How to Know If Your Company Must Report Under Brazil’s SBCE

Brazil’s regulated carbon market, the SBCE (Sistema Brasileiro de Comércio de Emissões de Gases de Efeito Estufa), was created by Law 15,042 of December 11, 2024. It introduces mandatory emissions monitoring, reporting, and cap-and-trade obligations for a wide range of industrial sectors. If your company operates in Brazil and emits greenhouse gases above certain thresholds, the SBCE will apply to you. This guide explains the two obligation tiers, the sector rollout calendar, and what to prepare before your deadline arrives.

What Is the SBCE

The SBCE is Brazil’s national emissions trading system. It works through two mechanisms. First, a Monitoring, Reporting, and Verification (MRV) framework requires covered operators to measure and disclose their annual greenhouse gas emissions. Second, a cap-and-trade mechanism distributes Brazilian Emission Quotas (CBEs), each worth one metric ton of CO₂ equivalent (tCO₂e). Operators that exceed their allocated quotas must acquire additional CBEs on the market or face penalties.

The system is managed by an Extraordinary Secretariat for the Carbon Market (SEMC) within the Ministry of Finance, established by Decree 12,677 of October 2025. The SEMC is responsible for reviewing monitoring plans, approving emissions reports, and administering allowance allocation.

Two Obligation Tiers: Reporting vs. Compliance

Law 15,042/2024 defines two thresholds based on annual Scope 1 greenhouse gas emissions at the facility level:

• 10,000 tCO₂e per year (reporting tier). Operators above this threshold must submit a monitoring plan to the SEMC for approval, then monitor and report emissions and removals every year according to the approved plan. They do not need to hold or surrender CBEs.
• 25,000 tCO₂e per year (compliance tier). Operators above this threshold face all reporting obligations plus the requirement to hold enough CBEs to cover their emissions. Once the National Allocation Plan (Plano Nacional de Alocação, PNA) is in effect, they must reconcile their emissions against their allocated quotas annually.

If your facility emits below 10,000 tCO₂e per year, the SBCE does not impose direct obligations on it under current rules.

Who Is Covered: Sector Phases

The SBCE does not cover every sector at once. A preliminary proposal released by the Ministry of Finance in May 2026, followed by a draft MRV ordinance submitted for public consultation in July 2026, defines three waves of sectoral inclusion:

Phase 1: MRV obligations starting 2027

• Pulp and paper
• Iron and steel
• Cement
• Primary aluminium
• Oil and natural gas exploration and production
• Oil refining
• Air transport

Phase 2: MRV obligations starting 2029

• Mining
• Recycled aluminium
• Electricity generation
• Glass
• Food and beverages
• Chemicals
• Ceramics
• Waste management

Phase 3: MRV obligations starting 2031

• Road transport
• Waterway transport
• Rail transport

Exemption: Primary agricultural production and goods, improvements, and infrastructure linked to agricultural activities on rural properties are excluded from the SBCE.

Note: The sectoral phasing was still under public consultation as of mid-2026. Consult the official text of the final ordinance published by the SEMC for the definitive list and dates.

The MRV Annual Cycle

Once your sector enters the SBCE, you follow a three-year ramp-up cycle:

1. Year 1 (A1): Submit your monitoring plan to the SEMC for review and approval. The plan must describe emission sources, quantification methodologies, data management procedures, and internal quality controls.
2. Year 2 (A2): Carry out effective monitoring of greenhouse gas emissions and removals throughout the calendar year, following the approved monitoring plan.
3. Year 3 (A3) and onward: Submit a verified Greenhouse Gas Emissions and Removals Report for the previous calendar year. This report must be verified by an accredited third-party verifier before submission.

For Phase 1 sectors, this means A1 begins in 2027, A2 runs through 2028, and the first verified report is due in 2029. For Phase 2 sectors, the cycle starts in 2029 with the first report due in 2031.

