In June 2022, Chile published its “Framework Law on Climate Change”, which sets a 2050 carbon neutrality goal, as well as a description of the national, regional, and local climate policies that Chile will use to achieve it. These include Chile’s NDC, Long-Term Climate Strategy, Climate Change Financial Strategy, and sectoral mitigation and adaptation plans. The Long-Term Climate Strategy, presented in October 2021, specified that Chile would set an increasing trajectory for its carbon price to 2050 between 2025 and 2030, while also specifying that Chile seeks to have an integral and efficient carbon pricing portfolio to deliver coherent and predictable price signals. Chile has had a carbon tax in place since 2017.
Article 14 of the Law mandates the Ministry of Environment to specify GHG emission limits for a range of sources, based on a system of emission standards set by technology, sector, or activity. GHG emission limits may be set for individual installations or groups of these. If set in aggregate, GHG emission limits could be akin to a cap. Furthermore, according to Article 15, regulated entities who perform better than their standard are to have their surplus emission reductions certified, which may then be used by other regulated entities for compliance with their respective emission standards. Furthermore, GHG reduction or removal certificates from projects implemented within Chile may also be used for compliance with the emission standards. A dedicated registry would track the projects and transfers.
The specific design of the system of GHG emissions limits is not yet defined and could be implemented either as an ETS or as a tradable performance standard.
Moreover, Article 37 provides a basis for the development of market, fiscal, and financial-based instruments to internalize the environmental, social and economic costs of GHG emissions, and realize the benefits of abatement activities, risk reduction, and climate change adaptation. This article could lay the foundation for a future ETS.
Chile is set to continue its cooperation with the World Bank. Work is expected to focus on a roadmap for implementing the changes to the carbon tax, as well as on deepening the understanding of the role of carbon pricing in carbon neutrality, including Article 6 and the development of the cap-and-trade system contained in the draft Framework Law.
Emissions & Targets
BY 2025: Peak GHG emissions (updated NDC)
BY 2030: GHG emissions level of 95 MtCO2e. Reduction of at least 25% of total emissions of black carbon, as compared to 2016. Carbon budget 1,100 MtCO2e between 2020 and 2030 (updated NDC).
The current GHG MRV system primarily serves the implementation of the carbon tax. Current regulations determine that operators of boilers and turbines of 50 MW or more of thermal capacity are required to monitor and report emissions through government-approved methodologies. Participation thresholds were changed by a tax reform approved in 2020. With these changes, the carbon tax will apply to entities that emit more than 25,000 tCO2 and/or 100 tonnes of particulate matter due to combustion processes per year from 2023 onwards. Current methodologies are expected to be updated in the future to incorporate all possible regulated fixed sources.
The Chilean government has developed a Unified Atmospheric Emissions Report (Reporte Único de Emisiones Atmosféricas) under the Pollutant Release and Transfer Register for entities regulated under the tax and other norms. This has streamlined various reporting needs and aims to improve the quality of the information provided. This new system, developed with support from the PMR, is considered a basis for Chile to advance to the development of a Unified GHG Report, which will help evaluate Chile’s National Climate Policy.
The government has also developed a National Mitigation Actions Registry (Registro Nacional de Acciones de Mitigación –RENAMI). This registry will allow the implementation of the offset scheme approved in the carbon tax reform and would constitute a key element for other instruments under consideration, such as the scheme proposed in the “Framework Law on Climate Change” or Article 6 of the Paris Agreement.
VERIFICATION: Verification procedures are administered by the Superintendency of the Environment under the Ministry of the Environment (no third-party verification is currently used). Once the offset scheme is operating, the implementation of a third-party verification process is planned to issue credits.
Ministry of Energy Ministry of Environment Ministry of Finance Ministry of Foreign Affairs Ministry of Agriculture Inter-Ministerial Committee on Climate Change PMR Chile (Precio al Carbono Chile)