- The three Brazilian states whose territory is mostly Amazon Rainforest — and carry the heaviest share of its conservation burden — are among the poorest and most fiscally dependent in the country.
- Amapá, Acre, and Amazonas operate on budgets so dependent on federal funding that they have almost no ability to act on their own, yet they are also precluded from developing their economies within their vast and federally protected swaths of forest.
- “It is a design flaw in Brazil’s fiscal constitution, and it is getting worse,” a new op-ed argues. “Brazil cannot credibly lead global climate diplomacy while its Amazonian states remain fiscally trapped.”
- This article is a commentary. The views expressed are those of the author, not necessarily of Mongabay.
The forests of the Brazilian Amazon are, by any measure, among the most important ecosystems on Earth. They absorb carbon on a planetary scale, regulate rainfall across South America, and shelter biodiversity that science is still cataloging. International negotiations, carbon markets, and diplomatic agreements all rest on the assumption that these forests will remain standing.
Yet while the Amazon spans nine Brazilian states, the three whose territory is most overwhelmingly forest — and which therefore carry the heaviest share of the conservation burden — are among the poorest and most fiscally dependent in the country. The states of Amapá, Acre, and Amazonas operate on budgets so dependent on federal transfers that they have almost no fiscal room to act on their own. That is not a coincidence. It is a design flaw in Brazil’s fiscal constitution, and it is getting worse.
The argument here is simple: Brazil cannot credibly lead global climate diplomacy while its Amazonian states remain fiscally trapped. The forest will not protect itself. And the states responsible for protecting it do not have the money to do so.
What the budgets show
Amapá is larger than Ecuador. Nearly three-quarters of its territory is classified as federally protected land — national parks, Indigenous reserves, and conservation units — that the state is legally obligated to maintain but receives no specific compensation for. In 2025, more than 60% of its entire state budget came from federal transfers, primarily from a single national fund called the FPE (Fundo de Participação dos Estados e do Distrito Federal). The state’s own tax revenues — what it can actually generate from economic activity within its borders — covered less than 15% of its needs.
Acre, tucked in the western Amazon near the Bolivian and Peruvian borders, is in a similar position. In 2024, federal transfers accounted for 42% of all state revenues, more than any other single source. The state’s own tax base, built largely on small-scale agriculture and services, generated only about 10% of what was needed to run government. In Amazonas, which has the advantage of hosting the Zona Franca de Manaus industrial zone, the dependency is somewhat lower, but the underlying dynamic is the same: the state grows its budget primarily by receiving more from the federal capital in Brasília than it generates from its own economy.
The contrast with a state like Mato Grosso, Brazil’s agricultural powerhouse to the south, makes the structural gap visible. Mato Grosso generates roughly 60% of its revenues from its own taxes. For Amapá, that figure is around 13%. Both are large, sparsely populated states in the Brazilian interior. The difference is that Mato Grosso converted much of its territory into soy farms and cattle ranches, while Amapá, legally and politically, cannot. The forest that the world wants to keep standing is the same forest that keeps the state poor.
A trap built into the system
This fiscal dependence is not new, and it is not shrinking. In Amapá, the total state budget nearly doubled between 2019 and 2025 — but the share coming from federal transfers stayed roughly the same. The state is not developing a broader economic base; rather, it is receiving more money from Brasília while remaining just as structurally dependent as before.
What makes this a trap rather than simply a challenge is the rigidity of the costs. Salaries, pensions, and mandatory health and education spending consume the bulk of what these states receive, while what remains for active environmental management — inspections, monitoring, enforcement, conservation programs — is marginal. In 2025, Amapá’s state environment secretariat received the equivalent of roughly $12 million while its military police received more than 40 times that amount.
When federal transfers are delayed or cut — which happens with some regularity during fiscal tightening in Brasília — the first things that get squeezed are discretionary programs. Environmental management is discretionary, while policing is not. The fiscal architecture systematically deprioritizes the function that the international community most needs these states to perform.
Other countries do this differently
Brazil is not the only country with large, sparsely populated territories that depend heavily on central government transfers. Canada’s Northwest Territories, a jurisdiction about the size of South Africa and with only 45,000 inhabitants, receives roughly 70% of its revenues from federal transfers. So does Australia’s Northern Territory, which relies on Commonwealth grants for more than 80% of its budget.
The difference is in how those transfers are designed. Canada and Australia have developed explicit formulas that account for the higher cost of delivering services in remote, low-density territories. They recognize formally and financially that governing a dispersed population across vast distances costs more per person than governing a dense urban state. Brazil’s federal transfer formula does not make that adjustment. It distributes money based partly on population and partly on redistributive criteria, but it does not compensate states for the economic activity they are legally prohibited from pursuing.
