December 27, 2022
Decarbonization Credits (CBIOs): Ministry of Mines and Energy Sets Forth New Rules for Bookkeeping, Registration, Negotiation and Retirement
On December 22, the Brazilian Ministry of Mines and Energy (MME) published Normative Ordinance No. 56/GM/MME, revoking its predecessor Ordinance No. 419/GM/MME after a public consultation process conducted between March and May 2022 on revising the rules for bookkeeping, registration, negotiation and retirement of Decarbonization Credits (CBIOs).
In general, as already expected based on feedback from the public consultation, most of the provisions contained in the now-void Ordinance No. 419/GM/MME were maintained in the new regulation. However, specific provisions have been introduced to ensure better monitoring of transactions involving CBIOs and to increase liquidity in the market.
New Provisions
Among these new provisions, the new regulation provides that the MME and its affiliated agencies may request that registration agencies provide data on each CBIO transaction “for the purpose of assessing any distortions to the economic order practiced in the Decarbonization Credits market.” In addition, the ordinance now requires that registration agencies segregate “Regulated Entities” from “Non-Regulated Entities” in the daily reports regarding the quantity, financial volume and price of the traded CBIOs and in the daily reports of retired CBIOs. Previously, such segregation was only required when reporting the amount of CBIOs held by each entity.
Another change is the creation of an exception to the rule of non-identification of parties involved in CBIO transactions: financial institutions trading directly with primary issuers and buyers, whether for contracting over-the-counter derivatives or for futures trading, may be identified.
Lastly, the new regulation requires registration agencies to report CBIO retirement requests in an automated manner, through an electronic system to be chosen by the Brazilian National Petroleum, Natural Gas and Biofuels Agency (ANP), and to report retired positions of Regulated Entities. Previously, this was the responsibility of bookkeepers, who were responsible for submitting quarterly reports to ANP in connection with CBIO retirements by Regulated Entities.
Entry into Force
The new requirement for segregating “Regulated Entities” from “Non-Regulated Entities” in daily reports shall enter into force on June 1, 2023. All other provisions shall come into effect on January 2, 2023.
In general, as already expected based on feedback from the public consultation, most of the provisions contained in the now-void Ordinance No. 419/GM/MME were maintained in the new regulation. However, specific provisions have been introduced to ensure better monitoring of transactions involving CBIOs and to increase liquidity in the market.
New Provisions
Among these new provisions, the new regulation provides that the MME and its affiliated agencies may request that registration agencies provide data on each CBIO transaction “for the purpose of assessing any distortions to the economic order practiced in the Decarbonization Credits market.” In addition, the ordinance now requires that registration agencies segregate “Regulated Entities” from “Non-Regulated Entities” in the daily reports regarding the quantity, financial volume and price of the traded CBIOs and in the daily reports of retired CBIOs. Previously, such segregation was only required when reporting the amount of CBIOs held by each entity.
Another change is the creation of an exception to the rule of non-identification of parties involved in CBIO transactions: financial institutions trading directly with primary issuers and buyers, whether for contracting over-the-counter derivatives or for futures trading, may be identified.
Lastly, the new regulation requires registration agencies to report CBIO retirement requests in an automated manner, through an electronic system to be chosen by the Brazilian National Petroleum, Natural Gas and Biofuels Agency (ANP), and to report retired positions of Regulated Entities. Previously, this was the responsibility of bookkeepers, who were responsible for submitting quarterly reports to ANP in connection with CBIO retirements by Regulated Entities.
Entry into Force
The new requirement for segregating “Regulated Entities” from “Non-Regulated Entities” in daily reports shall enter into force on June 1, 2023. All other provisions shall come into effect on January 2, 2023.
Authors
Stay Up To Date With Our Insights
See how we use a multidisciplinary, integrated approach to meet our clients' needs.
Subscribe