Colombia formalizes plans for an emissions trading system with regulatory decree

On 4 August 2026, the Colombian government published Decree 0969, establishing the regulatory framework for the country's cap-and-trade emissions trading system, the “Programa Nacional de Cupos Transables de Emisión de GEI” or PNCTE. 

The decree, signed by acting Environment Minister Irene Vélez one day before the transfer of presidential power, sets an ambitious regulatory workplan for the PNCTE implementation and marks an important step towards the formal entry into force of Colombia's compliance carbon market. The 2018 Climate Change Law first created the PNCTE and tasked the Ministry of Environment and Sustainable Development (Ministerio de Ambiente y Desarrollo Sostenible or MADS) with its implementation. 

The decree outlines the system’s design and sets the structural and operational rules for the PNCTE, though several critical parameters remain to be defined before the first phase begins. Its core provisions are:

• Implementation timeline. The decree sets a two-phase approach. From January 2027 to December 2029, the PNCTE will operate in a pilot phase aimed at testing and adjusting the system’s rules before full rollout. A second, fully operational phase will follow from January 2030 to December 2031, at which point the PNCTE will operate fully in line with the legal provisions. The system will continue beyond 2031 on the terms defined by MADS.
• Annual cap aligned with the NDC. MADS will set the number of available allowances each year, taking into account Colombia's NDC targets, the national GHG inventory, the national carbon budget and mandatory emissions reports submitted under the Obligatory Emissions Registry (Reporte Obligatorio de Emisiones or ROE). For Phases 1 and 2, the cap must be consistent with Colombia's NDC commitment to emit no more than 169.44 MtCO₂e in 2030, equivalent to a 51% reduction against the country's projected business-as-usual scenario. Beyond that point, the cap will be set in line with Colombia's updated NDC.
• Allowance allocation. Regulated entities may obtain allowances through auctions, free allocation, or by trading in the market. MADS may implement one or more of these allocation mechanisms individually or simultaneously. The decree limits the use of free allocation; it cannot represent 100% of a regulated entity's compliance obligation and may decline gradually over time. However, during the pilot phase, MADS may provide transitional flexibility on this limit through administrative acts.
• Annual compliance reporting. Regulated entities must submit an annual compliance report detailing reported emissions, the allowances surrendered, and the terms under which those allowances were acquired. Entities operating in covered sectors but below the emissions threshold must still file annual emissions reports and become regulated automatically if they exceed the threshold.
• The carbon tax will work as a price floor for allowances sold at auction. The floor price for allowance auctions will be set at the rate of Colombia’s National Carbon Tax, set by the tax authority.
• Voluntary mitigation projects will generate allowances. MADS may allocate up to 3.3% of allowances per compliance period to public or private mitigation initiatives outside the regulated entities, giving priority to public initiatives.
• Banking will be possible within phases. Allowances may be banked for use in later compliance periods, but only within the same implementation phase. When the phase ends, all the unused allowances will expire.
• Market stability reserve. The rules provide for MADS to retain a portion of allowances in each compliance period and use them for price stabilization, either through auctions or free allocation to regulated entities.
• Institutional governance. MADS will act as the authority responsible for cap-setting, allocation, auctions, market oversight, and enforcement. A Technical Committee, to be created under Colombia's Intersectoral Commission on Climate Change (CICC), will provide monitoring and advisory functions. The committee will include representatives from the Ministries of Finance, Commerce, and Environment, and the National Planning Department. ETS revenues from auctions and penalties will be channeled to the national Fund for Life and Biodiversity and fund the ETS operation.

Despite marking a significant regulatory milestone, Decree 0969 leaves several design elements to future administrative acts, some of them set to be prepared in the coming weeks:

• Covered entities and emissions thresholds still need to be defined. Decree 0969 does not specify which sectors are covered by the PNCTE or the emissions threshold above which a legal entity becomes a regulated entity. Both will be set by MADS through a separate administrative act. With the pilot phase set to begin in January 2027, and the decree requiring these definitions to be issued six months before each phase, the ministry would need to produce these definitions in the coming weeks.
• Eligibility rules for out-of-scope mitigation projects will be defined by a separate regulation. The mechanism for allocating allowances to voluntary mitigation projects will be established in a separate regulation defining eligibility criteria, quantification methodologies and verification requirements. 
• Pilot phase schedule and rulebook are due by the end of the year. MADS must publish the full implementation schedule and operational rules for the pilot phase before the end of 2026.

Next steps

Decree 0969 sets a tight implementation calendar. In the coming weeks, MADS must define which sectors are covered and set the emissions threshold, decisions that will determine who bears the compliance obligations from 2027. By the end of 2026, the ministry must also publish the Phase 1 operational schedule and the initial operational rules.

Both tasks fall to a new government. President Abelardo De La Espriella, who took office on 5 August 2026, has signaled through his environment minister an intention to review the recently issued norms, which may affect the pace and shape of secondary rulemaking.

A further constraint is data availability. The mandatory emissions reporting system, the ROE, only begins collecting data from some companies in 2027, meaning the information available for cap-setting in the pilot phase will initially be limited.