Petrobras, Brazil’s state-owned oil company, has made a significant move in the voluntary carbon market by purchasing carbon credits for the first time to offset its emissions. The company has bought carbon offsets from the Envira Amazonia project, which aims to protect 39,000 hectares of rainforest in Acre’s western state. This landmark purchase is part of Petrobras’ broader sustainability efforts and its commitment to reaching net-zero emissions by 2050. In the short-term, the company plans to reduce greenhouse gas emissions by 30% by 2030. Petrobras has already made progress in reducing operational emissions, with a 39% cut from 2015 to 2022, as well as a 67% drop in methane emissions during the same period.
To achieve its climate goals, Petrobras has also focused on lowering emissions intensity in its exploration and production activities by 50% and refining activities by 12%. The company has utilized Carbon Capture, Utilization, and Storage (CCUS) solutions, injecting 10.6 million tons of CO2 in 2022, equivalent to about 25% of the industry’s reinjection capacity. Originally, Petrobras had announced plans to invest up to $120 million in carbon credits, but this figure has now become the minimum amount as per the company’s revised business plan. The company intends to prioritize purchasing high-quality, nature-based carbon credits from domestic sources, particularly through Amazon reforestation projects. It aims to acquire at least $120 million in carbon credits by 2027, certified by Verra’s Verified Carbon Standard (VCS).
Petrobras’ decision to invest $120 million in nature-based carbon credits aligns with Brazil’s recent efforts to cap greenhouse gas emissions. The country has finalized a bill to create a cap-and-trade carbon market, which will regulate companies emitting over 25,000 tons of CO2 per year. This regulation will impact oil and gas companies, as well as other heavy emitters such as cement, steel, and aluminum manufacturers. These businesses represent only 0.1% of companies operating in Brazil but generate nearly half of the country’s total emissions. The new carbon credit market will allow companies that exceed emission reduction targets to earn tradable carbon credits, while those struggling to meet the targets can purchase credits to offset their emissions.
Carbon credits are tradable permits that represent a certain amount of CO2 emissions reduced or removed from the atmosphere. Companies can offset their emissions by investing in reforestation and conservation projects, which offer a voluntary means to offset their carbon footprint. Brazil, with its rich natural ecosystems including the Amazon, Caatinga, and Atlantic Forests, has the potential to become a global leader in the nature-based carbon credits market. However, the country faces challenges in terms of the quality of forest carbon offsets and the lack of private capital necessary to drive carbon markets. Petrobras’ investment in carbon credits created through Brazil’s reforestation initiatives opens up opportunities for investment in this sector.
In 2022, Petrobras entered the green financing market with over $1 billion in sustainability funds, attracting environmentally conscious investors. By pledging $120 million to the carbon market, the company is contributing to the conservation of hundreds of hectares of Brazil’s rainforest. This move aligns with Petrobras’ broader sustainability and net-zero efforts, as well as Brazil’s aim to create its own carbon market to combat climate change.