Put plainly, Amapá cannot log its forests, mine its subsoil at scale, or convert its wetlands to farmland because federal law and international pressure prohibit it. So, a state with 73% of its territory under federal environmental protection has a structurally smaller economy than it would otherwise have. It receives no compensation for that constraint.
The conservation mandate is national and international, but the fiscal cost is entirely local.
The COP30 opportunity that came and went
In November 2025, Brazil hosted COP30, the annual U.N. climate summit, in Belém — in the heart of the Amazon, in the capital of the state of Pará. The symbolism was deliberate, with the Brazilian government demonstrating that it takes Amazon governance seriously, that the forest is genuinely protected, and that the country deserves international trust and climate finance. With COP31 coming up in Antalya, Türkiye, it is worth asking what Belém actually delivered for the governments closest to the forest.
The centerpiece of Brazil’s own climate-finance agenda at COP30 was the Tropical Forests Forever Facility (TFFF), an ambitious mechanism designed to pay tropical-forest nations a fixed sum for every hectare of standing forest, verified by satellite. On paper, it is precisely the kind of instrument this problem calls for: predictable, results-based, and tied to conservation rather than to project cycles. In Belém, however, the fund secured around $6.7 billion in sponsor capital — barely more than a quarter of the $25 billion initially considered necessary for a full-scale launch — and the first payments to forest nations are not expected before 2028.
The TFFF matters for the argument made here, but it does not resolve it. Even at full capitalization, the facility would pay roughly $4 per hectare (about $1.60 per acre) of preserved forest per year. That’s a meaningful sum at national scale, but one that flows to the federal government and to nationally defined priorities, not automatically to the state environment secretariats that carry out conservation programs and law enforcement on the ground.
A national fund that rewards Brazil for keeping its forests standing does not, by itself, fix the fiscal architecture that leaves Amapá’s environment secretariat with one-fortieth of the budget of its military police. The TFFF and similar mechanisms, including the Fundo Amazônia, supplement state capacity; they do not replace the structural fiscal adjustment that would give Amazonian states governing capacity proportional to their conservation responsibilities.
Four things would make a real difference, and none of them require inventing entirely new institutions:
- Brazil’s federal transfer formula needs to be updated to account for the higher per-capita cost of governing low-density, geographically remote territories. Canada and Australia have done this. The tools exist. What is missing is the political will to apply them in a way that benefits states whose votes do not decide federal elections.
- A formal mechanism to compensate states for conservation mandates: a direct transfer to governments that maintain high proportions of protected territory, calibrated to the economic activity they are required to forgo. Several Brazilian economists have proposed versions of this under the label of ecological fiscal federalism. Some states have implemented partial versions through the ICMS Ecológico. A national-level policy does not exist.
- Results-based forest finance — and the TFFF above all — should be designed so that a defined share reaches subnational governments directly, rather than being absorbed entirely into federal budgets. If the TFFF is to become the instrument its designers hope for, the states doing the physical work of conservation need to see some of the money.
- The political framing of fiscal dependence needs to change. In Canada and Australia, high transfer dependency in remote territories is understood as a consequence of geography and federal responsibility, not as a failure of local governance. In Brazil, it is still treated primarily as a development problem to be solved by growing the state economy. For Amazonian states, that framing is not just unhelpful, it implicitly points toward the kind of economic development that conservation policy is supposed to prevent.
The forest is not free to maintain
The Amazon is often described as a global public good. That description is accurate: its climate functions benefit everyone on Earth, not just Brazilians, and certainly not just the small populations who live in its states. But global public goods do not maintain themselves. Someone has to pay for the institutions, the people, and the infrastructure that keep illegal activities in check and conservation policies functional.
Right now, the governments closest to the forest are being asked to provide a global service on a local budget. Brazil’s Amazonian states are rich in forest and poor in revenue. That gap is not nature, it is policy. And unlike the forest, policy can be changed.
João Gabriel de Araujo Oliveira is an economist and postdoctoral research fellow at the University of Brasília (UnB), funded by a CNPq productivity grant, and also a visiting professor in the Graduate Program of Economics at the State University of Londrina. He is an associate fellow of the World Academy of Art and Science, and his research on subnational fiscal governance draws on budget data from 11 Brazilian states.
Banner image: Expansive view of Amazon Forest. Photo by Rhett A. Butler for Mongabay.
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Cite this article
João Gabriel de Araujo Oliveira (2026). How Brazil’s federal fiscal policy hinders Amazon Rainforest conservation (commentary). Mongabay Conservation news. DOI: https://doi.org/10.66709/news-323538Credits
