Latest Developments and Initiatives in Brazil

In this Brazilian environmental law update, we bring you the latest news on key initiatives shaping Brazil's regulatory framework and delve into diverse subjects ranging from financial responsibility and proposals for environmental control regimes for the import of plastic and electronic waste, the management of chemical substances (PFAS), market access to medical devices, and the country’s proposal to regulate the carbon market and decarbonization credits, and advance its ESG and sustainable development agendas. Let's dive in:

1. Public Consultation on Decarbonization Credits: Shaping Accounting Practices

In collaboration with the Federal Accounting Council (CFC) and the Brazilian Securities and Exchange Commission (CVM), the Brazilian Accounting Pronouncements Committee (CPC) invites the public to participate in a crucial consultation. From August 21 to October 20, 2023, they seek insights on Technical Guidance Draft OCPC 10, which lays down fundamental criteria for recognizing, measuring, and disclosing decarbonization credits.

The primary aim of this Guidance is to establish the essential requisites for the recognition, measurement, and disclosure of decarbonization credits. These criteria will guide entities in the origination, negotiation, and acquisition of credits to fulfill decarbonization goals (retirement). Additionally, the Guidance addresses associated liabilities, whether stemming from legal obligations or informal commitments.

Comments and contributions will be treated as public and will be fully accessible after the conclusion of the consultation period on the Brazilian SEC website. The draft guidance is available on the CPC (http://www.cpc.org.br), CFC (http://www.cfc.org.br), and SEC/CVM (http://www.cvm.gov.br) websites. More information is available here.

2. Brazil Makes Progress in Carbon Market Regulation

Following President Lula's repeal of Decree 11,075 of 2022 in June, which was authored by his predecessor and has established the National System for Greenhouse Gas Emission Reductions, Brazilian Senator Leila Barros presented a Substitution Bill for Bill 412 of 2022 to the Senate Environment Committee on August 28. This committee is responsible not only for offering opinions on environmental defense matters but also for assessing the legislative technique, legality, and constitutionality of proposed legislation.

The Substitution Bill proposes the establishment of the Brazilian Greenhouse Gas Emissions Trading System (SBCE) through rules applicable to activities, sources, and installations within the national territory that emit or have the potential to emit greenhouse gases (GHGs). Bill 412 had been previously under consideration alongside four other bills related to the regulation of the Brazilian market for greenhouse gas emission reductions.

The text introduces certain concepts for the operation of the system, including:

• Brazilian Emission Allowance: A tradable fungible asset representing the emission of one ton of carbon dioxide equivalent, granted by the governing body of SBCE, either free or for a fee, to regulated installations or sources.
• Verified Emission Reduction or Removal Certificate: A tradable fungible asset representing the effective reduction or removal of one ton of carbon dioxide equivalent through accredited project activities, registered within SBCE.
• Carbon Credit: A tradable fungible asset representing the effective reduction or removal of one ton of carbon dioxide equivalent, obtained from external GHG reduction or removal projects not within SBCE, such as those generated from the voluntary market.
• Voluntary Market: An environment characterized by transactions of carbon credits or SBCE-related assets voluntarily established between parties for the purpose of voluntary GHG emission offsetting. Transactions in the voluntary market do not result in corresponding adjustments to the national emissions accounting within SBCE.

The Substitution Bill also regulates the trading of SBCE-related assets and carbon credits in the financial market, while addressing tax aspects. It defines these assets as securities and states that their trading will be regulated by the Brazilian Securities and Exchange Commission (CVM). We expect the Senate to approve it by the end of September, and prior to COP-28, which is scheduled to take place in Dubai.

Finally, on August 30, 2023, the Senate Environment Committee also approved Bill 1415/2022, which regulates the economic exploitation of permanent carbon dioxide (CO₂) storage in geological or temporary reservoirs, and its subsequent reuse. This system is also known as Carbon Capture & Storage (CCS) and involves capturing the CO₂ before it is released into the atmosphere and then storing it securely, usually underground, to prevent it from contributing to climate change.

With the above, Brazil advances in its commitment to mitigating climate change and reducing greenhouse gas emissions. With a robust regulatory framework in place, Brazil can foster the development of a thriving carbon market, attracting investments in CCS projects and further advancing its efforts towards a low-carbon and environmentally sustainable future.

