On September 20, 2023, the Senate of Paraguay approved by majority vote the draft Carbon Credit Law presented by a group of senators from various political parties. The project aims to provide the country with a specific regulatory framework for the development of projects that seek to generate carbon credits for sale in international carbon markets, whether compliance or voluntary.
Among other provisions, the bill contemplates the designation of the Ministry of Environment and Sustainable Development (MADES) as the authority in charge of enforcing the law and the creation of a national Carbon Credit Registry that will seek to guarantee transparency in the local market and avoid double accounting of emission reductions. It also includes measures to safeguard compliance with Paraguay's Nationally Determined Contributions (NDCs), including the obligation to withhold between 3 and 10% of the carbon credits generated by each project, and measures designed to promote the transfer of knowledge to Paraguayan professionals and technicians. Finally, the bill seeks to encourage national and foreign investment in local projects, providing certain legal protections to real estate properties affected by projects under development, providing legal clarity regarding the ownership and transferability of carbon credits, and exempting the transfer of these from Value Added Tax (VAT).
With the approval of the Senate, the bill was remitted to the Chamber of Deputies for review and consideration.
Paraguay, with its 16 million hectares of forests, with the accelerated increase in its new forest plantations, and with its vast availability of clean and renewable hydroelectric energy, has enormous potential in the international carbon credit market, the global value of which in 2023 is estimated at about 1.2 trillion dollars, an amount that is estimated to double in the next 5 years.
FERRERE advises local and foreign clients, including landowners, project developers, investors, specialized funds, and end buyers, in the most significant transactions in the carbon credit market in Paraguay.