Preparation of an Emissions Trading System (ETS) in Mexico
As of: September 2021
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.
State of implementation/results
- Building on the work of the Climate Alliance and with support from the project, the Climate Law Amendment (LGCC) entered into force in July 2018, providing for the introduction of an ETS starting in 2022 and a three-year pilot phase starting in 2019.
- Results of the project's technical and legal advice were fed into the development of the legal framework and negotiations with the private sector.
- In the first quarter of 2021, the project-supported learning network together with the electricity sector launched its online technical seminars. Training sessions on anti-corruption with the participation of the German Emissions Trading Authority (DEHSt) have been designed and are currently taking place for SEMARNAT and companies participating in the ETS. Together with the project "Strategic Partnerships for the Implementation of the Paris Agreement" (SPIPA) and the European University Institute, the project is currently conducting a series of online seminars to familiarize SEMARNAT, the private sector and Mexican research institutions with the EU ETS experience.
- Technical studies on, among other things, sector coverage, cap-setting (iki-alliance.mx/…), competitive impacts (iki-alliance.mx/…), allocation methodologies (iki-alliance.mx/…), and interlocking with other policy instruments such as the carbon tax and the clean energy certificate system (iki-alliance.mx/…) have been published as official government publications. A quantification of socio-economic benefits of the ETS will serve to communicate the instrument on a broad scale.
- The project also supported the establishment of a government website on the ETS pilot phase (www.gob.mx/…) where studies and information materials developed by the project, such as brochures and fact sheets, are available to the public. In addition, a video on ETS has been published (www.youtube.com/…;v=9B2jAgivO6c&t=5s). The project has also developed didactic tools such as a training course for civil society and a reference book with contributions from 23 academics from renowned Mexican research institutions. The goal of both activities is to disseminate knowledge on ETS.
- The project also supported the Ministry of Environment in bringing the topic of emissions trading closer to other government institutions and companies participating in the ETS (mainstreaming). In 08/2020 for example, the project co-hosted a second ETS Academy with the Partnership for Market Readiness and the International Carbon Action Partnership (iki-alliance.mx/…). The results of the auction study conducted by the project were shared with SEMARNAT, the Ministry of Finance, and the National Banking and Securities Commission CNBV.