By: Staff Writer
February 6, 2026
The Economic Commission for Latin America and the Caribbean (ECLAC) said in a recent report that carbon pricing mechanisms
Climate change is one of the greatest challenges facing humanity. Keeping the rise in global temperatures below the limits set in the Paris Agreement requires GHGs to be reduced drastically, and this will entail major transformations in the way economies currently operate. Through their various instruments, carbon pricing policies are an essential element in the set of actions needed for the transition to productive, inclusive and sustainable development.
The report, “Overview of carbon pricing policies in Latin America and the Caribbean, 2025: an analysis of their effectiveness and guidelines for implementation,” also said: “Carbon pricing can be introduced as part of public policy through various alternatives, the validity and appropriateness of which depends, in each case, on the interests of decision makers, the policy to be implemented, and national and international circumstances. Although there may be different ways to classify carbon pricing instruments, the literature often distinguishes between explicit and implicit carbon prices (see diagram 1). While this document reviews each of the explicit and implicit carbon pricing instruments, it focuses on carbon taxes, tradable emissions permits, the social price of carbon, fuel taxes and fossil fuel subsidies.
It added: “In Latin America and the Caribbean, offset systems and carbon credit mechanisms are the instruments that have made the most progress in recent years. At the same time, several countries continue to roll out emissions trading systems among policies to reduce emissions, engage the private sector and streamline the financing of climate action. The use of carbon taxes remains limited in the region, and none has been created at the national level in the last two years. Mexico continues to be a special case, with several subnational carbon taxes in place alongside the national tax and emissions trading system.”
“A major challenge in implementing carbon pricing is how to define the price or rate to be charged. According to the Intergovernmental Panel on Climate Change (IPCC), to limit the temperature increase to 2 °C, carbon prices in 2030 should be between US$ 60 per ton of carbon dioxide (tCO2 eq) and US$ 120/ tCO2 eq; and, to restrict the increase to 1.5 °C, they should be between US$ 170/tCO2 eq and US$ 290/tCO2 eq.
“Nonetheless, the High-Level Commission on Carbon Prices considers that the explicit carbon price compatible with the Paris Agreement targets should already be in the range of US$ 40/tCO2 eq to US$ 80/tCO2 eq and should be between US$ 50/tCO2 eq and US$ 100/tCO2 eq by 2030. Although approximately 80 carbon pricing instruments are being implemented around the world (World Bank, 2025b), few are in the latter range and, with the exception of Uruguay, they are all applied in high-income countries.”
The report added: “Carbon pricing policies in Latin America and the Caribbean date back to 2014, when several countries introduced new taxes to discourage activities that generated GHG emissions as part of tax reforms.
“Measures of this type, initially implemented in Mexico, gained momentum after the adoption of the Paris Agreement and the GHG emissions reduction commitments that countries made as they submitted their nationally determined contributions.
“In addition to interest in decarbonizing economies, the application of carbon pricing also hastens technological change that helps to modernize production systems and make processes more emissions-efficient. A third motivation for the use of carbon pricing is to generate tax revenue in contexts of resource scarcity, whether or not it is allocated to climate objectives.”