First results workshop is held

The establishment of an Emissions Trading System (ETS) involves the analysis of aspects such as the implications in terms of competitiveness and risk of carbon leakage. Therefore, SEMARNAT, with GIZ and a team of national and international experts carry out a study to measure the competitiveness of companies in this context.

For the establishment of an ETS, taking into account the possible economic effects at national and international level is a priority, both in terms of its design and implementation. According to the recent reform to the Climate Change Law, the preliminary bases, which will contain the basis of the ETS in its pilot phase to be published in 2018:

How can the competitiveness of an industry be affected?

The carbon pricing regime pursues individual approaches at the national and subnational levels. This can lead to the setting of different carbon prices between jurisdictions and can generate differences in compliance costs for the same industry in different locations. Therefore, it could be the case that carbon pricing could lead to a company’s production moving to jurisdictions with a less stringent emission reduction policy, known as carbon leakage. This would imply that the price of carbon has affected national competitiveness and, at the same time, has reduced emissions little or nothing at a global level, being an undesirable scenario.

In this context, the analysis of sectors that will be potentially covered by the ETS has begun. Through two types of top-down and bottom-up analysis, an attempt is being made to model the impact that could be produced by the introduction of an ETS in the country. The first analysis focused on presenting the results of the impact at a macroeconomic level that the introduction of the ETS would have on variables such as the Gross Domestic Product (GDP), Trade and Gross Value Added (GVA), while the second analysis focuses on a sectorial level. The objective is to measure the competitiveness of Mexican industries, with special emphasis on the risk involved in “carbon leakage”.

International and national experts have supported the development of this analysis regarding the topic of competitiveness (Vivid Economics and the Mexican Institute for Competitiveness – IMCO, respectively) and the preliminary results were presented at a workshop held on April 19th, 2018 in SEMARNAT. These results show the potential to apply a carbon price and at the same time ensure the economic competitiveness of the Mexican industry. At the same time, it was emphasized that there was no evidence of carbon leakage in other jurisdictions analyzed. The workshop was attended by around 20 participants, who represented the chemicals, steel, cement and paper sectors. The analysis is being prepared for the Ministry of Environment and Natural Resources (SEMARNAT), within the framework of the Project “Preparation of an Emissions Trading System in Mexico (ETS)” of the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH, on behalf of the Ministry of the Environment of Germany (BMU).

As next steps, dialogue spaces will be created by sectors that will enrich the findings of this study, and directly address the concerns of interested parties. It should be emphasized that the study will not have an effect on the pilot phase of the ETS, but rather seeks to initiate work in preparation for the implementation of the formal stage of the system.

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