Sectoral greenhouse gas offsets can provide the same incentives for emissions reductions as a carbon tax or a cap-and-trade program, with a focus on rewards rather than costs. This paper develops a pilot analysis of such offsets using relatively transparent quantitative methods to estimate a business-as-usual (BAU) emissions path for the gas and basic petrochemical subsidiary of Mexico’s national oil company, Pemex. This BAU path, in turn, may be used as a basis for monetizing emissions reductions via bilateral or international offset transactions, with potentially low transaction costs. Overall, the analysis finds that a 10 percent emissions reduction below baseline would yield about US$40 million in additional revenue over a 13-year period for this Pemex subsidiary at a price of US$10 per ton of carbon dioxide (CO2). Larger emissions reductions, higher offset prices, or expansion to other, larger company units could generate correspondingly higher revenues.
Sectoral Offsets in the Mexican Oil and Gas Industry: Developing a Credible Baseline via Econometric Methods
Mexico’s national oil company serves as a case study to demonstrate that substantial potential exists to use sectoral offsets to achieve cost-effective emissions reductions. But developing a viable baseline against which to credit reductions is key.
Working Paper by Richard D. Morgenstern, Alexander Egorenkov, and Daniel Velez-Lopez — Aug. 20, 2015Download
Richard D. Morgenstern
Workshops & Seminars
Economic Volatility in Oil Producing Regions: Exploring Impacts and Public Policy Responses
Examining regional impacts of oil volatility and potential avenues for federal intervention to support producing communities
Testimony and Public Comments
Testimony to the US Senate Committee on Energy and Natural Resources: The Electricity Sector in a Changing Climate