Environmental preservation and economic development are widely understood to be mutually reinforcing goals that must advance in tandem. This principle is enshrined in key global agreements such as the Rio Declaration on Environment and Development (United Nations, 1992), the 2030 Agenda for Sustainable Development, and the Paris Agreement, all of which call for integrative approaches that balance growth with ecological sustainability and climate resilience (United Nations, 1992; United Nations, 2015). At the core of this vision lies the political and institutional architecture of environmental regulation, wherein governments at all levels must establish and enforce appropriate laws, regulations, and codes to effectively advance sustainable development (Sarabdeen, 2024). While regulatory frameworks are not always the most socially equitable or technically effective mechanisms for achieving environmental justice (Sachs, 2010; Kotzé and Adelman, 2023), they provide essential legal instruments and procedural safeguards for managing potentially harmful activities. These frameworks typically arise from deliberative policy processes and reflect consensus over how to normatively structure environmental risk and compliance (Lemos and Agrawal, 2006).

Environmental licensing systems are guided by foundational principles such as the precautionary principle, public participation, and the need for technical assessments—principles widely consolidated in countries with robust environmental governance systems (Handoyo, 2024). In Brazil, however, these principles are currently being redefined as part of ongoing legislative reforms to environmental licensing. A central component of this reform is the General Environmental Licensing Law, approved by the Federal Senate and, subsequently, by the Chamber of Deputies, before being signed into law by the President in 2025 (No. 15.190/2025), which will enter into force in 2026 (Brazil, 2025). The law introduces a major restructuring of the existing licensing framework, proposing more flexible mechanisms — including self-declaratory licenses — for specific categories of projects (see Section I, Art. 5, Subsection V, Law 15.190/2025). These instruments aim to simplify and expedite licensing procedures by reducing the need for case-by-case assessments. While the law is framed as a modernization measure intended to streamline bureaucratic processes, it lacks a clear implementation strategy that details how the necessary data systems, institutional capacity, and technical infrastructure will be developed or mobilized to support this transition. Previous analyses, including Athayde et al. (2022), had already noted the absence of such planning when the bill was under consideration in the Chamber of Deputies. Among the changes, the law permits the use of self-declaratory licenses for projects classified as low to moderate environmental impact, according to Federal Ordinance No. 8.437/2015 and Federal Law No. 140/2011. This includes activities such as small hydroelectric plants, road construction, sewage treatment facilities, agrosilvopastoral systems, and certain types of mining operations. These licenses would be issued directly by developers and could bypass prior environmental impact assessments, eliminate the analysis of locational alternatives, and allow for automatic renewals. The law also does not include provisions for climate adaptation or governance instruments that support climate change coping strategies (Schramm and Fishman, 2010; Fernandes et al., 2025), which are important for long-term resilience. Between the parliamentary approval of bill and its enactment as law, the Presidential Office issued partial vetoes aimed at restoring key environmental safeguards and ensuring legal consistency. Broadly, these vetoes curtailed provisions that excessively simplified licensing procedures, weakened federal oversight, and reduced social participation mechanisms. Their intent was to reestablish minimum standards of environmental protection and reaffirm the Union’s authority to define general licensing norms. Nevertheless, despite these corrections, the final text of the law retained clauses granting municipalities extensive autonomy to conduct environmental licensing. The law advances the decentralization of environmental licensing from federal and state agencies to municipal governments without clearly ensuring that local authorities possess the legal, technical, and fiscal capacities required for effective environmental oversight, thereby reinforcing the systemic risks of decentralization without adequate institutional support (Athayde et al., 2022).

