Overthrow the veto to tax incentives of the National Policy Payment for Environmental Services is key to attracting investment

01 June 2021

The Partial Veto 5/2021, affixed to the Bill 5028/2019, which institutes the National Policy for Payment for Environmental Services (PES), is on the agenda of today's session of the National Congress.

The Brazilian Coalition on Climate, Forests and Agriculture, movement formed by more than 300 representatives of agribusiness, civil society, the financial sector and the academy, calls on parliamentarians to overthrow this veto, since the tax incentives are key to attract new sources of funding to PES mainly through the private sector.

The main resistance of some parliamentarians has been the understanding that the tax incentives to the PES would be a form of revenue waiver, which could only be done by an act of the Executive Branch. However, PES-related revenue is still non-existent and, therefore, does not represent a loss of revenue for the Union, nor a financial-budgetary impact.
Taxing payment to the service provider can be detrimental to the effective implementation of the National Policy on PES Payments, as it will reduce the resources that will be transferred - and which are currently low. In this regard, considering that, in order to receive payment, providers will invest in good practices and equipment, the increase in tax revenue will come through the strengthening of the restoration and environmental conservation chain in mid-term.

It is also worth mentioning that environmental services have been gaining attention from the private sector, given the growing representativeness of the concept in important corporate sustainability indexes, such as the Dow Jones Sustainability Index family (New York) and FTSE4Good Index Series (London). In Brazil, the assessment of ecosystem services is considered in the B3’s Corporate Sustainability Index (ISE-B3) since 2018. In addition, major asset management companies in the world, such as BlackRock, also began to evaluate funds based on environmental, social and governance parameters. Thus, to meet investor demand and stand out in the financial sector, fiscal and economic incentives can attract private sector resources for both to boost environmental funds that finance PES, and to increase the range of projects.

Another important aspect of PES programs is that, in addition to the positive impact on the income of landowners, there may be benefits associated with the ecosystem service itself, such as the possibility of selling non-timber products, the reduction in water treatment costs and the issuance of credits for capture or reduction of greenhouse gases emissions, among others. Whereas the incentive can positively impact the entire chain of economic activities already taxed, there will certainly be an increase of fiscal and tax collection.

Therefore, enabling private investment and international cooperation is crucial, especially in a post-pandemic economic recovery scenario.

For this reason, the Brazilian Coalition reinforces its request to parliamentarians to guarantee the economic attractiveness of the PES and, thus, make viable an important tool for protecting forests and valuing rural producers who help preserve the environment.

 

About the Brazilian Coalition
The Brazilian Coalition on Climate, Forests and Agriculture is a multi-sector movement formed with the objective of proposing actions and influencing public policies that lead to the development of a low-carbon economy, with the creation of quality jobs and the fostering of innovation, Brazil’s global competitiveness and generation and distribution of wealth to the entire society. More than 300 companies, business associations, research institutes and civil society organizations have already joined the Brazilian Coalition - coalizaobr.com.br/en