Skip to content

The Importance of Forest Carbon Projects in Mexico

In this Expert Focus article, Carlos Escoto and Lucia Manzo, partner and associate in Galicia's Environmental and ESG practice, discuss the role of forest carbon projects in meeting Mexico's Paris Agreement obligations, as well as the opportunities and difficulties that social communities (rural co-operatives) face in implementing them.

Published on 28 June 2022
Carlos Escoto Chambers Expert Focus Author
Carlos Escoto
Ranked in 1 department in Chambers Latin America 2022
View profile
Lucia Manzo

Carbon markets in Mexico

Mexico was the first developing country to submit its climate action plan to the United Nations Framework Convention on Climate Change (UNFCCC) and, in 2015, announced its Nationally Determined Contribution (NDC) under the Paris Agreement of 22% greenhouse gas (GHG) mitigation (36% conditional upon international support) by 2030 compared to business as usual.

The forestry sector has issued more mitigation credits than any other.

In order to comply with its GHG reduction commitments, Mexico has implemented, among other policies, the following mechanisms to guarantee effective and verifiable GHG reduction:

  • A mandatory Emissions Trading System (ETS) regulated under the General Climate Change Law (2018 amendment), which is based on the cap and trade principle, establishing an emissions cap for certain economic sectors which is to be reduced every year and which allows firms to acquire allowances equivalent to one ton of CO2.
  • A voluntary carbon market in which entities or individuals can choose to buy carbon offsets, offset credits or carbon-offset credits, from independent verifiers such as Verra, Climate Action Reserve (CAR), Gold Standard and Plan Vivo.

Before the implementation of the ETS, Mexico had experience in emissions reduction projects, which has come initially from its participation in the Clean Development Mechanism of the Kyoto Protocol, under which Mexico hosted projects producing Certified Emission Reductions (CER).

Forest carbon projects in Mexico: building capacity to address deforestation

Traditional offset project types include reforestation and improved forest management, methane gas capture and destruction, renewable energies, energy efficiency and fuel switching.

From an international perspective, the forestry sector has issued more mitigation credits than any other, equivalent to approximately 42% in emissions reduction in the last five years.

Over 70% of the territory of Mexico is natural terrestrial vegetation, and forest carbon projects have sold at least one million offsets over the years to voluntary buyers, for a total value of USD9.6 million, according to Ecosystem Marketplace.

Around 70% of the forest and tropical forest lands in Mexico are in the hands of ejidos/comunidades.

In light of recent international developments underlining the key role of forest ecosystems in climate change mitigation and adaptation, national governments are increasingly adopting legislation aimed at regulating forest carbon rights.

In particular, federal and state governments have created incentives and built capacity to address deforestation and halt forest degradation, as well as promoting carbon conservation in and enhancement of forest ecosystems through sustainable forest management.

The main actions seen in the past ten years are:

  • the process that the National Forest Commission (CONAFOR) has been leading to develop and implement a national strategy to reduce GHG emissions from deforestation and forest degradation in Mexico (REDD+); and
  • the development of a project standard (NMX-AA-173-SCFI-2015) whose main purpose is to ensure integrity and consistency in the accounting of all forest carbon project activities in Mexico.

Social communities as contributors to the development of forest carbon projects in Mexico

Land tenure in Mexico is comprised of private, social and public property. Social property is comprised of ejidos/comunidades (rural co-operatives) and represents more than 50% of the Mexican territory.

Around 70% of the forest and tropical forest lands in Mexico are in the hands of ejidos/comunidades, and about 3,000 social communities participate in forest-related activities. Of the total population living in forest areas, about 5 million are indigenous.

Article 27 of the Mexican Constitution recognises ejidos/comunidades with legal capacity (personalidad jurídica) and regulates community land rights, establishing mechanisms for sustainable land use.

It is important that the federal and state governments implement or subsidise programmes in ejidos/comunidades in order to promote in their members an in-depth knowledge and understanding of the local environment.

Social property is owned by the ejidos/comunidades rather than by their individual members, and is divided into three types:

  • common use land communal land protected by the community;
  • parcels productive land that has been divided up and the rights to which have been assigned to individual members for productive activities; and
  • solares and for human settlements.

The decision-making in ejidos/comunidades takes place through the assembly and the comisariado, which is the representative body in charge of implementing the decisions made by the assembly.

Main challenges to forest carbon projects in Mexico

During the last decade, social communities have progressively invested time and resources in structuring their relationships with the forest. Investment in forest carbon projects has the potential to improve the quality of life of rural communities, including indigenous communities, often considered to be marginalised groups.

Despite the aforementioned, the development of forest carbon projects in Mexico faces many challenges when developed with ejidos/comunidades.

Land disputes

Article 5 of the General Law for Forest Sustainable Development states that forest resources belong to the ejidos/comunidades, indigenous groups, individuals and others. Therefore, CONAFOR acknowledges that the carbon credits generated belong to the landowners.

It is common to see, in ejidos/comunidades, disagreements and conflicts or disputes regarding property limits and ownership; however, to be part of a forest carbon project it is required to have undisputed legal ownership over the land.

Quorum difficulties

The assembly, as the highest ejido/comunidad body where decisions are made, should approve the development of forest carbon projects in common use land.

The CAR Forest Protocol has not established a specific quorum required to approve these type of projects, however, the NMX requires a two-thirds majority vote of the assembly.

In practice, achieving a qualified majority on an assembly is, in some cases, an impossible task.

The main reasons for this are political/social differences between assemblies members and/or their representative bodies or because ejidatarios/comuneros leave their communities in search of better economic opportunities in other places.

Depopulation in ejidos/comunidades

The general base line for forest carbon projects is of 20 (NMX) to 30 (CAR Forest Protocol) years. This requires the commitment of the ejidos/comunidades for long periods, involving different generations.

The young people that integrate the ejidos/comunidades are a key element in the hoped-for future success in Mexico of forest consservation and the development of forest carbon projects.

However, one of the main problems that the ejidos/comunidades are currently facing is that young people see few economic opportunities within their own communities, and decide to migrate to bigger cities in the country or the United States of America.

The importance of subsidising programmes in keeping ejidos/comunidades intact and effective

With respect to the last two items, it is important that the federal and state governments implement or subsidise programmes in ejidos/comunidades in order to promote in their members an in-depth knowledge and understanding of the local environment and forest trends.

These solutions will have positive economic, biodiversity and social impacts in the ejidos/comunidades and will allow the development of more forest carbon projects.

Galicia Abogados

11 ranked departments
Learn more about the firm's ranking in Chambers Latin America 2022
View firm profile

Chambers Global Practice Guides Corporate Governance 2022

Learn more about global developments in corporate governance