Experiences from designing ETS in Mexico
The seminar “Designing the Technical Aspects of the Emissions Trading System (ETS) in Mexico” was held with the aim of presenting and discussing the results of the technical studies that have contributed to the definition of the core elements of the ETS in the country. The seminar therefore contributed to the transparency of the design process of an ETS in the country, covering the following issues: the emissions limit of the system (cap); the measurement of competitiveness in the Mexican industry and the risk of carbon leakage (change of national production to locations with lower restrictions or without a carbon price); considerations for allocation rules and the relationship of the ETS with other instruments such as the Clean Energy Certificates. The above-mentioned topics were presented by international experts from Oeko Institut, Vivid Economics and the Center for Resource Solutions (CRS).
It was mentioned that an absolute cap, estimated on historical emissions as reported to the National Emissions Registry (RENE), would be suitable for the Mexican ETS. Regarding the issue of competitiveness, it was suggested to start with free allocation for the pilot phase and to monitor the carbon leakage risk in the covered sectors. Currently there is no carbon leakage evidence in other jurisdictions with an ETS in place. The consultants presented advantages and disadvantages of different allocation methods and recommended, in order to avoid double counting, the coexistence and independence of the ETS and CEL systems. The results of all these studies, as well as the 2017 study “Achieving Mexican Mitigation Targets: Options for an Effective Carbon Pricing Policy Mix” on the interaction of the carbon tax with other market instruments, are available for regulated sectors and will be fundamental to SEMARNAT’s decision-making process in the next months. The Ministry expects to have the regulation (preliminary bases for the pilot phase) ready by the end of June 2018, to begin its official publication process.
The event was co-organized by the GIZ project “Preparation of an Emissions Trading System in Mexico (SiCEM)” and was attended by around 140 public, private, academia and civil society stakeholders.
Mexico has announced the conceptualization of a pilot phase for the ETS in the first half of 2018. This trial phase will last for 36 months. As established in the recent amendments to the Mexican General Climate Change Law, the Mexican Ministry of Environment SEMARNAT was given the mandate to gradually establish this system.