Almost half a century ago, economist Milton Friedman declared in a famous US television program that "the best way to deal with pollution was to impose a tax on the cost of the pollutants emitted by a car, as an incentive to keep low the amount of pollution". An influential thinker of the economic sciences of the 20th century, Friedman laid the foundation there for what, decades later, would become a policy instituted in several countries, as a response to one of the most urgent problems of humanity: the climate crisis.

Around the world, the energy transition to low-carbon mobility occurs mainly via subsidies, tax differentials and the carbon market. Many countries have opted for the carbon tax, a “tax” levied on gas emissions that aggravate the greenhouse effect, thus pricing the negative externalities of fossil fuels. The idea is to boost the reduction of equivalent carbon dioxide emissions, with the ultimate goal of slowing down global warming by up to 1.5 degrees centigrade, as agreed in the Paris Agreement.

Finland was the first country in the world to introduce a “carbon tax” in 1990. Later, many countries followed suit and introduced their own versions. Currently, there are 92 pricing initiatives implemented, scheduled or under analysis, according to a survey by the Energy Research Company, linked to the Ministry of Mines and Energy. Chile, Colombia, Mexico, Canada, Switzerland and Japan are examples of countries that have already implemented a carbon tax.

To get an idea of the dimension of this mechanism in the international debate, in January 2019, economists published a statement in the Wall Street Journal of the United States, calling for a carbon tax, describing it as "the most economical lever to reduce emissions carbon dioxide at the required scale and speed". As of October 2021, the declaration had been signed by more than 3,600 economists, including 28 Nobel Prize winners.

The use of parafiscal taxes (such as the carbon tax ) has numerous positive points and always deserves our attention. However, the carbon market, pricing avoided emissions or even their capture, has proved to be an even more efficient way of pricing externalities, which in this case are positive. In Brazil, a carbon market policy began with RenovaBio, the National Biofuels Policy, which aims to expand the production of renewable fuels, based on predictability and environmental, economic and social sustainability.

RenovaBio 's instruments is the Decarbonization Credit , which offers the opportunity to offset emissions for sectors of the economy with higher mitigation costs. Unlike the carbon tax, each decarbonization credit represents a ton of carbon dioxide equivalent that is no longer emitted thanks to the replacement of fossil fuels. This replacement occurs, for example, with the option for ethanol instead of gasoline in the vehicle's supply.

The use of ethanol in Brazil, and in other countries, has systematically contributed to the reduction of carbon dioxide equivalent emissions into the atmosphere. Ethanol emits up to 90% less carbon dioxide equivalent than fossil fuel. Since the flex technology was launched in Brazil, in 2003, approximately 600 million tons of carbon dioxide have not been released into the atmosphere, positively impacting the health of millions of people and the environment.

One way to encourage the choice of a renewable substitute is to ensure the competitiveness of biofuels through fiscal instruments. The positive impacts of the differentiation of taxes in the state of São Paulo are known, where the policy of rates of the Tax on Operations related to the Circulation of Goods was instituted, differentiated for common gasoline (25%) and hydrous ethanol (12%).

The option for biofuel provided, among other positivities, a successful experience for the control of pollutant emissions in the city of São Paulo, the fourth largest in the world, which accounts for low levels of atmospheric pollution, according to the international platform IQAir.

From this perspective, the National Congress approved, in July 2022, Constitutional Amendment 123, which amends Article 225 of the Constitution, to establish a differentiated tax regime for biofuels. The decision came in response to the measure, contrary to the world committed to sustainability, which zeroed fuel taxes until December 31, 2022, a period legally recognized as a “state of emergency”.

After this period, it would be prohibited to set rates on gasoline and ethanol in a percentage higher than that in effect when the rule was published. Extensions of the measure would be unconstitutional. By fixing the tax differential for biofuels, legislators correct possible market distortions, inconsistent with the commitment to low-carbon energy, promoting an ecologically balanced environment.

According to Article 225 of the Federal Constitution, “everyone has the right to an ecologically balanced environment, an asset for common use by the people and essential to a healthy quality of life, imposing on the Government and the community the duty to defend it and preserve it for present and future generations.” That's what it's about.

Almost half a century after Friedman, who is responsible for the environmental responsibility of polluting agents is at the heart of debates on energy transition. Obviously, there is no single model, and the choice of the most suitable route for each country is subject to a series of factors, such as the productive characteristics, the profile of the energy matrix, the political acceptability of the measure, the support of society and the signaling of the impacts on socioeconomic indicators, in addition to the fiscal situation in which the country finds itself.

But one thing is certain: carbon pricing is a very important tool for meeting the goals of the Paris Agreement. And, in addition to the environmental benefits, it can create a fiscal ecosystem for governments, encouraging the development of various sectors of the economy, generating employment and income in the country. We have, in Brazil, an enormous potential to do business, decarbonizing. And we want to decarbonize by doing business.