Panelists call for harmonized Mexican carbon pricing, climate finance rules

Clear and harmonized regulations across Mexico for carbon pricing and climate finance are urgently needed to unlock investment and advance the country's low-carbon transition, according to panelists at a climate financing forum in Mexico City.

Alejandra Chedraui Peralta, president of the federal Climate Change Commission and a deputy, or member, of Mexico's lower house of Congress, described Mexico's emissions trading system as a cornerstone for incentivizing emissions reductions across key sectors.

"This mechanism not only fosters innovation and resource efficiency, but also provides clear price signals that can help channel public and private capital toward clean technologies and sustainable development," Chedraui said in a follow-up interview after the forum.

Luisa Montes, CEO of Ecovalores, an independent agency focused on responsible investment and sustainability certification, underscored the pressing need for Mexican companies for regulatory certainty regarding carbon pricing instruments in the country.

Montes highlighted that subnational carbon taxes are inconsistent, with varying prices and thresholds, creating uncertainty and confusing market signals for potential buyers, who may perceive a regulatory overburden.

"For instance, in Mexico City, the carbon tax is set at approximately $3 per mtCO2e, with companies required to pay once their emissions reach 1 mtCO2e," Montes said.

In contrast, Querétaro's carbon tax is $34/mtCO2e, where emissions thresholds vary by industry segment, as outlined in the Pollutant Release and Transfer Register of Mexico's Secretariat of Environment and Natural Resources.

Structural coherence key to climate tools

By ensuring consistency and transparency in carbon pricing, Mexico can enhance its climate finance landscape and drive meaningful progress toward sustainability goals.

"The role of the Mexican ETS in climate action planning is crucial, and therefore, establishing clear guidelines for carbon instruments can attract investments and facilitate a more stable market environment," Montes said.

"As a commission, we will continue to foster legislative and technical dialogue with key stakeholders to consolidate this system as a foundational element of the country's environmental and financial regulatory framework," Chedraui said.

Aligning the ETS with Mexico's broader public policy agenda and international climate commitments, such as the Paris Agreement, is essential to ensure its effectiveness and enable a just transition, she added.

The deployment of renewables was also identified as a key milestone to promote just energy transition in the country, "especially in a context where not all the Mexican population is connected to the electricity grid," said Sandra Guzmán, founder of Climate Finance Group of Latin America and the Caribbean, or GFLAC.

Mexico allocated just 0.37% of its federal budget to climate-related programs in 2023, highlighting a major gap in resource mobilization for cross-sectoral initiatives, including nature-based solutions, adaptation, energy transition and biodiversity preservation, according to GFLAC.

Chedraui said market instruments like Clean Energy Certificates and International Renewable Energy Certificates can play a central role in accelerating renewable energy adoption, attracting investment, and enhancing the competitiveness of Mexico's energy sector, particularly in light of Sheinbaum's target of Mexico reaching 45% renewable energy by 2030.

She emphasized that these tools must be developed under principles of transparency, traceability, and equity to ensure their benefits reach vulnerable communities.

"We aim to foster broader dialogue to strengthen these mechanisms and align them with climate justice goals," Chedraui said.

Call for policy alignment

Eduardo Bohorquez, CEO of Transparencia Mexicana, a civil society organization focused on anti-corruption efforts, said a lack of policy alignment, driven by a compartmentalized approach to environmental and social issues across legislative and regulatory frameworks, has created structural barriers for stakeholders seeking to take proactive action.

This misalignment was reflected in discussions around Mexico's Sustainable Taxonomy, developed by the Ministry of Finance, cited as a promising instrument to channel investments toward climate-aligned projects. However, participants noted that its design remains disconnected from on-the-ground realities, limiting its applicability and execution.

"The taxonomy is largely inapplicable to micro, small and medium enterprises," Ecovalores' Montes said. This represents a significant barrier to broader participation, she added.

Panelists agreed that bridging the climate finance gap requires aligning public policies with shared goals and strengthening resource tagging, including revenues from carbon pricing, to better channel funds toward climate projects.

They also highlighted the importance of expanding access to climate finance mechanisms for historically underserved sectors, such as micro, small and medium enterprises and Indigenous communities.

Platts is part of S&P Global Commodity Insights.