Doing Business in Brazil

15. Environmental

06/30/23

15.1. Evolution of the environmental protection

In the past decades, especially since the United Nations Conference on the Human Environment – Stockholm Conference – held in 1972, concern in relation to environmental issues has risen worldwide.

In Brazil, the legal protection of the environment gained expressive repercussion in the ‘80s, pursuant to the enactment of the National Environmental Policy Act (1981), the Public Civil Action Act (1985) and the Federal Constitution (1988).

Since then, environmental issues have been receiving increased attention at the Brazilian Legislative Branch with the enactment of several environmental regulations, which, naturally, must be followed by both the public and the private sectors during their activities.

The Judiciary has also been more frequently ruling cases related to the enforcement of environmental law, resulting in the consolidation of court decisions and in the enactment of precedents by the Superior Court of Justice.

In parallel, it is also noticed a greater movement in the role played by the Public Prosecutor and Non-Governmental Organizations to protect the environment and natural resources as well as in the inspection actions taken by environmental authorities.

Furthermore, it is notorious the society’s high demand for economic development to occur in an environmentally correct form and in a socially fair manner, being certain that the financial market has also been moving in the direction of considering social and environmental aspects in the allocation of capital. Actually, it is in this context that emerges the social and market requirements for companies to adopt ESG (Environmental, Social and Governance) practices.

Hence, the incorporation of environmentally appropriate actions, in compliance with the applicable legislation, becomes increasingly relevant, not only to avoid environmental liability, but also to contribute to the continuity and the sustainability of a company.

15.2. General aspects of environmental protection

15.2.1 Authority over environmental matters

According to the Brazilian Federal Constitution, the Federal Government and the States have the power to legislate in a competitive way about environmental protection and pollution control, as well as about liability for environmental damages. Additionally, Municipalities are also entitled to legislate on environmental matters in relation to issues considered of local interest and may complement federal and state legislation as appropriate.

Therefore, there is a wide federal, state and local environmental legislation. Although there is divergence, the majority view of doctrine and of the Judiciary is that, in situations where there is a conflict of rules, the legislation offering greater environmental protection shall prevail.

In relation to the activities of inspection, protection, improvement and recovery of environmental conditions in Brazil, all levels of the government have common powers, what means that all of them can, by means of the authorities that are part of the SISNAMA – National System of Environment, exercise such activities, observing the definitions and limits provided for in Complementary Law No. 140/2011.

The Public Prosecutors’ Office, in its turn, has institutional powers, under Brazilian Federal Constitution, to initiate civil investigations and to bring public civil actions with respect to environmental damages, as well as to file lawsuits related to crimes against the environment.

15.2.2 Major Federal Laws

In the federal level, two statutes  compose the general structure of environmental protection: the National Environmental Policy Act and the Federal Law No. 9,605/98.

The National Environmental Policy Act was established by Federal Law No. 6,938/81 and provides for principles, guidelines, and mechanisms aimed at the preservation, improvement, and recovery of environmental quality.

In its turn, Federal Law No. 9,605/98 sets forth the criminal and administrative sanctions applicable to conducts and activities that are harmful to the environment. On one hand, this statute describes those conducts deemed to be crime and establishes the applicable penalties. It also provides for the possibility to attribute criminal liability to a legal entity when a violation is committed as a result of a decision taken by its representative, or by one of its corporate bodies, in the interest or benefit of the company.

On the other and, the Federal Law No. 9,605/98 establishes the general rules for administrative environmental liability. To regulate the matter, Federal Decree No. 6,514/2008 was encated, which disciplines the administrative sanctioning process and describes the conducts considered as violations to environmental legislation, as well as the respective applicable administrative sanctions.

15.2.3 Environmental Liability in Brazil

Under Brazilian Federal Constitution and National Environmental Policy, environmental liability may occur, severally and cumulatively, in civil, administrative and criminal levels.

