The ITAM Energy and Natural Resources Center and Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH organized a forum to discuss the importance of carbon emissions pricing due to climate change. The objective of the forum was to review the status of carbon emissions pricing, both at the international and national levels. It aimed to facilitate discussion so that Mexico can make informed decisions about this public policy instrument.

Dr. María Amparo Martinez of the National Institute of Ecology and Climate Change (INECC) commented that putting a price on each ton of carbon dioxide released into the atmosphere reflects its cost to the environment and promotes the search for inexpensive ways to fight climate change. For her, carbon prices help reduce global emissions, while giving companies flexibility to find their own solutions for increasing efficiency.

The United States Environmental Protection Agency (EPA) defines the social cost of carbon as an estimate of the economic damages caused by a ton of CO₂ emissions in a given year. Based on studies conducted in 2013, the average social cost of carbon was 31 euros per ton of carbon dioxide. Mexico contributes 1.4% of global CO₂ emissions produced from the burning of fossil fuels. In 2013, part of the Tax Reform initiative sent to Congress considered a carbon price for each ton of CO₂ emitted by fossil fuels.

According to Dr. Carlos Muñoz of the Ministry of Finance and Public Credit (SHCP), environmental taxes generate reliability in company costs. Their collection is simple in an efficient tax system, and they can be applied broadly. On the other hand, while the results of a cap-and-trade approach are fairly certain, its costs are not. With this approach, it is necessary to develop agile and deep markets. Finally, a significant challenge of the cap-and-trade approach is how to allocate the initial quotas. International experience indicates that, in practice, environmental taxes would be useful for Mexico because they have been shown to be an attractive option for emerging economies.

Dr. Alejandra Elizondo of the Center for Research and Teaching in Economics (CIDE) commented that carbon prices are important because they generate incentives to desist polluting activities. For her, economic instruments are necessary to drive private investment towards low-carbon options. Represented the private sector point of view, José Ramón Ardavín, an engineer from the Private Sector Studies Commission for Sustainable Development (CESPEDES), stated that electricity generation is the main action for complying with international commitments to reduce emissions; he stressed that Mexico could establish a formal market in record time if it builds a coalition among the main sectoral chambers, scientists, academics and authorities.

In the seminar, public and private sector representatives, as well as academics, expressed their opinions; these stakeholders agree that a carbon pricing system is necessary for Mexico to internalize the negative externalities for carbon emissions and, at the same time, comply with Mexico’s Nationally Determined Contributions (NDCs).