Environmental Deregulation by Design: Institutional Capacities and the Perils of Brazil’s New Environmental Licensing Law

Decentralizing environmental governance is often cast a route to greater administrative efficiency and local empowerment. Yet its ability to uphold socio-environmental safeguards remains under-scrutinized, particularly when authority is devolved to subnational entities with limited institutional capacity. Brazil faces its most severe regulatory rollback: The environmental legislation reform would dramatically expand municipal autonomy in environmental licensing—including for complex, high-impact projects—while weakening oversight mechanisms, community consultation, and technical safeguards. To evaluate the risks of this institutional shift, we assessed the environmental governance and institutional capacity of 1,270 municipalities across all twenty-six Brazilian states. Using a multidimensional framework, we analyzed indicators such as the presence of municipal environmental secretariats, existence of local environmental legislation and councils, and availability of qualified technical staff. Our findings reveal widespread and persistent institutional fragility: most municipalities lack even the minimum structures required to conduct precautionary and effective environmental licensing. These deficits are especially acute in regions with lower Human Development Index (HDI) and in ecologically critical biomes such as the Amazon—home to the planet’s highest biodiversity—and the Caatinga, a uniquely Brazilian semiarid biome of high socioecological vulnerability. We also identify strong associations between territorial, socioeconomic, and environmental profiles of municipalities and their institutional readiness. We argue about the need to strengthen municipal capacity, standardize licensing procedures, and provide intergovernmental technical support before transferring complex projects to local authorities. Without these safeguards, decentralization could undermine Brazil’s environmental protection and its commitments under global frameworks. This study offers a national-scale diagnostic of subnational environmental governance and provides a scalable framework for assessing institutional capacity in countries facing similar deregulatory pressures.