Supporting Brazil and the World towards net zero
Developing the Brazilian voluntary carbon market
with high integrity
Our initiative has 5 workstreams focused on different parts of the carbon credits value chain
The Brazilian Initiative for the Voluntary Carbon Market is the result of a combination of companies and institutions from several sectors in Brazil – Amaggi, B3, Bayer, Dow, Equinor, Itaú, Natura, Rabobank, Systemica and Vale – with the goal of structuring key actions to develop the voluntary carbon market in Brazil and contribute to the global high-integrity carbon market. McKinsey & Company is the knowledge partner for the initiative
The initiative works on several fronts to position the country as the leader of a high-integrity global carbon market. Project objectives include broadening the offering through improved certification/verification processes, develop the financial instruments required to align demand and supply, define requirements for a high integrity market (technical, environmental and social), explore the main tax implications, design an independent governance body to coordinate the market and design the engagement strategy with the key stakeholders.
Enable supply through better certification / verification processes and support the regulatory discussions
Streamline the due diligence process and address key
Improve financing for voluntary carbon market projects by designing financing mechanisms with risk mitigators, and provide more fungibility and liquidity to the market by proposing standard contracts that reflect the Brazilian context
Design of an independent governance body to coordinate the market, ensuring the integrity of the organization and impartial decision-making by its members
Outline the engagement strategy with key stakeholders to define communication and to assure the correct media visibility of the Initiative
Who we are
Initiative sponsors and content contributors
Part of the Initiative that provides expertise, fact base and analysis
Which companies and entities are involved in the initiative?Amaggi, B3, Bayer, BNDES, Dow, Natura, Rabobank, Raízen, Vale and Votorantim (Cimentos, Auren and CBA), as well as McKinsey, which is the group’s knowledge partner.
How did the participating companies come together for this initiative?As the carbon markets discussions grew in Brazil and around the world, it became clear the potential to be unlocked in Brazil as a credible and relevant source of carbon credits. With that in mind, McKinsey proposed a workgroup with companies committed to the discussion. The companies and institutions joined forces and started conversations on this common theme in the beginning of July 2022, identifying the business opportunities for the country, as the bottlenecks that impede the advance of the theme as well, which will bring many business opportunities for Brazil and the environment.
What is the scope of action of this initiative?The initiative is focused on helping the high-integrity voluntary Brazilian carbon market scale to enable Brazil and the world to achieve net zero. Therefore, it aims to propose a structure for an entity that would support the country to unlock its potential. The three main objectives are: 1. Promote actions to unlock the supply of high integrity carbon credits in Brazil, which will meet Brazilian and global commitments to net zero; 2. Facilitate market access and knowledge for buyers; 3. Become a think tank that actively contributes to the international discussion and supports the establishment of local regulation
What is the initiative's mission?Unlocking Brazil's potential to support the world in achieving the “net zero” goal Develop a high integrity Voluntary Carbon Market (VCM) as an instrument to attract substantial financial flows to unlock Brazil's climate finance potential and its co-benefits (e.g. biodiversity protection, water security, socio-economic development ) Recognize the primary need to decarbonise the value chain/operations, leveraging carbon credits to offset emissions on the journey to “net zero” and then neutralize hard-to-reach emissions reduce once “net zero” is reached
Why is this initiative different from other existing initiatives?It is fact-based, built through multiple perspectives of different stakeholders (suppliers, buyers, financial institution, public entities) and with an apolitical vision; It goes beyond diagnostics, with actionable and tactical mechanisms to scale the Brazilian VCM with integrity; Leverage and connect with international initiatives that address key topics for scaling VCM (eg The Integrity Council, VCMI); It has sponsors and members committed to developing a high integrity Brazilian VCM with a collective agenda that can unlock the market; It has transparent governance connected with global and local entities to ensure a high integrity market.
Is there a similar initiative in other country(ies)?Southeast Asian countries have similar initiatives (to try to scale their markets), however, according to public information, it is not a set-up similar to the initiative (with various stakeholders come together to accelerate the market).
How is the initiative linked to government efforts?The initiative is a collective effort of private sector sponsors and a federal development bank and is not linked to any government agency responsible for market regulation. To adhere to the highest standards of transparency, we invite public/governmental entities to the discussion table.
