INTERVIEW: Mexico’s new carbon market must move carefully to build confidence

Successfully implementing an emissions trading system in Mexico means more education and market engagement, an environmental regulations expert said, as the country's carbon market takes its first steps.

Implementing an emissions trading system in Mexico in 2026 will require navigating complex legal frameworks and community governance to guarantee the program's success, Estuardo Anaya, environmental and regulatory specialist at Mirai Abogados, told Platts, part of S&P Global Energy.

Currently, in Mexico, legislation focuses on protective agrarian measures, and transaction costs could make participation challenging for both investors and local stakeholders, Anaya said.

"The main problem seen in the market is a general lack of public knowledge about emissions trading schemes. Its implementation can be costly, and investment returns are still unclear," Anaya said.

Anaya said the rushed implementation of the project could face serious challenges, including a weak investment structure and limited integration among the sectors involved. He said that this situation could affect the project's effectiveness and sustainability in the long term.

Despite a planned official launch this year, the ETS is expected to evolve over the next few years, with ongoing adjustments to regulatory and technical frameworks.

Background

Mexico has a long history of environmental regulation, including the measurement and reporting of emissions.

The General Climate Change Law, enacted in 2012, provided a foundation for carbon market mechanisms. However, implementation has been gradual and complex, with multiple authorities involved in the design, authorization, and enforcement of policies.

Mexico's Nationally Determined Contributions under the Paris Agreement sets two main emissions reduction targets for 2030: an unconditional goal to cut emissions by 35% using only its own resources, and a conditional goal to increase this reduction to 40% if it receives international financial and technical support.

Reforms

Mexico's ETS is fundamental to achieving the country's NDC emissions-reduction objectives.

Mexico's ETS, proposed in 2020, has been implemented gradually, starting with a pilot phase from 2020 to 2021 to test and refine the system and prepare participants, followed by a transition phase in 2022 focused on consolidating regulations and operations, which was extended due to delays in final regulatory approvals.

Now, the final regulations and the start of the Operational Phase, the mandatory compliance stage for participants, are expected to be finalized in 2026. This phase will be key, as it will mark the formal beginning of the system and its effective contribution to Mexico's climate commitments.