The Environmental Justice Dimension of the Mexican Emissions Trading System

Emissions trading systems have the potential of increasing air quality given that GHG emissions are often co-produced with local pollutants such as NO_x, SO_x, and Particulate Matter (PM). Can emissions trading systems exacerbate or alleviate environmental justice concerns in emerging economies? According to the U.S. Environmental Protection Agency, Environmental Justice is achieved when no group is disproportionately affected by an environmental policy or phenomenon. The main objective of this chapter is to estimate the pollution burden faced by marginalized neighbourhoods in Mexico. This is relevant for Mexico given the beginning of the pilot program of the Mexican Emissions Trading System (ETS) and the country’s history of income inequality and poverty. Using linear regression and two-way fixed effects methods, we found that the highest emitters regulated under the ETS are located near poor populations. We estimated a 5% CO₂ emissions-reduction scenario corresponding to national targets and associated NO₂ emissions to that scenario. We find that this scenario is consistent with a decrease in the exposure of NO₂ pollution for the most marginalized neighbourhoods. This chapter also discusses other potential sources of environmental injustice that could result after the beginning of the ETS and the potential to address them.