Mexico Weighs Uncapped Carbon Offsets Ahead of 2027 ETS Compliance Launch
Environment ministry officials are considering dropping the 10% offset ceiling entirely, a decision that reshapes compliance cost exposure for roughly 90 regulated corporate groups.
Mexico is considering removing the ceiling on carbon offsets in its emissions trading system entirely, Diana Guzman, director of climate change mitigation and adaptation policies at the environment ministry, said in comments reported by Carbon Pulse on Thursday (2026-09-24). The proposal would allow companies to cover any share of their compliance obligations with offset credits rather than surrendering regulated allowances.3
That would be a significant departure from the pilot program, which limited offset use to 10% of annual emissions. Guzman was direct: "We are considering [offsets] to be of open compliance, meaning that it would not be closed at 10%." Officials have also suggested the ceiling could reach 100% for hard-to-abate sectors during the system's early years, a position Guzman confirmed is still under active consideration.3
The ETS, with a tentative 2027 compliance start, covers around 300 installations belonging to roughly 90 corporate groups. CO2 is the system's anchor greenhouse gas, and the inclusion threshold sits at 100,000 tonnes of annual emissions. Public and private sector stakeholders are still finalizing how allowances will be distributed and what formal role offsets will play, Carbon Pulse reported.3
During the pilot phase, those installations voluntarily surrendered 235 million freely allocated allowances in 2025, a practice expected to carry into the compliance period. The pilot capped offset use at 10%. Removing that limit would substantially change the economics: regulated entities with access to cheap credits would face limited commercial pressure to reduce emissions directly, particularly in the early compliance years when abatement investment decisions tend to be made.3
Enforcement design is also unsettled. Proposals for Phase 1 include cutting a facility's next allowance allocation by 10% for verification or surrender failures, alongside monetary penalties of MX$3.3 million to MX$5.6 million, equivalent to roughly $190,000-$320,000. Those figures are modest for large industrial emitters, and their deterrent effect in a market where offsets may face no ceiling has not been independently assessed.3
Offset quality has proved difficult to police in established markets. Bloomberg reported on May 24 (2026-05-24) that 30 Chinese dry-gas projects were invalidated after claiming to avoid 2.1 million tonnes of CO2, roughly equivalent to the annual emissions from around 500,000 cars. The episode illustrates the verification burden that comes with liberal offset eligibility, a challenge Mexico's design process has not yet publicly resolved.1
Mexico's offset framework will also bear on the country's engagement with international Article 6 mechanisms. The International Emissions Trading Association has proposed a hybrid Article 6 model for Brazil that would allow credit exports while retaining 50% of mitigation outcomes domestically, a design that could serve as a reference point for offset policy elsewhere in Latin America. Mexico has not indicated whether it is considering a comparable approach.2
The unresolved offset ceiling is the most material design variable facing the 300 regulated installations ahead of 2027. Guzman confirmed the process is active but not complete. An uncapped approach would keep compliance costs contained in the near term — the 235 million allowances surrendered under the pilot give some sense of the obligation's scale — while deferring pressure on industrial emitters to invest in actual emissions reductions. How the offset decision is made will signal more about the system's environmental ambition than any of the penalties currently being floated.3