Mexican carbon market sees first brokered trades

Quantum Commodity Intelligence – The budding Mexican carbon market has seen its first transactions in the last few weeks, with market liquidity expected to increase as more states adopt carbon taxes, said broker StoneX on Thursday.

The broker has confirmed it was involved in several trades of Mexican carbon offsets in relation to the carbon tax adopted by Querétaro state last year.

The counterparties and the levels of the trades were not revealed, but the state is due to release a report on its carbon tax soon.

The $31 tax is the highest of any Mexican states and allows for offsets from projects registered in Mexico to be retired as compliance units.

Alfredo Nicastro, head of carbon markets at StoneX, told Quantum it has been in discussions with several firms interested in offsetting their tax exposure throughout Mexico.

"Only four or five companies pay the carbon tax using offsets...some other companies are challenging the state (tax)," said Nicastro, adding that the carbon market landscape is complicated in the country due to a multitude of schemes.

Eduardo Piqueiro, a carbon market expert at Mexico2, says market liquidity is bound to increase with many companies looking to sell 'carbon neutral' products to the US, which is Mexico's largest export market.

"We do see a lot more schemes developing in the shape of taxes, a carbon neutral seal provided by different governments or voluntarily achieved by companies, that's definitely the way forward for Mexico," he told Quantum.

In total, nine Mexican states are in the process of or have already adopted a carbon tax, out of 32.

They include Querétaro, Zacatecas, Yucatán, Durango, Mexico State, Sonora, Guanajuato and others.

Tax levels differ widely, from $2 to $31 in the case of Querétaro, although Piqueiro sees them converging over time.