In Brazil, when a project causes a significant environmental impact, a portion of the total cost of the project needs to be paid into an environmental fund. Federal Law No. 9985, of July 18, 2000, which established the National System of Nature Conservation Areas, requires project proponents to pay not less than 0.5% of the total cost of the project into the fund as environmental compensation, whenever the that project is expected to cause significant environmental impacts. The environmental office in charge of managing the particular area (or areas) determines which conservation area(s) is able to receive compensation as a result of the project’s impacts. If compensation is warranted, the office also decides the exact amount of the compensation, based on the degree of impact.
When a project is expected to harm a specific conservation area, the environmental office in charge of managing that conservation area is responsible for approving the license for the project. When compensation is warranted, the compensation monies must be spent on the conservation area that is harmed and spent on creating a new conservation area, depending on the criteria of the office.
According to Federal Decree No. 4340, of August 22, 2002, which complements Federal Law No. 9985, the compensation that is paid must be invested according to the following order of priority (highest priority first):
- I. Fixing the boundaries of the conservation area and other activities related to regularizing the lands;
- II. Elaboration, revision, or implementation of the management plan;
- III. Paying for equipment and facilities necessary to implement, manage, monitor, and protect the area and its buffer zones;
- IV. Development of studies necessary to create a new conservation area; and
- V. Development of research necessary to manage the conservation area and its buffer zones.
Recently, negotiations led to the creation of an Environmental Compensation Fund, which will be an alternative to developers and other entities that need to pay environmental compensation but do not want to get involved in a bureaucratic process. This Fund will be financed by monies paid as compensation, and these monies will be applied to the creation, management, and implementation of Parks, Reserves, and other protected areas. The Fund is based on two premises: improving the efficiency of investing funds in order to really benefit conservation areas and facilitating the implementation of the law.
The Economic Federal Bank is in charge of managing the Fund. It will offer facilities to developers. All the contributions to the fund will be submitted to public proceedings in order to ensure transparency in the environmental compensation process.
For more information, contact raquel.breda@mma.gov.br, maria-carolina.hazin@mma.gov.br, or larissa.godoy@mma.gov.br