This essay is titled in the spirit of the Weird Economies glossary for the breadth of meanings we can extract from a single word captured by economic use – in this case, exchange. That is, to change one thing for another. As we have, by trading one atmosphere that allows a habitable planet for all life, for one that threatens all life. Exchange also means reciprocation—you give one thing and get another in return. From this perspective, atmospheric exchange lends itself to two connotations: a market exchange based on atmospheric gases; and climate change itself. 

Though public discourse has become rife with statements that we, as a society, are engaged in fighting climate change, in fact, we continue to increase annual carbon emissions year after year. So far, from the atmosphere’s perspective, there is no perceptible battle. For the air, this battle is invisible for the time being.

Invisibility is an element that appears several times in this topic: the invisible exchange of gases – gases that are invisible to us but not to the quality of our lives; the invisible hand of the self-regulating market; the invisibility of Brazil’s land situation to international regulators; the invisibility of emission costs to companies and governments; gases that are turned into currency as a mechanism to actually make them visible. 

Carbon market is a buzz term that has become commonplace in the media but whose meanings and implications are often opaque to the general public. This essay’s motivation is to make it a bit more legible, transparent, and visible, particularly in the Brazilian context. 

Brazil holds a key role in climate change, both as part of the problem–as it ranks 6th in global carbon emissions–and as part of the solution–due mainly to its biodiversity and tropical forests. As part of the Global South, it is one of the many countries that is owed, by wealthy nations of the Global North, an ecological and historical debt, in exchange for building and imposing a system sustained through extensive extraction of natural resources. Inhabitants of the Global South already pay a higher price for climate change and will do even more so in the future.

To talk about the carbon market, we first need to understand what we call carbon emissions. Let’s go over the basics: 

So-called carbon emissions are emissions of greenhouse gases (GHG)—carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, and hexafluorsulfuric acid. To enter the carbon market, these can in turn be converted into carbon credits. Because carbon dioxide (CO2) is the most relevant GHG, being released in higher quantities and having a higher impact on the planet, “carbon” became a sort of shorthand, a common denominator for the exchange, which is a key factor when creating a commodity market. One carbon credit, then, refers to the equivalent of one tonne of carbon dioxide, regardless of whether the gas in question is CO2 or any other GHG. A carbon credit is the currency of the carbon market. In order to calculate carbon (or GHG) emissions, one needs to understand the emissions of these gases in the complete life-cycle of a good or service, from the extraction of raw materials through processing, distribution, end use, disposal, and, if necessary, recycling. Globally, the sector that emits the most carbon is energy, including energy use in industries, transport, commercial and residential settings. In other words, the burning of fossil fuels is the main contributor to climate change. 

In Brazil, however, the scenery is different—we have an emissions map that is characteristic of our country’s specificities. Here, almost half of our emissions are derived from changes in land use and forests, i.e., deforestation, which is linked to agricultural activity in general. This is followed by agriculture itself, which accounts for 25% of emissions, with livestock farming weighing-in heavily. Then comes the energy sector, with 18%.¹ Finally, 4% is waste, and only 3% is industry.²  

Municipalities that emit the most are in the Amazon region, where deforestation is very high. Most tree-felling in Brazil—around 90% of it—is illegal, that is, a federal crime. This indicates, to quote Suely Araújo, public policy specialist at Observatório do Clima and former IBAMA³ president, that most of our carbon emissions can be considered a police issue.⁴

As we have seen, agriculture, particularly in terms of land use, accounts for an outsized proportion of the emissions map of Brazil. Expansion into new areas is one of the strategies used to increase agricultural production (both plantations and cattle farming). A recent study stated that circa 20% of soy and 17% of beef production potentially involved illegal deforestation⁵  

