Mexico's Emissions Trading System (SCE)

Mexico's Emissions Trading System (Sistema de Comercio de Emisiones, SCE) is a market-based instrument designed to reduce greenhouse gas emissions from the country's largest-emitting sectors. It works on a cap-and-trade principle: the authority sets a maximum emissions limit for the covered sectors and distributes allowances that installations can buy and sell among themselves.

The SCE was the first emissions trading system launched in Latin America, making it a regional reference point for carbon market design.

How a cap-and-trade system works

In an emissions trading system (ETS), the regulator sets a total emissions cap that must decline over time. Installations receive or buy allowances and, at the end of each period, must surrender as many allowances as the tonnes they have emitted. Those who cut emissions can sell their surplus allowances; those who emit above their allocation must buy them. This puts a price on carbon and drives reductions where they are most efficient. The model has parallels with the EU Emissions Trading System (EU ETS), though with its own rules.

Legal framework and covered sectors

The SCE is grounded in the General Climate Change Law (LGCC), whose 2018 reform mandated its creation. The system targets the energy and industry sectors whose installations exceed an emissions threshold, which together account for a very large share of the emissions reported in the country.

The SCE relies on the National Emissions Registry (RENE), which provides the verified emissions data needed to allocate allowances and check each installation's compliance.

From pilot programme to operational phase

The SCE was designed in two stages. The first was a pilot programme running from 2020 to 2022, with a pilot phase and a subsequent transition period in which participating installations became familiar with the mechanics without financial penalties for non-compliance. The second is the operational phase, with full binding effect.

The move to the operational phase was scheduled for early 2026, after several delays against the original timetable. Its full entry into force has been repeatedly postponed, so it is worth checking the current status of the system before making decisions based on it. The design includes an offset mechanism allowing the use of voluntary market credits, including forestry-based ones, up to a limited share of compliance obligations.

Why it matters for companies

For covered installations, the SCE introduces a cost attached to emitting and, therefore, a direct financial incentive for decarbonisation. Anticipating the system, measuring emissions accurately and planning reductions lets companies manage carbon price risk rather than be exposed to it.

Get ready for the carbon market with Manglai

At Manglai we help companies measure their emissions, anticipate the cost of carbon and design credible reduction plans. Discover how Manglai can help you prepare for the SCE and for a future with a price on carbon.