Mexico's Emissions Trading System (SCE): a guide for companies

Mexico's Emissions Trading System (SCE, Sistema de Comercio de Emisiones) is the first regulated carbon market in Latin America. It is a climate policy instrument that caps the greenhouse gas emissions of the country's largest installations and lets those installations buy and sell emission allowances, so that reductions happen where they are most efficient. Its goal is to support the achievement of national climate change mitigation targets at the lowest possible cost.

The SCE works on cap-and-trade logic: the authority sets a total emissions cap, allocates or auctions allowances and, over time, lowers that cap. Each covered installation must surrender as many allowances as the tonnes it emitted. If it emits less, it has surplus allowances to sell; if it emits more, it must buy them. This creates an economic incentive to reduce emissions.

This guide explains what the SCE is, its legal basis in the General Law on Climate Change, how the pilot programme worked, which sectors and threshold it covers, how it relates to the National Emissions Registry (RENE) and what obligations it entails for Mexican companies.

What a carbon market is and how the SCE fits in

An emissions trading market (ETS) is a mechanism that puts a price on carbon through the trading of emission permits. Mexico thus joins an international trend that already includes systems such as the European Union Emissions Trading System (EU ETS). All emissions are accounted for in CO2 equivalent, a common unit that allows the effect of different greenhouse gases to be compared.

The SCE also coexists with other carbon pricing instruments: the federal carbon tax on fossil fuels and the state carbon taxes that, according to ICAP's inventory, apply in Colima, Durango, Guanajuato, Mexico City, Morelos, Querétaro, San Luis Potosí, the State of Mexico, Tamaulipas, Yucatán and Zacatecas. The SCE is not linked to any other system, although the LGCC provides for that possibility.

Legal basis: the General Law on Climate Change

The legal foundation of the SCE lies in the General Law on Climate Change (LGCC). Its article 94 empowers the Ministry of the Environment and Natural Resources (SEMARNAT), with the participation of the Intersecretarial Commission on Climate Change, to establish gradually and on market criteria an emissions trading system, in order to promote reductions that can be carried out at the lowest possible cost, in a measurable, reportable and verifiable way, without undermining the competitiveness of the participating sectors.

That legal mandate has been developed through specific agreements and regulations published by SEMARNAT, which define the operating rules, the allocation of allowances and the obligations of covered installations.

The July 2018 reform of the LGCC added an important detail in its second transitory article: before the system was implemented, preliminary bases would be set for a pilot programme with no economic effects on participating sectors, lasting 36 months, and those bases had to be published within ten months at most. That transitory provision is the origin of the pilot programme that started in 2020.

The pilot programme (2020-2022) and the phase after it

Mexico did not launch the market all at once. It first ran a pilot programme, non-binding in terms of financial penalties, so that companies and the authority could get familiar with how the system works. The preliminary bases were published on 1 October 2019 and the programme ran in two stages: a pilot phase in 2020 and 2021 and a transition phase that ended in December 2022.

During that stage the SCE Advisory Committee (COCOSCE) was created, a permanent technical body for consultation, social participation and advice. With the pilot programme concluded, the country is working on the move to the operational phase, the phase in which the market operates with full obligations. That transition has accumulated delays against the original timetable: the operational phase has not started yet, and the pilot programme regulation remains in force until the operational phase regulation is published, which SEMARNAT is still developing along with mechanisms such as auctioning and the eligibility of offset credits. It is advisable to confirm the current status in SEMARNAT's official publications before making decisions.

The pilot programme in figures

The design of the pilot programme is well documented thanks to the tracking done by the International Carbon Action Partnership (ICAP), in which Mexico takes part as an observer. These are the elements worth keeping in mind:

• Annual cap: 271.3 million tonnes of CO2 in 2020 and 273.1 million in 2021. The slight increase was due to the extension of the sectoral allocation for installations classified as "others".
• Reserves on top of the cap: an auction reserve equivalent to 5% of the cap, a new entrants reserve of 10% and a general reserve of 5% for ex-post adjustments to installations that emitted more than they were allocated.
• Free allocation: each installation received allowances equivalent to 100% of its most recent verified emissions. New entrants are allocated on the basis of the verified emissions of the year in which they crossed the 100,000 tonne threshold.
• Gas covered: only CO2 from stationary sources, although the RENE requires the remaining greenhouse gases and compounds to be reported.
• Regulated installations: around 300 in 2025, according to SEMARNAT.
• Verification: each year's emissions are verified by accredited bodies by the end of June of the following year, and the verified figure is reported both to the RENE and to the SCE registry.
• Consequences of non-compliance in the pilot: there is no financial penalty, but the installation loses the option to bank surplus allowances and will receive two fewer allowances for every allowance not surrendered in the first allocation of the operational phase.
• Banking: allowances from the pilot programme cannot be carried into the operational phase. In the operational phase, banking between years and phases is foreseen.

