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Jáuregui y Del Valle

CLIMATE CHANGE LAW

This Informational Notice refers to the enactment of the General Law of Climate Change (Ley General de Cambio Climático) (the “CC LAW”) published in The Official Daily of the Federation on June 6, 2012.

Mexico will now be the fifth country in the world having a law of this type.[1]

1. Purview of the CC LAW

The CC LAW seeks, inter alia, to regulate adaptation[2] and mitigation[3] actions to address the adverse effects of climate change as well to regulate emissions of greenhouse gases (the “Gases”)[4] and greenhouse compounds (the “Compounds”).[5] It also sets forth as one of its purposes to promote the transition of Mexico to a competitive, sustainable and low carbon emissions economy.[6]

2. Emission Reduction Targets

In accordance with the CC LAW, one of the targets is to reduce fifty percent of the emissions by 2050, vis-à-vis, those emitted in 2000. The CC LAW clarifies that the target espoused by it is subject to the implementation of an international regime that provides financial and technological mechanisms from developed countries.[7]

This target will be reflected in the first publication of the document containing the National Strategy of Climate Change and after ten years as from said publication it will be revised.[8]

3. Actions and Considerations for Emission Reductions

In order to reach the emission reduction target, the CC LAW mandates that the federal and local governments of Mexico and the Federal District implement financial, fiscal and market instruments, to provide incentives for private entities and individuals.[9]

As part of the above-mentioned instruments the Climate Change Fund (Fondo para el Cambio Climático) (the “CCF”) is implemented and will substitute the current Mexican Carbon Fund (Fondo Mexicano de Carbono). The CCF resources will be destined, inter alia, to the following activities:[10]

a) projects related to energy efficiency, development of renewable energies and second-generation biofuels;

b) elimination and use of fugitive emissions of methane and gas associated to the exploitation of carbon mineral deposits;

c) the development of sustainable transportation systems; and,

d) the purchase of certified emission reductions regarding projects registered at the National Registry of Emissions or any other approved by international agreements ratified by the United Mexican States.

With regard to fiscal instruments, the CC LAW considers a priority to grant incentives toward research and implementation of:

a) mechanisms, equipment and technology to avoid, control or reduce emissions;

b) energy efficiency systems, development of renewable energies and low carbon emissions technologies; and,

c) activities regarding adaptation to climate change and mitigation of emissions.

Regarding market instruments, the Inter-Secretarial Commission on Climate Change has powers to enact a voluntary system of emissions trading where it will be possible to carry out transactions related thereto in other countries or international markets.[11]

4. The National Registry of Emissions

4.1 Obligation to measure and report Gases and Compounds

Assuming that “what cannot be measured cannot be controlled,” the CC LAW has established the obligation to measure and report emissions to the National Registry of Emissions (Registro Nacional de Emisiones) (el “NRE”). The specifications about which will be the emission sources compelled to carry out such report, types of gases and compounds to be reported, and methodologies for calculation thereof will be established in the regulations of the CC LAW to be enacted at a later date.[12]

Reporting of emissions to the NRE will be used to establish the National Inventory of Emissions.

Such reporting obligation may be deemed to be an additional and important cost for individuals and companies whose businesses are obligated to report. Nevertheless, said costs are variable according the activities and size of the emissions source.[13]

According to a research carried out in 2010 in the United Kingdom Department for Environment, Food and Rural Affairs, 155 companies experienced benefits from measuring and reporting emissions and achieved cost savings, brand consolidation and communications with stakeholders. The majority of the companies interviewed considered the reporting costs as non-significant from an economic impact stand point.[14]

The obligation to measure and report emissions is expected to benefit companies dedicated to the manufacture of instruments used to provide services of emissions’ measuring and calculation.

4.2 Registration of projects and activities regarding Gases and Compounds

Entities and individuals carrying out projects or activities with the purpose of mitigating and reducing emissions will be able to register the results information with the NRE, including transactions regarding emissions trading, whether on a national or international level.[15]

5. Surveillance and Compliance

The Office of the Attorney General of the Federal Environmental Protection (Procuraduría Federal de Protección al Ambiente) (the “PROFEPA”) will be in charge of verifying compliance with the CC LAW. The PROFEPA will be able to impose economic sanctions of up to MxPs $ 623,300 regarding delinquency to duly and timely file the information requested by the Ministry of the Environment and Natural Resources (Secretaría de Medio Ambiente y Recursos Naturales).[16]

6. New Governmental Entities

6.1 The National Institute of Ecology and Climate Change (Instituto Nacional de Ecología y Cambio Climático) (the “NIECC”) is implemented and will substitute the National Institute of Ecology (Instituto Nacional de Ecología) (the “NIE”).[17] The NIECC will be in charge of carrying out the functions of the NIE in addition to project research and technical and scientific support related to climate change.[18] The NIECC will also incorporate the National Inventory of Emissions.[19]

6.2 The Inter-Ministerial Commission on Climate Change (the “ICCC”) and the Council of Climate Change are implemented to substitute the current Commission and Council. The ICCC has powers to establish an emission trading system.[20] At the same time, it will continue to approve projects that reduce emissions under the scheme of the Clean Development Mechanism and emission reduction projects linked to other instruments recognized by Mexico.[21]

The Assessment Coordination is implemented and will be composed by the General Director of the NIECC and six climate change experts. The Assessment Coordination will have powers to assess the national climate change policy.[22]

1 http://saladeprensa.semarnat.gob.mx/index.php?option=com_content&view=article&id=4866:mexico-segundo-pais-en-desarrollo-con-una-ley-de-cambio-climatico&catid=50:comunicados&Itemid=110

2 Measures and adjustments, in human or natural systems, as a response to climate stimuli, whether projected or actual, or their effects, that might moderate the damage, or use their beneficial aspects.

3 Implementation of policies and actions aimed to reduce sources emissions, or enhance sinks of greenhouse gases and greenhouse gaseous compounds.

4 The Gases are those gas components of the atmosphere, whether natural or generated by humans that absorb and emit infrared radiation. The international community recognizes as principal Gases: Carbon Dioxide (CO2), Methane (CH4), el Nitrous Oxide (N2O), Hydrofluorocarbon (HFC) and Perfluorocarbon (PFC).

5 The Compounds are greenhouse gases, their precursors and particles that absorb and emit infrared radiation to the atmosphere

6 Article 2, SectionVII of the CC LAW.

7 Transitory Article Second of the CC LAW.

8 Article 61, Second paragraph of the CC LAW.

9 Article 91 of the CC LAW.

10 Article 82 Subsections III and VII of the CC LAW.

11 Articles 94 and 95 of the CC LAW.

12 Articles 87 and 88 of the CC LAW.

13 https://www.ukmediacentre.pwc.com/imagelibrary/downloadMedia.ashx?MediaDetailsID=1833

14 Idem.

15 Article 89 of the CC LAW.

16 Articles 114 and 115 of the CC LAW.

17 Article 13 and the Transitory Articles Sixth and Seventh of the CC LAW.

18 Article 22, Subsections I and II of the CC LAW.

19 Article 22, Subsection VIII of the CC LAW.

20 Article 94 of the CC LAW.

21 Article 47, Subsection XI of the CC LAW.

22 Article 25 of the CC LAW.