Implementation Phases of the Law Itself

Beyond the sectoral rollout, Law 15,042/2024 defines five broader stages for the entire system:

1. Stage I (regulation): Up to 12 months from enactment (December 2025), extendable by another 12 months, for issuing secondary regulations.
2. Stage II (operationalization): One year after Stage I ends, for operators to set up monitoring instruments and internal processes.
3. Stage III (reporting only): Two years after Stage II, during which operators submit monitoring plans and emissions reports but do not yet face cap-and-trade obligations.
4. Stage IV (first allocation plan): Implementation of the first PNA with free distribution of CBEs.
5. Stage V (full operation): Auctions of CBEs begin, and the market operates with both free allocation and paid allowances. The government has indicated full operation is targeted for 2030.

Step-by-Step: Determine Your Obligations

1. Calculate your facility-level Scope 1 emissions. Use the GHG Protocol or the methodology specified by the SEMC (check the latest SEMC resolution for approved quantification methods). Aggregate all emission sources at each facility, not at the corporate level.
2. Check the threshold. If a facility emits below 10,000 tCO₂e per year, it has no SBCE obligations. Between 10,000 and 25,000 tCO₂e, the facility falls under the reporting tier. Above 25,000 tCO₂e, the facility is in the compliance tier.
3. Identify your sector phase. Match your primary activity against the three-phase list above. If your activity is not listed and is not primary agriculture, monitor SEMC publications for future inclusion.
4. Map your MRV cycle start date. Once you know your phase, A1 is the first year of that phase. Work backward to determine when your monitoring plan must be ready.
5. Assess CBE exposure. If you are above 25,000 tCO₂e and in Phase 1 sectors, start estimating how many CBEs you may need once the PNA takes effect. The first PNA will define allocation rules and any free-allocation benchmarks.

Common Mistakes

• Confusing corporate totals with facility totals. The 10,000 and 25,000 tCO₂e thresholds apply at the facility (installation) level, not the company level. A company with five facilities emitting 8,000 tCO₂e each is not covered, even though the corporate total is 40,000 tCO₂e.
• Assuming agriculture is fully exempt. The exemption covers primary agricultural production. Agroindustrial processing (e.g., ethanol distilleries, meatpacking plants) may fall under food and beverages or chemicals, depending on the activity.
• Waiting for the compliance phase to start reporting. Reporting obligations begin years before cap-and-trade kicks in. A Phase 1 operator that waits until 2030 to build its monitoring plan will already be in violation.
• Ignoring third-party verification requirements. From A3 onward, emissions reports must be independently verified. Selecting and contracting a verifier takes time, especially in the early years when accredited verifiers in Brazil may be limited.
• Using outdated emission factors. The SEMC may publish Brazil-specific emission factors or approve specific methodologies. Using generic international defaults without checking the official guidance could result in rejected reports.

What to Do Now

If your sector is in Phase 1 (2027), the preparation window is closing. If you are in Phase 2 (2029) or Phase 3 (2031), you have more time but not as much as the dates suggest, because building reliable emissions inventories and internal MRV processes takes at least 12 to 18 months.

• Run a preliminary emissions inventory at every facility that might cross the 10,000 tCO₂e line.
• Identify gaps in metering, data collection, and record-keeping that the monitoring plan will need to address.
• Subscribe to SEMC publications and public consultations. The regulatory framework is still being finalized, and the final MRV ordinance, sector definitions, and approved methodologies will come through official channels.
• Begin evaluating accredited third-party verifiers. Early engagement gives you better access to experienced auditors before demand peaks.
• For compliance-tier facilities, start modeling your CBE exposure under different allocation scenarios so that the first PNA does not catch your budget by surprise.

The full text of Law 15,042/2024 is available at planalto.gov.br. For the latest regulations and public consultations, follow the Extraordinary Secretariat for the Carbon Market (SEMC) under the Ministry of Finance.