Overview

Description

In June 2022, Chile enacted its “Framework Law on Climate Change”, which sets a 2050 carbon neutrality goal and describes the national, regional, and local climate policies that Chile will implement to achieve it. These include Chile’s NDC, Long-Term Climate Strategy, Climate Change Financial Strategy, and sectoral mitigation and adaptation plans. Article 14 of the law mandates the Ministry of Environment to specify GHG emissions limits set by technology, sector, or activity. GHG emissions limits may be set as emissions benchmarks for individual installations or in aggregate, for a group of installations or a sector. If set in aggregate, GHG emissions limits could be akin to a cap. According to Article 15, installations that perform better than their benchmark will have their surplus emissions reductions certified, which may then be used by other regulated entities for compliance with their respective emissions limits. The specific design of the emissions limits system is not yet defined and could be implemented either as an ETS or a tradable performance standard. In November 2023, the Ministry of Environment published the “Draft Rules for the Development of GHG Emissions and Short-Lived Climate Pollutant Limits” for public consultation. The document specifies procedures and characteristics of the emission limits to be developed under the Framework Law. The draft law was approved in March 2024 and published in July 2025 as Supreme Decree DS No 12/2025 Based on Article 37 of the Law, which provides a basis for the development of market-based, fiscal, and financial instruments to address the negative impacts of GHG emissions, the country’s “2022-2026 Energy Agenda” states that a pilot ETS project for the energy sector will be developed. Work around this will be supported by the World Bank’s Partnership for Market Implementation. Chile has had a carbon tax in place since 2017. The country’s “Long-Term Climate Strategy”, presented in October 2021, specifies that Chile will set an increasing trajectory for its carbon price between 2025 and 2030. It also specifies that the country seeks to have an integral carbon pricing portfolio to deliver coherent and predictable price signals. In line with this, the government launched its “National Energy Policy by 2050”, which states that carbon prices in Chile should reach USD 35/tCO2e by 2030 and USD 80/tCO2e by 2040.

Recent Developments

Chile is expected to start a pilot ETS for the energy sector in 2026 or 2027, with initial participation being voluntary only.

Coverage

Not Specified

Pricing and Allocation Approaches

Not Specified

Compliance Approaches

Not Specified

Relation to Other Compliance CPIs

Not Specified

Covered Sectors

No eligible activities specified for this instrument.