Latin America pushes carbon pricing

Countries are taking different steps to achieve the same goal of decarbonising and protecting their natural environments

Work towards pricing carbon emissions is advancing in Latin America as governments prepare to comply with their nationally determined contributions (NDCs) and to implement article 6 of the Paris climate agreement.

Regional countries showed different approaches to carbon pricing at the UN's recent Latin America and the Caribbean Climate Week in Santo Domingo, with some implementing a carbon tax and others designing emissions trading systems (ETS). But the goal is the same — to focus on adaptation and protection of their ecosystems.

"Article 6 serves to promote mitigation, adaptation and sustainable development," says Karina Barrera, undersecretary of climate change at Ecuador's environment, water and ecological transition ministry. "We are not among the biggest emitters of greenhouse gas (GHG) emissions in terms of energy, but we have the potential to be one if we deforest our forests," she says.

Ecuador last year launched its voluntary carbon zero programme aimed at promoting and encouraging companies to implement measures and actions for the quantification, reduction and neutralisation of GHG emissions. Companies that participate receive some benefits, including tax incentives.

Around 220 firms have joined the scheme, Barrera says, adding that local and international pressure — such as the EU's plan for a carbon border adjustment mechanism — and commercial restrictions have prompted private-sector interest. "Now we are working on a regulation for a [carbon] offset mechanism," she says.

Panama is taking a similar approach. The country last year launched a voluntary programme called "reduce your carbon footprint". Around 71 companies are registered, of which 26 are measuring their carbon footprints and 25 have committed to be carbon neutral by 2050, the co-ordinator of the national platform for climate transparency in Panama, Juan Lucero, says. The programme is a first step towards building a national carbon market. "We hope to create demand through the voluntary programme that will end up being mandatory," Lucero says.

Bankable projects

A second step is to create a pool of environmentally friendly projects to generate carbon offsets, followed by the creation of a national carbon exchange, Lucero adds. Panama is working with the World Bank on methodologies so that the projects can generate carbon offset credits, Lucero says. "We are working with different registries, identifying which methodology is more convenient and adaptable, as well as which projects are feasible in Panama." The country is focusing on projects related to the protection of tropical forests, agroforestry, reforestation and rural electrification but is open to evaluate other projects at a later stage, Lucero says.

Uruguay this year launched a carbon tax on emissions created from gasoline combustion. The level is set at $135/t CO2e but can vary depending on the consumer price index or gasoline prices. The money raised will be used to promote policies that help reduce emissions, boost e-mobility or adaptation of ecosystems.

Other countries that have taxed CO2 emissions in the region are Argentina, Colombia and Chile, with the latter two considering an ETS, as well as Brazil, while Peru is exploring carbon pricing options, the World Bank says.