Brazil, which is already a major player in the $30 billion global trade in carbon credits, aims to hold its first online carbon credit auction this year on the São Paulo BM&F commodities and futures exchange in an initiative geared towards attracting European buyers. “We hope to reach an accord with one particular company interested in selling its credits via auction in the second half of the year,” says Guilherme Magalhães Fagundes, the BM&F’s head of special projects. With a lack of liquidity in the world carbon credit market, daily trading is still some years away, but the BM&F says it aims to make the auction possible on the basis of buyer or seller demand and widen carbon credit sales away from the current business-to-business format.
The initiative might help Brazil and Latin America stop a slide in their share of the world’s carbon credit trade. In a market that tripled in value on 2005, Brazil accounted for 4% of traded Certified Emissions Reductions (CERs), which are established under the Kyoto Protocol and let developed countries buy into emissions-reducing projects in emerging markets to reduce their own carbon emissions by about 5% by 2012. But Brazil’s participation was down from 10% in 2005. Latin America as a whole accounted for 10% of traded volumes last year, down from 17% in 2005.
Regulatory obstacles appear to be slowing the Brazilian market’s development. Venture capitalists and bankers say long project approval delays and a lack of financing opportunities and government incentives are keeping Brazil from playing a bigger role in the carbon credits market. One of the world’s largest producers of carbon dioxide emissions because of its rainforest clearances for agriculture, Brazil is investing in hydroelectricity projects, windfarms and ethanol production to register as carbon-reducing projects. But Brazilian consultancy Geoklock says it takes almost a year on average to register a small-scale project and 405 days for a large-scale project, compared with a global average of 295 days for a small-scale project and 251 days for bigger projects.
Some New York investment bankers say there are hundreds of Brazilian landfill gas capture projects that banks are keen to finance and to buy and trade their carbon credits, but that local town halls are very slow in developing such projects. Such bureaucracy is frustrating, given that Brazilian companies say they are keen to develop environment-conscious business plans, switching from fuel oil to natural gas in boilers and furnaces. São Paulo state water utility Sabesp says it aims to sell treated wastewater on the international carbon credit market. Meanwhile, biodiesel producer Brasil Ecodiesel says it has developed the world’s greenest fuel via a new high-yield form of biodiesel. “Brazilian biodiesel has the greatest potential to replace fossil fuel energies in the world,” says Ecodiesel’s Nelson Cortes da Silveira.