And then there is the issue of land value. Deforestation has an effect on land prices, which benefits the agribusiness sector.⁶ Land is a contentious issue in Brazil: there has never been an effective nationwide agrarian reform, and although the law declares that unused land can be appropriated by the state to then be distributed to families, there is a constant struggle over how that is regulated. The activist movement that pushes for the enactment of that law and claims for land, Movimento dos Trabalhadores Sem-Terra, ‘Landless Workers Movement’ (MST), is one of the main enemies of the agro,⁷ who claim they regularly occupy productive land to steal it. MST claims the opposite, that they only occupy unproductive land to make it productive for family farming. Additionally, there are lands demarcated for indigenous peoples and traditional communities, such as quilombolas⁸ , and there are public lands with no specified use. Nationwide, but especially in Amazonian states,⁹ there are land thefts, for which deforestation is one of the methods of claiming territory. The equation goes: deforestation > more land in the market > lower land prices. That means that indirectly, even for those large landowners who have not felled a single tree, deforestation is a factor in facilitating any purchase of more land to increase production. All of this ultimately affects the price of commodities themselves, which makes them more competitive in the international market.

The agricultural sector in Brazil is politically represented by what we call the Ruralist Parliamentary Front (also known as the Agro Parliamentary Front or Big Cattle), a multi-party group that feeds from the agro-industry lobby to represent their interests in Congress. Out of a total of 513 representatives and 81 senators, 324 and 50 congresspeople, respectively, are part of this Front, which is the most powerful parliamentary group in national politics. 

Agribusiness has always been enmeshed with the state in Brazil. Until the 1960s Brazil was a food importing country, and in the 1970s, during the Military Dictatorship, the state invested greatly in research and technology development to make agriculture flourish as an economic sector, supposedly with the goal of reaching food sovereignty. The fact is that currently, Brazil’s economy is largely dependent on agriculture because of commodity exports (mainly soy, sugar, and beef), which represent about 25% of the country’s GDP. These commodities are produced with soil-draining monocultural methods and are highly dependent on pesticides.

As a political force, agro is, at its best, aligned with reactionary conservative views and, at its worst, far-right climate change denialism. In general, they lobby for being allowed to legally deforest more than they currently can; they lobby for more deregulation of pesticides (Brazil is currently unparalleled in its pesticide use, employing more toxicants in crops than the US and China combined);¹⁰ they lobby against agrarian reform; they lobby against any type of strictening of environmental law; they lobby for far-right politicians. And they are savvy in their attempt at conquering support from the general population, by investing in propaganda that spreads their self-aggrandising mythology of self-made farmers who feed the country and the world. All of which is disputed, considering the continued governmental support that has structured the sector as a whole and that they still receive; the fact that Brazil has a significant portion of the population that is underfed; and, finally, the fact that the country’s exports are just around 10% of the commodities traded worldwide. ¹¹ A famous ad that runs frequently in Brazil’s largest open-access channel states Agro is Pop. 

In a recent round of interviews I had the opportunity to conduct with specialists on the subject, such as professor Suely Araújo from Observatório do Clima and professor Arilson Favareto from UABC and CEBRAP,¹² it became clear that although sometimes, agriculture producers might be aware that their political representations defy economic rationality and may very well negatively affect their income and production (because climate change obviously has deep impacts in agriculture, land use, seasons, etc.),¹³ they still choose to let go of such concerns to be a cohesive political force, opting for levelling down to maintain political power. 

It is important to state that the agrolobby and its Parliamentary Front are not synonymous with all of the agro producers in Brazil—which also include small-scale family agriculture, traditional community-based agriculture, organic agriculture, agroforestry agriculture, even big agricultural producers interested in making low-carbon productions with more efficacy and less land use— but they are effectively the political representatives of this category in the country. They dictate the tone, more and more, of any type of environmental policy development, and their stance is pretty consistent with opposing that of environmentalists.

Monoculture has been a staple of the Brazilian landscape since this territory became Brazil—that is, with colonisation. Our economic history is told by commodity cycles, all based on monoculture and/or extractivism. Brazilwood cycle, sugar cycle, rubber cycle, coffee cycle. There is a new commodity-based cycle in view, though claiming to be different: the carbon cycle.

One of the solutions to controlling emissions is the so-called “carbon market”. What we have gotten used to referring to by this single term, however, is actually two different things with the same name: the voluntary market and the regulated market. 

