By André Ricardo Passos de Souza for Money Times
Returning to our main theme of the column, which deals with sustainability and agribusiness, we’re going to tackle an important issue and provide the reader with a comparison between the three legal instruments available on the market today (carbon credit, green CPR and Payments for Environmental Services) to remunerate those who preserve the environment, those who produce with quality and respect best practices.
The environmental issue and our economic system, based on sustainability and free enterprise, are so relevant that they were treated by the constituent legislator, when the 1988 Constitution was promulgated, as cornerstones of our legal system.
Thus, we can say that the combination of both, as set out in the Federal Constitution itself, is not only a fundamental right of society as a whole, but its maintenance and development is enshrined as a duty of the Brazilian state in relation to the direction of public policies in all their aspects.
From this constitutional approach, we can say that both the principles of Environmental Law, which are inherent to the preservation of the environment, and the current legal norms, such as Law n. 12.187/09, which instituted the National Climate Change Policy (PNMC) – creating conditions for public entities, through environmental and regulatory bodies, and private entities, such as companies, rural producers and market institutions, such as commodity, stock and futures exchanges, regulated by authorities such as the Securities and Exchange Commission (CVM).
Payment for Environmental Services instruments
In this way, specific instruments have been created and materialized through legislation to ensure the effectiveness of these policies, which are based on the main issue of remuneration to conservation agents for their sustainable practices, whether in the form of money or some other type of consideration, thus bringing about a positive correlation between the act of preserving and the material benefits to the individual who preserves the environment, making the economy interact with environmental conservation for the benefit of the entire planet.
The forms of remuneration and legal instruments created for this have the same characteristic: they derive from a voluntary act, i.e. not a compulsory one, aimed at a healthy environment and the maintenance of preservationist policies through sustainable businesses with special remuneration for delivering, in addition to the traditional products derived from these businesses, environmental preservation – what we call “agri-environmental products”.
It is a premise of the legislation (and common to existing legal instruments) that such actions be duly certified by reputable companies capable of attesting to environmental preservation standards such as the capture of greenhouse gases and by scientifically established metrics, which creates challenges – especially in relation to local metrics that have yet to be “tropicalized” in order to generate more effectiveness for those who preserve the environment in Brazil.
However, while generating challenges, these businesses also end up generating market opportunities by helping to materialize and legalize businesses that preserve the environment to the detriment of those that don’t, as well as lending practical economic content to voluntary exchanges that can be made on the market.
The common ground is a preservationist policy developed by the Brazilian state and based on international standards, as well as established principles of environmental law, such as “polluter pays”, “protector receives” and “user pays”.
Carbon credits, CPR-Green and PSA and the prospects for their use.
Therefore, despite being different – even in terms of their nature and legal effects – the instruments under analysis are part of the same system and the same possibility of materializing incentives for the sustainable production of existing businesses within the scope of what we call the “Broad Agribusiness Chain”.
These different functionalities and characteristics can be seen in the table below:
| Tool | Who can take part? | Direct Benefits |
|---|---|---|
| Payment for Environmental Services (PES) | Individuals, legal entities or collectives carrying out the preservation action may be rural producers, NGOs or traditional communities. | Payment in currency, services or goods for environmental services provided |
| Carbon Credits | Rural producers, companies, associations or cooperatives that reduce greenhouse gas emissions in their respective production chains and/or operational activities | Payment in currency through direct operations of assignment of rights and/or sales of certificates representing emission reductions |
| Green CPR | Rural producer (individual or legal entity), their associations, cooperatives and other entities legally authorized to issue the title under Law no. 13.986/20 | Payment in currency for the “rural products” listed in Decree no. 10/828/21 and/or bond discounts in financing operations in the agribusiness chain |
These tools, of course, are being used in a variety of different situations and projects by different agents, as the table above shows, but in common we can say that they all contain ways of materializing good environmental practices and instrumentalizing existing preservationist policies at both national and global level.
In addition, by generating direct benefits by encouraging rural producers and other market agents to produce with quality and responsibility, generating positive impacts for the environment and the population in general, they tend to contribute decisively to a healthier business environment and to Brazil’s economic insertion into global chains at a level far above its competitors at international level.
It is also important to remember, as we have already discussed in this column on the last few occasions, that we are on the verge of new legislation on the carbon credit market which aims to expand the market beyond voluntary exchanges, as well as the discussion around a specific CVM resolution for Investment Funds in Agro-Industrial Chains (Fiagro) which is currently under public consultation and which could help to maximize CPR-Green emissions and even have a positive impact on the voluntary carbon credit market.
Finally, we can’t forget that there are the challenges of tropicalizing international metrics that we still need to face and work on developing scientific parameters to support this market, just as we did through Embrapa, which developed the conditions and cultivars in Brazil’s Cerrado to make the world’s largest agribusiness flourish.
Disponível em: Carbon credit, green CPR and more: What are Payments for Environmental Services? – Money Times
