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During the third Conference of the Parties (COP3) to the United Nations Framework Convention on Climate Change (UNFCCC) in 1997, several countries signed the Kyoto Protocol. This document established the mechanism known today as the carbon market, making it possible to trade carbon credits generated by reducing emissions or removing carbon dioxide from the atmosphere. This instrument aimed to stimulate the reduction of greenhouse gas (GHG) emissions by assigning a financial value to carbon.

Today, we have multiple ways of trading carbon which have been organized into two segments: the regulated market and the voluntary market. One of the regulated market modalities is known as cap-and-trade and, in this model, markets are established for a country, region, or state where the government or regulatory body sets a GHG emissions reduction target. This target is broken down into different sectors, and an emission limit is set for each sector. Thus, companies that emit GHGs above the established limit need to trade emission unit allowances from other parties that emit below the permitted limit in the same sector. If the limit is exceeded, it is possible to buy the carbon credits generated by emission capture projects or avoided emissions. Certified emission reductions (CERs) are generated through methodologies established by the Clean Development Mechanism (CDM), which are administered by UNFCCC bodies.

The voluntary market has also used the instrument created in the Kyoto Protocol, through the CDM and the methodologies proposed for mitigating climate change. It was possible for not only the regions to generate credits but also other entities such as non-governmental organizations (NGOs) and the private sector. Voluntary carbon credits aim to mitigate emissions voluntarily, i.e. carbon credits and certified emission reductions are audited by an independent third party with no ties to the UNFCCC. The main proponents of methodologies and certifiers are Verra's Verified Carbon Standard (VCS), the Gold Standard, Social Carbon and the Global Carbon Council (GCC), as well as the UNFCCC's own CDM.

In 2021, at the 26th United Nations Climate Change Conference (COP26), the Rule Book for Article 6 of the Paris Agreement, created at COP21 in 2015, was established. This event made it possible to regulate the international carbon market, which will be driven by a new mechanism called the sustainable development mechanism (SDM), replacing the CDM. The operationalization of this new mechanism will be defined and put into practice over the next few years.

In December 2023, COP28 was held in Dubai. One of the objectives of the meeting was to follow up on the operationalization of the global carbon market, including Article 6 of the Paris Agreement. Clear definitions of how the agreements will be made will provide more guarantees for the trading of carbon credits, ensuring that the activities carried out are focused on reducing emissions and removing carbon from the atmosphere and its co-benefits.

Article 6.2 of the Paris Agreement aims to establish the rules for the transfer of Internationally Transferred Mitigation Outcome (ITMO) between countries, while Article 6.4 covers private sector transactions. At COP27, held in Egypt in 2022, the negotiations defined that all accounting of carbon credits about nationally determined contributions (NDCs), known as A6.4ERs, will be attributed to an NDC, either from the buyer or the seller country. The difference between the credits is whether or not the corresponding adjustment is awarded.

In the coming years, discussions should focus on finalizing the technical guidelines for the instruments to make the markets more functional and agile, maintaining the quality of carbon credits, transparency of information, and implementing robust rules to prevent double counting, among other issues.

In the Brazilian context, in 2023 there was progress in discussions on the establishment of a regulated carbon market in the country and its governance. Originally proposed by Law (PL, for its initials in Portuguese) No. 412/2022, the text was added to PL No. 2.148/2015 and includes the foundations of a regulatory body called the Brazilian Greenhouse Gas Emissions Trading System, or SBCE (for its initials in Portuguese), which would be responsible for determining the sectors of the economy subject to the law. Furthermore, there would be two numerical emission thresholds: 10,000 tons of carbon equivalent (tCO₂e) per year, for which institutions emitting more than this reference value would be required to account; and 25,000 tCO₂e per year, for which limits would be imposed depending on the sector, size of the company and other aspects, which could be offset within the national emission permit allocation plan.

 

Carbon credits at Suzano

In 2021, Suzano structured the process for creating carbon projects, with an analysis of the eligibility of potential areas, their suitability for the different methodologies and the adaptation of internal processes for implementation and monitoring, ensuring important requirements such as additionality, analysis of the risk of non-permanence, unusual practices and that they are unique. In addition, we have established a network of external contacts with potential clients, partners and stakeholders, and increased the company's representation in associations and forums that specialize in shaping the guidelines for global carbon markets.

