With 486 million hectares of forests and a highly renewable energy mix, the country has exceptional conditions for the low-carbon economy. The treatment of IBS and CBS will play a decisive role in transforming this potential into investment.

By Priscila Campos – Businesswoman, accountant, founder and CEO of Grupo International

Brazil is building its regulated carbon market while transforming consumption taxation. These two changes need to work together. One establishes economic instruments to reduce emissions; the other redefines the treatment of transactions that drive the economy. At the intersection of the two are investment decisions that can finance conservation, restoration, and innovation.

It is at this point that tax reform takes on a strategic dimension: the classification of carbon credits may influence asset prices, project profitability, and Brazil’s ability to compete for international capital.

My assessment is that the country needs to treat this issue as part of its competitiveness policy. We have an environmental and productive base that is far too significant to allow uncertainties about taxation to compromise the viability of well-structured businesses.

Brazil’s strength can be measured. The 2025 Global Forest Resources Assessment by the Food and Agriculture Organization of the United Nations (FAO) records approximately 486 million hectares of forests in Brazil. This represents more than half of South America’s forest area and approximately 12% of the global total, considering the 4.14 billion hectares identified by the assessment.

In energy, the country’s position is also significant. According to the Ministry of Mines and Energy, based on the 2026 National Energy Balance, renewable sources accounted for 49.4% of Brazil’s energy mix and 86.8% of its electricity mix in 2025. These are distinct indicators: the first considers all energy uses; the second refers to electricity.

These figures demonstrate a concrete foundation for the low-carbon economy. However, they do not mean that every forest or renewable activity automatically generates tradable credits. The issuance of these assets depends on methodology, eligibility, measurement, and verification of environmental results.

The Brazilian Development Bank (BNDES) identifies native forest conservation, ecosystem restoration, agroforestry projects, bioenergy, and the recovery of degraded pastures among the promising opportunities for high-integrity Brazilian credits. This diversity expands the country’s opportunities for participation and connects the carbon agenda to activities distributed across different regions and production chains.

It is in light of this advantage that we need to assess tax reform.

The Central Issue: The PIS/Cofins Treatment Does Not Resolve IBS and CBS

Law No. 15,042/2024, which established the Brazilian Emissions Trading System (SBCE), provides, in Article 19, that revenues from the disposals covered by Article 17 are not subject to PIS/Pasep and Cofins. The same legislation regulates the income taxation of gains and the application of its provisions to the Social Contribution on Net Profit (CSLL) in the specified circumstances. Therefore, a specific tax treatment exists, but it does not amount to a complete tax exemption for the business.

The introduction of the Contribution on Goods and Services (CBS) and the Tax on Goods and Services (IBS) requires a new analysis. The provision concerning PIS/Cofins should not be interpreted as an automatic guarantee of equivalent treatment under the new taxes.

The relevant question becomes: what is the legal nature of the asset, and how does the transaction fall within the IBS and CBS rules?

The answer must consider the trading environment and the substance of the business. Law No. 15,042/2024 establishes that SBCE assets and carbon credits, when traded in financial and capital markets, are securities. Meanwhile, Article 6, item VII, of Complementary Law No. 214/2025 provides for the non-application of IBS and CBS to certain transactions involving securities, subject to exceptions, including those related to the specific financial services regime.

This connection provides an important basis for tax analysis. However, it would be inaccurate to turn it into a statement that every sale of carbon credits automatically falls outside the scope of the new taxes.

It would also be premature to present an estimated VAT rate as the definitive tax burden for the entire sector. The tax burden of a transaction depends on its classification, the applicable rules, and, where relevant, the possibility of claiming tax credits.

Brazilian legal research has already examined this boundary. In a study published in May 2026 in Revista Direito Tributário Atual, by the Brazilian Institute of Tax Law, Talden Farias, João Mário Martins Gonzales, and Caio Dias da Costa Accioly argue that IBS and CBS should not apply to decarbonization assets traded in the regulated market and point to unresolved issues in the voluntary market. This is a well-founded academic position that must be distinguished from a definitive solution for all transactions.

For business owners, this distinction has consequences that go beyond the interpretation of the law.

Tax Reform Affects Pricing, Contracts, and Returns

A carbon project may require funding before credits are issued and sold. Development, technical monitoring, verification, and certification are part of a cost structure that needs to be financed.

When planning assumes a particular tax treatment, that assumption becomes part of pricing and projected returns. If it is not confirmed, it will be necessary to assess who absorbs the cost: the generator, the developer, the intermediary, or the buyer.

In my experience with tax structuring and the implementation of international operations, decisions of this kind need to be made before the contract formalizes the parties’ expectations. After signing, a tax disagreement may become a commercial dispute over margins, responsibility, and economic balance.

For this reason, I see three areas that must move forward together: the classification of the transaction, the treatment of associated services, and the financial impact on the project.

The sale of the asset and the provision of development, consulting, or intermediation services require separate analyses. A favorable conclusion regarding a particular transaction should not be extended, without examination, to all revenues in the value chain.

Likewise, comparisons between scenarios should consider net cost, the timing of disbursements, and the recovery of tax credits where applicable. For businesses with long development cycles, the impact on cash flow may be as relevant as the nominal tax burden.

The transition already requires preparation. The schedule presented by the Brazilian Federal Revenue Service provides for the replacement of PIS/Cofins by CBS in 2027 and the transition from ICMS and ISS to IBS between 2029 and 2032, with completion in 2033. Projects spanning these periods need to incorporate the changes into their assumptions and contracts.

Waiting until the transition is complete to review the business structure means allowing today’s decisions to rely on conditions that may not reflect the coming years.

Brazil’s Competitive Advantage Must Reach Investors’ Decision-Making

The international landscape reinforces the importance of this preparation. The World Bank reports that 87 carbon pricing policies have been implemented, covering slightly more than 29% of global emissions. These instruments generated more than US$107 billion for public budgets in 2025 — an amount corresponding to emissions pricing, not to revenues from the voluntary carbon credit market.

Capital evaluating Brazilian projects compares quality, risk, and returns with opportunities in other jurisdictions. Our ability to generate significant environmental results is an advantage. To convert it into financing, we also need to demonstrate certainty regarding ownership, obligations, taxation, and execution.

My view is that tax uncertainty may increase the return required by investors, expand contractual reserves, or delay capital contributions. This does not mean that every project will become unviable. It means that a lack of predictability may erode part of Brazil’s economic advantage.

Tax reform offers an opportunity to build a more coherent system. In the carbon sector, this coherence requires revenue collection policy to consider the purpose of environmental instruments, without dispensing with technical rigor or creating benefits through improvised interpretations.

The debate needs to produce clear answers for different types of transactions and prevent uncertainty over tax classification from becoming a permanent obstacle to market development.

As a businesswoman and accountant, I believe that Brazilian leadership in this area will be demonstrated by the ability to deliver environmentally sound and economically sustainable projects. The tax structure plays a direct role in achieving this.

Brazil has extensive forest resources, a diversity of projects, and a highly renewable energy base. It now needs to ensure that the treatment of IBS and CBS allows its businesses to be assessed accurately.

Tax reform will be part of the competitiveness of Brazilian carbon. The potential is already documented; predictability needs to match its scale.