Carbon markets are designed to channel private finance toward reducing emissions and protecting forests—and few countries have more to offer than Brazil. Home to the Amazon, the world’s largest rainforest, and backed by a landmark carbon market law, the country has tried to position itself at the centre of global climate finance.
But that standing is now colliding with fundamental market design flaws and governance gaps, raising concerns that what is being sold does not produce real benefits.
In late January, the head of Brazil’s federal audit court called the country’s flagship carbon market program “a true sea of uncertainty.” Vital do Rêgo Filho’s assessment came after auditors found that RenovaBio, created to curb emissions in the fuel sector, has weak metrics and poor oversight, leaving its real climate impact unclear.
“Emissions trading systems are not delivering the impact that was promised,” says Alexandre Prado, WWF-Brazil’s climate change lead.
Carbon markets come in two forms: regulated systems, like RenovaBio, where companies meet government-set targets; and voluntary ones, where participation works on an opt-in basis. Brazil ranks among the top five suppliers in the voluntary market—but integrity concerns are surfacing there, too. In recent years, police investigations have uncovered criminal networks generating millions of carbon credits backed by Amazon land that had been seized illegally.Brazil’s carbon markets are now at a crossroads. “We have a serious problem, one that has to be addressed, because otherwise the whole system loses its purpose,” Prado says.
The next few years will determine whether the country can fix the deep-rooted failures in regulation, land tenure and oversight that have plagued both its regulated and voluntary markets. But how did it come to this and what lessons can be learned?
A Powerful Green Lobby
RenovaBio came into operation in 2020 as a tool to help Brazil meet its Paris Agreement commitments. The program requires fuel distributors to purchase decarbonization credits—called CBIOs—generated by certified biofuel producers, each representing one tonne of avoided carbon dioxide emissions. The theory is that biofuels, derived from organic matter such as sugarcane and soy, are less polluting than fossil fuels because the plants absorb carbon dioxide as they grow.
In its first five cycles, the program transferred around US$2.2 billion from the fossil fuel sector to biofuel producers. But its origins reveal more about industry interests than climate ambition. Lira Luz Benites Lazaro, a postdoctoral researcher at the University of São Paulo, calls RenovaBio a case of “sophisticated green lobbying,” a strategy shaping policy in the industry’s favour while projecting a climate-friendly image.
“RenovaBio was not simply a response to the Paris Agreement, but the result of a long-standing industry push for regulatory certainty and market mechanisms to boost ethanol,” says Lazaro, who researches Brazil’s green lobby.
Lawmakers approved RenovaBio in 28 days, compared to a legislative average of more than three years. Industry groups, including UNICA, the sugarcane sector’s main trade body, dominated public hearings on the bill, while academics and environmentalists were largely absent.
Structural Shortcomings
Lazaro credits RenovaBio with a sound technical basis and real climate-policy value but notes that the heavy industry influence, combined with the speed at which the program was approved, “helps explain some of its current shortcomings.” By focusing only on carbon emissions, the program leaves unaddressed the broader dimensions of bioenergy systems, she says. “This is not unique to Brazil; it is a common feature of climate policies built around carbon metrics alone.”
The audit found major structural gaps in RenovaBio: the program relies on a single carbon-intensity indicator that fails to capture net emissions, leaving its actual climate impact unverified. Weak traceability systems allow 60% of the biomass used by certified producers to pass unchecked for deforestation links—and auditors warned that expanding biofuel production could, in some cases, increase emissions as native vegetation is cleared.
The final audit report also showed that just three fuel distributors control 55% of mandatory CBIO purchases. “This report raises deeply shocking findings on the program’s oversight,” Vital do Rêgo Filho told a hearing in January.
Brazil’s National Oil Agency, which oversees the program, tells Corporate Knights the audit was “an important contribution to strengthening RenovaBio,” while acknowledging that CBIO regulation “requires constant updates” to keep pace with the program’s growth and ensure its integrity. The agency says it is working to improve data sharing with certifiers and tighten oversight of auditing firms.
Federal authorities have made adjustments along the way, tightening penalties and updating certification rules. In February, Brazil’s Supreme Court backed the government, lifting injunctions that had shielded non-compliant distributors.
However, RenovaBio’s underlying architecture was left intact. For Prado’s WWF-Brazil, that is the core problem. “The way it is structured, oversight will always be limited,” he says.
The Rise of ‘Carbon Cowboys’
The voluntary carbon market has existed for decades, but the 2015 Paris Agreement laid the groundwork for its rapid expansion in the following decade. Signed by 196 countries, the deal set new emission-reduction targets and introduced Article 6, which allowed countries to trade carbon credits across borders.
Brazil followed suit, though voluntary projects operated largely unchecked. Fuelled by corporate money, the scramble for forest carbon spawned a new class of unregulated brokers known as “carbon cowboys.” These individuals and companies target forest communities and disputed federal lands, forging land documents, misrepresenting credit values, and binding communities to decades-long contracts—before selling the credits to corporate buyers.
In June 2024, federal police launched Operation Greenwashing, the country’s largest carbon-credit investigation, uncovering a carbon-cowboy criminal network that had used forged titles, with help from public officials, to seize more than 500,000 hectares of Amazon land— roughly the size of Canada’s Prince Edward Island—and sell fraudulent credits worth $33 million to multinationals.
Two indictment reports have since been submitted to federal court, with searches spanning 22 companies, land registries and public agencies. Those arrested await a charging decision from federal prosecutors.
A Path to Credibility
In December that same year, a new law established Brazil’s first regulated carbon market, joining the European Union, China, and South Korea among those with mandatory emissions-trading systems. It also brings the voluntary market under a legal framework for the first time, requiring projects to follow methods of the regulated market, yet to be defined.
As of March this year, the government had just held its first meeting to draft the rules that will make the system operational. Critics flagged that heavy lobbying secured an exemption for agriculture, the country’s second-largest source of emissions.
A public consultation by BNDES, Brazil’s development bank, published in early 2026, revealed deep frustration with the country’s voluntary certification, where a single international certifier, Verra, handles more than 90% of forest carbon projects.
Verra tells Corporate Knights that Brazil is a priority market and that it allows methodology adaptations to reflect local social and environmental contexts. The certifier says it requires project developers to demonstrate a legal right to operate in the area and to work with a Verra-approved independent verification body. Projects must obtain free, prior and informed consent from communities affected.
Underlying Brazil’s carbon market ambitions is a structural problem that few international actors are equipped to navigate: the Amazon’s long history of overlapping claims, fraudulent registrations and contested boundaries has created deep land tenure insecurity. “How can you sell credit for avoided deforestation if you don’t know who owns the land?” Prado asks. “There is no way to have carbon credit projects without land regularization first.”
Still, he’s optimistic. “We know the problems, because we learned them along the way. And because we know them, we can see a way forward.”
Flávia Milhorance is a Brazil-based journalist covering the country for international outlets, including The New York Times and The Bureau of Investigative Journalism, and an editor at environmental website Dialogue Earth.
