Preparation of an Emissions Trading System (ETS) in Mexico

Mexico intends to involve the private sector in the implementation of its NDCs through the introduction of an Emissions Trading System (ETS). However, there is still a lack of expertise and institutional capacity to continue the development of and implement an ETS. Therefore, the project creates the institutional and technical conditions to be met by stakeholders from the public and the private sector and civil society. In doing so, the project develops knowledge-based recommendations for action to guide the Mexican decision-making processes on ETS design. The project strengthens the different stakeholders involved through capacity development and promotes cooperation between them. Besides, the project relies on international knowledge transfer to enable the Mexican stakeholders to learn from other countries and regions that already have an ETS and to disseminate the lessons learned in Mexico.

Project data

Countries: Mexico
IKI funding: 6,200,000.00 €
Duration: 09/2017 till 02/2025
Status: open
Implementing organisation: Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH
Political Partner: Ministry of Environment and Natural Resources (SEMARNAT) - Mexico
Implementing Partner: Ministry of Environment and Natural Resources (SEMARNAT) - Mexico
Online: http://iki-alliance.mx/en/portafolio/preparation-of-an-emissions-trading-system-ets-in-mexico/

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State of implementation/results

Building on the work of the Climate Alliance and with the support of the project, the amendment to the Climate Law (LGCC) came into force in July 2018, which provides for the introduction of an emissions trading system (ETS) and a three-year pilot phase from 2019. The results of the project's technical and legal advice were incorporated into the development of the legal framework and negotiations with the private sector.
Since February 2022, the SEMARNAT project has been advising on the regulation for the implementation phase of the ETS, which is due to come into force in 2024. To this end, important technical studies were carried out between 2021 and 2024. The main topics of the studies include setting emission caps, competitiveness of participating companies, allocation of emission allowances.
During 2023, several Mexican states have started a collaboration with the project on their own carbon pricing instruments (especially carbon taxes). The aim of this cooperation is to use different instruments at state and federal level in a coordinated manner and in the interests of effective climate protection.
In the last quarter of 2023, the project launched a forum for dialog between the central government and the environmental authorities of 22 states on carbon pricing instruments in Mexico. In addition to the Ministry of Environment, the Ministry of Finance also participated in the inter-institutional exchange on behalf of the federal government. The forum had already met twice by February 2024, and further working meetings are planned for the last quarter of 2024.
From mid-2023 to the second half of 2024, the project promoted exchange on Mexico's experience with the ETS at events in Mexico and internationally. The project also actively promotes exchange between Mexico and Brazil on emissions trading.
In August 2024, the project initiated a national multi-stakeholder dialog on the potential impacts of the European Union's Carbon Border Adjustment Mechanism for Mexico. A discussion forum was held in Guadalajara, Mexico, attended by more than 60 people, with a second event planned for September.
Three editions of the ETS Academy, a multi-week training format on technical, economic and political issues relating to emissions trading, were held between 2017 and 2022. Over 270 people have taken part in the ETS Academy so far, the fourth edition of which will take place in October 2024.
In the first half of 2024, the project initiated analyses of allocation methods that could be used during the operational phase of the ETS: Auctions or benchmarking method. In the case of auctions, an exchange has taken place with the Ministry of Finance to ensure an appropriate institutional framework for their implementation.

Latest Update:
11/2024