The enactment of Law 15,042/2024 marks a decisive step in the institutional development of Brazil’s carbon market. It created the Brazilian Emissions Trading System (SBCE), a regulated market based on a cap-and-trade model, under which the federal government sets emissions limits for covered sectors and allows market instruments to support compliance in an economically efficient manner.
The SBCE operates through emissions caps and the allocation of Brazilian Emission Allowances (CBEs). Each CBE generally represents the right to emit one ton of carbon dioxide equivalent (tCO₂e). A regulated operator that emits below its limit is entitled to sell the surplus. An operator that exceeds its cap must acquire additional allowances or other eligible assets. This design gives companies a direct financial reason to reduce emissions, since the cost of carbon becomes part of business decision-making.
The law also provides for Verified Emission Reduction or Removal Certificates (CRVEs). A CRVE represents the actual reduction or removal of one tCO₂e, based on certified methodologies and registration within the SBCE. Unlike CBEs, which work as CO₂ permits, CRVEs represent an environmental result. CRVEs may be awarded because of projects such as reforestation, forest conservation, or clean energy. They may also be used for regulatory compliance or traded in the regulated market.
The interaction between CBEs and CRVEs creates a structured market for the circulation of environmental assets. Registration, monitoring, reporting, and verification rules are intended to protect market integrity and traceability. The SBCE will coexist with the voluntary carbon market, where companies acquire credits to meet private sustainability commitments. In Brazil, the voluntary market still relies heavily on international certification standards.
From a tax perspective, Law 15,042/2024 seeks to encourage the carbon market. For example, it:
Excludes revenue from the sale of carbon credits from the taxable bases used for the social contributions on revenues (PIS and COFINS); and
Reinforces the understanding that state VAT (ICMS), municipal service tax (ISS), and federal excise tax (IPI) should not apply, given the specific legal nature of these assets.
Taxation on carbon trade therefore remains focused on income, through corporate income tax (IRPJ) and social contribution on net profit (CSLL), with the deduction of expenses incurred in acquiring carbon credits.
This treatment strengthens the regulatory role of the carbon credits regime rather than treating it primarily as a revenue-raising mechanism. It also supports the policy objective of reducing emissions. Together, these measures create a low-tax scenario, attracting investment in environmental projects.
Impact of the consumption tax reform
This framework may change under Brazil’s consumption tax reform, as it substitutes the current ICMS, ISS, IPI, PIS, and COFINS for the federal contribution on goods and services (CBS) and the state and municipal tax on goods and services (IBS).
The new regime has a broad taxable base, and thus IBS and CBS apply to onerous transactions involving tangible and intangible assets, services, and rights. At the same time, Supplementary Law 214/2025 excludes certain transactions from taxation, such as those involving securities, except under the financial services regime.
This distinction is relevant for the SBCE. Law 15,042/2024 treats both assets and carbon credits traded in financial and capital markets as securities. As such, they should remain outside the scope of IBS and CBS, honouring the constitutional principle that taxation must consider environmental protection.
The position is less clear for credits traded in the voluntary market. This is because, although Law 15,042/2024 recognises the existence of the voluntary carbon credit market – even if credits are not used to comply with SBCE obligations – these transactions are not considered as securities trading, and thus may be viewed as taxable transactions by CBS and IBS involving intangible assets or rights. If this interpretation prevails, voluntary carbon credits will be subject to different tax outcomes depending on the trading landscape.
Challenges and outlook
The possible taxation of the voluntary carbon market raises practical concerns, as it may reduce the economic appeal of environmental projects with narrow margins. It may also encourage transactions to migrate to organised markets, where the securities classification is clearer, which could improve standardisation and transparency. Yet it may also create competitive distortions between regulated, organised, and bilateral transactions.
Brazil’s current carbon market, therefore, begins with a strong environmental public policy. The legal framework reduces consumption tax issues, recognises tradable carbon assets, and supports investment in decarbonisation. At the same time, the transition to IBS and CBS may alter this balance. The key point is whether voluntary carbon credits will continue to receive favourable tax treatment or become subject to IBS and CBS.
The challenge is to strike a balance between tax neutrality and environmental policy, as a neutral VAT system should avoid unjustified distortions. However, considering that Brazil’s Constitution expressly provides that environmental protection is a principle that should inform the tax framework, this may support an interpretation favourable to the carbon market with regard to IBS and CBS. Clear rules for carbon assets will be essential to preserve legal certainty, maintain the market’s attractiveness, and align tax reform with the country’s decarbonisation goals.
