Chile adds Climate Action Reserve to Green Tax Emissions Offset System’s recognized certification programs

Chile’s Ministry of the Environment (MMA) recently recognized the Climate Action Reserve (CAR) as the sixth External Certification Program (ECP) of the Green Tax Emissions Offset System (SCE).

As the SCE continues to advance in its implementation, ECPs expand the alternatives available for validating projects and emissions reduction certificates intended to offset taxed emissions.

The SCE established in September 2023 under Supreme Decree No. 4 of 2023 of the MMA (DS 4/2023), operates under the Green Tax, which requires major polluters to pay for the carbon emissions and other pollutants they release.

The ECPs set the methodologies and standards under which project holders may request the evaluation and validation of their projects and reduction certificates. The five other ECPs recognized before CAR are as follows:

• Clean Development Mechanism of the United Nations Framework Convention on Climate Change (UNFCCC) (Exempt Resolution No. 1420/2023),
  
  
• Verified Carbon Standard of Verra (Exempt Resolution No. 1420/2023),
  
  
• Gold Standard for the Global Goals of Gold Standard Foundation (Exempt Resolution No. 1420/2023),
  
  
• Cercarbono Certified Carbon Standard (Exempt Resolution No. 7120/2024), and
  
  
• Biocarbon Standard (Exempt Resolution No. 7120/2024).

The MMA’s recognition of CAR

CAR is a non-profit organization based in Los Angeles, operating as an internationally recognized registry of greenhouse gas reductions and removals. It is one of the registries authorized to administer offset projects under California’s Cap-and-Invest program.

Recently, the MMA partially recognized CAR as an ECP, validating its methodologies, protocols, and quantification tools, as well as the work of its accredited verification entities. This allows holders of projects certified under CAR to request the evaluation and validation of their projects and reduction certificates under the SCE.

This recognition does not imply the automatic approval of its projects or certificates for the SCE. Projects must meet the requirements established in DS 4/2023, including that emission reductions be additional, measurable, verifiable, and permanent, among other requirements set forth in Chilean regulations.

Partial scope and exclusions

The recognition has a partial scope, establishing the exclusion of renewable electricity generation projects that:

• Have emissions reduction certificates issued before September 29, 2023, in respect of reductions generated between 2020 and 2023; and
  
  
• Use technologies that represent more than five percent of the installed capacity of the National Electric System.

However, the foregoing exclusion will not apply, among others, to projects intended for self-consumption; projects connected to an electric system with a capacity of less than 1,500 kilowatts (kW); projects connected to an electric system with an installed capacity of less than 200 megawatts (MW) and with net capacity of 50 MW or less; hybrid systems with net capacity of 15 MW or less; or certain generation facilities with surplus capacity of up to 9,000 kW.

For projects not linked to agriculture, forestry, and other land uses, only reductions attributable to the first 21 years of the project’s operation will be considered additional.

Of particular note to the energy sector: Energy storage systems, by themselves, are not considered electricity generation projects for these purposes.

What this recognition means for companies

For companies subject to the Green Tax: The recognition of CAR expands the alternatives available to offset taxed emissions and enables diversification of portfolios and suppliers. In addition, it helps reduce the risk of a shortage of eligible credits.

For project developers and managers: Recognition of CAR may provide an additional avenue to monetize emissions reductions through certification and subsequent validation in Chile. In addition, CAR reported that it is developing a protocol for landfills in Chile that would establish criteria to quantify and verify reductions associated with biogas capture and destruction systems. If implemented, the protocol could facilitate additional methane-reduction projects in the waste sector.

With six ECPs recognized to date, Chile’s continued expansion of its recognized certification programs reflects a broader regional trend toward the use of carbon-pricing instruments and offset mechanisms.

For further information, please contact the authors.

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