Our thinking

Greenhouse gas emissions trading schemes: A global perspective

What's inside

An overview of rules and developments in major jurisdictions globally, including the US, Canada, Mexico, Japan, the UK and the EU.

Navigating greenhouse gas emissions schemes worldwide

As global emissions trading systems undergo fundamental changes, understanding the policies and rules around them can alert you to opportunities as well as challenges.

The impacts of greenhouse gas (GHG) emissions continue to be of great concern globally. Innovations have occurred in market-based solutions, technology development and international law, and there are 17 GHG emissions trading schemes that have been established globally, operating in 35 countries, 12 states and seven cities.

These trading schemes present a market-based approach to controlling GHG emissions and mitigating the effects of climate change by limiting the quantity of industrial discharges of GHGs, either through the allocation or purchase of emissions allowances from a central authority or the purchase of emissions credits from market participants. For example, a company that emits more GHGs than its permits allow can buy credits from others willing to sell them. GHG emissions credit units are often known as carbon credits or GHG emission-reduction credits.

With the 2013 – 2020 Kyoto Protocol compliance period coming to an end, meeting intended nationally determined contributions under the Paris Agreement has opened up new challenges, and the resulting changes are confronting GHG emissions trading globally. These changes include economic dynamics, which have lowered the value of emission-reduction credits and have affected the marketplace, potential political opposition to the policies underlying GHG emissions trading and the rise of cost-effective innovations in fnancing GHG emissions reductions.

This report offers readers an overview of the status of GHG emissions trading schemes in major jurisdictions globally, including the United States, Canada, Mexico, Japan, the United Kingdom and the European Union. It illustrates the current status of global GHG emissions trading systems and also offers insights into where the global GHG emissions trading system is headed, alerting readers to potential opportunities and challenges.

 

United States

Individual states are expected to take the lead in regulating greenhouse gas emissions.

California Coast and Pacific Ocean

Canada

Ontario and Québec lead the way in developing trading schemes.

aerial view of Toronto, Canada

Mexico

Implementation of a cap-and-trade program and compliance market is expected by 2021.

Monarch butterflies

United Kingdom

EU's trading scheme framework dominates, but Brexit brings uncertainty.

Wind Electricity

European Union

The world’s biggest trading scheme sees proposals intended to stabilize the market and links to Switzerland.

Offshore Wind Platform

Japan

Tokyo Metropolitan Government's and Saitama Prefecture's schemes are connected as Japan considers a national scheme.

Japanese bamboo

The global future

Regional trading systems are expected to expand and increase their connections with one another.

Greenhouse gas emissions

Global auction statistics

Mapping emissions trading globally

Mexico: Greenhouse gas emissions trading schemes

Insight
|
3 min read

Implementation of a cap-and-trade program and compliance market is expected by 2021

In 2012, Mexico enacted the General Law on Climate Change (GCCL), which required the creation of a national registry for greenhouse gases and provided orientation to federal, state and municipal authorities toward the authority to establish a voluntary emissions trading scheme (ETS).

In 2014, the Regulations of the GCCL for the Creation and Operation of the Emissions Registry (the GCCL Regulations) were published, followed by an implementing decree in 2015, recognizing that the first step in establishing an efficient compliance market was implementing an accurate registry of emissions of greenhouse gases (GHGs) and compounds.

The GCCL Regulations establish a reporting threshold of 25,000 tons of carbon dioxide (CO2)-equivalent, generated annually in all covered facilities operated by a company. Covered facilities include emitters in the energy, industrial, transport, agricultural, waste, commercial and services sectors. Although reports must be filed per facility, the sum of all covered facilities is considered for determining if reporting is required. For example, if a company has six different covered facilities emitting only 5,000 tons/CO2-equivalent, it must file a report for each facility, since their total emissions (30,000 tons/CO2-equivalent) would exceed the 25,000 tons/ CO2-equivalent threshold.

The governments of California, Québec and Ontario are expected to participate as observers during the pilot ETS.

The GCCL Regulations list the GHGs and compounds that must be recorded. This includes the following:

  • CO2
  • Methane
  • Nitrous oxide
  • Carbon black
  • Chlorofluorocarbons
  • Hydrochlorofluorocarbons
  • Hydrofluorocarbons
  • Perfluorocarbons
  • Sulphur hexafluoride
  • Nitrogen trifluoride
  • Halogenated ethers
  • Halocarbons
  • Mixtures of the above
  • GHGs and compounds that the Intergovernmental Panel on Climate Change lists as such and that Mexico's Federal Ministry of Environment and Natural Resources (SEMARNAT) may further publish.

In 2016, SEMARNAT, the Mexican Stock Exchange (BMV) and MexiCO2 (a voluntary carbon platform of the BMV) signed an agreement to implement a voluntary pilot ETS for several major companies pertaining to the power generation, manufacturing and transport sectors. Implementation of such a pilot project is currently being discussed, and its purpose is to prepare companies to create a draft ETS regulation by 2018, which would lead to a cap-and-trade program and compliance market (expected to be implemented by 2021).

The governments of California, Québec and Ontario are expected to participate as observers during the pilot ETS, with the purpose of collaborating in the potential linkage between these ETSs. Mexico signed a Memorandum of Understanding in 2015 with Québec that includes cooperation on emissions trading, and in 2016, Mexico, Québec and Ontario issued a joint declaration on carbon markets collaboration. This collaboration would be attractive for implementing emission-reduction projects with potential lower costs in Mexico, which may be recognized for compliance in these Canadian provinces, and it is already a possibility in the voluntary market of California, managed by the Climate Action Reserve, which has implemented several protocols for projects that may be implemented in Mexico.

 

 

This publication is provided for your convenience and does not constitute legal advice. This publication is protected by copyright.
© 2017 White & Case LLP

Top