The City of Rio has stood as a stronghold for sustainable development since the Earth Summit of 1992. We have embraced the commitment to achieve carbon neutrality by 2050 and the objectives of the 2030 Agenda, which are reflected in our Plan for Sustainable Development and Climate Action. But more than 30 years after the ’Rio Declaration’ we must face the fact that the ’global partnership’ established then to “conserve, protect and restore the health and integrity of the Earth’s ecosystem” still has a long way to go.
As the capital hosting the G20 Summit next year, we are committed to advocating for the much-needed structural changes to speed up the pace towards our common goals. Furthermore, we are strengthening our efforts to bring about fundamental transformation through local action. Our priority lies in public policies geared towards the transition to a low-carbon economy and stimulating the sustainable development of the city. The Neutral ISS Law, sanctioned this year, and the Center for Tomorrow’s Energy and Finance, currently under construction, are two of our core initiatives in this endeavor.
A CORE STRUCTURAL INITIATIVE
Law No. 7,907, of June 12, 2023 –, the Neutral ISS Law -, is an innovative law that aims to stimulate the voluntary carbon credit market in the city. Rio will deduct up to R$60 million a year of the Tax on Services of Any Nature (ISS) applied to companies based in Rio that buy carbon credits voluntarily in order to mitigate their damage. Furthermore, the ISS rate has been reduced from 5% to 2% on emission inventory activities and on project development and auditing; this is in addition to registration activities and the development of transaction platforms linked to carbon credits.
This groundbreaking law - drafted by the municipal Secretariats for Economic Development, Innovation, and Simplification (SMDEIS) and Finance and Planning (SMFP), which is the first of its kind in Brazil, is intended to encourage participation in the voluntary carbon credit market. As part of our broader vision to position Rio as the epicenter of green investment in the country, this move is simultaneously aiding us in achieving our CO2 emission neutrality goals: 5% by 2024, 20% by 2030 (both in relation to 2017), and 100% by 2050. The incentive is temporary (effective until the end of 2030) and requires compliance with international certification standards for its benefits to take effect, thereby bolstering the credibility of the compensations.
Despite its significant potential, the carbon market in Rio and Brazil remains nascent, with no current regulations in place, although the matter remains on the National Congress’s agenda. Therefore, facilitating companies’ entry at this juncture could prove pivotal, so that when the market solidifies, these companies are already rooted in the city and will be encouraged to remain. Recent studies conducted by C40 Cities highlight that apart from aiding countries and cities in meeting their emission reduction targets, green investments create opportunities for local green job creation, serving as a crucial catalyst for sustainable economic growth. The law is also expected to have a positive impact on the health of Rio residents. Neutralizing emissions using locally generated carbon credits will improve air quality in the city, countering spikes in pollution and long-term exposure to pollutants, both of which are known to cause an increase in mortality and morbidity.
COLLECTED UNDER ONE ROOF
Another groundbreaking initiative, The Center for Tomorrow’s Energy and Finance, will consolidate in one place the various actions of the Rio City Hall on the topic of green economy, effectively working as the city’s ’green brain’. The Center’s mission is to spearhead a sustainable energy transition and nurture the green finance ecosystem in Rio de Janeiro. By fostering the development of novel technologies, financial tools, and entrepreneurship, the Center will serve as a nexus for universities, the government, and the private sector. Construction of the Centre - spanning an area of 4,440m² on Rua do Passeio in Rio’s historic center - commenced in the first quarter of 2023, with an anticipated completion timeline of 18 months. The restoration project is estimated to cost R$37.6million (more than €7million). Located in what will soon be the first low-carbon emission district in Brazil (Rio decree 51.047/22), the property is positioned in front of Passeio Público, the oldest public park in the Americas.
As a global city, we believe in global cooperation, welcoming both national and international partners to the Center. Ahead of the G20 and in accordance with our belief that we must scale up sustainable development financing and the green energy transition at the city-level, Rio is surveying cutting-edge financial mechanisms to accelerate local action. Blended finance structures and urban biodiversity credits are some of the avenues open to explore. These ideas and projects will be gathered in the Center, there by ensuring the alignment of all stakeholders and initiatives in this arena Urban communities are the vibrant heartbeats of our societies.
By 2050, two out of every three people are likely to be living in cities or other urban centers. While local efforts like the ones of Rio carry significant weight, we cannot bear them alone. Cities still face an enormous financing gap for green infrastructure, and boosting the public and private financing available is an urgent matter. Hence, we must make a collective effort towards integrating the global financial architecture and sustainable urban development needs. Without a global commitment to action and change, commendable local efforts notwithstanding, the 2030 Agenda will soon become a mirage.