• Track 03
• SDGs

The Ecological ICMS Program in Paraná, Brazil, encourages municipalities to protect natural areas and water resources by linking environmental conservation to the distribution of state tax revenue. The program allocates a portion of the state’s Tax on Circulation of Goods and Services (ICMS) using environmental criteria, creating a financial incentive for conservation.

The Ecological ICMS Program in Paraná, Brazil, is a fiscal redistribution mechanism that uses environmental criteria to allocate a portion of the state’s Tax on Circulation of Goods and Services (ICMS) to municipalities. The program is governed by a legally established 5% share of the total ICMS revenue. Half of this allocation (2.5%) is distributed to municipalities that manage protected areas or traditional community lands, while the remaining 2.5% is allocated to municipalities that protect public water supply watersheds.

Linking Financial Transfers to Environmental Performance

Financial transfers are supported by a permanent technical inspection process and continuous environmental monitoring, ensuring that funding is linked to the quality of conservation management rather than the designation of protected areas alone.

To support transparency, the state provides an interactive dashboard and a transfer simulator that allow municipal managers to estimate potential revenue based on their environmental performance.

Flexibility for Local Governments

A distinctive feature of the program is that municipalities are not legally required to spend these funds on environmental activities. Instead, they can incorporate the resources into their general budgets to support areas such as health, education, or infrastructure. This flexibility encourages local governments to view natural resources as strategic assets that contribute to broader local development.

The program also uses the CEUC digital platform to georeference protected areas and manage the documentation required for technical evaluations.

A Long-Term Funding Mechanism

Because the Ecological ICMS is established in the state constitution and tax law, it provides a stable source of funding that operates independently of external grants or donor support.

The program also promotes biodiversity corridors by rewarding municipalities that connect their vegetative fragments with those of neighboring territories.