Mexico and its ETS, where offsets are allowed for compliance

The carbon market is a very important pillar within the Mexican context for supporting the achievement of its national climate goals. Mexico, in its National Development Plan 2020-2024 (and NDC [1], 2020 [2]) commits to unconditionally reduce 22% of GHG emissions and 51% of black carbon emissions by 2030 in comparison to business as usual (BAU) scenario. Furthermore, Mexico conditionally commits to reduce up to 36% of GHG emissions and up to 70% of black carbon emissions by 2030 in comparison to BAU scenario. [3]

Mexico is currently implementing its Emissions Trading System (ETS) test programme led by SEMARNAT (Secretariat of Environment and Natural Resources) with the support of GIZ Mexico. The test program is divided into the following phases:

• Pilot phase: running from 1st January 2020 to 31st December 2021.
• Transition phase: running from 1st January 2022 to 31st December 2022.
• Operational phase: to start from 2023.

The pilot phase covered direct CO₂ emissions from entities in the energy and industry sectors generating at least 100,000 tCO₂ per year. Approximately 300 entities were covered by the pilot, corresponding to around 40% of national emissions. This makes Mexico the first Latin American country to have an ETS in operation. [4]

The Ministry of Environment and Natural Resources is in the process of establishing a domestic offsetting program as Mexico contemplates offsets as a mechanism for compliance within the Mexican ETS, where 10% of the total emissions can be compensated via offsets [5] – the EU ETS for instance, does not allow such a compensation. More specifically, Mexico is in the process of assessing the different existing offset protocols, initially in four sectors: agriculture, livestock management, non-motorized transportation – use of bicycles in cities – and forestry protocols.

Moreover, SEMARNAT is preparing a registry for mitigation outcomes from voluntary and regulated sources (“second branch” of the National Emissions Registry, RENE). The eligibility rules for the use of offsets within the ETS are being developed based on a mapping of activities and projects that could be used for this purpose. [6] Mexico is very interested in diving deeper into mitigation measures with a social impact – mitigation measures that addresses nature-based solutions and synergies between mitigation and adaptation strategies, including adaptation based on communities, adaptation based on ecosystems and adaptation based on reduction of climate risks. [7]

References:

1. Nationally Determined Contributions
2. https://www4.unfccc.int/sites/ndcstaging/PublishedDocuments/Mexico%20First/NDC-Eng-Dec30.pdf
3. Data shared by SEMARNAT during Executive Dialogues on International Carbon Markets (2 March – 21 April 2021)
4. https://icapcarbonaction.com/en/?option=com_attach&task=download&id=723
5. Data shared by SEMARNAT during Executive Dialogues on International Carbon Markets (2 March – 21 April 2021)
6. https://icapcarbonaction.com/en/?option=com_attach&task=download&id=723
7. Data shared by SEMARNAT during Executive Dialogues on International Carbon Markets (2 March – 21 April 2021)