Rio de Janeiro, Brazil to Explore Emissions Market Solutions with Emissions Market Accelerator

The Rio de Janeiro City Hall, Brazil, is working with the Emissions Market Accelerator (EMA) to address its environmental challenges through market-based solutions like cap-and-trade. The EMA, a groundbreaking initiative that helps governments across the Global South design and implement markets, will work with Rio de Janeiro officials to identify the most pressing pollutants and design tailored, data-driven solutions that reduce emissions, build institutional capacity, and promote sustainable, inclusive growth.

The unveiling was made on stage at The Earthshot Prize Impact Assembly, co-hosted with Bloomberg Philanthropies during London Climate Action Week, as The Earthshot Prize marks five years of scaling and replicating solutions to repair our planet.

“The Rio de Janeiro City Hall is taking a bold step forward in spearheading this innovative approach to reducing pollution within its city,” says EMA Co-Chair Michael Greenstone, the Milton Friedman Distinguished Service Professor in Economics at the University of Chicago. “We are thrilled to work with government leaders each step of the way to ensure this market successfully reduces pollution while fostering continued economic growth.”

Once launched in Rio, such an emissions market would be the first of its kind in South America.

“Rio de Janeiro is proud to partner with the Emissions Market Accelerator (EMA) to bring market-based solutions to air pollution in South America for the first time,” says Mayor Eduardo Cavaliere. “The success of Gujarat’s emissions trading scheme, recognized by the Earthshot Prize, proves that cities can harness innovative regulatory tools to protect our people and our future.’’

Plans for the market come as the EMA expands its footprint beyond India, where the initiative got its roots—growing out of a successful market in the Indian state of Gujarat. Researchers affiliated with the Energy Policy Institute at the University of Chicago (EPIC) and the Abdul Latif Jameel Poverty Action Lab (J-PAL) worked with Gujarat to form the market—the world’s first for particulate pollution—which dramatically raised compliance with the law, sharply reduced pollution emissions, and increased industry profits. The State of Gujarat was a 2025 Finalist for the Earthshot Prize, and spurred the launch of the EMA, a joint initiative of EPIC and J-PAL. Following its success, Gujarat launched a second market and is working with the EMA to form two others: for sulfur dioxide and wastewater pollution. Additionally, the EMA is working with other Indian states on similar market approaches.

“This partnership with Rio marks an exciting step toward globalizing the success of market-based pollution control,” says Kaushik Deb, Executive Director of the EMA. “In Gujarat, India, we successfully demonstrated that emissions trading can reduce pollution dramatically without compromising industrial productivity. Now, we have the opportunity to take those lessons global and work with Rio to become a model for how developing economies in Latin America can harness economic tools to solve environmental challenges.”

The success of emissions markets in India serves as an important proof-of-concept that such markets can help countries confront pollution without compromising economic growth. The EMA is talking with other potential government partners to launch markets for air, greenhouse gas and water pollution—with the goal to benefit 1 billion people in the Global South by 2030.

Unlike conventional command-and-control style regulatory approaches that are costly and difficult to enforce, emissions markets are a flexible, transparent approach that allow for stronger compliance at lower cost. The market works by setting a cap on total emissions across industrial plants, and allotting plants permits. Plants that find it cheaper to cut pollution and meet the cap can sell their extra permits to plants that can’t meet it. The plants selling permits make higher profits than they would without the market, while those buying permits spend less than they would on pollution control equipment. This approach allows industries to continue to profit and economies to grow, all while reducing harmful pollution.

Narrative from Rio

Rio de Janeiro’s climate leadership spans more than three decades. In 1992, the city hosted the Earth Summit that gave rise to the UNFCCC, the founding moment of global climate governance, and went on to host Rio+10 and Rio+20, cementing its role as a recurring stage for international environmental diplomacy. Rio+20 in particular is recognized as a landmark for advances in global climate policy.

Building on that legacy, Rio became the first city in Latin America to develop a greenhouse gas emissions inventory in the 2000s, a process now conducted annually. In 2011, it became the first Brazilian municipality to enact climate-specific legislation, through Law No. 5,248/2011. In 2016, Rio signed the Deadline 2020 commitment alongside C40 cities, pledging to achieve net-zero emissions by 2050.

The city has since developed a robust ecosystem for carbon market innovation. In 2021, Rio launched its Sustainable Development and Climate Action Plan and welcomed AirCarbon Exchange, a carbon credit trading platform operating across seven countries, establishing its Brazilian headquarters in the city. The following year, Rio hosted the world’s first urban micromobility auction, using carbon credits from local company TemBici through the AirCarbon Exchange platform. In 2023, the city created the ISS Neutro, one of the largest municipal-level incentives for the voluntary carbon market anywhere in the world. In 2024, B3’s carbon credit arm established operations in Rio through its partnership with AirCarbon Exchange. By 2025, the ISS Neutro’s three public calls had already offset approximately 250,000 tonnes of CO2 equivalent. That same year, Rio launched Solário Carioca, Brazil’s first public-private partnership dedicated to solar energy, converting a former landfill into a solar power plant and turning a legacy environmental liability into a clean energy asset, and hosted the Local Leaders Forum, the largest climate summit of mayors in history.

Last November, Rio de Janeiro made history as the first Latin American city to host the Earthshot Prize, held at the futuristic Museum of Tomorrow, on the eve of COP30.

In June 2026, at London Climate Action Week, Rio will sign a Memorandum of Understanding with the Energy Policy Institute at the University of Chicago (EPIC) to develop the first particulate matter emissions trading market in Latin America, the next step in a trajectory that has consistently placed Rio at the frontier of urban climate action.

Rio’s Climate Action Plan sets clear targets: a 5% emissions reduction by 2024 and 20% by 2030 against 2017 levels, full carbon neutrality by 2050, a zero-emission district by 2030, a carbon market operational by 2026, and 40% of formal employment in green jobs by 2030.