Brazilian aluminum producer Companhia Brasileira de Aluminio (CBAV3.SA) and green economy project developer Reservas Votorantim are issuing Latin America’s first carbon credits from the Cerrado biome, they said jointly on Tuesday.
Reservas Votorantim has certified an area covering 11,500 hectares (28,417 acres) in Goias state, where it can potentially generate some 50,000 carbon credits annually.
Issuing carbon credits on preserved areas of the Cerrado, Brazil’s second-largest ecosystem after the Amazon, is unprecedented, the companies said.
Some 316,000 credits have been issued and will be sold at auction. Bids can be submitted through the end of September. Each credit equals one tonne of saved carbon emissions.
The sale of this first batch of credits could generate around $5 million in revenue, the companies said.
They based the calculation on the sales value of carbon credits issued out of the Amazon biome, which range from $10 to $18 per tonne.
For credits issued on properties of the endangered Cerrado, however, the value would need to rise to entice farmers to preserve.
David Canassa, Reservas Votorantim director, said he sees $40 per tonne as the “breakeven value,” or the level at which farmers would be effectively compensated for keeping trees instead of planting soy in the Cerrado.
Under Brazil’s 2012 forestry code, farmers have to conserve 35% of the area on their properties in that biome, and 80% if the farm is on the Amazon.
The Cerrado savannah, Brazil’s main grain belt, is being destroyed faster than the neighboring Amazon rainforest, according to the Worldwide Fund for Nature.
ERA, one of the companies running Cerrado carbon credit auctions, is trying to persuade growers on more than 30,000 hectares of the Cerrado to enter the market as a way to diversify their revenue, though planting commercial crops remains attractive there.
“The high return of soybeans competes directly,” ERA Chief Executive Hannah Simmons said in an interview.