Legal Alert | Voluntary carbon market - Regulations

On 2 October last, three ordinances were published that regulated Decree-Law 4/2024 of 5 January, which established the voluntary carbon market (MVC) in Portugal and the rules for its operation:

• Ordinance 239/2024/1, which establishes the amounts of fees to be charged for the voluntary carbon market by the supervisory and managing bodies of the registration platform;
• Ordinance 240/2024/1, which defines the qualification criteria for the role of independent verifier of greenhouse gas emission mitigation projects and identifies the entity managing the qualification system under the Voluntary Carbon Market; and
• Ordinance 241/2024/1, which establishes the general requirements for the electronic platform for registering the voluntary carbon market.

Ordinance 240/2024/1 (on the qualification criteria for the role of independent verifier) shall take effect from 31 December 2024. The remaining Ordinances are already in force.

With the regulations approved by these ordinances, it is now possible to answer some important questions on the functioning of the MVC in Portugal.

How much do the various MVC operations cost?

Ordinance 239/2024/1 established the amounts of the fees due: (i) for opening and maintaining an account on the registration platform, (ii) for registering carbon programmes and projects on the registration platform, (iii) for carbon credit transactions, and (iv) for approval of methods proposed by market players.

What are the fees for opening and maintaining accounts on the registration platform?

The fees for opening and maintaining accounts on the registration platform vary depending on whether the account holders are individuals or companies/other organisations.

For natural persons:

• The fee payable for opening an account is EUR 50;
• The annual maintenance fee for the account is EUR 10.

For legal persons:

• The fee payable for opening an account is EUR 500;
• The annual maintenance fee for the account is EUR 120.

If the market agent has an account without any registered and active project or programme, the amount of the annual maintenance fee is higher than that of the corresponding account opening fee (i.e. EUR 50 or EUR 500, depending on the type).

What are the fees for registering programmes and projects on the registration platform?

For registering projects and programmes on the platform, the fee amount payable is:

• For a carbon project, EUR 950;
• For a carbon project programme, EUR 950 for the first project plus EUR 200 for each additional project included in the programme.

The amount of EUR 200 for each additional project included in the programme applies up to the following ceilings, above which the amount of EUR 950 provided for individual projects applies:

• Up to 20 projects included in the programme;
• In the case of sequestration projects, up to a maximum of 20 hectares of the total area of the programme;
• For emission reduction projects, up to the limit set out in the corresponding methodology for equivalent criteria.

In carbon projects and programmes carried out in priority areas, developers are exempt from the project or programme registration fee and should request this exemption from the platform’s manager, the Energy Agency (ADENE), with supervision by APA, I.P. Within a programme, the project registration fee exemption applies only to carbon projects that are actually carried out in priority areas.

What are the fees for carbon credit transactions?

The fee payable for carbon credits between accounts is, as a general rule, EUR 0.20 and is payable by the purchaser of the credits.

The transaction fee is not, however, payable in the case of(i) transactions involving the guarantee exchange, and (ii) transactions that are intended to meet the carbon credit restoration obligations arising from the Decree-Law. In such cases, prior notice to ADENE should be provided.

What are the fees for the approval of methods?

For a carbon project to be considered admissible in the MVC, it shall comply with the applicable carbon capture methods. These methods are defined for each type of project and shall be approved by the supervisory body.

For each request for approval of methods proposed by market players to the supervisory body, the applicable rates are as follows:

• By submitting a new method under the MVC: EUR 500 until 31 December 2026 and EUR 3000 after that period;
• For the review of an existing method within the MVC: EUR 1,500

The value of the fees will be updated annually and automatically by application of the consumer price index published by Statistics Portugal, I.P. and the supervisory body will make the updated value available on its website.

Who can act as an independent verifier for GHG emission mitigation projects?

Under Ordinance 240/2024/1, the independent verifier (MVC verifier) must be an individual who, acting under an individual name or on behalf of a legal person, is independent of the project developer and holds the qualification conferred by a certificate issued by the qualification management entity.

The MVC verifier applicant has to meet a number of cumulative requirements, namely:

• Higher education relevant to the position for which s/he is an applicant;
• Proven relevant professional experience in the specific area of the activity sector grouping to which s/he is applying;
• Vocational training for audits;
• Approval in an examination carried out by the qualification manager, which will focus on the topics defined in the Ordinance referred to below, among others;
• Full member of the relevant public professional association, where applicable.

The categories that the MVC verifier can apply for - affiliated with business sectors groupings - are (i) energy; (ii) industrial processes; (iii) agriculture; (iv) land use; (v) wetlands and marinas; and (vi) waste.

As the managing body for the training of MVC verifiers, ADENE will maintain an up-to-date digital record of qualified MVC verifiers in a position to carry out the activity, and ensure it is published on the MVC website.

How does the MVC electronic registration platform work and what can it provide?

Ordinance 241/2024/1 set out the general requirements for the MVC electronic registration platform, managed by ADENE, with supervision by APA, and the information to be made available for the purposes of registering projects and issuing credits, in compliance with Article 18 of Decree-Law 4/2024.

All market players must register with the platform. Market players include project developers mitigating greenhouse gas (GHG) emissions, individuals and organisations, both private or public, that purchase or use carbon credits, and certification bodies (MVC verifiers). Each market player is assigned an identification number by the platform, which is assigned the features corresponding to their profile.

The platform shall, as a minimum, include the following features:

• Registration and management of market players;
• The recording and monitoring of projects and programmes;
• The issue, transfer and cancellation of carbon credits;
• The management of the guarantee exchange;
• User and account management;
• Market monitoring and information management;
• The submission and management of proposals for methods of carbon capture.

For the issue of carbon credits, the platform is expected to assign a unique identification code to each credit, to enable traceability. These credits are paid into the account of the project or programme developer, who will become the holder thereof.

The platform will also identify the different types of credit and operate the procedures for converting future carbon credits (CCF) into verified carbon credits (CCV).

Regarding cancellation, the platform is expected to include the cancellation of credits feature by its holder. This should indicate whether the cancellation was intended (i) to offset emissions or (ii) to contribute financially towards climate action.

The account provided by the platform for the guarantee exchange will have specific functionalities, allowing:

•  Automatically transfer to the guarantee exchange account the amount of credits issued by carbon sequestration projects which contribute it;
• Cancel the existing credits in the guarantee exchange account following an unintentional reversal of sequestered emissions from a particular project or programme contributing to the stock exchange, at the request of the developer;
• Proceed with the phased return of carbon credits from the guarantee exchange to the project or programme developer after completion.

The platform will also have a public section, to allow users to consult information and documentation on the voluntary carbon market - no registration is required to access it.

In terms of data protection, the manager may define which documents or type of information should be kept confidential, under the applicable legal terms, at the request of market players. The entire Platform is naturally subject to compliance with the rules of the General Data Protection Regulation.

Our team is fully available for any clarification or additional question on this matter.