Brazil Struggles to Export Carbon Credits Without Breaking Chain of Custody

Why it matters: Brazil hosts some of the world’s largest voluntary-market carbon projects, and the ability to export those credits under Article 6 of the Paris Agreement could unlock significant international capital. If the regulatory design breaks chain of custody, however, it effectively creates a technical barrier to export, turning a law meant to organize the market into one that shrinks it.

What this means for Brazilian project developers

For a company that generates carbon credits in the Amazon or Cerrado and sells them to a European airline or a compliance buyer under CORSIA (the aviation offset scheme managed by ICAO), the practical consequence is binary: either the credit retains its Verra or Gold Standard serial number after passing through the SBCE, or it does not. If it does not, the buyer’s compliance system will not accept it, and the transaction falls apart. The developer would then face a choice between selling exclusively on the domestic regulated market, likely at a lower price, or structuring the project under a different jurisdiction entirely. Neither outcome serves Brazil’s interest in scaling nature-based solutions.

The risk is amplified by timing. The public consultation on ITMO regulation closed last month, and final rules have not been published. Project developers preparing credits for export have no confirmed pathway, which stalls investment decisions and contract negotiations with international counterparties. In carbon markets, regulatory uncertainty does not merely slow deals; it redirects them to competing supply countries such as Indonesia, India, or countries in sub-Saharan Africa that already have bilateral Article 6 agreements in place.

What remains undecided

The central unresolved question is whether registration in the SBCE will be declaratory (a record that the credit exists and is authorized for export) or constitutive (a conversion that replaces the original registry entry). Renata Amaral, a partner at Trench Rossi Watanabe, argues for the declaratory model: the credit would be inscribed in the SBCE without canceling its original record, preserving its full transaction history and certifier endorsement. The SEMC’s Nathalie Vidual has signaled alignment with this logic, stating the transfer should be treated as continuity rather than a break in custody.

But signaling intent is not the same as publishing a rule. Several concrete steps still need to happen. First, the government must define, in the final regulation, the legal nature of the SBCE registration for ITMOs. Second, it must reach operational agreements with Verra, Gold Standard, Art Trees, and ICAO so their systems recognize the SBCE entry without triggering automatic cancellation. Third, the SBCE’s own IT infrastructure, which is still under development, must support interoperability with those external registries. None of these steps has a confirmed deadline.

Winners and losers if the custody problem persists

If Brazil fails to resolve the issue, the clearest losers are domestic project developers and the communities (often Indigenous or traditional) that host forest-conservation and restoration projects tied to voluntary credits. Without a viable export route, these projects lose access to the higher prices that international compliance and voluntary buyers pay. The federal government also loses, both in foregone foreign-exchange revenue and in reduced leverage when negotiating NDC targets under the Paris Agreement, since fewer credits would carry corresponding adjustments.

The winners, paradoxically, would be competing carbon-credit supply countries that already have functioning Article 6 frameworks. Buyers bound by CORSIA or the EU’s Carbon Border Adjustment Mechanism who need offset supply will simply source it elsewhere. International certifiers could also lose engagement with the Brazilian market if the SBCE registration requirement makes their role redundant or conflicting, reducing their incentive to cooperate on a technical fix.

The outcome hinges on regulatory drafting that is precise enough to satisfy both domestic sovereignty concerns and international market infrastructure. That drafting is still in progress.

via Reset