Finocchio & Ustra Sociedade de Advogados | View firm profile
Does my Legal Reserve and Permanent Preservation Area make me eligible to issue carbon credits? This is one of the most recurring questions among Brazilian rural landowners considering the recent enactment of Federal Law No. 15,042/2024, which establishes the Brazilian Emissions Trading System.
The question is legitimate: if Legal Reserve (RL) and Permanent Preservation Areas (APP) are protected by legal obligation under the Forest Code, Federal Law No. 12,651/2012, would it be possible to generate carbon credits by keeping these areas conserved? The answer, considering the new legislation, is yes, but the principle of additionality prevents carbon generation projects from being eligible for this purpose.
Before delving into the analysis of whether or not it is possible to issue carbon credits in these areas, it is necessary to explain what the institute of legal reserve and permanent preservation area is in the Forest Code. Legal reserve is understood as the area located within the rural property intended for the sustainable use of natural resources, conservation of biodiversity, and fulfillment of the socio-environmental function (art. 3, III, and art. 12, Law No. 12,651/2012). The permanent preservation area, in turn, corresponds to the protected space, whether or not covered by native vegetation, whose function is to preserve water resources, soil stability, biodiversity, and ensure the well-being of human populations (art. 3, II, Law No. 12,651/2012).
Federal Law No. 15,042/2024, article 43, paragraphs 17 and 46, which establishes the regulated market, expressly recognizes the suitability of these areas to generate carbon credits, provided they meet the technical and regulatory requirements for measurement, verification, and registration. However, the debate arises regarding the criterion of additionality, traditionally required in carbon markets, which questions whether conservation already required by law can be considered an “additional” mitigation.
It is important to understand the legal concepts established in the Forest Code to understand the relationship of this rule with the regulated carbon market law. Thus, for Legal Reserve, Federal Law No. 12,651/2012 defines, in its art. 3, item III and 12, the area located within a rural property or possession that must be maintained with native vegetation, with the purpose of ensuring the sustainable use of natural resources, the conservation of ecological processes and biodiversity. The extent of the mandatory Legal Reserve varies according to the geographical location of the property: 80% for forest areas in the Legal Amazon, 35% for cerrado within the Legal Amazon, and 20% for other regions.
Art. 3, item II, of the aforementioned law, in turn, defines permanent protection area as a protected area, whether or not covered by native vegetation, with the environmental function of preserving water resources, landscape, geological stability, and biodiversity, facilitating the gene flow of fauna and flora, protecting the soil, and ensuring the well-being of human populations, such as the marginal strips of any natural watercourse, slopes with a gradient greater than 45 degrees, restingas, mangroves, hilltops, edges of plateaus or tablelands, and veredas.
And then comes the question: what is additionality? I preserve 20% of my area with vegetation cover, in this scenario of climate change does it have no value? Does being in environmental compliance not generate economic benefits for me? In common sense, these questions are pertinent, since the media constantly mentions that Brazilian agribusiness will benefit from the carbon credit market and that rural areas will be eligible to generate carbon credits. However, in practice, the monetization of the conservation of these areas within rural properties does not occur, either because there is no additionality or because it is too small to gain scale and guarantee the cost of the projects.
The concept of additionality, although not expressly provided for in Brazilian environmental legislation, was developed internationally and is a criterion used to verify whether the environmental benefits, notably the reduction of greenhouse gas emissions, are actually due to the implementation of the project, and are therefore additional to the reference scenario.
From a systematic reading of Federal Law No. 15,042/2024, which establishes the Brazilian Greenhouse Gas Emissions Trading System (SBCE), and the Forest Code (Federal Law No. 12,651/2012), the compatibility between the legality of the protection of these areas and the principle of additionality is analyzed, as well as the effects of Brazilian legislation in relation to the environmental integrity standards of carbon markets.
The article “Is the requirement of additionality for carbon projects unfair?”, published by LACLIMA, critically discusses this point, arguing that landowners who have historically kept the forest standing are disincentivized, while agents who deforested and now restore obtain greater access to the market.
After the enactment of Federal Law No. 15,042/2024, the possibility of issuing carbon credits from the conservation of native vegetation protected by law was established. In theory, additionality ceases to be an absolute criterion and becomes weighed according to the Brazilian regulatory and socio-environmental reality. However, considering that the rule is recent and the carbon credit market does not apply this logic to carbon credit projects, there is a high probability that rural landowners will have difficulty monetizing the preservation and conservation of existing forests on their rural properties that result from compliance with the Forest Code.
By recognizing the suitability of permanent preservation areas and legal reserves to generate carbon credits, the Brazilian legal system gives economic value to the maintenance of ecosystems and promotes a fairer and more effective model of sustainable development.
Luciana Camponez Pereira Moralles
Partner, Specialist in Environmental, Sustainability, and Regulatory Law.