The regulated market, also referred to as the cap-and-trade system, is managed by governments with the aim of meeting the emission reduction targets set by each country, in which they limit carbon emissions (cap) and are allowed to make transactions within these limits (trade).

The voluntary market, on the other hand, is based on what we call carbon offsetting. It is voluntary, which means that companies participate in it of their own free will, not because they are obliged to by the state, but, for example, to show their consumers and stakeholders that they are concerned and engaged in combating climate change. Importantly, it is self-regulating, which means that the infamous ‘invisible hand of the market’ supposedly guides this endeavour, which arises spontaneously from a direct demand to companies. It is an effect of not every country having, at the moment, a formal market to offer, bringing forth private regulators. 

Both markets share a basic logic, which is that carbon is a gas that spreads evenly throughout the atmosphere. Therefore, it is considered that if a tonne of CO2 (which, as we saw before, is one carbon credit) is absorbed (or its emission avoided) from the atmosphere in one part of the world, it can “balance” a tonne of CO2 emitted anywhere else. There is a subtlety in how each market uses credits: the regulated market uses carbon credits, which translate to the quota of how much carbon an enterprise can emit; the voluntary market uses carbon offset credits, which translate to how much carbon is removed from the atmosphere.

In the voluntary market, instead of reducing their emissions, a company pays to compensate for them in some way, usually through projects such as reforestation, carbon capture, investment in renewable energy production, or the main type of project in Brazil, prevention of deforestation (REDD, Reducing Emissions from Deforestation and Forest Degradation). REDD involves a method that calculates deforestation in a region and then extrapolates an amount of carbon credits that will be generated from preventing further deforestation.

According to Tatiana Oliveira, advisor for socio-environmental and climate policies at the Institute for Socio-Economic Studies (INESC), 

“This expression ‘avoided deforestation’ is very controversial in international negotiations, precisely because we can’t have exact parameters to establish what is avoided. What I have seen is that the methodologies that are based on this logic of avoiding deforestation have suffered a lot of international criticism.”¹⁴  

In Brazil, this market is associated with a series of organisations that have been accused of committing abuses of various kinds, from so-called climate land grabbing (registering public protected areas as if they were private to profit from selling off their carbon offsetting credits) to seeking to impose private management on the territories of traditional quilombola and indigenous groups, harassing these populations. In addition to threats to the territory, there are also accusations of carbon-offsetting enterprises harbouring conflict within communities. Media often uses terms like “carbon cowboys” and “carbon wild west” in reference to a lawless time rife with opportunity, in which land was disputed and the indigenous suffered. It seems an adequate image for a self-regulated market, more so than the classic idea of the invisible hand. Indigenous rights are largely invisible to the market, but the market’s violent hand is deeply felt by communities. 

A document entitled ‘Peoples’ Opinion on the Proposal to Adopt a Quota and Pollution Trading System in Brazil’,¹⁵ drawn up by 28 civil society organisations from grassroots fields—trade unions, social movements, and representatives of traditional peoples and communities—contains a survey based on data from Verra, the leading (private) global carbon certifier, which found that of the 69 projects in operation in Brazil available for evaluation, 11 have total overlap with areas of collective use, i.e., community lands, and 22 overlap with public areas, i.e., public land-grabbing. 

The abuses and conflicts that these projects commit divide communities with a cruel dilemma, well illustrated in an Intercept Brasil article¹⁶ about the Alto Turiaçu Indigenous Land in Maranhão, where one side says

“Pollution will always exist; companies will always exist; this carbon credit will neither increase nor decrease pollution in the world. It’s just that companies are now being forced to compensate those who protect nature in order to pay for what they pollute. What will the Ka’apor people have to do? Nothing. They’ll have to not cut down trees and make millions. It’s as simple as that. (…) If the Ka’apor people don’t take advantage of this opportunity, do you know who will get the money that would have gone to the Ka’apor people? It will go to the state government. And the Ka’apor people will remain in misery.”

While the other side is contrary, since it sees these types of action as a commercialisation of a way of life that is in relationship with a living forest. They are also wary of the harmful effects that this type of influx of money could have on the community. They also make clear they have not been appropriately consulted by the carbon offset companies interested in signing a contract regarding their territory.

