ICAP is very pleased to welcome Chile as the 8th jurisdiction with ICAP observer status. Mr. Diego Gonzalo Pardow Lorenzo, Minister of Energy, has signed the ICAP Political Declaration, making Chile an ICAP observer as of 6 December 2023.
Chile is committed to use carbon pricing instruments on its path to carbon neutrality by 2050. The country implemented a carbon tax in 2017, initially set at USD 5 per tCO2. In line with Chile’s “National Energy Policy to 2050”, the price should rise to USD 35 per tCO2 by the end of the decade. Notably, in 2023 an offset mechanism was integrated into the carbon tax framework, demonstrating an innovative use of market mechanisms.
Looking ahead, Chile is preparing to design and implement a cap-and-trade system for the energy sector. The country’s “Framework Law on Climate Change”, enacted in June 2022, lays the foundation for developing this system, as well as a separate carbon market instrument, akin to a tradeable performance standard. The Ministry of Energy is receiving support from the World Bank’s Partnership for Market Implementation to develop these instruments. .
Becoming an ICAP observer enables Chile to share and benefit from the experiences of ETS policymakers all over the world, supporting its efforts to implement robust and effective carbon markets.
For further information on Chile’s climate policies, please visit the website of the Ministry of Energy.