Here, our argument is not against the decentralization of environmental licensing per se. From an applied standpoint, local enforcement of environmental regulations may offer certain advantages (Bakhsh et al., 2018). Local governments often possess context-specific knowledge, as environmental concerns are closely intertwined with urban planning (Sjoberg, 2015), landscapes management, and local social-ecological dynamics (Dawson et al., 2017). Moreover, decentralization can enable cross-sector collaboration and foster more responsible, place-based solutions to complex environmental challenges (Yuerong et al., 2024), particularly in large, territorially diverse nations where centralized policies often fail to reach local realities with sufficient efficacy and timeliness. However, decentralization without adequate safeguards can also generate negative externalities. Lenient enforcement may help municipalities appear business-friendly and attract investments (Sjoberg, 2015), while the environmental and social costs are externalized and borne by society and natural assets. Fredriksson et al. (2010), through a theoretical model, demonstrated that this dynamic leads to a “home bias”, where local officials favor short-term gains and adopt suboptimal regulatory standards. In this context, two critical issues emerge: legal certainty and administrative efficiency. While national legislation is designed to provide a harmonized framework for environmental governance (Esty and Porter, 2005), it presumes that local governments have the institutional capacity to implement and enforce such regulations effectively (Borrás et al., 2024). This is precisely where the danger lies: the new General Environmental Licensing Law in Brazil delegates excessive autonomy to municipalities — in our view, without ensuring adequate technical, legal, or operations preparedness — thereby posing significant risks to environmental protection and governance integrity.

From a theoretical standpoint, this tension reflects a broader pattern long identified in decentralization studies. As Ribot (2004) observes, many reforms labeled as “decentralization” often amount to deconcentration, that is the mere transfer of responsibilities without corresponding authority, fiscal resources, or decision-making power. Such incomplete reforms tend to reproduce central control while transferring management burdens downward, leading local governments vulnerable and under-resourced. In these conditions, environmental functions frequently fail, as responsibilities are devolved without the fiscal or institutional capacity to exercise discretion effectively. Similarly, Agrawal and Gibson (1999) argue that successful decentralization requires local institutions capable of making, implementing, and enforcing rules over resource use. When the implementation is devolved but rule-making and adjudication remain in little assurance of local institutional capacity, governance becomes largely procedural rather than transformative. In this sense, decentralization without genuine empowerment of fiscal support risks producing only the appearance of participation while entrenching structural inequality and administrative fragility. The Brazilian case thus exemplifies this paradox: while the legal reform of decentralization promises proximity and efficiency, its practice, absent institutional and fiscal scaffolding, may weaken rather than strengthen environmental governance.

Effective environmental licensing must balance developer, sustainable, and social interests, which is inherently difficult to achieve (Enríquez-de-Salamanca, 2021). Projects and their associated development processes, whether led by private actors or government authorities can heighten pressures on evaluators, as noted by Kolhoff et al. (2013). In addition, the independence and functioning of environmental licensing system varies between countries or regions, and in all cases the final decision rests with government agencies (Morrison-Saunders, 2018), which must respond to all interested parties. Nevertheless, political control is a constant (Enríquez-de-Salamanca, 2021). From the standpoint of environmental safeguards, licensing needs broad requirements to be effective, fair, and development-enabling: (i) prior and proportionate assessment that explicitly considers reasonable locational and technological alternatives, cumulative effects, and climate-risk appraisals (Bragagnolo and Geneletti, 2012; Schramm and Fishman, 2010); (ii) verified institutional capacity and decisional independence at the competent authority (Loomis and Dziedzic, 2018); (iii) meaningful, timely, and inclusive participation consistent with procedural-justice standards (Ulibarri et al., 2022); and (iv) binding conditions, compliance monitoring, and adaptative management (Barr et al., 2021). Accordingly, reforms to the licensing process should, at a minimum, maintain rather than weaken these socio-environmental safeguards.

Rooted in sound environmental governance, effective institutional arrangements can lead to improved environmental management outcomes (Young, 2003). Public institutions must be capable of enforcing regulations, facilitating public participation, and ensuring transparency and accountability in decision-making processes (Paavola, 2007). As a contribution to understanding the structural foundations of environmental governance, this study evaluates the institutional capacity of municipalities in Brazil to undertake the complex and high-stakes responsibilities of environmental licensing — particularly in light of new environmental reform, which will offload significant regulatory authority to the local level without assuring the necessary institutional readiness. To this end, we evaluated the organizational and institutional environmental frameworks of 1,270 municipalities across all twenty-six Brazilian states. This assessment was based on key indicators, including the existence of a municipal environmental secretariat, the number of active staff, the presence and nature (deliberative or consultative) of municipal environmental councils, the participation of civil society in these councils, and the existence of local environmental legislation. These elements provided a comprehensive overview of municipal-level capacity to address the governance challenges posed by decentralization, particularly whether local structures are equipped to uphold and strengthen environmental protection in the face of potentially widespread regulatory weakening under the law reform. Finaly, this study addresses a critical research gap concerning the complex relationship between public environmental governance and the need for large-scale, quantitative assessments of institutional structures responsible for implementing environmental regulation.

