Principal investigator: Angelo Cruz do Nascimento Varella
Article title: CONTRIBUTION OF CONSERVATION UNITS TO ECOLOGICAL ICMS GENERATION FOR MUNICIPALITIES AND ENVIRONMENTAL CONSERVATION
Article authors: Indira Bifano Comini, Laércio Antônio Gonçalves Jacovine, José Cola Zanuncio and Gumercindo Souza Lima
Location of the Intervention: Minas Gerais, Brazil
Sample sizeData from the municipalities of Minas Gerais between 1995 and 2015
Sector: Environment, Energy & Climate Change
Type of intervention: Effects of the ecological ICMS (Tax on Circulation of Goods and Services) on environmental preservation.
Primary variable of interest: Conservation Units
Evaluation method: Other
Policy Problem
Environmental preservation is a challenge of enormous proportions that faces a complex range of difficulties across the globe. Practicing conservation in ecological areas requires reducing or preventing economic activities in those locations, which creates an opportunity cost between environmental protection and financial gains.
Furthermore, the economic exploitation of natural areas generates local and concentrated wealth, while environmental damage is widespread and dispersed. This characterizes a severe problem of economic incentives. In order to combat this reality, public policies aimed at redistributing public resources conditioned on environmental preservation have emerged. In the Brazilian state of Minas Gerais, one of the most relevant initiatives in this regard is the Ecological ICMS (a tax incentive for environmental protection).
Assessment Context
Brazil is a pioneer in creating a system of ecological fiscal transfers. The aim of this public policy was to benefit municipalities obliged to maintain environmental preservation areas within their territories, compensating them for being prevented from economically exploiting these regions. Other countries such as Germany, France, and Portugal have also created their own ecological fiscal transfer tools, and the Brazilian model has even inspired the implementation of a similar public policy in the European Union.
The Ecological ICMS (a Brazilian tax incentive program), created in the state of Paraná, is present in 17 of the 26 Brazilian states, with some variations. In Pernambuco, for example, the law is called Socio-environmental ICMS, since it takes into account social aspects for the redistribution of state resources to municipalities. In Minas Gerais, the initiative was implemented in 1995 through the "Robin Hood Law," later replaced in 2009.
Policy Details
The Tax on the Circulation of Goods and Services (ICMS) is a state tax that is passed on to municipalities, so the Ecological ICMS, also known as ICMS-E, is based on three criteria in the state of Minas Gerais to effect part of this transfer:
- Conservation units
- Waste and sewage treatment and disposal systems
- Proportion of seasonal deciduous forest (Dry Forest) in the municipalities
Regarding Conservation Units (UCs), there are basically two types, according to the objectives of each category. The first type refers to the Integral Protection Category, whose objective is strictly aimed at environmental preservation and its direct economic use is prohibited, with activities such as education, recreation, and research being permitted. The second type refers to the Sustainable Use Category, whose objective is focused on nature conservation and ecologically viable commercial activities. The categories are listed below:
Assessment Method
In order to investigate whether the ICMS-E (Tax on Circulation of Goods and Services - Electronic) implemented in Minas Gerais is effective in its objectives of environmental preservation and conservation, researchers from the Federal University of Viçosa (UFV) collected data from the João Pinheiro Foundation and the State Secretariat for the Environment and Sustainable Development – SEMAD, of the Government of Minas Gerais.
Based on the data collected, the researchers compared the evolution of environmental protection areas in the state, analyzing the proportions of different types of conservation categories, in order to assess the preferences of public managers in the ways of safeguarding Brazilian natural heritage.
Results
The ICMS-E program covered 71,5% of municipalities in Minas Gerais in 2015, with 61,5% of that total coming from the rules of Conservation Units. This represents a proportion of 44% of the municipalities in Minas Gerais with at least one Conservation Unit in their territory, with the largest number of registrations being Private Natural Heritage Reserves (RPPNs) and Environmental Protection Areas (APAs), both categories of Sustainable Use. In 2015, these registrations represented 87,9% of the total number of Conservation Units in the state. The evolution of the proportion of municipalities benefiting from the legislation can be observed in the following graph:
Regarding the area, in 2015, the state of Minas Gerais had 8,7% of its territory protected, representing more than 5,1 million hectares. Of this total, 90,8% are registered under Environmental Protection Areas (APAs) and Private Natural Heritage Reserves (RPPNs). It is worth noting that, between 1995 and 2005, the proportion of protected area in Minas Gerais increased from 2,9%, representing 1,7 million hectares, to 8,6%, with a total area of 5,0 million hectares. Thus, it is highlighted that between 2005 and 2015 there was an increase of only 0,07%, which demonstrates the maturity of the legislation in the state.
Regarding state transfers, transfers related to Conservation Units through ICMS-E totaled 35 million reais, with Parks, Environmental Protection Areas, and Private Natural Heritage Reserves accounting for 87,4% of this amount.
Lessons in Public Policy
The proportion of municipalities in Minas Gerais benefiting from the ICMS-E (Tax on Circulation of Goods and Services - Electronic) has progressively increased throughout the law's existence, rising from just over 33% to more than 71% of the total number of municipalities between 1995 and 2015. Furthermore, the area under environmental protection has also increased considerably, reaching 8,7% of the state's territory, triple the amount observed at the beginning of the implementation of this public policy.
These results demonstrate that the creation of effective mechanisms that address the issues of economic incentives are powerful tools in the pursuit of environmental sustainability. Minas Gerais, like several other Brazilian states, proves that it is possible to preserve the environment without penalizing the localities that engage in this activity, serving as a national and international reference in the pursuit of natural resource conservation.
Reference: COMINI, Indira Bifano et al. Contribution of conservation units to Ecological ICMS generation for municipalities and environmental conservation. Land Use Policy, vol. 86, p. 322-327, 2019.
