Chile

Implementation period: 2024-2027 Funding amount: US$5 million Window: Implementation

Chile has demonstrated a strong commitment to carbon pricing and carbon markets. This is reflected in its climate commitments, or Nationally Determined Contributions (NDC 3.0), which calls for their strategic use to mobilize financing and accelerate climate action. Chile has made significant progress in operationalizing carbon pricing policies, building on its 2017 introduction of a carbon tax. A domestic offsetting mechanism linked to the carbon tax has been operational since 2024. The Framework Law for Climate Change, adopted in 2022, establishes a legal basis for developing cap-and-trade systems to support compliance with the country’s NDCs and its Long-Term Strategy. The mitigation plan for the energy sector mandates an Emissions Trading System (ETS) pilot to be implemented in the sector.  

Chile is also positioning itself as a regional leader in international carbon markets under Article 6 of the Paris Agreement, with multiple bilateral agreements in place.

Objectives & Activities

The PMI Program in Chile supports the country in implementing and enhancing its carbon pricing instruments by providing targeted technical assistance, analytics, and capacity building across several priority areas:

• Regulatory and Technical Strengthening of the Domestic Offsetting Mechanism: Support the roll-out of the mechanism by offering detailed advice on regulations, developing methodologies, and strengthening the required Information Technology (IT) infrastructure and institutional capacity.
• Design of an Emissions Trading System (ETS) Pilot in the Energy Sector: Support the development of an energy sector ETS pilot, including design options and impact assessment modeling, aligned with sectoral mitigation plans.
• Instrument Interaction Analysis for Policy Coherence: Deliver analytics on the interaction between the existing carbon tax and offsetting mechanism, and prospective cap-and-trade systems to support optimal policy design.
• Article 6 Strategy and Governance Development: Assist the Inter-ministerial Working Group in finalizing a national strategy for participation in international carbon markets under Article 6 and enhance regulatory readiness for future implementation.
• Carbon Market Infrastructure Development: Provide technical and IT support for the development of a national carbon market registry, ensuring readiness for both domestic and international transactions.
• Exploration of Regional Carbon Market Linkages: Evaluate opportunities for international cooperation and potential carbon market linkages in Latin America, strengthening South-South exchange and exploring opportunities for regional collaboration.
• Stakeholder Engagement and Capacity Building: Deliver dissemination activities and training sessions to enhance awareness and understanding of the carbon offsetting mechanism and future ETS development among key stakeholders.

Additional Resources

• NDC Chile, Update 2025 (Spanish)
• Framework Law for Climate Change (Spanish)