From a municipal perspective, environmental governance and the capacity to implement it in Brazil, are fragile and must be carefully considered before delegating greater autonomy to municipalities. Accordingly, our findings indicate that, in general, municipalities are not adequately prepared to assume greater responsibilities for environmentally sound and precautionary licensing processes. Proponents argue that decentralization can reduce bureaucracy, speed up decision-making, and enhance place-based responsiveness; however, without substantial, targeted investment municipal staffing, training, data systems, and enforcement, these benefits are unlikely to materialize. The novelty of this study lies in its comprehensive assessment of the multidimensional aspects of public environmental governance and institutional capacity, and how these intersect with the territorial, socioeconomic, and environmental characteristics of municipalities. As environmental governance has become increasingly fragmented and complex, the growing interactions among institutions under polycentric governance warrant further investigation (Elsässer et al., 2022). Our findings contribute to this debate by showing how subnational institutional weaknesses may undermine the effectiveness of decentralized governance arrangements, particularly in contexts marked by rapid regulatory reform. In this context, Brazil moves against a growing body of evidence suggesting that environmental regulation tends to improve when intergovernmental interaction and cooperation are strengthened at state and substate levels (i.e., municipalities) (Weiland, 1998; Bastos Lima et al., 2017; Elsässer et al., 2022; Handoyo, 2024). This quantitative diagnosis, therefore, provides an empirically grounded overview that should inform both academic debate and the design of public policies aimed at strengthening local institutional capacities — a sine qua non condition for achieving equitable and functional environmental governance.

Over the past several decades, countries around the world have enacted and progressively improved legislation aimed at protecting their natural biological heritage (Armitage et al., 2020). Furthermore, national environmental performance, which reflects how well countries manage their environmental resources and mitigate environmental harms, has been scrutinized in light of global sustainability goals (Handoyo, 2024). Unfortunately, Brazil appears to be on the verge of moving in a dangerously regressive direction with the deregulatory environmental law. Revisions and adaptations of the legal and operational framework for environmental governance are indeed necessary. As development pressures evolve and the synergistic nature of environmental impacts become more complex (Reis-Filho et al., 2024), governance systems must adjust accordingly (Fried et al., 2022). However, as Schramm and Fishman (2010) argue, such improvements must incorporate, for example, adaptative management — a strategy that promotes resilient and decision-making frameworks capable of responding dynamically to new information and changing ecological conditions. In contrast, top-down decisions by monocratic political debates, often justified by the need to streamline procedures, reduce bureaucracy, and expand local autonomy (e.g., municipality governments), can lead to significant setbacks.

When environmental licensing is accelerated without adequate safeguards, it often leads to poor risk assessments (Dias et al., 2022), particularly in municipalities lacking institutional capacity and clear legal instruments — which, surprisingly, is the case for the majority of the assessed municipalities in Brazil. This concern is particularly urgent in regions where local governments are neither structurally equipped nor supported by well-defined environmental governance mechanisms — with amplified effects in the North and Northeast regions, which encompass the Amazon Rainforest and the Caatinga biome, respectively. The Amazon biome, 60% of which lies within Brazilian territory, harbors nearly one-third of the world’s remaining tropical rainforests and holds some of the highest biodiversity levels on the planet (Guayasamin et al., 2024). The Caatinga, an exclusively Brazilian semiarid biome, sustains supports rich socio-biodiversity and is central to local and regional livelihoods, yet paradoxically remains the least protected biome in the country (Barbosa and Gomes Filho, 2022; Teixeira et al., 2021). Our results reinforce this territorial inequality: municipalities in regions with higher HDI scores consistently exhibit better environmental and institutional capacity, while those with lower HDI, often overlapping with these critical biomes, show pronounced institutional deficits. Therefore, any reform aimed at decentralizing environmental responsibilities must be accompanied by deliberate efforts to strengthen local institutional capabilities, ensure legal and procedural clarity, and uphold environmental protection as a fundamental and non-negotiable commitment — especially in territories where ecological significance and institutional vulnerability intersect most acutely.

