Mexico’s carbon tax and nascent emissions trading scheme

The foundation of Mexico’s climate policy is the General Law on Climate Change (2012) (analyzed by ELI and EDF, with relevant sections on trading translated by EDF). It established the basis for climate policy in Mexico, including the guidelines for developing planning instruments and provisions for mitigation and adaptation strategies and activities. Pursuant to the 2012 law, and as part of a broader fiscal reform measure, Mexico established a carbon tax in 2013 for those sources whose emissions exceed the emissions of natural gas, with the value of the tax capped at 3% of the value of the resource (officially summarized here). Also under the General Climate change law, Mexico established MexiCO2, a voluntary exchange that provides carbon credits to companies that develop environmentally friendly projects in the country, which can be used to offset costs from the carbon tax. WRI conducted an analysis of Mexico’s carbon regime in the context of its Paris commitments and found that expanding the coverage and raising the price of its carbon tax to $15 may be sufficient. 2018 amendments to the General Climate Change Law gave SEMARNAT, the state’s environmental authority, the mandate to gradually establish an Emissions Trading System, beginning with a 36-month pilot.