Municipal carbon offsetting instrument (Extrema – Minas Gerais)

Description

CODEMA Normative Resolution No. 016/2018 is a regulatory instrument adopted by the municipality of Extrema, in the state of Minas Gerais (Brazil), as part of its Municipal Climate Change Policy. This resolution integrates greenhouse gas (GHG) emission offsetting requirements and forest restoration financing into the environmental permitting process. This instrument builds upon the municipality's extensive experience with the Conservador das Águas ("Water Protector") project, a Payment for Environmental Services (PES) program launched in 2005 to promote forest restoration and water resource protection through financial incentives for rural landowners. In 2018, with the adoption of the Municipal Climate Change Policy and the creation of the Extrema no Clima (“Extrema for Climate”) program, this approach was expanded to include climate change mitigation objectives and to establish a more stable funding mechanism for restoration activities.

Pursuant to Normative Resolution No. 016/2018, companies subject to municipal environmental permits are required to quantify and offset their greenhouse gas (GHG) emissions and water consumption as a prerequisite for obtaining or renewing their environmental permit. These companies must submit annual reports on their GHG emissions and water consumption, which are reviewed by the Municipal Environmental Secretariat. Based on these reports, the Secretariat calculates the required environmental compensation by converting GHG emissions and water consumption into an equivalent area of ​​forest restoration. This area is then converted into a monetary value according to the methodology defined by SMA Technical Instruction No. 003/2019. The final compensation amount is expressed in Extrema Fiscal Units (UFEX) and paid into the Municipal Fund for Payments for Environmental Services. The resources thus collected finance forest restoration, watershed conservation, and the acquisition of strategically located land for ecological restoration within the framework of the Conservador das Águas. By linking environmental authorization to mandatory environmental compensation, the Resolution establishes a financing mechanism dedicated to ecosystem restoration while integrating the objectives of climate change mitigation, water resource protection, and municipal environmental governance.