The minute
- Compliance markets (like the SBCE or the EU ETS) are a legal obligation for specific sectors; voluntary markets are a choice, with no law requiring the purchase
- Compliance market prices tend to be higher and more standardized; voluntary prices vary a lot by project type and quality
- The SBCE creates, for the first time in Brazil, mandatory domestic demand, which should bring the two markets closer together over the next decade
Why it matters: Knowing which of the two markets your company is in (or will be in) completely changes the strategy: compliance is not optional, voluntary is a positioning choice.
The core difference
In a compliance market, a law requires specific sectors to monitor, report and eventually buy allowances or credits to cover emissions. In a voluntary market, companies and individuals buy by choice, usually to offset residual emissions or for brand positioning.
Price and standardization
Compliance markets like the EU ETS tend to have more predictable pricing, set by supply and demand for allowances within a regulatory cap (cap-and-trade). The voluntary market has more fragmented pricing, from a few euros to over a thousand euros per tonne, depending on project type.
How the SBCE changes the game in Brazil
Before the SBCE, Brazil only had a voluntary market, with supply almost entirely exported. The SBCE creates mandatory domestic demand for large emitters, which should increase demand for domestic credit and, over time, bring price and quality standards closer between the two markets.
Which market a company should look at first
If the company is in SBCE scope (a large emitter in a covered sector), the priority is understanding the compliance obligation. If not, the voluntary market remains the path for voluntary offsetting or ESG positioning.
Frequently asked questions
Can a company use a voluntary market credit to meet an SBCE obligation?
It depends on the specific fungibility rules the SBCE is still defining in its early phases; the expectation is for the compliance market to have its own rules.
Why does voluntary market pricing vary so much?
Because there’s no single quality standard across projects, and each buyer assesses additionality, vintage and project type differently.
Are the EU ETS and Brazil’s SBCE connected?
Not directly today, but CBAM creates a bridge by allowing a carbon price already paid in Brazil (via the SBCE) to be deducted from the amount owed on European imports.
Read next: what the voluntary carbon market is.
Read next: what the SBCE is.