Priority was given to the development of the first project in the plantation expansion areas of the Cerrado Project, which we call the new Suzano factory located in Ribas do Rio Pardo (MS), which will be operational in 2024. In 2022, the company completed both the Cerrado Carbon Project and another of its kind, called Horizonte and located in Três Lagoas (MS). Both reforestation projects were audited by an independent third party for validation and verification and were submitted for final registration on Verra's platform.

It is important to note that in addition to addressing climate change, these projects also generate social and environmental benefits, known as co-benefits, with activities that can improve air quality, water quantity and quality, biodiversity conservation, increased access to energy and income generation, among other positive impacts. Both projects will improve Suzano's current practices with elements that go beyond the usual, integrating three dimensions:

  • Sustainable forest management;
  • Native forest conservation;
  • Social and territorial development.

Suzano's forest management respects the characteristics of the region and uses efficient systems based on the most modern equipment, as well as seedlings produced with clonal technology, which have one of the most advanced genetic bases for creating forests for pulp production. It is worth noting that Suzano has more than 1.6 million hectares certified by the Forest Stewardship Council (FSC®) or PEFC/Cerflor, and the carbon project areas will also seek FSC® certification. Efforts are already underway to achieve this goal.

The activities will be financed by Suzano. In addition to the costs of commercial planting, Suzano will provide resources for the above-mentioned initiatives. To this end, the company is making financial plans to allocate part of the funds from the sale of credits to social projects and forestry activities, in addition to commercial plantations. Carbon credits are sold upon completion of the verification audit, in which a third party certifies that the project has met the requirements of the chosen certification.

 

Horizonte de Carbono Project

In 2022, Suzano prepared the Horizonte de Carbono Project, based on the methodology of afforestation, reforestation and restoration of the Clean Development Mechanism ACM0003, which was submitted for certification by Verra.

The project is located in the municipality of Três Lagoas (MS). It involves the implementation of an integrated landscape, which combines the planting of fast-growing species - in this case, eucalyptus - with the planting of native species in areas intended for conservation and environmental restoration. 

The environmental restoration proposed in the project for the Cerrado biome includes activities to control erosion processes and rehabilitate degraded areas, control exotic species, promote natural regeneration, and plant native species. The restoration activities started in 2023 are aimed at a more natural methodological approach, providing inputs so that in the future regeneration will take place as it normally would in nature; for this reason, the activities are supported by the company Agroícone, general coordinator of the Caminho das Sementes initiative.

First, a preliminary diagnosis of the areas was carried out using a topographic survey by drone and expert analysis to identify the characteristics and peculiarities of the areas in order to decide on the best way to carry out direct seeding, using seeds directly from the Seed Network program. The field monitoring, carried out in partnership with Agroícone, also aims to train Suzano's technical team in the operations and monitoring of ecological restoration using direct seeding of native muvuca seeds and green manure. Implementation and monitoring meet the requirements of state legislation and are therefore in line with the Environmental Regularization Program (ERP).

The social projects to be implemented as a result of the credit income will be developed in the Três Lagoas region and will go beyond the area of the initiative. They are

  • Inclusive Recycling: this activity will develop, with the recycling cooperatives in the municipalities of the Três Lagoas region, actions that promote the inclusion of individual waste pickers to generate income, promoting the development, strengthening and promotion of the productive organization of cooperatives in the territory. It is important to contribute to waste management and disposal to improve public health, in compliance with basic sanitation and solid waste policies, reducing the disposal of materials in municipal landfill. For this reason, the inclusion of individual waste pickers in the recycling production chain will generate an increase in income for all the people who collaborate in the cooperative;
  • Other social projects are being analyzed with the relevant technical team so that the Horizonte de Carbono project can reach a greater number of stakeholders who will benefit from the carbon credit investment in the region.

You can find more information about this initiative at the following links:

Cerrado Carbon Project

In 2021, Suzano started the Cerrado Carbon Project, related to carbon credits from afforestation, reforestation, and restoration (ARR), based on the methodology of the clean development mechanism ACM0003 and which has been submitted for certification by Verra.

This project is located in the municipality of Ribas do Rio Pardo (MS). It involves the implementation of an integrated landscape that combines fast-growing plantations with conservation and environmental restoration areas.

