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Mexico's exchange to launch platform for carbon trading

Source: Reuters - Fri, 8 Nov 2013 20:52 GMT
Author: Reuters
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A broker talks on the phone as he monitors stock prices at Multiva Bank in Mexico City, Aug. 9, 2011. REUTERS/Carlos Jasso
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By Marcelo Teixeira

SAO PAULO, Nov 8 (Reuters) - Mexico's stock exchange said on Friday it will launch an electronic platform to trade carbon credits, opening a new environmental market in the Americas and looking to profit from new low-carbon legislation in Mexico.

Bolsa Mexicana de Valores (BMV) and its partners in the project said they will hold a presentation on Nov. 26 at the exchange's auditorium, in Mexico City, to detail the mechanism called MEXICO2.

The exchange did not elaborate on the initiative, but a source familiar with the project said it will offer different types of carbon credits to companies willing to offset emissions traded in an over-the-counter (OTC) market.

According to this source, the platform will trade CERs, the United Nations-certified emissions reductions units, as well as credits from the voluntary markets.

The BMV's carbon platform has been in the works for months, but it received a potential boost last week when the Mexican Senate passed the country's fiscal reform proposed by President Enrique Pena Nieto.

The bill, which changes several aspects in the Mexican tax system, includes a new carbon tax over fossil fuels.

A provision added to the legislation will let companies pay the new tax with carbon credits, what could stimulate the local demand for these types of assets.

But the exchange also has plans to foster interest for credits in a manner not associated with the carbon tax.

"Companies with shares listed in the BMV will be invited to set emissions reductions targets," said the source, who asked not to be named.

"If they are unable to meet those targets with programs and changes in processes in their organizations after a specific period, they could use the platform to buy offsets," he said.

The exchange plans to run workshops on carbon markets functioning for executives of the companies who decide to join the initiative.

It is not clear when the platform will be ready to operate.

The new Mexican carbon tax, however, is expected to be imposed in the beginning of 2014.

The Mexican government initially estimated that the carbon tax could raise 22 billion pesos per year ($1.7 billion).

But this amount is likely to fall sharply after changes made to the bill in the Congress, where deputies decided to cap the tax to 3 percent of the value of a fossil fuel.

For gasoline, for example, the original charge of 16 pesos per liter was reduced to 10 pesos.

For products such as coal, the reduction was much bigger, going from 178 pesos per tonne in the original version of the bill to only 27 pesos.

Deputies also decided to exempt oil and natural gas from the tax, further reducing the revenue collection's potential.

In any case, participants of projects to generate credits such as the U.N.'s Clean Development Mechanisms (CDM) think there will be demand for credits by companies that will prefer to hand them over to the government instead of paying the carbon tax.

There are some 210 Mexican projects currently in the CDM pipeline. They could earn more than 200 million credits by 2020, according to UNEP Risoe data.

The carbon tax bill went back to the lower house for a new vote, due to changes made by senators in other parts of the fiscal reform. If approved, it will be sent to the president to be signed into law.

(Editing by Rory Carroll and Marguerita Choy)

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