In general, the perceived advantages of this market–for governments, NGOs, and market actors– are that it is a necessary mechanism for Brazil to reach its emission targets agreed in the Paris Agreement and that it is a mechanism which can generate a lot of income while also moving a lot of money in the national economy without deforesting. 

However, structural critiques view the voluntary market model as flawed. For example, 94% of the forest-based offsets from the world’s largest carbon accreditor (Verra) have probably not reduced CO2 in the atmosphere; they are “ghost credits,” according to an investigative report in The Guardian¹⁷ at the beginning of 2023. In recent years, we have seen a series of studies that question their real effectiveness.

Alongside that is the fragility of the base calculations themselves, which are overestimated. The same Guardian investigation found that the threat of deforestation was overestimated by an average of 400% in the registered projects.

Finally, there is the fact that in practice, carbon offset projects function as a “license to pollute,” generating a rebound effect as they discourage investment in reducing emissions. Instead of investing in production methods that emit less carbon, the incentive is to continue emitting as usual and simply compensate for it through voluntary market projects. In other words, offsetting does not incentivise doing things differently, even in the face of planetary crisis.

A regulated market, on the other hand, is in principle a tool for decarbonisation since it induces companies, through pricing, to modernise their apparatus in order to reduce carbon emissions in their main production. 

In August 2023, the Lula administration, launched its ecological transformation plan alongside the PAC (Growth Acceleration Programme), making this issue a priority. The establishment of a regulated carbon market is a vital part of this plan, as are energy transition, investment in the bioeconomy and combating deforestation.

This process is being led by the federal government, though there have already been many parallel initiatives. After many agreements and efforts to organise different proposals, in 2023 a bill was introduced to Congress proposing the creation of the Brazilian Greenhouse Gas Emissions Trading System (SBCE). Any company that emits more than 10,000 metric tonnes of greenhouse gases per year would be included in the system, and the legal emissions ceiling would be 25,000 metric tonnes of carbon. Those who exceed the limit would be obliged to compensate for their emissions by purchasing credits from other companies that have leftover emission quotas (Brazilian Emissions Quotas, or CBEs) or, noticeably, from offsetting projects. Those who fall below the limit would need to monitor and give transparency to their emissions; they could also market their CBEs to companies that have exceeded their quotas. The penalties for those who do not comply range from a fine of up to 5 percent of the company’s turnover to a partial or total suspension of activity.

In other words, this system creates an obligation on the part of the company to limit its emissions; if they can’t, they can trade the credits amongst themselves; the government doesn’t initially limit the operation, but it does signal that carbon has a price. Emissions, thus, become an additional cost that until then had not been included in the books; it’s a question of including an invisible cost and making it visible. 

Brazil has opted for a mixed system that involves both setting pollution targets for companies and creating a market for pollution licences and credits. The project has two main controversial points: the exclusion of the agriculture sector and compatibility with the voluntary market. 

Agribusiness’s exclusion took place in the Senate after the bill’s rapporteur, Senator Leila Barros, forged an agreement with the Agro Front. The agro sector’s argument was that the world’s main carbon markets do not include agriculture and livestock in their regulations and that there are no ways to measure carbon emissions from agricultural activities. It’s worth saying that this is a constant complaint from the agro sector, which claims that the standard measurements weren’t designed for the Brazilian context. But Observatório do Clima (Climate Observatory) points out that such is the possibility to make this measurement, that they have been calculating it for a decade and making the data available on their platform, SEEG (System for Estimating Greenhouse Gas Emissions and Removals).

The main criticism of this exclusion is that agriculture is responsible for 75% of emissions; and so a regulated market that leaves agriculture out cannot be very effective because it only addresses a small part of the problem. Agriculture should, as the sector that emits the most, commit itself to decarbonisation efforts.

