Mexican carbon market faces delays

Mexican carbon market faces delays

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Forming a market to trade carbon emissions in Mexico has faced delays as elections this year kept the environment ministry Semarnat from drafting regulations.

The pilot program, billed as the first carbon market in Latin America, was expected to get going in the second half of the year, but the victory of President-elect Andrés Manuel López Obrador from the left-wing Morena party in July complicated things, said an analyst in Mexico.

"We don't know if Semarnat is working on the rules behind doors, or if it will wait to introduce them next year," he said.

Semarnat said in a statement on November 14 that it had started a two-day public consultation period on the rules of operation for the carbon market. It added that the pilot program was slated to start on January 1, but it did not say if the regulations would be ready by then.

The pilot program will last three years, starting with trades of clean energy certificates, or CELs, as Mexico aims to get 35% of its energy from clean sources by 2024. The market will include industrial firms and energy companies that emit more than 100,000 tones of carbon dioxide. HSBC, Anheuser-Busch InBev and Deacero are expected to participate.

"The market is not cancelled or frozen. What is frozen are the operating rules," the analyst said. "We hope it will start working next year."

Moody's analyst Adrián Garza agreed the market is facing delays and added that many CEL projects are not ready for trading. The postponement of Mexico's fourth renewable energy auction until next month is "a major concern," Garza said, signaling that the AMLO administration may not be serious enough Mexico's clean energy commitments.

"Investors have been very interested in the first three renewable auctions, and there are opportunities, but there is uncertainty right now," he said. "The CEL market is also very new, so it will take a while for investors to want to participate."