In the civil level, liability arises from damages caused to the environment and aims exclusively at its recovery, which, according to doctrine and former court decisions, must occur through restoration to the previous status, compensation or indemnification, necessarily observing this order of preference. The entities with legal standing to protect the environment in court are the Public Prosecutor’s Office, the Public Defender’s Office, the federal, state and municipal governments, by government corporation, foundation or mixed-capital company, or even by associations created to defend the environment, in addition to Brazilian citizens, by means of a popular action.

According to the National Environmental Policy Act, environmental civil liability is strict, i.e., it occurs irrespective of fault by those that have caused the damage. However, still, it is necessary to proof the actual damage and the chain of causation between such damage and the activity undertaken by the applicable party. In this sense, the party will only be held liable if the damage, its extent and the link between the damage and the activity are evidenced.

It should also be noted that, under the National Environmental Policy Law, environmental civil liability is joint among those directly or indirectly responsible for the activity that causes environmental degradation.

Administrative liability, in its turn, is verified when the environmental legislation is violated, which is defined,, pursuant to Federal Decree No. 6,514/08, as any act or omission that violates the legal rules for the use, enjoyment, promotion, protection and recovery of the environment.

Committing an environmental infraction may subject the party to penalties, such as warning, fines ranging from BRL 50 to BRL 50 million, total or partial suspension of activities, suspension or cancellation of licenses, permits and authorizations, prohibition on contracting with the government, enjoyment of tax benefits and/or obtaining financing from official credit institutions, among others.

At last, criminal liability is verified when the agent incurs in a conduct classified as an environmental crime, under Federal Law No. 9,605/98, subject to a public criminal action that may be filed exclusively by the Public Prosecutor’s Office. Attribution of criminal liability requires proof that the person accused of committing an environmental crime acted with negligence or willful misconduct, as the case may be.

15.2.4 Environmental protection instruments

There are several instruments aiming at the preservation, improvement and recovery of environmental quality. In general terms, they can be classified as follows: direct regulatory instruments (which compose the “command and control system” referred to in item 15.2.3), economic instruments (which seek to encourage the adoption of environmentally positive practices) and communication/information instruments.

Under the National Environmental Policy Law, the main environmental instruments are: (i) environmental quality standards; (ii) environmental zoning; (iii) environmental impact assessment; (iv) licensing of effectively or potentially polluting activities; (v) incentives for the production and installation of equipment and the creation or use of technology, aimed at improving environmental quality; (vi) specially protected territorial spaces; (vii) the national environmental information system; (viii) the registration of polluting or potentially polluting activities; (ix) the penalties for non-compliance with the measures necessary for the preservation or correction of environmental degradation; and (x) the economic instruments, such as forest concessions, environmental easement, environmental insurance and others.

Depending on the type of activity to be developed and on its location, different instruments may be applicable. We highlight some of them below, without prejudice to others that are equally important, such as soil and water quality standards, limits for the discharge of liquid effluents, and limits for atmospheric emissions.

15.2.4.1 Environmental Licensing – direct regulatory instrument

Pursuant to the Brazilian environmental law, effectively or potentially pollutant activities, as well as activities that, in any form, may cause environmental degradation, shall be subject to previous environmental licensing, which consists of a public administrative proceeding in which the environmental agency evaluates and authorizes the location, installation, expansion and operation of those activities, considering the applicable legal provisions, regulations and technical rules in each case.

During the environmental licensing process, the entrepreneur may be required to submit environmental studies to support the analysis for the requested licenses. There are various types of environmental studies, and the environmental licensing agency shall indicate the study that applies to each specific case.

Environmental licensing encompasses, as a rule, three distinct and successive phases, as follows:

  • Preliminary License – granted in the preliminary planning phase of the project or activity, approving its location and design, attesting its environmental feasibility and establishing the basic requirements and conditions to be complied with in upcoming phases of implementation;
  • Installation License – authorizes the installation of the project or activity according to the specifications contained in the approved plans, programs and projects, including the measures needed for environmental control and other conditions;
  • Operating License – authorizes the operation of the project after certification of effective compliance with the provisions contained in the previous licenses and provides the measures needed for environmental control and the conditions set for the project’s operation.

