Latin America holds one of the planet’s largest biodiversity reserves and vast potential for generating nature-based carbon credits: from Amazon conservation through REDD+ projects to regenerative agriculture and reforestation initiatives. Meanwhile, European companies face unprecedented pressure from regulators, investors, and consumers to decarbonize their operations.
The key question for European sustainability directors and executives is straightforward: Is it legal and viable to buy Latin American carbon credits?
The short answer is yes, but the rules of the game in the European Union have changed radically. Below, we break down how this market works, the European regulations that must be met, and how to avoid penalties or claims of greenwashing.
1. Voluntary vs. Compliance Market: A Vital Distinction
To understand the scope of this purchase, two environments with completely independent rules must be separated:
- The Compliance Market (EU ETS): Does not allow international credits. Major emitting industries in Europe (steel, cement, energy) subject to the EU Emissions Trading System must fulfill their mandatory allowances exclusively through authorized emissions rights within the European block.
- The Voluntary Market: The avenue for corporate buyers. European companies from any sector can acquire Latin American carbon credits within the Voluntary Carbon Market (VCM) to support their corporate Net Zero commitments, offset residual emissions, or strengthen their ESG strategies.
2. The EU’s New Regulatory Tsunami Against Greenwashing
Buying a carbon credit in Latin America is no longer as simple as transferring funds and issuing a press release. European directives impose strict requirements on how these credits are communicated and reported:
A. Prohibition of Fake «Neutrality» (EU Directive 2024/825)
European consumer empowerment regulations explicitly prohibit labeling a product or service as «carbon neutral», «100% offset», or «eco-friendly» if that claim relies solely on purchasing carbon credits. European companies can finance projects in Latin America, but they cannot use those credits to mask unreduced emissions in their end products.
B. Strict Separation in ESG Reporting (CSRD Directive)
Under the Corporate Sustainability Reporting Directive (CSRD), large companies operating in the EU must separately report:
- Direct emission reductions within their own value chain (Scopes 1, 2, and 3).
- External contributions made through purchasing carbon credits.
External offsets can no longer be mathematically subtracted from a company’s own emissions in official reporting.
C. QU.A.L.ITY Criteria of the CRCF Framework
The EU Carbon Removal Certification Framework establishes that international credits acquired by European firms must demonstrate:
- Accurate Quantification: Robust, scientifically sound measurement.
- Real Additionality: Proof that the project would not have happened without carbon finance.
- Long-Term Permanence: Safeguards against reversal (e.g., wildfires or subsequent deforestation).
- Social and Environmental Sustainability: Respect for the rights of local and indigenous communities and biodiversity protection.
3. The Double-Counting Challenge: Article 6 of the Paris Agreement
One of the most delicate legal aspects in cross-border credit purchases is the allocation of reductions.
Under Article 6 of the Paris Agreement, for a credit generated in a Latin American country (such as Brazil, Colombia, Peru, or Mexico) to be unambiguously counted internationally by a European company or entity, the host country must issue a Corresponding Adjustment. This ensures that the origin country does not count that same ton of $CO_2$ toward its own Nationally Determined Contribution (NDC), preventing double counting.
4. Recommendations for Buyers and Project Developers
To ensure a transatlantic carbon credit transaction is safe and effective, three steps should be followed:
- Require High-Integrity Standards: Prioritize projects verified under internationally recognized methodologies (such as Gold Standard or Verra – VCS) that deliver tangible community benefits.
- Prioritize Internal Reduction: Use Latin American credits as a mechanism for global transition finance or to compensate strictly for hard-to-abate residual emissions—never as a substitute for decarbonizing core operations.
- Verify the Origin Country’s Legal Framework: Ensure the project complies with the local carbon legislation of the Latin American country and holds the necessary government registry entries.
Latin America offers one of the world’s most powerful ecological restoration opportunities, and European capital is critical to funding it. However, the success of this market depends on transparency, technical rigor, and strict adherence to the legal framework currently governing the European Union
