On March 21, 2022, the Brazilian Government launched a new package of incentive measures seeking to stimulate programs and actions to reduce methane emissions, particularly through development of biogas and biomethane initiatives. The new package – called Federal Strategy of Incentive to the Sustainable Use of Biogas and Biomethane – includes the Methane Zero National Program and is aligned with the commitments made by Brazil in the context of COP26, the Global Methane Pledge and other domestic regulatory efforts, such as the National Policy on Waste Management.

One of the main targets of the incentive package – in addition to promoting research and development of new technologies allowing the reduction of methane emissions and the use of biogas and biomethane as sources of sustainable energy and fuel – is to promote the development of carbon markets, particularly introducing the methane credit.

Although the package does not provide further details on such methane credits, they are supposed to represent a ton of methane that has not been emitted and are expected to be aligned with existing carbon credits markets, in the sense that the marketing of such methane credits should generate additional income to biogas and biomethane projects.

Brazil already has a successful regulated market for credits related to decarbonization through biofuels – RenovaBio – that has been fully functional since 2020 and currently presents a 98% compliance rate. Considering RenovaBio created a regulated market in which fossil fuel distribution companies have yearly decarbonization targets they must meet by acquiring decarbonization credits, which in turn are generated by producers of biofuels, such as ethanol, biodiesel and biomethane, it is expected that in fact the newly created methane credit will be a part of the RenovaBio market, not only reinforcing its already significant role, but also further developing such a market.

The new package is one more step in the direction of using economics and market instruments for promoting environmentally positive initiatives in Brazil. However, there is much yet to discuss until the newly proposed mechanisms are effectively functional, producing results and aligned not only with the already implemented RenovaBio, but also with the prospective legal framework governing the Brazilian carbon credit markets, which is currently under analysis in the National Congress.

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