Other environmental permits and documents may be required for certain activities, such as authorization for suppression of vegetation, authorization for management of fauna and water grant for intervention in water courses.

Pursuant to Complementary Law No. 140/2011 the power for issuance of environmental licenses and permits is generally attributed to State environmental agencies. In certain cases, such power is attributed to the federal environmental agency (Instituto Brasileiro do Meio Ambiente e dos Recuros Naturais Renováveis) (“IBAMA”) or to the Municipal environmental authorities.

15.2.4.2 Reverse Logistics – direct regulatory instrument

Reverse logistics is one of the instruments foreseen by Brazilian legislation to strengthen the shared responsibility among manufacturers, importers, distributors, traders and consumers in relation to solid waste management. Its goal is to enable the collection and restitution of certain solid waste to the business sector for reuse or for another environmentally appropriate final destination, including, among other alternatives, reusing, recycling, composting, recovery and energy production.

This instrument was formally created by Federal Law No. 12,305/2010, which established the National Policy on Solid Waste, and regulated by Federal Decree No. 7,404/2010, despite the existence of rules enacted prior to such law and decree related to the reverse logistics of some specific products.

In general terms, in a reverse logistics system, traders and distributors are responsible for receiving products and packaging returned by consumers and delivering them to manufacturers or importers for an environmentally appropriate final destination.

Pursuant to the applicable legislation, there are several products subject to reverse logistics, such as pesticides batteries, tires, lubricant oils, fluorescent lamps, sodium and mercury lamps and mixed lamps, electronics and their components and medicinal drugs.

The legislation also provides for the possibility of expanding the list of products subject to reverse logistics, what should be done by the enactment of decrees or execution of sectoral agreements or commitment agreements, after verifying the technical and economic viability of the implementation of such system. Based on that, a reverse logistics system has been established, at the national level, for e.g. packaging in general, composed of paper and cardboard, plastic, aluminum, steel, glass or combination of these materials, such as long life packaging.

It is possible that reverse logistics systems are instituted at the state and municipal levels, also through decree, sectoral agreement or commitment agreement. 

15.2.4.3 Access to genetic heritage and associated traditional knowledge – direct regulation instrument

Brazil ratified the Convention on Biological Diversity (“CBD”) then undertaking the obligation to establish internal rules regarding the access to the genetic resources under its jurisdiction and to protect the traditional knowledge of local communities and indigenous population, valuable to the conservation and sustainable use of the biodiversity.

Currently, the access to the genetic resource of the country and to the associated traditional knowledge is regulated by Federal Law No. 13,123/15 and Federal Decree No. 8,772/16 (together referred to as the “Biodiversity Law”).

According to the Biodiversity Law genetic resource is the genetic information from flora, fauna, microbial or other nature species, including those originating from such living beings’ metabolism while the associated traditional knowledge is information or customs from indigenous population, traditional community or traditional farmers regarding the properties, direct or indirect uses associated to the genetic resource.

Pursuant to the Biodiversity Law, whenever there is research and/or technological development on Brazilian genetic resource or on associated traditional knowledge, there is access. The applicable regulatory requirements will depend on the specific case, and may involve registration  before the National System for the Management of Genetic Heritage and Associated Traditional Knowledge (“SisGen”), the prior authorization from the provider of any traditional knowledge, the benefit sharing (in monetary or non-monetary terms), among others.

The enforcement of the Biodiversity Law is performed by IBAMA, which is entitled to:

  • Impose fines ranging from (i) BRL 300 to BRL 30,300 when the violation is committed by individuals; and (ii) from BRL 3,030 to BRL 3,030,300 when the violation is committed by a legal entity.
  • Seize (i) samples containing the component from the Brazilian biodiversity that was subject to the access; (ii) instruments employed to acquire or process the component from the Brazilian biodiversity or of the associated traditional knowledge that was subject to access; (iii) products deriving from the access to the genetic resource or to associated traditional knowledge; or (iv) products obtained from information arising out of associated traditional knowledge.
  • Suspend temporarily the manufacturing and sale of the finished product or reproductive material deriving from access to the genetic resource or to associated traditional knowledge up to its regularization.
  • Suspend (fully or partially) the specific activity related to the infraction.
  • Suspend or cancel a certificate or authorization granted.