In the sixth compliance year, closed in 2025 with 2024 emissions, 88% of participants submitted a positive verification report and 86% met their surrender obligation.

Where the operational phase stands

As of the end of 2025, and again according to ICAP's tracking, no auction had been held, transactions could only take place through direct negotiation between participants (there is no exchange where allowances are traded) and allowances have the nature of administrative instruments, not financial instruments. In March 2025 SEMARNAT was restructured and created the Undersecretariat for Sustainable Development and Circular Economy, in charge among other things of coordinating and operating the SCE. In August 2025 the first ordinary meeting of the COCOSCE took place, discussing the regulation of the first operational phase, allowance allocation, the obligations of the electricity sector and offset credits. In September 2025, the 2025-2030 Sectoral Programme for Environment and Natural Resources included putting the first phase of the SCE into operation as a line of action. And in November 2025 the Intersecretarial Commission on Climate Change approved NDC 3.0, which sets an unconditional emissions cap of between 364 and 404 million tCO2e in 2035 and a net zero target for 2050, goals the SCE is meant to support.

For the operational phase, free allocation is expected to be reduced from the first year, the use of offset and early action credits is expected to be allowed for up to 10% of each participant's obligation, a monitoring plan is expected to be required and penalties are expected to be activated. None of that is enforceable until the corresponding regulation is published.

Sectors and threshold covered

The SCE focuses on the largest sources, which concentrate most emissions. The covered sectors are the industrial sector and the energy sector, the latter split into the hydrocarbons and electricity generation subsectors.

In the pilot programme, the industrial sector covered the automotive, cement, lime, chemicals, food and beverages, glass, iron and steel, metals, mining, petrochemicals and pulp and paper subsectors, plus any other industrial subsector with direct CO2 emissions from stationary sources above the threshold. According to ICAP, sectors and the threshold are not expected to change in the operational phase.

The participation criterion is an emissions threshold. Installations whose direct emissions reached or exceeded 100,000 tonnes of CO2 in a reference year participate on a mandatory basis. Together, the covered installations represent around 90% of the emissions reported to the National Emissions Registry and roughly 30% of Mexico's national greenhouse gas emissions, giving the system very broad coverage of the most relevant fixed sources.

Relationship with the RENE

The SCE relies on the National Emissions Registry (RENE), the instrument through which establishments subject to reporting declare their greenhouse gas and compound emissions each year, based on the LGCC and its registry regulation. The RENE provides the measurable, reportable and verifiable emissions data on which the market is built: it defines which installations exceed the threshold and how many tonnes each must cover with allowances. For a company that already reports to the RENE, taking part in the SCE is therefore a natural extension of a measurement exercise it already carries out.

What obligations it entails for companies

For a covered installation, the SCE means a set of responsibilities:

• Report emissions fully and verified through the RENE, the basis of the system.
• Receive or acquire allowances in line with each phase's allocation rules.
• Surrender allowances equivalent to the emissions of the compliance period.
• Monitor, report and verify (MRV) its emissions to the quality the regulation requires.
• Manage its market position, deciding between reducing emissions internally or buying and selling allowances.

Beyond the obligation, the SCE creates a clear incentive to invest in efficiency and decarbonisation, because every tonne avoided has an economic value. Placing the SCE within the whole of Mexican environmental regulation helps prepare for compliance; the overview of environmental laws, NOM and key certifications in Mexico is useful for this.

Frequently asked questions

Which companies are covered by the SCE?

Installations in the industrial and energy sectors (hydrocarbons and electricity generation) whose direct emissions reach or exceed 100,000 tonnes of CO2 in the reference year. These installations concentrate around 90% of the emissions reported to the RENE.

What is the legal basis of the SCE in Mexico?

Article 94 of the General Law on Climate Change, which empowers SEMARNAT, with the Intersecretarial Commission on Climate Change, to establish gradually and on market criteria a measurable, reportable and verifiable emissions trading system.

Is the SCE already fully operational?

Not yet. After the 2020-2022 pilot programme, the operational phase is still pending and the pilot programme regulation remains in force until the operational phase regulation is published. As the timetable has changed several times, it is best to verify the current status in SEMARNAT's official publications.

Prepare your emissions report with Manglai

Taking part in the SCE, or getting ahead of it, starts with measuring your emissions well. With Manglai you can calculate and manage your organisation's carbon footprint, organise the data the RENE requires and plan reductions with verifiable information, so you reach your emissions trading obligations with everything in order.