Mexico Will Launch Carbon Pricing In November

September 7th, 2016 by Sandy Dechert

On Monday, September 7 (the Labor Day holiday in the US), the government of Mexico announced that the nation “south of the border” would soon join the growing ranks of countries that have adopted cap and trade to reduce harmful greenhouse gas emissions. Mexico’s pilot carbon pricing program will begin in November on a trial basis for 12 months. The demonstration project will serve as a testing ground for a national carbon market that Mexico intends to launch in 2018.

The program follows a standard model of similar greenhouse gas reduction programs. Cap and trade does not confer the immediate and deep benefits of taxing carbon. However, it does constitute an effective beginning to reducing loads on the atmosphere.

This type of pricing scheme starts with officials setting a national limit that will bring down the levels of toxic greenhouse gas emissions from participating organizations. Regulators can then adjust the limit downward as the polluting entities comply and incorporate sustainable forms of renewable energy and industrial improvements. All participants can exchange tradable certificates to offset their emissions. Firms and other groups that lower emissions below their caps can then sell their excess allowances to other businesses that have not yet succeeded in holding to their own limits.

Up to 60 companies will participate in Mexico’s program as volunteers. As well as producing a significant environmental benefit, they’ll have a competitive edge by gaining a head start and a say in the evolving carbon pricing system.

Says Rodolfo Lacy, Mexico’s deputy minister for environmental policy and planning, “When we have mechanisms that facilitate the reduction of greenhouse gases, we’re implicitly reducing pollution.” Mexico City, the largest metropolitan area in the western hemisphere with over 21 million people in the metro area (10% of the national population), has had severe air pollution problems for decades. It especially stands to benefit from the carbon reduction program.

The program falls in line with international goals expressed in last December’s world pledges from the United Nations Paris Agreement. Mexico then promised it would take steps to reduce its greenhouse gas emissions 22% by 2030. A major oil-producing nation, it also seeks to generate 50% of its own energy from clean sources by 2025.

Says Roberto Frau, a senior sustainability specialist with the public policy and social development advisors at Cocoa Services:

”There’s a lot of pressure on Mexico internationally and from within to start delivering real results.”

The people of Mexico have recently expressed disappointment in their current leader, President Enrique Peña Nieto, who took office on December 1, 2012. During his campaign, Peña Nieto promised to lift up the country’s relatively stolid economy and reduce violence instigated by the nation’s powerful drug lords. His failure to perform has made him unpopular with Mexico’s people, who initially welcomed him as a minority-party challenge to decades of laissez-faire government.

Peña Nieto also upset many at home and abroad by treating Donald Trump, the Republican candidate in the US presidential election. Although Trump is only running for president, Peña Nieto treated him as an equal on the American’s recent surprise visit and did not challenge Trump’s repeated and flamboyant assertions that a Trump administration would quickly build a wall — a very high wall — on its southern border and force Mexico to pay for its construction.

Also on the North American continent, both Canada and the United States not only pledged in December to cut back on carbon use, but they have also each upped their plans somewhat in succeeding months. Other emerging nations around the world have committed to substantial measures. Mexico can position itself as a leader in this important group by firmly supporting eco-environmental plans like this new one.

In terms of US political impact, Mexico’s effort aligns with the American drive to confront climate-altering emissions. Hillary Clinton and the Democratic party support pollution abatement plans. Donald Trump and his fellow Republicans not only oppose them, but they have threatened to rescind President Obama’s careful planning on Day One of a Trump accession. Achieving this would be virtually impossible, however.











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