Environmental Taxes in Mexico
Ecological, environmental or green taxes, aim to impose fiscal charges on individuals or companies engaged in activities that harm or could harm the environment. Their goal is also to discourage environmentally negative activities. Considering the increasing effects of climate change, the government has strengthened its implementation of policies incorporating these so-called “ecological” taxes. These taxes serve to regulate and generate funds for environmental protection.
In Mexico, green taxes primarily target companies whose operations have a negative impact on the environment, covering sectors such as chemicals, oil, mining, manufacturing, and energy generation. Historically, environmental taxation began in the 1970s with the enactment of the Federal Law for the Prevention and Control of Environmental Pollution. However, it wasn’t until the 2000s that more precise fiscal policies were implemented to combat environmental pollution.
As a historical note, these ecological taxes are commonly known in economic doctrine as Pigouvian taxes, proposed by the English economist Arthur Cecil Pigou. The rationale behind assigning a price to polluting activities lies in their classification as a “negative externality” in economic theory. This means they are activities that adversely affect society and are based on the principle of “polluter pays.”
Application in the Federal and State Fiscal Framework
At the federal level, environmental taxes are governed by the Ley de Impuestos Generales de Importación y Exportación, which includes provisions for taxing carbon emissions and other pollutants. These taxes are calculated based on the quantity of greenhouse gases emitted, incentivizing companies to adopt cleaner technologies.
State governments have taken a more tailored approach, introducing specific taxes aligned with their regional environmental challenges. As of 2024, fifteen states, including Mexico City, Querétaro, and Nuevo León, have implemented environmental taxes. These taxes often target carbon dioxide emissions, industrial waste, and water pollution, reflecting local priorities.
Sectors That Contribute the Most to Pollution
The three primary sectors responsible for the highest emissions in Mexico are:
- Energy Sector: Contributing approximately 55% of total greenhouse gas emissions, this includes oil and gas production, electricity generation, and fuel combustion.
- Transportation: Accounting for 25% of emissions, driven by the reliance on fossil fuels for vehicles.
- Industrial Sector: Representing 15% of emissions, with significant contributions from cement, steel, and chemical production.
These sectors collectively highlight the urgency of adopting cleaner energy sources and more efficient practices to reduce their environmental footprint.
Natural Gas as the Best Solution
Natural gas presents a compelling alternative to traditional fossil fuels, offering multiple environmental and economic benefits:
- Lower Carbon Emissions: Natural gas emits up to 30% less CO2 than oil and up to 50% less than coal.
- Reduced Air Pollutants: It virtually eliminates sulfur dioxide (SO2) and particulate matter, improving air quality.
- Energy Efficiency: Natural gas provides a higher energy yield per unit, making it a cost-effective solution for industries.
By transitioning to natural gas, businesses not only reduce their tax liability under environmental regulations but also contribute to the overarching goal of a cleaner, more sustainable Mexico.
Recommendations for Industrial Stakeholders
To maximize the benefits of environmental taxes and promote sustainable practices, the following steps are recommended:
- Education and Awareness: The government should invest in educating industrial stakeholders about the importance and benefits of environmental taxes, emphasizing their role in combating climate change.
- Incentivizing Adoption: Tax credits and subsidies should be offered to companies that adopt cleaner technologies and reduce emissions.
- Technological Upgrades: Industries must invest in modern technologies, such as LNG infrastructure, to align with environmental regulations and achieve long-term cost savings.
- Collaboration: Partnerships between the government, private sector, and environmental organizations can drive innovation and foster a culture of sustainability.
Conclusion
Environmental taxes in Mexico are more than just a fiscal policy; they represent a collective effort to safeguard the planet. By adopting Liquefied Natural Gas (LNG) and other sustainable practices, industries can reduce their environmental impact while complying with tax regulations. However, success hinges on collaboration and proactive measures from all stakeholders. Together, we can create a cleaner, healthier future for Mexico and the world. With the global push towards decarbonization, LNG has become a key ally in mitigating environmental impacts while enabling businesses to adapt to these fiscal measures.
By the Commercial Deputy Director, Marcela Gastelum from Énestas – Raw Materials and Fuels.