Municipalities in Brazil have held distinct traits of autonomy since the federalist model was inaugurated in the late 1980s, following the end of the military dictatorship (Melo, 1996). Under the current federal arrangement, municipal autonomy is defined as the power to govern local affairs within the boundaries established by higher authority in political, administrative, and fiscal spheres, supported by both self‑generated and transferred resources (Federal Constitution, art. 29). Within this framework, the implementation and enforcement of environmental laws at municipal level are constitutionally legitime function of Brazilian democracy. However, effective environmental governance at the local level requires more than formal autonomy. It demands institutional mechanisms, locally enacted legislation, and a comprehensive set of enforcement and regulatory procedures that enable municipalities to effectively exercise their responsibilities — particularly with regard to environmental licensing. This need becomes even more critical as municipalities are expected to assume greater responsibilities due to projected legal reforms introduced at the federal level. As evidenced in this study, the expectation that such a system can function effectively across Brazil presumes a level of uniformity that does not reflect reality. The country’s extreme heterogeneity in terms of administrative capacity, legal infrastructure, and institutional maturity in the environmental governance poses significant challenges to implementing this vision. What may appear to be technically sound and democratic process may, in practice, encounter serious limitations that jeopardize its effectiveness and legitimacy.

The geographical asymmetry regarding environmental governance and deep socio-economic heterogeneity, combined with the overall poor environmental institutional capacity of Brazilian municipalities, underscores a critical challenge for the ongoing decentralization of environmental governance. As highlighted by Sands et al. (2012) from the perspective of non-implementation of national environmental laws, the mere existence of laws — and, by extension, broader environmental governance frameworks — often prove insufficient when countries lack adequate institutional and human resources, suffer from legal ambiguity that opens space for misuse or misinterpretation, and face structural difficulties in meeting the demands of numerous actors involved. This resonates directly with the fragile environmental institutional capacity observed in Brazilian municipalities. More seriously, as emphasized by Kassie (2024), non-compliance driven by policy ambiguity, conflicting interests, and the absence of binding legal obligations becomes an imminent risk.

Notably, however, our approach reveals a positive relationship between the proportion of population exposed to socio-environmental risks — such as droughts, floods, or deforestation — and higher values of ICI. This suggests that in municipalities where populations are more vulnerable to environmental hazards, there may be better institutional mobilization or investment in governance structures. Yet, this adaptive response appears to be uneven and insufficient at the national scale. The new law, which also introduces mechanisms such as self-declaratory environmental licenses (i.e., License by Adhesion and Commitment) and automatic license renewals without prior review by competent authorities, notably omits climate adaptation instruments, elements that are essential for supporting climate change response at the subnational level. Without integrating such tools, substantial investments, and targeted public policies aimed at strengthening local institutional capacities, particularly in the most vulnerable and ecologically critical regions, such as the Amazonian and Caatinga related states, the decentralization process risks further exacerbating existing territorial inequalities and severely undermining the overall effectiveness of environmental governance nationwide.

