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The Government of Japan and FINEP-Research and Project Financing, an innovation agency of the Brazilian Government, have signed a partnership in which Japan will invest USD1 million to develop the carbon market in Brazil. The agreement, set up through the World Bank, will also have the participation of the Brazilian Mercantile & Futures Exchange-BM&F SA.
According to FINEP, the partnership will finance a series of studies about the structuring and implementation of the carbon market. This market is under the auspices of the Clean Development Mechanism (CDM) of the Kyoto Protocol, an international agreement implemented on February 2005 to commit countries to reduce their emissions of carbon dioxide and five other greenhouse gases, or engage in emissions trading if they maintain or increase emissions of these gases.
The main objective of the Protocol, ratified by 144 nations, is to reduce the emissions of greenhouse gases by 5.2% in developed nations, in order to reach their 1990 emissions level by 2012. The carbon market is structured much like a stock exchange; the difference is that instead of stocks, the market trades Certified Emission Reductions (CERs), measured in metric tons of carbon dioxide.
Carbon credits are granted by regulatory environmental protection agencies to countries that reduced documented emissions of greenhouse gases, through reforestation programs, development of alternative energy sources, and other initiatives. The acquired CERs are then sold to nations interested in emitting carbon dioxide, but have surpassed the established quota.
Each credit is equivalent to a ton of gas and has a market value of €12.00 to €18.00, which varies in accordance to the international price. According to estimates of the World Bank, Brazil has a potential to conquer approximately 10% of the world’s carbon market, which should reach USD1.3 billion in 2007.
FINEP has established, since December 2006, a program that sponsors projects linked to the Clean Development Mechanism (CDM) - Programa de Apoio a Projetos do Mecanismo de Desenvolvimento Limpo (Pró-MDL). The aim of this initiative is to finance approximately BRL80 million in projects that help reduce the emissions of greenhouse gases by 2009 and, consequently, decrease global warming.
