A new system of consumption taxes in Brazil was approved by constitutional amendment in December 2023, with infra-constitutional legislation under debate in Congress as of July 2024. This legislation will include provisions for a special VAT regime for fuels and create a new excise tax targeting goods with negative health and environmental externalities. This note shows that negative externalities justify significant corrective taxation to be levied on fossil fuels, whereas recent changes to fuel taxes have reduced effective taxation.Estimating the total carbon price implied by current taxes on fuels suggests tax equivalent to US8 per ton of CO2 for gasoline, but a subsidy (negative tax) of US8 per ton for diesel. A special regime for fuels under the new VATis expected to levy the tax on fuels as a single stage ad-rem rate. This entails the risk for tax erosion, which can be mitigated by including an automaticadjustment mechanism. Externalities could still be properly priced under this regime, either by including them in the ad-rem VAT rate or separate excise tax. While 72 percent of gasoline is consumed by the richest 40 percent of households, higher fuel taxes nevertheless increase the tax burden on the poor, especially when accounting for indirect effects. This impact can be successfully mitigated by using the resulting revenue for targeted transfers or reduced general taxation.