Country
Assessment
Mexico is working on an Emissions Trading System (Sistema de Comercio de Emisiones) Test Program. In 2018, an amendment to the General Law on Climate Change (under SEMARNAT) established an emissions trading system that promotes emission reductions at the lowest possible cost. A three-year trial program began January 1, 2020. Operators of the installations associated with the development, production, transport, and distribution of hydrocarbons can participate in the trading scheme. Only operators of those facilities with annual emissions of 100,000 tonnes of carbon dioxide or more can participate in the trial program.
The Emissions Regulations provide for the Commission to conduct competitive auctions in which third parties can bid for gas currently being disposed via flaring, venting, or waste. The NGFCP announced the first auction in November 2018. The NGFCP was relaunched in October 2022, to advance the government’s goal of achieving zero routine flaring within this decade. The NGFCP 2022 has been restructured to offer flare sites to technically and commercially competent third-party investors through a competitive and transparent bid process. The auction was closed in late March 2023 after several extensions of the submission deadline.
Carbon dioxide emissions from the oil and gas sector are covered under the EU ETS Act No. 99 Relating to Greenhouse Gas Emission Allowance Trading and the Duty to Surrender Emission Allowances, 2004 , which entered into force in 2005. Norway joined the EU ETS in 2008.
Oman has two associated gas recovery and utilization projects under the CDM, both operated by Occidental of Oman and hosted by the MEM, representing the government. The first project, at Block 9, was registered in December 2012. The recovery of associated gas that would otherwise have been flared or vented started in 2010. Over the crediting period (December 31, 2013–December 30, 2020), about 2.1 billion cubic meters (bcm) of associated gas was recovered, with an average methane content of about 70 percent. The project had reduced emissions by about 4.2 million tonnes of carbon dioxide equivalent (tCO2e) by the end of 2020. The second project, at the Khamilah oil field area in Block 27, was registered in August 2020. Over the crediting period (August 3, 2020–August 2, 2030), about 2 bcm of associated gas is estimated to have been recovered, with an average methane content of about 78 percent. The project is expected to reduce emissions by about 0.43 million tCO2e annually.
No evidence of market-based incentives was found. However, since the 1970s, the development of the MGS and its ongoing expansion is driven by the economic value of captured associated gas.
All UKCS oil and gas facilities have been subject to EU ETS requirements. Following Annex I of the EU ETS Directive 2003/87/EC, 2003 , these requirements cover offshore installations that emit carbon dioxide from combustion installations with a maximum thermal input exceeding 20 megawatts, including flares. Operations were provided free allocations if their compliance with the EU ETS put them at a competitive disadvantage in the global market (that is, if they were not able to reflect the cost of compliance in the price of their goods and services and lost market share as a result), a situation known as carbon leakage. As such, the EU ETS did not affect GHG emissions from flaring or most other oil and gas industry activities until recently. In 2021, Phase IV of the EU ETS started. The changes in Phase IV exclude installations associated with gas extraction, including flaring, from the carbon leakage list. Accordingly, flare installations will receive only 30 percent of their emissions allocations free until 2026, after which the free allocation will decline to 0 percent by 2030. The United Kingdom played an integral role in the development of Phase IV, and the UK ETS is expected to follow the EU ETS closely. However, the cap is 5 percent lower than the United Kingdom’s share of Phase IV cap to support the net-zero target of the government. It is also possible that the two trading schemes will be linked in the future, although changes to the way the United Kingdom implements the ETS are possible.
Per NDIC Order 24665, 2014 , an operator is allowed to accumulate credits for LNG utilization, compressed natural gas (CNG) utilization, and volumes of gas captured during the most recent six months in excess of the current gas capture goal. The NDIC grants the use of credits to meet monthly gas capture target only under certain circumstances: right-of-way issues, midstream outages, federal regulations, safety issues, delayed access to electricity, and possible reservoir damage. Credits cannot be transferred to another operator. Unused credits expire after six months. Most transport contracts are for interruptible service, which means a producer may be denied the ability to transport natural gas in a gathering system if the system is constrained, such as when a shortage of processing capacity causes downstream bottlenecks. In November 2019, the NDIC issued an order to encourage firm (that is, uninterruptible) service agreements, which would guarantee access to pipelines.