The global effort to combat climate change hinges on the effectiveness of local actions. Consequently, Brazil, being a crucial carbon sink, confronts a multifaceted challenge: the imperative to reduce emissions originating predominantly from wildfires and deforestation across various municipalities within the framework of Fiscal Federalism. Therefore, the Ecological ICMS (or Green ICMS) involves using sustainability criteria for the distribution of this tax, in Portuguese Imposto sobre Circulação de Mercadorias e Serviços (ICMS). This book chapter conducts a study of the extra-fiscal function of the Ecological ICMS as a potentially benefit measure to reduce greenhouse gas emissions (GHG). We will use a bibliographic review and documentary sources. We hope to discover trends that show correlations of this fiscal instrument with qualitative implementation of low-emission areas.