Tag: Emissions Trading System

The National Emissions Registry (RENE) is a public policy instrument derived from the General Law on Climate Change (LGCC) in 2012, with the aim of compiling information on direct and indirect emissions of greenhouse gases and compound emissions (CyGEI) generated by the fixed and mobile sources of the different productive sectors across the country, which is used to trace climate policies in Mexico.

Annually, Establishments Subject to Reporting (ESR) regulated by the RENE Regulation, report their CyGEI emissions to the Ministry of Environment and Natural Resources (SEMARNAT). The reports must be verified every 3 years by a Certification Body for the Verification and Validation of GHG Emissions (OC-VV-GEI) accredited by the Mexican Accreditation Entity (EMA) and approved by the Federal Attorney for Environmental Protection (PROFEPA), which certifies the relevance, integrity, consistency, transparency and precision of the information they contain.

The recent Emissions Trading System (ETS) Test Program in Mexico, effective as of January 1, 2020, is integrated with the information reported in the RENE and establishes the obligation of regulated facilities in the preliminary bases of the ETS, to present positive verification opinion on an annual basis only for its direct carbon dioxide emissions, in accordance with the procedure and criteria provided in the RENE Regulations.

In order to continue strengthening and creating OC-VV-GHG capacities in Mexico, SEMARNAT, in collaboration with the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH through the project “Preparation of an Emissions Trading System in Mexico ”(SiCEM), organized the series of online seminars “Methodological Aspects for GHG Verification within the Framework of the report to the National Emissions Registry and the Emissions Trading System for Mexico”, with the participation of the EMA, PROFEPA, and 16 OC-VV-GEIs.

The seminars were held on August 24, 27 and 31, 2020 with the purpose of reinforcing the knowledge of the OC-VV-GHGs on the methodological aspects for the development of a risk analysis, the preparation and planning of sampling plans, and the calculation of materiality in the GHG emissions verification process based on the CyGEI Emissions Verification Criteria issued by SEMARNAT. In this way, it seeks to strengthen the verification process to provide reliability and transparency to the RENE and the ETS.

Seminar 1: Monday, August 24, 2020. Development of Risk Analysis.

Seminar 2: Thursday, August 27, 2020. Data Sampling and Materiality – Regulation, Concepts and Calculation.

Seminar 3: Monday, August 31, 2020. Materiality Calculation and Application of Sampling Methodologies.

With the entry into force of the Test Program of the Emissions Trading System in Mexico (ETS), the project “Preparation of an Emissions Trading System in Mexico” (SiCEM) of GIZ is supporting SEMARNAT in the design of the various components, with one highlight being the design of the auction scheme for the Mexican ETS.

The preliminary bases of the Test Program state in its 20th article: “As of the second year of the pilot phase of the Test Program, the Ministry may implement an auction scheme for the emission rights deposited in the auction reserve without economic effects, depending on the behavior of the emissions market.”

Therefore, the study “Design of Auctions for the Emissions Trading System in Mexico” was carried out. This study is a first effort to establish scenarios that show what an auction scheme could look like for Mexico.

The analysis presents an overview of international best practices, the necessary elements in auction design, as well as technical and operational decisions that must be considered in the design process. For this purpose, four guiding principles were taken as a reference that include a broad review of the institutional structure in Mexico:

  1. Efficiency: Efficient allocations and prices while maintaining low transaction costs for participants.
  2. Simplicity: Reduction of administrative barriers for regulated participants, avoiding unnecessary complexity and achieving the qualification of a wide range of participating entities.
  3. Credibility: Operation through a regulatory financial framework that safeguards effectiveness against inappropriate market behavior.
  4. Compatibility: Compatibility with a broad design and objectives of the ETS including, but not limited to, future pricing prefeasibility, as well as international links.

Likewise, a preliminary analysis of the Mexican regulatory and institutional context was carried out, preliminarily identifying the relevant actors that would play a role in the implementation of the auction scheme and the regulations that could potentially to be adapted as a result of the implementation of the four proposed scenarios. These scenarios are mainly based on the following elements:

  1. Monitoring auctions using existing government agencies (regulators) or outside vendors (independent).
  2. Using the infrastructure of existing stock exchanges or use a new personalized platform.

Each of the proposed options represents advantages and disadvantages that will have to be further analyzed, but at the moment it is possible to list a series of recommendations for the design and subsequent operation of auctions guided by the aforementioned principles.

The presentation was carried out through a virtual session on August 10. This meeting was held within the framework of the project “Preparation of an Emissions Trading System in Mexico (SiCEM)” developed by GIZ and commissioned by the German Government in support of SEMARNAT. The session was attended by highly relevant institutions such as the Ministry of Finance and Public Credit (SHCP), the Mexican Stock Exchange (BMV), the National Banking and Securities Commission (CNBV), the Mexican Banking Association (ABM), Mexico2 and Laguna Sustentabilidad and Law. The study was developed by the Vivid Economics consulting team.

For more information on this subject, please contact us at: comercial.emisiones-MX@giz.de