Grounds for Payment: How Capital is Catching Up with Climate in Brazil
#18 BAR Raiser
Brazil’s new green payments law could flip the switch on scale for regenerative ag and climate finance
Clause for Action
Last month, Brazil entered a new phase of quiet transition. On June 5, 2025, the Ministry of Environment launched a 45-day public consultation to finalize the regulatory decree for Law 15.042/2024—a groundbreaking update to the country’s Payment for Environmental Services (PES) framework.
The law itself was sanctioned a year earlier, in June 2024, but its full potential is only now beginning to unfold. It created a new instrument: PRAFs, or Federal Environmental Service Remuneration Projects. These provide the legal scaffolding for a national PES platform, where governments, companies, NGOs, and investors can pay rural landowners for delivering measurable environmental outcomes like carbon sequestration, water protection, and biodiversity preservation.
This isn’t just a policy refinement. It’s the shift from intention to implementation, from principle to payment.
For farmers, that shift represents a clear financial signal. For climate investors, it opens a long-awaited pipeline into one of the world’s most biodiverse and underfinanced landscapes.
Law of the Land
For years, Brazil’s PES system existed mostly on paper. The original 2021 law (Lei 14.119) laid out the vision: reward landowners who maintain or restore environmental services. But without mechanisms to contract, verify, register, or scale those services, uptake was limited. There were no rules for co-investment. No fiscal clarity. No infrastructure.
Law 15.042/2024 changed that.
It introduced PRAFs as formal, contract-ready vehicles for PES implementation. It established legal conditions for both public and private actors to engage in PES agreements. And critically, it clarified tax treatment—ensuring that payments for environmental services wouldn’t be lumped into traditional agricultural income, removing a key barrier to adoption.
The regulatory decree now under consultation will define how PRAFs actually work. It will detail eligibility criteria, benefit-sharing protocols, monitoring and verification standards, and the national PES registry. The consultation runs through July 20, 2025 and the response so far has been unusually energized. Farmers, agtechs, carbon platforms, cooperatives, buyers, and financial institutions are weighing in, not just to comment, but eager to participate.
Once finalized, the system will enable both public and private capital to flow into verified environmental outcomes, at scale. That turns PES from a development buzzword into a real platform. And it positions Brazil as a global model for results-based land stewardship.
Green Trigger
The biggest constraint on regenerative agriculture in Brazil has never been technical, it’s financial. Farmers know how to rotate livestock, build cover crops, and reduce erosion. Many already do. But those practices cost time, money, and short-term yield loss. In a volatile, capital-constrained farm economy, good intentions don’t move the needle, financial incentives do.
That’s what this new PES structure delivers.
Instead of vague ESG encouragements, the PES system enabled by Law 15.042/2024 creates a second revenue stream, one linked not to harvest volumes, but to ecosystem performance. Whether it’s maintaining legal reserves, replanting riparian zones, reducing emissions, or improving soil carbon, producers can now be paid directly for environmental outcomes.
That kind of income stream changes the equation. It allows risk-averse farmers to experiment. It improves creditworthiness. It creates alignment between what’s good for the land and what’s viable for the business.
And the signal moves up the chain. Rural banks can structure sustainability-linked loans using projected PES cash flows. Cooperatives can coordinate member projects and register them as bundled PRAFs. Agfintech startups can plug in with MRV tools and smart contract systems. CPGs sourcing from Brazil can build verified climate impact into their supply chains, not as a CSR talking point, but as a contractual line item.
By turning environmental stewardship into a paid service, Brazil is creating the kind of durable incentive that can actually shift behavior, not just among farmers, but across the entire rural economy.
Purpose with a Price Tag
What Brazil is building isn’t a subsidy, it’s a marketplace. A legal framework to convert environmental public goods into investable, traceable, and contractable outcomes. And while the law passed in 2024, it’s the regulatory infrastructure being debated right now—mid-2025—that will determine whether this becomes a workable model or just another missed opportunity.
If successful, Brazil’s PES platform could be the missing piece in the climate finance puzzle. It could connect blended capital to real landscapes. It could bring long-term revenue to farmers who’ve preserved their forests for decades without compensation. It could help close the loop between rural credit, supply chains, and verified carbon.
There’s still work to do. The decree isn’t final. The registry needs to be built. Monitoring protocols need to be simplified and scaled. But the structure is sound, and the alignment between climate ambition and rural incentives has never been stronger.
Brazil is no longer just talking about how to value ecosystem services. It’s creating the conditions to pay for them.
Thanks for reading.
KFG 🚀
Kieran Finbar Gartlan is an Irish native with over 30 years experience living and working in Brazil. He is Managing Partner at The Yield Lab Latam, a leading venture capital firm investing in Agrifood and Climate Tech startups in Latin America.