Co-designing the Mexican Emissions Trading System Based on International Experience
Mileiri Montiel & Camila Barragán
With the intention of strengthening the design of the Mexican Emissions Trading System (SCE), and in view of the next launch of the SCE Test Program in 2020, the project “Preparation of an Emissions Trading System in Mexico” ( SiCEM ) of GIZ continuously carries out capacity development activities for the different actors - public and private - relevant to the design, implementation and operation of an SCE.
In this context, the ETS Academy Mexico was held, a three-day seminar that brought together international experts with officials from different Federal Public Administration (APF) departments relevant to the development of an SCE, with the aim of learning the lessons learned and best practices of international jurisdictions, and facilitating the joint design of the SCE in Mexico.
The workshop took place on July 23, 24 and 25, 2019 at Casa Lamm in Mexico City. It was convened by the Ministry of Environment and Natural Resources ( SEMARNAT ), the World Bank Partnership for Market Readiness ( PMR ) and the project “Preparation of an Emissions Trading System in Mexico ( SiCEM )” implemented by the German Development Cooperation ( GIZ ) commissioned by the Federal Ministry of Environment of Germany ( BMU ). It was also supported by the International Carbon Action Partnership ( ICAP), an internationally recognized forum that brings together all the governments of countries that have established or are in the process of developing an SCE.
The course was attended by representatives of a variety of institutions, such as SEMARNAT, the National Forestry Commission ( CONAFOR ), the National Commission of Natural Protected Areas ( CONANP ), the Ministry of Finance and Public Credit ( SHCP ), the Ministry of Foreign Affairs ( SRE ), the Federal Attorney for Environmental Protection ( PROFEPA ), the National Commission for Regulatory Improvement ( CONAMER ), as well as Petróleos Mexicanos ( PEMEX ) and the Federal Electricity Commission ( CFE ).
In addition to theoretical sessions on the different essential technical elements for an SCE, such as the design of the cap, the choice of the allocation method, the design of the compensation program or the Monitoring, Reporting and Verification (MRV) system, international experts of jurisdictions including California, Quebec, China, Ukraine and Germany shared their practical experiences to facilitate the design, implementation, and operation of the SCE in Mexico. Likewise, SEMARNAT presented the advances that have been made so far in the design of the secondary regulation of the Mexican SCE Test Program.
The first day of the course began with an overview of the role of the SCE within a wider mix of climate policies in Mexico. Highlighting the importance of this instrument to generate changes in behavior and make structural changes towards a low carbon economy, the need for the design of the instrument to be robust and clear and to generate certainty and promote emission reduction was recognized. The relevance of having a diversity of actors in its design and implementation was also emphasized.
On the second day, we had the opportunity to learn more about the flexibility mechanisms in an SCE. After learning about the international experience - and specifically the Latin American one - in the development of compensation projects , an interactive session on types of compensation projects was held.
The generation of carbon revenue through the auctions of an SCE, and the social benefits that its proper use has brought in jurisdictions with an SCE in operation, were discussed further. For example, in different jurisdictions around the world carbon revenues are used to support communities and households vulnerable to the energy transition, foster clean technologies (energy efficiency, energy storage, electro-mobility, renewable energy), finance research and development in innovative low carbon technologies, etc. The day concluded with an interesting interactive activity that encouraged the convergence of positions regarding the design of an SCE by inviting participants to take on the role of different actors (eg Presidency, Ministry of Economy, Ministry of Environment).
Finally, the third day focused on elements of MRV, governance and transparency in the SCE, highlighting the role of the Monitoring System (also called Registry ) in ensuring the environmental integrity of the system. The behavior of the Emission Rights market was discussed further, including international experiences in its management and intervention mechanisms to maintain market stability, which is key for participating companies to achieve proper carbon management in their installations.
The months prior to the implementation of the pilot phase of the SCE are key to developing capacities in the relevant actors, as well as to continue with the design of a robust and effective Test Program. In the coming months, the capacity development efforts carried out, as well as additional technical studies to strengthen the design of the system, will continue to be presented on the “IKI-Alliance Mexico” blog.
For more information on this subject, please contact: Comercio.Emisiones-MX [AT] giz.de.
This blog was originally posted here.
All photos are credited to GIZ.