3. Brazil's National PFAS Control Policy Bill: Unveiling Regulatory Measures

Brazil has taken a significant step forward in regulating per- and polyfluoroalkyl substances (PFAS). The Brazilian National PFAS Control Policy Bill No. 2726/2023, introduced in the Chamber of Deputies, sets forth an ambitious agenda to establish a comprehensive national policy to control PFAS.

The proposed policy focuses on several key areas, such as environmental impact and sustainable practices, and establishes the duty of federal, state, and municipal public authorities to further regulate and implement the policy effectively. For companies and industries that utilize PFAS, the bill mandates the submission of annual consumption and disposal reports for these substances.

The bill proposes measures to progressively reduce the presence of PFAS in products and production processes and extends its influence on public awareness campaigns, intending to educate the public about the health and environmental risks associated with PFAS. It also emphasizes the importance of research into contamination remediation technologies.

Procedurally, this bill has reached the first of its four approval Commissions on July 4th, 2023. If approved by all four Commissions, it goes straight to the Senate for voting. If approved by some and rejected by other commissions, it goes to the Plenary of the Chamber of Deputies for approval before heading to the Senate.

4. IBAMA Extends Public Consultation on Proposed Norm for Enhanced Environmental Control in Solid Waste Imports

The Brazilian Institute of Environment and Renewable Natural Resources (IBAMA) has extended the Public Consultation period regarding a proposed regulation aiming to enhance environmental control on the import of solid waste to September 8, 2023. The draft of the proposed Normative Instruction (NI) by IBAMA outlines the procedure for prior consultation and approval for the import of plastic and electronic waste. More information can be found here.

Currently, IBAMA oversees the import of 63 types of waste. Upon implementation, all imports of plastic waste into Brazil will undergo a technical analysis by the Institute, evaluating the origin and proper disposal of the material.

The draft NI also expands the range of controlled waste and aims at generating positive socioeconomic impacts for recyclable material collectors, as well as fostering the development of a circular economy.

The measure is part of IBAMA's efforts in implementing amendments to the Basel Convention, of which Brazil is a signatory.

5. New Regulation for Import of Medical Devices: ANVISA Publishes RDC 810/2023

The Brazilian Health Regulatory Agency (ANVISA) has issued Resolution of the Collegiate Directorate (RDC) 810/2023, amending RDC 751/2022. The regulation concerns risk classification, notification and registration procedures, labeling requirements, and usage instructions for medical devices.

The regulatory amendment addresses the need to establish requirements for importing new medical devices manufactured abroad before their regularization in Brazil but imported afterward and in accordance with the conditions approved by ANVISA in the product's regularization dossier.

Key Points:

• The resolution emphasizes the prerequisite for prior regularization of the medical product to be imported, serving as a fundamental condition for import authorization. Additionally, the imported product must be within its validity period when such a period can be determined.
• The decision factors in health risks and the necessity for product access, especially considering that medical device production is not exclusively aimed at the Brazilian market. Global challenges in raw material supply, logistical complexities, and the unique characteristics of seasonally produced devices or those with extended/indeterminate shelf lives are considered.
•  Under the new rule, importing properly registered medical devices with ANVISA that were manufactured up to five years before the regularization date by the Agency is permitted. Importers must submit a declaration from the notifier or registrant with each import process. This declaration should confirm the product's full compliance with ANVISA’s approval conditions and must be attached to the LPCO (Customs Declaration for Import).

6. New Chapter of Collaboration: Brazil and UN Sign Landmark Cooperation Framework

On August 1, 2023, the Brazilian government, and the United Nations (UN) signed the new Brazil-UN Cooperation Framework 2023-2027 (UNSDCF). This framework is a pivotal milestone in pursuing the 2030 Agenda for Sustainable Development.

The UNSDCF outlines the planning, execution, monitoring, and evaluation of UN-supported activities in Brazil and focuses on five key themes:

1. Economic Transformation,
2. Social Inclusion,
3. Environment and Climate Change,
4. Governance and Institutional Capacity and
5. Conflict Prevention and alignment of humanitarian, development, and peace-building efforts.

