Overview

Description

The Mexico ETS, the first in Latin America, started in January 2020. It covers direct CO2 emissions from fixed sources in the energy and industry sectors emitting at least 100,000 tCO2 per year, representing around 40% of national GHG emissions and 90% of emissions reported in the National Emissions Registry (RENE). Under the Mexico ETS, participating entities must surrender allowances for all of their covered emissions. Allowances are allocated through grandparenting based on historical emissions, which are verified annually. The Mexican ETS started with a Pilot Program with two phases: a pilot phase between 2020 and 2021, and a transition phase in 2022. The Pilot Program aimed to test system design, contribute to national mitigation goals, and build capacity in emissions trading. The operational phase began in 2025. The pilot regulation remains in force until the regulation for the operational phase is published. Free allocation is expected to decrease from the operational phase onwards, and SEMARNAT is developing the auctioning mechanism.

Recent Developments

The operational phase of the ETS began in 2025, with approximately 300 entities covered. In March 2025, SEMARNAT was restructured, creating the Undersecretary for Sustainable Development and Circular Economy to coordinate ETS operations. In August 2025, the first meeting of the Consultative Committee of the Emissions Trading System (COCOSCE) convened, covering the operational phase regulation, allocation, electricity sector obligations, and offsets.

Coverage

Installations in the power and industry sectors with annual direct emissions from stationary sources of at least 100,000 tCO2.

Pricing and Allocation Approaches

Free allocation (Grandfathering)

Compliance Approaches

Annual

Relation to Other Compliance CPIs

The Mexico ETS is not linked with any other system, though the General Law of Climate Change provides for linkages with other systems. Various cooperation activities have taken place in recent years. Mexico signed a Memorandum of Understanding with California in 2014 and with Québec in 2015 that includes cooperation on emissions trading. In August 2016, Mexico, Québec, and Ontario issued a joint declaration on carbon markets collaboration. Additionally, in December 2017, Mexico – together with four countries and seven subnational governments – issued the Paris Declaration on Carbon Pricing in the Americas for carbon pricing implementation, which creates a platform for cooperation in the region.

Covered Sectors

Electricity and heat

Industry

Mining and extractives