The Impact of the Ecological ICMS on Investments on Sanitation and Environmental Management: Analysis of Municipalities in the State of Rio de Janeiro

Abstract

In a growing economic and industrial development scenario, public policy can be used to encourage environment-friendly behaviour. In this context, it is a part of the Ecological ICMS, which is the VAT percentage of transfer raised by the States in favour of their municipalities, according to criteria established by law. In this paper, we seek to assess the contribution of the Ecological VAT in the State of Rio de Janeiro for the environmental development in this State. Therefore, of the 92 municipalities, data of budget expenses were collected for 87 of them (5 were excluded from analysis due to lack of information for some periods) in sanitation functions and environmental management from 2005 to 2012 and therefore the 4 years before and after the validity of the Ecological VAT (2009). From the collected data, the mean difference test was used (Wilcoxon). The hypothesis tested was that the institution of the Ecological VAT in the State of Rio de Janeiro generated an increase of municipal expenditures in sanitation functions and environmental management. The results indicated that the average spending on sanitation and environmental management of municipalities in the state of Rio de Janeiro before and after the ecological ICMS institution are, from a statistical point of view, different and that the this benefit has contributed to an increase of environmental investments there. Moreover, the average expense on environmental management showed the largest percentage increase in the periods before and after the start of the distribution of resources to the Ecological VAT, although spending on sanitation express a higher total sum.