On Monday, September 7 (the Labor Day holiday in the US), the government of Mexico announced that the nation “south of the border” would soon join the growing ranks of countries that have adopted cap and trade to reduce harmful greenhouse gas emissions. Mexico’s pilot carbon pricing program will begin in November on a trial basis for 12 months. The demonstration project will serve as a testing ground for a national carbon market that Mexico intends to launch in 2018.
The program follows a standard model of similar greenhouse gas reduction programs. Cap and trade does not confer the immediate and deep benefits of taxing carbon. However, it does constitute an effective beginning to reducing loads on the atmosphere.
This type of pricing scheme starts with officials setting a national limit that will bring down the levels of toxic greenhouse gas emissions from participating organizations. Regulators can then adjust the limit downward as the polluting entities comply and incorporate sustainable forms of renewable energy and industrial improvements. All participants can exchange tradable certificates to offset their emissions. Firms and other groups that lower emissions below their caps can then sell their excess allowances to other businesses that have not yet succeeded in holding to their own limits.
Up to 60 companies will participate in Mexico’s program as volunteers. As well as producing a significant environmental benefit, they’ll have a competitive edge by gaining a head start and a say in the evolving carbon pricing system.