From 50% to 25%: Colombia's New Government Reverses Course on the Carbon Tax Offset Cap

Colombia’s government has proposed cutting the cap on using carbon credits against the national CO2 tax from 50% to 25%, according to Carbon Pulse. President Abelardo De La Espriella’s administration put the measure forward on Thursday, just weeks after promising to remove the cap entirely. For credit buyers, project developers and investors in Colombian supply, the proposal reverses the direction the market had been expecting and shrinks the largest regulated source of demand for domestic credits.

What the bill changes

The measure sits inside the Economic Rescue Bill, filed in the Chamber of Representatives on 29 October 2026 as Bill 477 of 2026, according to Goyen Legal. The bill has 106 articles and was filed by Finance Minister Miguel Gómez Martínez. It covers corporate income tax, VAT, consumption taxes and relief with the tax authority, so the carbon tax change is one item in a much larger fiscal package.

On carbon, El Tiempo reports that the bill would reduce the rate applicable to those who certify offsets from 50 to 25 per cent. It also says the tariff would be updated annually according to changes in the Tax Value Unit (UVT). Goyen Legal lists carbon among the consumption taxes that would rise under the bill, so the headline rate increases while the offsetting allowance shrinks.

A reversal within weeks

The 25% cap contradicts what the government said in September. Environment Minister Fabio Arjona announced at Climate Week in Medellín that the government would revoke the carbon market regulation issued under the previous administration, according to El Espectador. That regulation is Decree 973 of 2026, published on 6 August, a day before President Gustavo Petro left office.

The same report says the government would ask Congress to remove the 50% limit on non-causation of the carbon tax. Arjona wanted covered companies to be able to be exempt from the whole tax. Prensa Mercosur, republishing La Silla Vacía, describes the new bill as going the opposite way: the exemption is cut further, to a 25% limit.

The tax revenue earmark disappears

Source: CarbonMeld — independent carbon credit market intelligence. Document-based quality scores and assessments across all major registries: carbonmeld.com

The bill also changes where the money goes. Today 80% of carbon tax revenue is earmarked for the environment sector, and the bill ends that allocation, according to Prensa Mercosur. Most of the money, half a billion pesos, had been assigned to pay Amazon deforestation-arc communities for keeping forests standing.

That creates a second-order effect for the market. A tax that funds conservation and a credit market that offsets it were meant to be complementary, and the bill weakens both at once. The environment ministry would lose a revenue stream and the credit market would lose part of its demand.

Why the cap matters for credit prices

The offsetting limit is the main driver of domestic demand. Prensa Mercosur cites the cut in the exemption in 2022 as one reason for an oversupply of certificates and a sharp price fall, alongside reputational risks. Mauricio Rodríguez, board president of industry body Asocarbono, said there is currently a stock of 41 million tonnes available. At a 50% exemption that stock would be used in two years, and a 100% exemption would have shortened that to one.

A 25% cap works in the opposite direction. Using the same logic, halving the cap would lengthen the time needed to absorb the existing stock, although the sources do not give a revised estimate. Developers holding unsold inventory would face weaker demand, and buyers would pay more of the tax in cash instead of settling part of it with credits.

What buyers and developers should do now

The bill is not law. As of 30 October it was at the publication and distribution stage, with four debates, conciliation and presidential approval still to come, according to Goyen Legal. The text can change at any of those steps, and the carbon provisions may be traded against other parts of the package.

For companies subject to the tax, the practical step is to model both scenarios: the current 50% cap and the proposed 25%. The annual UVT indexation means the cash cost of the tax would also rise over time, which raises the value of any offset allowance that survives.

For developers, the signal is about policy reliability. A government that promised a full exemption and then proposed the opposite within weeks gives investors little basis for pricing Colombian credits over a multi-year horizon.

What to watch

Three things will show where this lands. The first is whether the carbon provisions survive the committee stage of the bill. The second is how Asocarbono and the environment ministry respond, since Arjona had publicly backed a larger exemption. The third is whether the government publishes the replacement carbon market regulation it announced in September, which would show if the 25% cap is a fiscal measure or a new policy direction for offsets.