Today is Monday, January 8, 2024.
2024 has barely begun and yet another country publishes rules for its carbon market: Portugal.
In the introduction of the Portuguese decree-law no. 4/2024 of January 5th, several parts deserve to be mentioned:
"The creation of a voluntary carbon market in Portugal allows the involvement and participation of various agents, at an individual or organizational level, public or private, whether on the supply side, through the promotion of projects to reduce GHG emissions or carbon sequestration generating carbon credits, whether on the demand side, through the acquisition of these credits for the purposes of offsetting residual GHG emissions or to ensure financial contributions in favor of climate action. This market, in addition to facilitating the meeting between different agents, allows catalyzing private sector investments, complementing the public effort to accelerate and promote mitigation actions in the national territory."
"It provides for the promotion of carbon sequestration, through active agricultural and forestry management, promoting the valorization of the territory."
"...natural-based solutions for carbon sequestration are not restricted to the forest, there is an important contribution that must also be promoted in other areas, including coastal and marine ecosystems."
"It is also important to highlight the importance of research, innovation and knowledge production for neutrality in the various sectors of activity, especially in sectors where decarbonization technologies are still at a low state of maturity."
"Voluntary carbon markets, by generating economic incentives to reduce emissions or increase carbon sequestration, reinforcing the cost-effectiveness of GHG mitigation measures and promoting innovative solutions and technologies, constitute an instrument to support compliance of national objectives in terms of climate action, accelerating the transition to a carbon-neutral society and reinforcing the commitment to the Sustainable Development Goals of the 2030 agenda for sustainable development. It also contributes to combating the loss of biodiversity by improving the state of conservation of natural heritage and promotion of recognition of its value..."
Great to see that blue carbon sequestration projects are specifically cited. Countries like Mozambique and Madagascar are beginning to emerge on this front, as Carbon Credit Markets became aware recently.
For the purposes of developing and evaluating methodologies for each type of carbon projects within the scope of the voluntary carbon market, the decree defines the creation of a technical committee. The projects in the Portuguese voluntary carbon market are governed by the following principles: credibility, additionality, permanence, effectiveness, monitoring, transparency and sustainability.
About carbon credits:
may take the form of future carbon credits (CCF) or verified carbon credits (CCV).
are tradable, and credit flows between market agents must be registered on a specific electronic platform.
are valid indefinitely, if not cancelled.
if, in addition to carbon sequestration, they incorporate significant additional benefits in terms of biodiversity and natural capital, the determination and monitoring of which are provided for in the respective methodology, they may be subject to identification in the registry as carbon credits +.
each credit issued has a unique and traceable serial number associated with it.
Carbon projects are subject to an initial validation process and a periodic verification process, by an independent, duly qualified verifier, in accordance with the criteria established by the Government body responsible for the area of climate action.
The decree also establishes the creation of a "guarantee pool" aiming to safeguard situations in which an unintentional reversal of sequestered emissions occurs during the project's duration. At the time of registration, the project promoter must indicate whether he intends to contribute to the guarantee pool - 20% of the CCF and CCV issued - whether he only intends to use his own insurance or whether he intends to use both options, being mandatory to choose, at least least one of the options.
And something of utmost importance: "carbon credits cannot be used or claimed for the purposes of complying with European or international obligations, namely for the purposes of the European Emissions Trading scheme and the Carbon Emissions Compensation and Reduction scheme of International Aviation or for the fulfillment of nationally determined contributions from any other party to the Paris Agreement".
Click on the image below to read the 29 articles of the decree-law on the Portuguese voluntary carbon market, in which the types of forestry carbon sequestration projects are considered priority and therefore exempt from certain fees.
All this while other countries are still debating their carbon markets or even presenting innovations that are worth highlighting, such as India's Green Credit Program, according to which "green credits" will be generated by activities such as sustainable agriculture, forestry, waste management, construction of buildings and water management practices, with individuals and entities required to register their activities through the central government of India's dedicated app/website. Remember these and a few other cases, such as those from the United Arab Emirates, South Africa and Paraguay.
PS. A few months ago, Carbon Credit Markets was approached to advise on a property purchase transaction in Portugal using carbon credits. It's good to see that the regulatory context in that country is evolving, eventually creating due diligence criteria for operations of that type. Remember the post from June 2023 "For the first time, rural property auctions will accept carbon credits as payment"
