Review of Environmental Taxes in Mexico
Environmental taxes are fiscal instruments designed to internalize the costs derived from negative externalities affecting the environment. Their purpose is twofold: on the one hand, to dissuade polluting practices; on the other, to generate public resources for environmental protection measures.
These mechanisms make it possible to modify the behavior of producers and consumers by reflecting in prices the possible environmental effects of the taxed activities. They also encourage innovation and competitiveness of companies through incentives towards more efficient, sustainable and circular models.
Main objectives of environmental taxes
The purpose of environmental taxes is to:
– Internalize ecological costs in economic decisions.
– Promote energy savings and the use of renewable energies (or sometimes less polluting fuels, such as natural gas).
– To discourage polluting consumption or production.
– Encourage sustainable technological improvements in companies.
– To generate revenue for environmental projects.
– To protect the environment against climate change.
According to organizations such as EUROSTAT, the OECD and the European Commission, an environmental tax is one whose base is directly related to a physical unit that has a negative impact on the environment, such as the use of fossil fuels, emissions or waste.
In Mexico, the General Law of Ecological Balance and Environmental Protection (LGEEPA) establishes in articles 21 and 22 that the authorities must design and implement economic instruments that encourage compliance with environmental policy objectives.
The mechanisms recognized by this law are divided into:
– Fiscal: such as taxes and stimuli to guide economic behavior.
– Financial: credits, bonds, insurance and trusts for investment in sustainable practices.
– Market: facilities for granting or renewing environmental authorizations, concessions and permits.
An emblematic case is the Environmental Tax on Greenhouse Gas Emissions (GHG) in Mexico City. This levy applies to industrial, commercial or service companies that emit more than one monthly ton of CO₂ equivalent (CO₂e), including gases such as methane (CH₄) and nitrous oxide (N₂O). Its calculation is governed by the Tax Code of the CDMX and guidelines of the Official Gazette.
The tax seeks to strengthen transparency in the use of the resources collected through Measurement, Reporting and Verification (MRV) systems.
Any level of government proposing or reforming a carbon tax should include in the bill:
– The tax base
– The initial tax rate and its growth trajectory.
– The use and destination of the revenues collected
– The definition of institutions responsible for the MRV system
It is advisable to start with a low or moderate rate, with progressive increases in the short and medium term. In addition, it is suggested that state authorities focus regulation at “downstream” points in the production cycle, such as final consumption, rather than at the initial (“upstream”) stages, in order to minimize undue tax burdens and maximize the impact on emissions reduction.
Critical analysis and areas of opportunity
- Although the SCJN has established general criteria on the constitutionality of state environmental taxes, each enactment of new laws on the matter or amendments to them can be reviewed and subject to judicial scrutiny. The above, through the promotion of a means of constitutional control such as the indirect amparo trial. This is a permanent right of individual taxpayers.
There are already precedents of challenges such as the case of the emissions tax in Mexico City, as well as in Zacatecas and Querétaro, which have resulted in the unconstitutionality of certain components of environmental taxes, precisely because they do not comply with the principles of reasonableness, proportionality and tax equity. On the other hand, entities such as Aguascalientes, Tlaxcala, Nayarit, Durango, Yucatán, Colima, Campeche and Baja California Sur have not yet issued this type of taxes, which could give rise to controversies in this matter. Any new tax must strictly comply with the principles of legality, tax proportionality and, increasingly urgently, with a specific environmental benefit purpose.
- Most state laws that have established environmental taxes lack clear, specific and mandatory provisions linking the destination of the resources collected to concrete environmental mitigation or protection measures. This omission weakens the basis of the tax as an instrument with an ecological purpose and generates doubts about its constitutional legitimacy.
By not being used in a transparent and verifiable manner for environmental objectives, these taxes run the risk of being considered merely for tax collection purposes, which could contravene the principles of proportionality, tax equity and specific use of public expenditure. Consequently, a more rigorous scrutiny of their constitutionality is necessary, i.e., a more rigorous scrutiny of the tax system.
- The parameters established by the federal entities for the determination and payment of environmental taxes are highly heterogeneous, both in their taxable bases and in their rates, obligated parties and measurement and verification mechanisms. This lack of uniformity generates distortions in the market, creates unequal incentives between regions and creates legal uncertainty for companies operating in multiple jurisdictions.
In the long term, these regulatory inconsistencies can be counterproductive, both for environmental efficiency and for the economic competitiveness of the regulated sectors. Therefore, it is imperative to develop common technical and methodological standards at a national level to guide the creation of these taxes under sound scientific criteria, such as those derived from the Intergovernmental Panel on Climate Change (IPCC) or other recognized sources, thus providing regulatory certainty, territorial coherence and alignment with international commitments.
At ECIJA Mexico, we offer comprehensive advice for the analysis, compliance and implementation of environmental taxes, both for governments and companies, seeking legally sound and environmentally effective models.
ECIJA Mexico
socios.mexico@ecija.com
(+52 55) 56 62 68 40
www.ecija.com