Before embracing a sweeping decentralization of environmental licensing, Brazil could benefit from learning from countries such as India and Indonesia, where decentralization has advanced considerably. These decentralization reforms, each characterized by distinct institutional architectures and implementation trajectories, offer valuable lessons for Brazil’s environmental licensing reform. In India, despite constitutional mandates, decentralization has faced structural challenges, including mismatches between responsibilities and local capacities, with outcomes varying according to regional governance regimes (Véron et al., 2024). In Indonesia, decentralization has enabled subnational innovation in climate governance, particularly in land-use sectors, yet has also introduced policy fragmentation and perverse incentives that undermine mitigation goals (Di Gregorio and Moeliono, 2023). In sum, both India and Indonesia show that decentralization yields benefits only when subnational mandates are matched with resources and autonomy, via ring-fenced funds and protected space for local innovation. For Brazil, the most relevant lesson is the need to front-load targeted funding and accountability to build municipal capacity prior to extending authority to licensing complex, high-impact projects. These international experiences underscore the importance of balancing local autonomy with strong institutional safeguards. Without such an equilibrium, Brazil risks replicating similar pitfalls — fragmented authority, uneven implementation, and ultimately weakened environmental governance in the face of mounting socio-environmental challenges.

It is essential to adopt a historical and contextual perspective to adequately assess the capacity of local governments to assume this new frontier of environmental licensing. More than mere political-administrative units, Brazil’s 5,570 municipalities represent complex territorial, social, and historical realities. Their economic, social, demographic, extension, and particularly environmental characteristics form an extraordinarily diverse mosaic across the country (Batista et al., 2020). It is therefore critical to evaluate whether regions already experiencing intense agri-business expansion (Arias et al., 2017), or a proliferation of small-hydroelectric power plants (see Reis-Filho and Leduc, 2024), possess institutional capacity — based on the attributes examined in this study — to ensure environmentally sound governance in licensing processes. Specifically, these two types of developments are expected to have their environmental regulation relaxed under the new environmental reform in Brazil. Although the presidential sanction introduced partial vetoes to remove unconstitutional provisions (Fernandes et al., 2025), there is an active movement in Congress to overturn them, largely driven by the Agriculture and Ranching Parliamentary Front (FPA, 2025), whose legislative agenda continues to promote regulatory flexibility in favor of agribusiness interests. Additionally, our findings indicate that larger municipalities often exhibit lower levels of environmental governance and institutional capacity. This suggests that greater territorial extension, particularly when combined with intensive land use pressures such as agribusiness or hydropower expansion, may introduce logistical, operational, and coordination challenges that further compromise environmentally sound licensing practices. Moreover, as highlighted by Batista et al. (2020), transparency and accountability mechanisms remain fragile across Brazilian municipalities, with low adherence to freedom of information laws and limited association between transparency and effective government performance. These findings underscore that institutional weaknesses go beyond environmental governance alone. Thus, any move to decentralize environmental licensing must contend not only with uneven technical and administrative capacity, but also with broader structural challenges related to governance quality. Strengthening local institutions must therefore encompass not just technical and legal dimensions, but also measures to promote transparency, curb mismanagement, and enhance accountability—conditions that are indispensable for safeguarding environmental integrity under a decentralized regulatory regime (Orsini et al., 2013).

Interestingly, based on our analysis focused on the Environmental Institutional Capacity Index (ICI), agro-pastoral use areas were not significantly associated with the ICI in the model (either negatively or positively). It is important to note that SHAP values in this context indicate statistical associations embedded within the model structure rather than causal relationships; they reveal how structural and socioeconomic conditions co-vary with institutional capacity, not how they directly determine it. Beyond the interpretation of the relationships between the drivers of environmental institutional capacity and their relative importance in explaining model outputs (see Fig. 6), it is crucial to highlight the pervasive influence of agribusiness on Brazilian politics and how it has shaped the trajectory of domestic environmental policy (Amorim et al., 2023). The purely economic and expansionist interests of this sector have, for decades, guided, influencing, and often overridden the balance between development and environmental protection in the country (Rochedo et al., 2018). This dynamic urgently requires deeper investigation within the broader context of environmental governance and institutional capacity at the municipal level. It involves examining how local governments balance multiple regulatory frameworks in their daily operations, the extent of institutional discretion, and the bureaucratic complexities involved in pursuing sustainability and environmental protection goals. However, this normative vision appears far removed from the current reality. A considerable proportion of Brazilian municipalities, particularly in certain regions, still lack even the most basic policy instruments and operational governance structures necessary to support effective environmental licensing. In this context, the political and economic power of agribusiness further exacerbates the historical tension between the paradigm of “standing forests” and the relentless expansion of pastures and croplands. As projected, the new environmental law, which promote regulatory and institutional flexibility in Brazil, must be evaluated beyond the initial stages of environmental impact assessment (i.e., licensing procedures). Even in developed countries with historically well-enforced environmental governance, such as Sweden, regulatory flexibilization has emerged as a key challenge for managing complexity and systemic risk (Dawson et al., 2017). How, then, can one expect a country like Brazil to reconcile such anachronistic and deregulatory proposals with its urgent need for effective, coherent, and science-based environmental protection? This is especially concerning given Brazil’s socio-ecological relevance — from the unparalleled biodiversity of Amazon rain forest to the socio-ecological importance of traditional communities, including the largest population of traditional small-scale fishers in the Americas (Cavole et al., 2025).

