62
F. L. L. de Paulo and P. J. S. Camões
(Schröter-Schlaack et al. 2014). Poland has already introduced the discussion on
EFT implementation introduced in the policy arena (Schröter-Schlaack et al. 2014),
and other countries have theoretically simulated such a scheme: Germany (Ring
2002), Switzerland (Köllner et al. 2002), and Indonesia (Mumbunan et al. 2012).
Brazil follows a mix of policy instruments to achieve targets in environmental
policies (May et al. 2012). EFTs are a policy tool, among others, that contribute to
achieve environmental and social goals at local level. Its operation in Brazil is based
in a tax collected from the state government which is transferred to municipalities.
There are several policies targets introduced in EFTs schemes across Brazilian states,
but the literature theoretically and empirically explores two: protected areas (PA) and
solid waste management (SWM).
The potential of EFTs goes beyond those related to PA and SWM. Indigenous
land, fire control, environmental education, and water conservation are examples of
policies in which EFTs tools may contribute to sustainable local development. In
the case of water conservation policies, there is a literature gap on the role of EFTs
mechanisms regarding the incentive and compensation to local governments in such
fiscal transfers. It is an exciting research agenda because it can inspire other developing countries to adopt similar policies so to achieve goals related to water policies.
It is strongly related to the 2030 Agenda for Sustainable Development, particularly
concerning the importance in ensuring availability and sustainable management of
water and sanitation for all.
The paper is structured in three more sections. The second section addresses the
EFTs policy tool in Brazil, detailing the mechanism of fiscal transfers, the criteria
that is usually adopted, and the potential of EFTs across states. The third section
addresses the role of the ecological fiscal transfers for water conservation policies,
mainly concerning the incentive and compensation. The last section presents the
conclusion, by showing suggestions for future research and policy recommendations.
2 Ecological Fiscal Transfers in Brazil
Ecological fiscal transfers in Brazil are a mechanism for redistributing a tax collected
from the state government, the ICMS (Imposto sobre Operações Relativas à Circulação de Mercadorias e sobre Prestações de Serviços de Transporte Interestadual
e Intermunicipal e de Comunicação), to local governments. They are known using
different names: ICMS Ecológico, ICMS Verde, and ICMS Socioambiental. To be
precise, three-quarters of the revenue collected from ICMS remains with the state
government and only one is redistributed to local governments. Three-quarters of this
one-quarter is transferred according to fiscal value-added criterion, while remaining
quarter may be transferred according to the state-policy objectives. The states are free
to decide upon the criteria used in these transfers. EFTs may compose the amount
destined to state-policy objectives (see Fig. 1).
EFTs in Brazil are not earmarked, that is, the local governments can use the money
they receive as they deem fit. The first state to adopt EFTs in Brazil was Paraná in
F. L. L. de Paulo and P. J. S. Camões
(Schröter-Schlaack et al. 2014). Poland has already introduced the discussion on
EFT implementation introduced in the policy arena (Schröter-Schlaack et al. 2014),
and other countries have theoretically simulated such a scheme: Germany (Ring
2002), Switzerland (Köllner et al. 2002), and Indonesia (Mumbunan et al. 2012).
Brazil follows a mix of policy instruments to achieve targets in environmental
policies (May et al. 2012). EFTs are a policy tool, among others, that contribute to
achieve environmental and social goals at local level. Its operation in Brazil is based
in a tax collected from the state government which is transferred to municipalities.
There are several policies targets introduced in EFTs schemes across Brazilian states,
but the literature theoretically and empirically explores two: protected areas (PA) and
solid waste management (SWM).
The potential of EFTs goes beyond those related to PA and SWM. Indigenous
land, fire control, environmental education, and water conservation are examples of
policies in which EFTs tools may contribute to sustainable local development. In
the case of water conservation policies, there is a literature gap on the role of EFTs
mechanisms regarding the incentive and compensation to local governments in such
fiscal transfers. It is an exciting research agenda because it can inspire other developing countries to adopt similar policies so to achieve goals related to water policies.
It is strongly related to the 2030 Agenda for Sustainable Development, particularly
concerning the importance in ensuring availability and sustainable management of
water and sanitation for all.
The paper is structured in three more sections. The second section addresses the
EFTs policy tool in Brazil, detailing the mechanism of fiscal transfers, the criteria
that is usually adopted, and the potential of EFTs across states. The third section
addresses the role of the ecological fiscal transfers for water conservation policies,
mainly concerning the incentive and compensation. The last section presents the
conclusion, by showing suggestions for future research and policy recommendations.
2 Ecological Fiscal Transfers in Brazil
Ecological fiscal transfers in Brazil are a mechanism for redistributing a tax collected
from the state government, the ICMS (Imposto sobre Operações Relativas à Circulação de Mercadorias e sobre Prestações de Serviços de Transporte Interestadual
e Intermunicipal e de Comunicação), to local governments. They are known using
different names: ICMS Ecológico, ICMS Verde, and ICMS Socioambiental. To be
precise, three-quarters of the revenue collected from ICMS remains with the state
government and only one is redistributed to local governments. Three-quarters of this
one-quarter is transferred according to fiscal value-added criterion, while remaining
quarter may be transferred according to the state-policy objectives. The states are free
to decide upon the criteria used in these transfers. EFTs may compose the amount
destined to state-policy objectives (see Fig. 1).
EFTs in Brazil are not earmarked, that is, the local governments can use the money
they receive as they deem fit. The first state to adopt EFTs in Brazil was Paraná in