Between green discourse and fiscal waiver: the selective tax as a paradox of the tax reform

Abstract

Environmental taxation in Brazil does not represent an innovation detached from the constitutional text but is a direct expression of the structural commands of the Constitution of the Federative Republic of Brazil (CRFB), notably Articles 225 and 170, VI, which enshrine environmental protection as a legal duty of the State and as a guiding vector of the economic order. The recent Constitutional Amendment (EC) No. 132/2023, by expressly introducing the defense of the environment as a principle of the National Tax System (STN), provides normative substance to green extrafiscality, imposing upon the legislature and the tax administration the duty to use taxation as an instrument of ecological induction. In this context, the Selective Tax (IS), regulated by Complementary Law (LC) No. 214/2025, assumes centrality as a mechanism for correcting negative externalities, aligned with the logic of “Pigouvian” taxes. However, the granting of exemptions to highly polluting sectors, such as the energy sector—which accounts for 19% of national greenhouse gas (GHG) emissions—raises questions about the compatibility between tax benefits and the new green paradigm of the STN. From this scenario arise constitutional tensions between the legislator’s freedom of tax design and the material limits imposed by environmental principles, opening space for the constitutional review of fiscal policies under the lens of the polluter-pays principle and environmental tax justice.