New carbon credit law is enacted in Paraguay

On October 12, 2023, the President of the Republic of Paraguay signed and enacted Law 7190/2023, of Carbon Credits. The law provides the country with a specific regulatory framework for the development of projects that generate carbon credits for sale in international carbon markets, whether compliance or voluntary.

Among other provisions, the new law designates the Ministry of Environment and Sustainable Development (MADES) as the authority in charge of enforcing its provisions, and creates a national Carbon Credit Registry that will seek to guarantee order and transparency in the local market and avoid double accounting of emission reductions. It also includes measures to safeguard compliance with Paraguay's Nationally Determined Contributions (NDCs), including the obligation to withhold between 3 and 10% of the carbon credits generated by each project, and measures designed to promote the transfer of knowledge to Paraguayan professionals and technicians. In order to encourage national and foreign investment in local projects, the law provides certain legal protections to real estate properties where projects are under development, providing legal clarity regarding the ownership and transferability of carbon credits, and exempting the transfer of these from Value Added Tax (VAT).

MADES, as the designated enforcement authority, now has the task of regulating and implementing the specific procedures required by the new law and oversee their compliance.

Paraguay, with its 16 million hectares of forests, with the accelerated increase in its new forest plantations, and with its vast availability of clean and renewable hydroelectric energy, has enormous potential in the international carbon credit market, the global value of which in 2023 is estimated at about 1.2 trillion dollars, an amount that is estimated to double in the next 5 years.

FERRERE advises local and foreign clients, including landowners, project developers, investors, specialized funds, and end buyers, in the most significant transactions in the carbon credit market in Paraguay.