Instead, however, agribusiness won another victory when it reached the House of Representatives: the text of the law was modified to allow farmers to generate and commercialise carbon credits for maintaining the legally mandated environmental protection areas (APPs: Permanent Preservation Areas), which they are already obliged to do by law anyway. This means that this market will circulate credits that actually do not compensate for anything, as the offset generated for maintaining APPs should already be accounted for as a legal imperative. 

Then there is the issue of the voluntary market. When the bill was in the House, representatives included a clause that created a compatibility between the two markets — a particularity of the Brazilian system. Part of the emissions from the regulated market can be offset by credits from the voluntary market. Voluntary market initiatives that meet the requirements set by law (to guarantee the reliability of measurement, for example) will be able to commercialise their credits in the regulated system.

On the one hand, there are those who believe that this integration could improve the quality of the voluntary market in the country, since the activities would have to be subject to the approval of the state regulator. And there are also those who, as pointed out before in this essay, argue in favour of encouraging the voluntary market as something of its own merit, a market that has the potential to generate a lot of income for the country. 

On the other hand, however, this creates uncertainty and concern, precisely because of the abuses indicated above. There is a fear that this integration of both markets will legitimise actions that put marginalised groups at risk in their vital relationships with their territories. 

In addition, it is generally recommended that there be a limit on the use of offsets: the regulated market should not be a form of compensation; if it wasn’t for this restriction, a company could assume that it is more economically viable to always buy offsets; thus, it would not internalise low-carbon technology. Whereas the regulated market is precisely an instrument for the transition towards decarbonisation, since it encourages the regulated agent to transition to less environmentally taxing technologies and use a small part of offsetting credits to complement its efforts. However, the bill does not indicate how this will be done. 

Though last year there was an expectation it would quickly become law, having had its first approval in October 2023, the bill is currently stalled in the Senate, and it has not been revisited in over six months. In any case, when it passes, it is unlikely there will be new changes to it that alter these two polemical points, which seemingly weaken the positive environmental impact such an initiative could have.

A regulated carbon market is a significant initiative towards a fundamental effort for decarbonisation. It is also not enough. As said by Ana Toni, Secretary for Climate Change at Brazil’s Ministry of the Environment and Climate Change,

“It’s a really important instrument, but it’s not the only one; it’s one of many. It won’t solve all our problems. Here in Brazil, [the carbon market] is seen as a silver bullet. There is no silver bullet for climate change. We have to work on a large framework of means of implementation.”¹⁸  

In Brazil’s case, the exclusion of agribusiness from such a project is disheartening, as the cap and trade model holds great potential for diminishing emissions by incentivising economic actors to visualise carbon, take it into account as a harmful externality, and re-think their ways to emit less carbon. It should be applied to all economic actors, especially those who emit the most. However, even if a cap-and-trade system is extremely successful, it is unlikely to be enough. To quote economic anthropologist Jason Hickel, “growth keeps outstripping our best efforts to decarbonise.”¹⁹  

The implication of a growth-based capitalist system is that it requires more and more extraction of resources—even if that doesn’t emit carbon, it still has harmful consequences for the planet. Rigorous and impactful initiatives towards decarbonisation should be welcome, as they are necessary. They are just not enough. Again quoting Jason Hickel:

“Once we have 100% clean energy, what are we going to do with it? Unless we change how our economy works, we’ll keep doing exactly what we are doing with fossil fuels: we’ll use them to power continued extraction and production at an ever-increasing rate, placing ever-increasing pressure on the living world, because that’s what capitalism requires. (…) A growth-obsessed economy powered by clean energy will still tip us into ecological disaster” .²⁰

Capitalism is an efficient system in shifting the focus of the problem, and rendering any other possibility invisible. Thatcher’s famous slogan stated There Is No Alternative, a declaration which builds on discouraging political imagination, and on denying the mere chance of a different system. Vandana Shiva called it TINA syndrome, and drew attention to diversity – natural, cultural– as a necessary context for alternatives to be seen, to be imagined, to be planned. “Shifting to diversity as a mode of thought, a context of action”, she says, “allows multiple choices to emerge.”²¹ Carbon as a term is, itself, a flattening of the problem. The best guarantee for the future is not, it seems, a mere carbon exchange, but a change of economic system.