It sets the stage for the UN's role in the nation and underscores Brazil's perspective on its own challenges, strengths, and priorities in UN activities that tangibly impact sustainable development.

The development of the new UN System Cooperation Framework in Brazil was shaped by the Brazilian federal government and the United Nations, drawing inspiration from Brazil's Plurianual Plan (PPA) and the Federal Development Strategy 2020-2031. This program reflects the United Nations' contributions to the country, aligning the efforts of its 21 specialized agencies, funds, and programs with the national sustainable development policies.

A collaborative effort crafted this new framework. Representatives from 18 institutions across the three branches of the government (Executive, Legislative, and Judiciary) participated in its creation. Throughout the process, the input of civil society was actively sought. More than 21,000 individuals contributed their insights through the Participa+Brasil platform and the United Nations' social media channels.

This collaborative endeavor signifies a shared commitment to advancing sustainable development goals, promoting cooperation between the Brazilian government and the United Nations, and fostering meaningful change for the betterment of the nation.

7. B3 Launches IDIVERSA B3: Pioneering Diversity and Representation in Latin America

On August 15, 2023, B3, the Brazilian Stock Exchange, introduced a pioneering initiative, the IDIVERSA B3 index. This marks a historic milestone as the first index in Latin America to combine gender and racial criteria for selecting companies to be part of its portfolio. This innovative index is designed to recognize listed companies that excel in diversity while fostering greater representation of historically underrepresented groups (including women, Black, and Indigenous individuals) within the market.

By introducing the IDIVERSA B3 index, B3 reinforces its commitment to leading the ESG (Environmental, Social, and Governance) agenda and driving best practices, encouraging companies to advance in terms of diversity and representation.

The construction of this index draws from publicly available data in the Reference Form (FRe), an annual requirement for publicly traded companies. This year, the Brazilian Securities and Exchange Commission (CVM) mandated the reporting of board members' and council members' demographics by gender and race in these forms.

It's important to note that on August 19t,2023, the new Issuers' Regulation (Regulation) came into effect, along with its Annex A – Timeline Table and Annex B – ESG Measures (ESG Annex). Annex B aims to align B3's norms with recent regulatory movements –on the Brazilian and international fronts – related to ESG themes, with a spotlight on diversity and inclusion. It has been developed in a "practice or explain" format, requiring the presentation of evidence for the adoption or justification for non-adoption, whether total or partial, of each measure in the reference form, while adhering to the timelines specified in Annex B (ESG Annex).

According to experts, this move reflects an increasing concern for sustainability and corporate governance practices, and align with global efforts to mitigate and adapt to climate change, discussions highlighted during the COP27 – the United Nations Climate Change Conference held in Egypt in November 2022.

8. Charting a Sustainable Path: Eight Countries Sign the Belém Declaration for the Amazon Region

Eight countries that make up the Amazon Cooperation Treaty Organization (ACTO) signed the Belém Declaration during the Amazon Summit on August 8, 2023. The document consolidates the shared agenda of Brazil, Bolivia, Colombia, Ecuador, Guyana, Peru, Suriname, and Venezuela for the region. The Belém Declaration contains 113 cross-cutting objectives and principles.

The Declaration addresses various critical topics, ranging from institutional strengthening to sustainable infrastructure, from climate change to the protection of forests and biodiversity. It also emphasizes the importance of cooperation in combating illegal activities, such as environmental crimes, through police, judicial, and intelligence collaboration. Other essential topics covered include strengthening of Amazonian cities, creating an Amazon Parliament, as well as establishing health, food security, and social protection.

The signing of the Belém Declaration marks a significant step towards a more sustainable and prosperous future for the Amazon region.

As part of our International Environmental Law practice group, Beveridge & Diamond's Latin America practice group helps multinational clients navigate dynamic and unprecedented change in Latin American environmental law. We offer capabilities and visibility for clients into Brazilian environmental regulatory developments through the presence at B&D of Miriam Mazza, a Brazilian lawyer now practicing in the U.S. as a Foreign Legal Consultant, as well as other members of our Latin American practice who have spent decades living in the country or working with companies that have interests in Brazil.