In addition to the administrative sanctions above, companies that violate the law may have their names associated with biopiracy, then offering a serious risk of damage to their brands and image.

The last years have been subject to ongoing climate change, extinction of species and social inequality. The sustainable use of biodiversity and compliance with access and benefit sharing rules by companies is therefore a competitive advantage and a solid way to implement CBD principles. It also copes with environmental policies, stimulate socioeconomic development, public health and encourages research, development and innovation.

15.2.4.4 Payments for Environmental Services – economic instrument

Aiming at encouraging the environmental recovery and preservation – and, ultimately, at promoting the sustainable development -, it was enacted Federal Law No. 14,119/2021, which implemented the National Policy on Payment for Environmental Services (PNPSA) and instituted the Federal Program of Payment for Environmental Services (PFPSA) and the National Register of Payment for Environmental Services (CNPSA). 

Payment for environmental services is a voluntary transaction, whereby the provider of such services is remunerated, through financial resources or otherwise (for example, adoption of measures resulting in social improvements to communities, compensation linked to certified emissions reduction, green bonds), by a given payer. Environmental services are those that support the maintenance, recovery or improvement of the environmental conditions of ecosystems.

It may be a provider of environmental services individual or legal entity, public or private, or family or community groups. On the other hand, it may be a payer party public authorities, civil society organizations or private agents (individuals or legal entities, national or International). 

The amounts received as payment for environmental services are not included in the calculation basis of Income Tax (Imposto de Renda), contribution on profits (CSLL) and VAT tax (PIS/Pasep and Cofins). With respect to agreements executed between private parties, the agreement must be registered with the CNPSA for the tax benefits to be granted. 

To specifically regulate the payment for environmental services by the Federal Government, the PFPSA was created, aimed primarily at actions for the maintenance, recovery or improvement of vegetation located in priority areas for conservation, in areas destined to combat the fragmentation of habitats, in areas destined to the creation of biodiversity corridors and in areas destined to the conservation of water resources, notwithstanding the possibility of identification of other environmental services subject to payment. The PFPSA will prioritize – although it is not restricted to them – services provided by traditional communities, indigenous people, family farmers and rural family entrepreneurs.

PFPSA may aim at, among others, areas covered with native vegetation or areas subject to ecosystem restoration, recovery of native vegetation or agroforestry planting. For private areas to be eligible, the properties in which they are located must be registered before the competent environmental register for rural areas – CAR (if located in rural areas) or in accordance with the respective master plan (if located in urban areas). Individuals and legal entities in default in relation to consent agreements executed with environmental authorities, as well as areas embargoed by environmental authorities, cannot be benefited by the allocation of public resources for payment for environmental services.

To systematize information about payments for environmental services, Law No. 14.119/2021 established the National Register of Payment for Environmental Services (CNPSA), which will gather, without prejudice to other data and documents, the agreements related to payment for environmental services that involve public agents, the potential areas and the respective environmental services provided, and the methodologies and data that support the valuation of environmental assets, as well as information on the plans, programs and projects that are part of the PFPSA. It should be noted that the relevant clauses for each type of agreement related to payment for environmental services to be executed within the PFPSA will be established by means of a proper regulation, which has not been enacted yet. Without prejudice, there is no obstacle for execution of contracts of this nature, separately from the PFPSA, including between private parties.

 


Authors: ​Adriana Mathias Baptista and Bianca Bilton Signorini Antacli

TozziniFreire Advogados

Rua Borges Lagoa, 1328
04038-904 – São Paulo – SP
Phone: +55 (11) 5086 5000
Fax: +55 (11) 5086 5555
E-mail: [email protected] [email protected]

Internet: www.tozzinifreire.com.br

[1] Foreign companies may only develop access activities if in association to a Brazilian legal entity.

[2] Is the element whose presence in the finished product is essential to the existence of its functional features or to the marketing appeal.