomass, and solar. Accordingly, the Energy Research Office maintains that hydropower, which at the beginning of this century represented 83% of Brazil’s installed capacity, should reduce its relative share to 46% by 2031.

Against this backdrop, wind and biomass are particularly important and have been given special attention by the Brazilian government more recently.

On 25 January 2022, Decree No 10,946/2022 filled a key regulatory gap regarding the development of wind projects, providing for rules on the concession of offshore areas.

As for biomass-based energy, on 22 March 2022, Decree No 11,003/2022 established the “Federal Strategy to Incentivise Biogas and Biomethane Sustainable Use”, following the Global Methane Pledge undertaken at the COP26 in Glasgow. This act sets forth incentives for biomethane and biogas production and stipulates that methane credits may be issued and traded in the carbon market.

Biomass also has the potential to contribute to the reduction of greenhouse gas emissions caused by the transport sector, by complementing the use of oil derivatives (eg, gasoline and diesel) with biofuels.

In this regard, Law No 13,576/2017 created the National Biofuels Policy (RenovaBio). In a nutshell, under this Law, the National Council of Energy Policy (NCEP) sets forth annual emissions reduction targets for the downstream distribution sector, and, on an annual basis, such targets are allocated amongst individual fuel distributers according to their market shares. Individual targets are met through the acquisition of Credit Decarbonisation by Biofuels (CBIO).

Furthermore, Brazil is also evaluating opportunities concerning the development of hydrogen. In this regard, on 17 May 2021, the NCEP, through its Resolution No 9/2021, ordered the Ministry of Mines and Energy to elaborate, with the support of the Energy Research Office, directives for a Hydrogen National Programme, delivered on 4 August 2021. On 23 June 2022, the NCEP approved the Programme.

National Fund on Climate Change

The Climate Fund was created by Law No 12,114/2009 and, as seen, is currently regulated by Executive Decree No 9,578/2018. It has the purpose of securing resources to support projects or studies and financing of undertakings aimed at mitigating climate change and adapting to climate change and its effects.

The Climate Fund’s resources are originated, inter alia, from:

• agreements, adjustments, and contracts entered into with federal, state, district, or municipal public administration bodies and entities;
• donations made by national and international, public or private entities; and
• loans from national and international financial institutions.

The Ministry of Environment and Climate Change is responsible for the Climate Fund’s co-ordination, and the Brazilian Development Bank is its financial agent.

The Climate Fund is a key instrument for the implementation of the NPCC (Article 6, II). On 5 June 2020, however, several political parties filed before the Supreme Court a lawsuit against the government due to alleged negligence in the management of the Climate Fund’s resources (ADPF No 708). Refer to 2.1 National Climate Change Policy under “The UN Climate Regime as Part of Brazil’s Domestic Law” for further discussion.

Amidst the set of new environmental policies put forth on 2023’s Global Environment Day, the Executive Decree No 9,578/2018 was altered in order to change the Climate Fund’s composition (Executive Decree No 11.549/2023). In essence, besides adding to the Fund’s Managing Committee new ministries created by the new administration (Indigenous Peoples and Racial Equality Ministries), the alteration also included.