Legal uncertainties in Brazil's State Licensing

Brazil’s environmental licensing framework is a multifaceted system that involves federal, state, and municipal authorities, each with distinct responsibilities and powers. This article delves into the creation of special licenses by various states in the federation aimed at regularizing activities that operate without the required permits.  

While states have the competence to issue environmental licenses, these innovations are often scrutinized by the Brazilian Federal Supreme Court (STF), which can lead to significant legal uncertainties for businesses looking to regularize their operations. For example, Tocantins’ corrective license and Rio Grande do Sul’s regularization license were ruled unconstitutional by the STF. On the other hand, Bahia’s regularization license was upheld because it was temporary and aimed at regularizing existing activities. 

Understanding these variations and their implications is crucial for companies aiming to navigate the regulatory landscape effectively.

Brazil’s environmental licensing framework

Brazil’s environmental licensing framework is governed by the principle of concurrent competences, where the Union, States, and Municipalities share responsibilities. Federal Complementary Law 140 of 8 December 2011 regulates common competences among these entities, establishing cooperation norms to reduce overlaps and conflicts and make the licensing process less burdensome and more efficient.

Federal competences

The Brazilian Environmental and Natural Renewable Resources Institute (IBAMA) handles licensing for activities with significant national or regional impacts. These include large-scale infrastructure projects and cross-state activities.

State competences

State environmental agencies license activities with localized impacts. Each state has specific regulations and procedures, but most include local infrastructure projects and activities confined within state boundaries. 

Municipal competences

Municipalities license activities causing local environmental impacts, including projects within municipal conservation units.

Nomenclature variations

The environmental licensing procedures can vary significantly depending on the licensing agency. Variations can include nomenclature, procedural steps, types of licenses issued, and the specific activities subject to licensing requirements. Most states replicate the federal three-step licensing scheme, composed of: 

• Preliminary License (LP): Granted during the initial planning phase, approving location and concept, and setting basic requirements. 

• Installation License (LI): Authorizes the installation of the project according to approved plans, including environmental control measures. 

• Operation License (LO): Permits the operation of the project, ensuring compliance with environmental control measures. 

The applications of these types of licenses differ from state to state, influenced by factors such as environmental impact, size, pollution potential, location, and activity duration.  

Even further, some states innovate and create licenses not provided at the federal level, such as regularization or corrective licenses, which will be analyzed below.

Regularization licenses: State innovations and challenges

Despite the concurrence of competences between authorities and the authorized nomenclature variations and procedural specificities, the creation of new types of licenses at the state level isn’t an uncontroversial topic in Brazil’s highest court. The following sections will analyze the approaches taken by different states and the corresponding jurisprudence.

Tocantins 

The State of Tocantins (TO) introduced State Law 3.804 of 29 July 2021, which established a corrective license (Licença Corretiva, LC) aimed at regularizing companies operating without prior licenses. The Brazilian Federal Supreme Court (STF) (in case RE 1462932 / TO) later deemed this section of the law unconstitutional, highlighting that creating new types of licensing would exceed the competence granted to the member states. This decision was issued on 19 December 2023. 

Rio Grande do Sul

On 7 April 2025, the STF (in case ADI 6618) also deemed unconstitutional the article of State Law 15.434 of 9 January 2020 of the State of Rio Grande do Sul (RS) that established the Operating and Regularization License (Licença de Operação e Regularização – LOR). The full decision (Acórdão) hasn’t yet been made available with the arguments of the STF ministers.

Bahia

In the State of Bahia (BA), the regularization license (Licença de Regularização – LR) provided by State Law 10.431 of 20 December 2006 aims to regularize activities in installation or operation existing until the date of the law’s regulation, upon presenting feasibility studies and proving environmental recovery and/or compensation, provided there is no risk to public health. This section of the law was deemed constitutional by the STF (in case ADI 5014) roughly a month before the Tocantins decision, on 13 November 2023. The Court’s reasoning was that “the norm has a clear temporary and transitional function, aiming to regularize activities or enterprises existing until the date of the law’s regulation.” It was also relevant that Law 10.431/2006 refers to studies and compensation as part of the regularization procedure, which the Court considered essential for ensuring environmental protection.

Paraná

Despite the contested jurisprudence, the State of Paraná recently issued State Law 22.252 of 12 December 2024, regulated by State Decree 9.541 of 10 April 2025, both of which very recently entered into force on 11 April 2025. They provide for three new types of regularization licenses: Simplified Environmental License for Regularization (Licença Ambiental Simplificada de Regularização – LASR), Installation License for Regularization (Licença de Instalação de Regularização – LIR), and Operating License for Regularization (LOR). Unlike the Bahia law, Paraná’s legislation doesn’t have a temporary or transitional nature, nor does it refer to environmental studies or compensation measures applicable to the regularization procedure.

The future of regularization licenses

Regularization or corrective licenses offer a pathway for regularizing activities and enterprises operating without proper environmental licenses. However, these licenses aren’t standardized at the federal level and depend on state legislation, resulting in regulatory variations based on the facility’s location. Jurisprudence surrounding these licenses is also unsettled, with the highest court in the country handling cases in a complex manner, heavily influenced by the specific wording of each state’s legislation under analysis.  

For example, the STF has deemed certain state laws unconstitutional, such as Tocantins’ corrective license and Rio Grande do Sul’s regularization license, because they created new types of licensing beyond state authority. Conversely, Bahia’s regularization license was upheld by the STF because it had a clear temporary and transitional function, aiming to regularize existing activities without compromising public health. 

It’s impossible to predict the outcome of Paraná’s recent introduction of new regularization licenses under State Law 22.252/2024. The new licensing framework as a whole is controversial, and IBAMA even issued a technical note criticizing several aspects of the proposal while it was under consideration. This adds another layer of complexity and uncertainty for businesses operating in Paraná. 

Understanding these nuances is crucial for companies to mitigate risks, maintain compliance, and demonstrate a commitment to sustainability. Businesses must be vigilant and proactive, ensuring adherence to both federal and state regulations to avoid relying on corrective or regularization licenses that may later lose validity or be deemed unconstitutional. Staying ahead of regulatory changes will help companies manage these challenges and operate sustainably.