This contradiction becomes even more striking given Brazil’s internal history of tensions involving top-down environmental regulations, conservation actors, scientific research, and various segments of society (Costa Neves, 2016). These tensions have often culminated in regulatory rollbacks, such as the controversial revision of the Brazilian Forestry Code (Law No. 12,651/2012), which weakened restriction on land use and forest preservation in rural areas. As our multidimensional analysis shows, expecting this General Environmental Licensing Law to simultaneously streamline licensing procedures and guarantee environmental safeguards in not only unrealistic ones, but it is also fundamentally contradictory. This concern is even more pressing given that Brazil is set to host the COP30 in 2025, a global climate summit organized under the United Nations Framework Convention on Climate Change, where countries are expected to demonstrate bold and credible commitments to climate action. Moreover, Brazil has recently approved a Bill for the Law of Sea (Bill No. 6,969/2013), which establish a national policy for the sustainable use and protection of marine resources under its jurisdiction. The law aims also to align Brazilian marine governance with international standards and biodiversity commitments. Taken together, these developments underscore another deeper question: what kind of nation does Brazil aspire to be, one that stands as a global reference for conservation, fair and science-based environmental regulation, or one where developmental interest operate in isolation from ecological stewardship?

Brazil is heading toward a dangerous scenario of environmental deregulation and institutional fragilization, despite decades of hard-fought progress aimed at improving its environmental licensing system (see Assis et al., 2012; Diniz et al., 2024). Alarmingly, this process is now poised to be catalyzed precisely through the most fundamental spheres of environmental control and regulation, the municipalities. As our study demonstrates, much of Brazil, especially regions with low human development, limited environmental technical staff, and ecologically sensitive biomes, lacks the institutional readiness to absorb the responsibilities envisioned by the new environmental reform.

Our analytical approach provides an interpretable and quantifiable assessment of environmental governance capacity at the municipal level, synthesizing complex multivariate information into a continuous and scalable index that is highly applicable for analytical, comparative, and policy-oriented purposes. The assumption that streamlined environmental licensing procedures will yield positive environmental outcomes is, at best, highly questionable. This has been evidenced in other international contexts, as shown by Enríquez-de-Salamanca (2021), where similar deregulatory processes resulted in weakened environmental safeguards. Brazil now stands on the verge of witnessing this same perverse chain reaction — one that risks generating ultra-simplified processes, truncated deadlines, and the elimination of critical procedural steps, all without the institutional safety net necessary for municipalities to effectively uphold environmental protection standards.

We emphatically urge Brazilian policymakers, particularly within legislative bodies, to carefully consider the realities of municipal environmental governance and institutional capacity before advancing this environmental licensing reform. The potential negative outcomes are not merely hypothetical; they represent a concrete and imminent risk. Such a scenario not only compromises environmental integrity but also positions Brazil unfavorably within international environmental governance frameworks and intergovernmental panels that monitor and evaluate countries’ compliance with global environmental commitments (e.g., OECD). In essence, it risks triggering a self-defeating process, one in which deregulation undermines the very systems required to safeguard the country’s unparalleled natural heritage.