Is there federal government support for the initiative?The work started from the private sector, but we already have BNDES, a federal bank, in the group. It is worth emphasizing that the initiative has no political or partisan bias, it is aimed at the country and the environment, so that there are process improvements, stricter controls and with the objective that Brazil becomes a world power in the voluntary carbon market of high integrity.
How will the initiative connect to existing international VCM governance bodies?The initiative decided early on to adhere to the integrity principles of international agencies such as VCMI and The Integrity Council. Discussions are carried out in close collaboration with international agencies and other organizations relevant to the topic.
What will be the gain of this initiative for Brazil and for companies?For Brazil, the benefits are multiple: increasing and bringing sustainable, socioeconomic development to border regions, ensuring the preservation and recovery of biomes, increasing water security and preserving and expanding biodiversity. The proposal brings precisely the balanced union of these two benefits. In parallel, the voluntary carbon credit market has been gaining strength day by day and we understand that it brings countless benefits and opportunities to the economy and the country. We know that all institutions involved have their individual interests in the market, however this is a collective and non-competitive initiative to create the mechanisms that allow the market to flourish/scale with high integrity. For participants, the benefits will be: creation of mechanisms to allow effective participation in the market, from funding mechanisms, liquidity, greater integrity of processes, etc.
Are there other entities involved in the initiative?The initiative is in regular communication with a broad set of stakeholders through an advisory board and advisory group to reflect multiple and apolitical market perspectives.
Will the initiative also cover the compliance market?The initiative is exclusively focused on the voluntary carbon market.
Will entities not participating in this initiative be able to contribute?Yes, the initiative will open a public consultation to receive input and feedback from any interested party, including public and private entities, NGOs, and others.
The participating companies are mostly multinationals. Will they take this initiative to other countries where they are present?There is a mix of Brazilian and international companies, but all of them have a significant share in the Brazilian market. This is a positive factor, as Brazil has as much opportunity to use these credits at home as it does to use offset credits to help in other regions. Bringing different perspectives together is a differentiator. There is also an interest in using the initiative's work as an inspiration/reference for other countries that have another potential for generating offsets, whether in Latin America itself or in other regions of the world.
Are the biggest challenges technological, financial, procedural, political or otherwise?There are challenges in several aspects: regulatory and legal issues, such as how to pay taxes on these credits and how this impacts the balance sheet of organizations; creation of mechanisms that stimulate the market, from governance to finance; technical challenges, such as certification and verification, whether locating and developing methodologies, or applying technology to reduce cost/effort by increasing integrity. And, in addition, the challenge of ensuring that Brazil plays a more active/relevant role in international discussions, given the country's potential.
What are the biggest bottlenecks for initiative to achieve its goals?The structural changes that will be necessary, application of new technologies and controls and the market having this vision. All this needs to be done carefully, but quickly, so that we don't miss this opportunity to put the country in a prominent position globally. But we understand that with the paths that will be proposed, the country will be fully able to move forward at the appropriate pace.
What are the plans for after COP 27?Work will continue, with the objective of putting the proposed ideas into practice quickly so that Brazil leads and conquers the opportunities of this global market. It is worth emphasizing that on the occasion of the COP we will launch the public consultation, an opportunity for other actors to contribute to the proposal.
How long does the initiative expect to have concrete results?The meetings seek to discuss the bottlenecks and opportunities that involve this market and Brazil. We will advance these discussions under different pillars, seeking the best solutions for each challenge and identifying the strengths we already have. At COP 27 we will deliver the proposal so that it can be disseminated, discussed more broadly by other actors in this market and, above all, so that it can be put into practice quickly.
How long does Brazil need to be more relevant in the global market?This will depend a lot on the measures taken, the bottlenecks overcome, the technologies applied, the controls created, among other aspects, and the speed with which all this will be done. In addition, it also needs the collaboration of both the entities linked to the VCM and the legislators and regulators. But we are optimistic, as Brazil has one of the greatest potentials in the world in this market and we need to take advantage of this opportunity, which will bring gains to the country, the economy and, of course, the environment, which is the main focus.
Estimated environmental and socioeconomic impacts in Brazil
Potential to generate carbon credits in Brazil considering USD 25-35/tCO2eq, most of it in reforestation and forest conservation
Gross Value Added impact with a carbon price of 25-35 USD/tCO2e, considering reforestation activities in degraded pasture areas, REDD+ and agroforestry
550 - 880k
Net positive impact in jobs, of which ~60% are located where the project takes place (e.g., seedling growth, forest management, etc.)
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