Brazil is betting on China to expand the market for carbon credits before COP31

Brazil is moving to expand its presence in the market carbon credits through upcoming negotiations with China, in a move that may open a new channel for international trade in reducing emissions and support the country’s transition from voluntary markets to a regulated carbon market with greater connection to global markets.

Brasilia intends to use a high-level visit to China in the coming days to test the possibility of Beijing becoming a buyer of Brazilian carbon credits, in parallel with pushing talks towards a bilateral agreement that the government hopes to announce by the COP31 conference scheduled to be held in Türkiye during November.

This move comes as Brazil works to accelerate the construction of its marketLocal carbon emissions, at a time when China is also considering developing its emissions trading system, which is the largest of its kind in the world.

Brazil targets the Chinese market

The idea of the potential deal is for Brazil to achieve a documented reduction in emissions, then release part of it in the form of internationally transferable units known as Internationally Transferred Mitigation Outcomes (ITMOs). If China buys these units, it can count them among its official climate goals according to the rules of the Paris Agreement, while Brazil, in return, receives a return from selling the achieved reduction.

This trade is subject to accounting rules aimed at ensuring that the reduction is calculated only once, so that the same reduction in emissions from Brazil and China is not recorded at the same time.

Discussions between climate officials and carbon markets focusIn both countries, there is the possibility of China purchasing Brazilian credits within recognized international mechanisms, giving Brazil an opportunity to access one of the largest emissions markets in the world.

The talks are scheduled to coincide with meetings in the Chinese city of Wuhan during the period from September 14 to 18, where Brazil, China and the European Union will discuss new steps to bring their carbon trading systems closer together.

The Brazilian government is seeking to turn this rapprochement into a clearer agreement before COP31, expanding the international role of carbon credits produced within the country.

International trade enters the official path

Negotiations with China include expanding the use of ITMOs within the formal mechanisms of the Paris Agreement, which could shift part of the trade in carbon creditsThe Brazilian transition from voluntary markets to more organized international trade.

Cristina Reyes, Secretary of the Carbon Market in Brazil, confirmed that her country wants to provide credits with a high degree of integrity if China becomes a buyer of these units.

China does not yet have a formal agreement with another country to trade this type of assets, which gives the current talks special importance if the two parties can reach a formula for cooperation.

Brazil accelerates its regulated market

Brazilian carbon credits are currently traded within voluntary markets, where companies buy credits to meet emissions reduction targets they set themselves.

But legislation passed in 2024 paves the way for the creation of a regulated carbon market, with companies using carbon credits To meet official emissions reduction targets, as well as open the way for international trade through ITMOs.

The original plan aimed to establish a system to verify balances allocated to international trade during the period between 2031 and 2035, but the government is currently studying demands from the industrial sector to accelerate this timetable.

Credit producers are following these developments with interest, as international compliance markets may provide additional demand and broader opportunities for trade.

Developing an organized market to reduce emissions intersects with Goal 13 of the Sustainable Development Goals (SDGs) on climate action, especially with market mechanisms directed towards supporting official commitments to reduce emissions.

Alliance linking carbon markets

Brazil operates in parallelWith China and the European Union to develop an action plan for the Carbon Markets Alliance, which was launched earlier this year with the aim of increasing compatibility between different systems.

The alliance currently includes 11 members, while the participating parties cover about 42% of global emissions, according to Brazilian officials.

The cooperation aims to gradually reach greater levels of integration between trading markets, while seeking to attract more developing countries to participate.

Brazil believes that mutual recognition of carbon assets between different markets may become possible within a decade, which could open the way for broader and more regulated trading of assets between countries.

Carbon opens the door to investment

Brazil is betting on thatExpanding carbon credits and linking their markets to international systems could achieve gains beyond reducing emissions, by attracting new investment flows into the economy.

The government believes that strengthening the relationship with China, in parallel with developing the tripartite alliance with the European Union, may help expand the size of the market and increase demand for Brazilian assets.

Brasilia also links these movements with recycling plans based on new technologies, making the carbon market part of a broader economic and industrial path.

Cooperation between Brazil, China and the European Union intersects with the seventeenth goal of the Sustainable Development Goals (SDGs) on partnerships, especially since the convergence of rules and regulations between different markets can contribute to expanding the scope of climate and investment cooperation.

In light of these developments, Earth Conservancy indicates that Brazil’s expansion into the market carbon credits reflects a trend to transform emissions reduction into a tool that combines climate commitments and attracting investment, while the success of this path will remain linked to the ability of countries to build reliable markets and clear rules. Allows international trading of funds.