The social projects to be implemented as a result of the credit income will be developed in the Ribas do Rio Pardo region and will go beyond the area of the initiative:

  • Honey production: local beekeepers receive support to implement new technologies, technical assistance in the production process, and training to improve the handling and marketing of the product, as well as to promote honey production in the project area. In addition, a honey processing unit will be built in the town. The initiative will benefit 40 families;
  • Cerrado Circular: this project creates a source of income for local families through the circular economy, with innovative economic activities that promote the conservation of the Cerrado biome, such as functional foods, biomaterials, circular form and sustainable extraction. The initiative benefits 180 people.

You can find more information about this initiative at the following links:

The tables below show the results of the carbon projects that have already been verified:

  • Verified total GHG removals;
  • Buffer;
  • Available Verified Carbon Units (VCUs);
  • VCUs traded or used;
  • Retired VCUs in internal initiatives.

Horizonte de Carbon Projet

2023 ¹ ²
tCO₂e

Verified total GHG removals

1,900,911.33

Buffer ³

190,095.00

Available VCUs

1,710,813.00

VCUs traded or used

25,000.00

Retired VCUs in internal initiatives

139.00

  1. The year in which the values in the table are being reported is the year in which the verification audit was completed.
     
  2. The credits retired in internal initiatives were used to neutralize different types of products, such as the copies printed with the new Pollen® Paper of the books In Defense of Time, That's How It Begins and A Good Life. In addition, the emissions from 6 million medicine boxes were neutralized. The vintage used for the pensions corresponds to the 2017 generation year, with 36 credits and 103 credits being used for the books and medicine boxes, respectively. More information can be found at: https://www.suzano.com.br/papel-polen-e-editoras-companhia-das-letras-record-e-sextante-se-unem-para-neutralizar-emissao-de-carbono-na-producao-de-livros/ e https://portalbenews.com.br/editoria/nacional/suzano-neutraliza-102-toneladas-de-carbono-de-embalagens-de-medicamentos/.
     
  3. Buffer is an amount of carbon credits that is retained by the certification standard registry, to guarantee the validity of the carbon credits if the removals or reductions achieved by the project are lost.

Additional information

Credit generation guidelines


Suzano is working to reduce the concentration of greenhouse gases (GHG) in the atmosphere. Among some of the gases that cause the greenhouse effect, the main one is carbon dioxide (CO₂), which is used as a standard measure for carbon credits. Therefore, one tonne of CO₂ equivalent not emitted or removed from the atmosphere corresponds to one carbon credit. To be certified, it is necessary to develop a carbon credit project, which must follow a specific methodology and respect the eligibility criteria. The main criteria are: 
 

  • Additionality: demonstrating the additionality of a project means showing that it goes beyond business as usual (BAU), i.e. that the activities it envisages have, as a specific purpose, benefits for the environmental and/or social service and would not normally be carried out if the project were not implemented. The additionality of a project cannot be precisely calculated, but certain certification systems indicate methods for testing it. Some carbon credit methodologies include additionality tests, which are useful when designing a project. The most modern methodologies establish a control area for comparing and proving which activities are additional;
  • Duration/temporality: for a carbon credit project, longevity is one of the most important aspects and is directly linked to how long the activity carried out - for example, forest cultivation - will sequester carbon dioxide from the atmosphere. When we talk about avoided emissions projects, the process change made will often last for many years, but the methodological standards set a limit for the emission of carbon credits;
  • Dispersion/leakage: especially for projects involving land use, land use change and forestry, an analysis is made regarding the displacement of the activity prior to the carbon credit project with respect to what was done in the area, i.e. it is necessary that the reforestation activity in one location does not imply deforestation in another;
  • Monitoring: the management plan for the proposed activities is presented at the project design stage. It is therefore necessary to monitor operational activities, the respective information generated from our databases, and the activities proposed in the carbon credit projects. This monitoring is taken into account when the project and the carbon credit issue are verified by an independent third party.

 

Eucalyptus 

 

  • It is an exotic plant (not native to Brazil), just like coffee, corn, soy, sugar cane and several other crops widely grown in the country;
  • With proper management, water consumption is similar to that of native forests, and their roots remain far from the water table;
  • Eucalyptus takes approximately seven years to harvest and can be grown on land with low natural fertility;
  • Properly managed, it promotes the protection and conservation of biodiversity, as can be seen in the results of biodiversity monitoring in Suzano's areas;
  • Fast-growing, this plant helps to absorb carbon dioxide from the atmosphere, returning pure oxygen to nature. The role of eucalyptus forests is fundamental in humanity's efforts to neutralize the greenhouse gases responsible for the Earth's warming.