INTERVIEW: Mexican ETS operation is a matter of political will: MexiCO2

Mexico's national Emissions Trading System (ETS) remains stalled, with no measurable progress to date, according to Eduardo Piquero, General Director of MexiCO2, the Mexican Carbon Platform, during an interview with Platts held on Sept. 23.

"There is no way to evaluate [progress] because, to this day, there aren't any [public] developments in the operational rules of the emissions trading system," Piquero said. "And without political will at the highest level—above SEMARNAT—it's difficult to secure participation from key players, like the oil, gas, and electricity industries," he added.

He noted that subnational governments have instead implemented carbon taxes, which offer only "rudimentary" compensation mechanisms in the best cases.

The Ministry of Environment and Natural Resources of Mexico (SEMARNAT) said at the Mexico Carbon Forum held on Sept. 10-11 that it plans to publish ETS operational rules by year-end. However, Piquero cautioned that pricing remains speculative.

"There is no basis to provide a possible value for ETS allowances," he said, "Prices will depend on the emissions gap to be covered and the auction exit value. I don't expect auctions in the short term."

Compensation system: a possibility

Piquero said a dual-price structure could emerge if an Emissions Compensation System materializes—one for the voluntary market, with high-quality credits trading internationally at around $11/mtCO2e, and another for the domestic market, adjusted to local payment capacity.

He added that carbon credits from segments such as transportation, energy, and methane could be included, though there is currently "no interest in renewable energy."

A subnational compensation registry was also announced at the Mexico Carbon Forum, sponsored by MexiCO2. The registry is being developed as an independent mechanism, with participation from the governments of Guanajuato, Tamaulipas, Colima, and Querétaro, as well as federal agencies, the National Forestry Commission and SEMARNAT.

Harmonization of subnational carbon taxes proves challenging

Piquero warned that the existence of 11 subnational carbon taxes complicates the ETS operation. These taxes range from $2/mtCO2e to $35/mtCO2e, depending on the subnational governments, which are autonomous in Mexico.

"Perhaps [the use] of offsets could help create a mechanism that links subnational carbon taxes with the ETS," he suggested.

He also highlighted capacity constraints at SEMARNAT, noting that while California and Germany have 120 and 180 staff working on the emissions markets, respectively, Mexico has only three to four.

"There's a lack of human capacity and data," he said.