Chile, getting ready to impose a carbon tax on industry from 2017, could eventually replace it with a national emissions trading scheme once it improves its MRV system, the country’s environment minister said Wednesday.

Last year, Chile passed South America’s first carbon tax law as part of broader reforms, and will charge any power installations that generate more than 50 MW a levy of $5 for every tonne of CO2 they emit.

But Francisco Javier Pinto Pardo said that as the country builds its emissions monitoring, verifying and reporting infrastructure, it could revise its strategy.

“By improving our MRV system it will be possible to scale up the tax or to develop emissions trading, if the (government) considers it appropriate,” he said.

Pardo added that while emitters would not be allowed to use carbon offsets initially as a way of complying with the tax, the idea was not being ruled out.

“After the full implantation (of the tax) it will be a possibility, but not now.”

Chile’s carbon tax, from which thermal plants fuelled by biomass are exempt, will also help the country reach its target to cut GHG output by 20% below 2007 levels by 2020.

Pardo told Carbon Pulse that the country had initially considered launching South America’s first national carbon market, but opted to go with a tax as a quicker way to raise revenue.

“The political context changed. Chile is imposing several reforms, and one of them is education, so the government needed a rise in revenues to fund this and one of the instruments to do this was green taxes,” he said on the sidelines of the Carbon Expo conference in Barcelona.

Chile’s carbon tax is expected to cover around 27% of the nation’s carbon emissions, and is estimated to raise around $160 million for government coffers.

By Mike Szabo – mike@carbon-pulse.com