Brazilian Emissions Trading System and Insurers

In March 2025, the National Confederation of General Insurance, Private Pension, Supplementary Health, and Capitalization Companies (CNseg) filed a Direct Action of Unconstitutionality (ADI) with a request for injunctive relief, seeking a declaration of unconstitutionality of Article 56 of Federal Law 15,042/2024 (Brazilian Emissions Trading System Law). The challenged provision imposes on insurance companies, open supplementary pension entities, capitalization companies, and local reinsurers the mandatory purchase of carbon credits or shares in investment funds holding such assets, amounting to at least 0.5% per year of their technical reserves and provisions. CNseg argues that the provision suffers from both formal and material constitutional defects, in that insurance companies cannot be subjected to a mandatory investment requirement under the terms set by a Complementary Law regulating the sector. It contends that the provision restricts freedom, free enterprise, and free competition, forcing insurers, despite not being the largest contributors to greenhouse gas (GHG) emissions, to purchase carbon credits, thereby imposing an excessive burden on them in the name of environmental protection. Within this context, it is argued that carbon credits have uncertain real value, there is insufficient supply in the domestic market, and the obligation artificially creates demand, which could harm insurers and other companies interested in acquiring these assets. As interim relief, CNseg requests the immediate suspension of Article 56. On the merits, it seeks a declaration of unconstitutionality, with retroactive effects (ex tunc), of Article 56 of Federal Law 15,042/2024.