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Chile: gradual transition between only tax in 2017 and carbon market in 2023.

Today is Wednesday, January 31, 2024.

See the interesting case of Chile, which over the years has gradually expanded its focus and regulations on greenhouse gas emissions. And at the end of last year, it took an interesting step towards a carbon market. Let's see how.

"As of 2017, considering the emissions generated in that year and to be paid for the first time in 2018" (Article 14 of Law No. 20,780) Chile created a tax of five dollars per ton on "emissions into the atmosphere of particulate matter (PM), nitrogen oxides (NOx), sulfur dioxide (SO2) and carbon dioxide (CO2), produced by establishments whose emission sources, alone or together, emit 100 or more tons per year of particulate matter (PM) , or 25,000 or more tons per year of carbon dioxide (CO2).” (Article 8).

Among other things, Article 8 also established very interesting formulas in the case of PM, NOx or SO2 emissions, considering:

  • Tij = Tax rate per ton of pollutant “i” emitted in municipality “j” measured in US$/Ton.

  • CSCpci = Social cost of pollution per capita of pollutant "i".

  • Pobj = Population of the municipality "j".

  • CCAji= Air quality coefficient in municipality “j” for pollutant “i”, depending on whether it is “saturated zone” or “latent zone”.

As a reference and comparison, Chile has 346 municipalities ("comunas") while Brazil has 5,568.

It is also determined that the Chilean Ministry of the Environment annually publishes a list of establishments that must report their emissions in accordance with the regulations, and maintains a public register of auditors authorized to participate in this entire process.

In 2018, Law 21,210 amends Article 8 above, among others, establishing the possibility of “offsetting all or part of the taxed emissions, for the purposes of determining the amount of tax payable, through the implementation of projects of reducing emissions of the same pollutant, provided that said reductions are additional, measurable, verifiable and permanent".

In 2023 came decree No. 4 from the Chilean Ministry of the Environment, regulating Article 8 regarding projects to reduce greenhouse gas emissions, which "can only be compensated through the implementation of emission reduction projects carried out in national territory" (i.e. Chile).

Initially only considered projects and methodologies approved or developed by the Ministry of the Environment, until December 19, 2023, a few days after COP-28, when Resolution No. 1420 of the same Ministry of the Environment recognized methodologies from external certification programs in its domestic process for emission reduction and compensation projects. Specifically:

In Chile, most carbon credits come from the energy sector and less from the forestry sector.

The Chilean Electric System is well diversified, across a series of energy sources and technologies, including: solar-PV (25%), wind (14%), diesel oil (12%), coal (11%), natural gas (11%), reservoir hydraulics (10%), flow hydraulics (10%) and others.

Click on the image below for this recent Resolution No. 1420 (in Spanish) from the Chilean Ministry of the Environment.


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“Nothing in life is to be feared, it is only to be understood. Now is the time to understand more, so that we may fear less.”

“I am among those who think that science has great beauty”

Madame Marie Curie (1867 - 1934) Chemist & physicist. French, born Polish.

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