Colombia has published the long-awaited regulations for its national emissions trading system, and it did so at the last possible moment. On 7 August the government issued two decrees regulating the cap-and-trade ETS, known as the PNCTE, and the country’s broader carbon markets framework. On 14 August, the left-wing administration that drafted them leaves office. For buyers watching Latin American offset supply and for developers weighing compliance-linked demand in the region, Colombia now has a complete carbon pricing rulebook on paper, with its real-world test about to begin under a different political management.
Eight Years From Mandate to Rulebook
The ETS has been a legal obligation since 2018, when Colombia’s Climate Change Management Law (Law 1931) created the PNCTE and mandated its full operation by 2030. Progress since then has been slow and contested: as recently as January, market watchers were describing the ETS proposals as stalled amid political infighting, and the government’s own 2026 legal calendar had to schedule four separate carbon pricing instruments plus Article 6 rules.
The two new decrees close that regulatory gap. One regulates the ETS itself, the other the carbon markets framework that connects it to the rest of the country’s carbon pricing architecture. According to Carbon Pulse’s analysis of the design, the result is a system that struggles to reconcile competing policies and capacity constraints, with outcomes that will emerge in real time as regulators, covered entities and offset suppliers start to operate under the new rules.
Three Instruments, One Design Problem
The core difficulty is that Colombia is not building a carbon price from scratch. It is layering an ETS on top of instruments that already exist and already interact.
The national carbon tax has been in force since 2017, initially covering gas and petroleum-derived fuels, and was extended to coal in 2025. Attached to it is a domestic offsetting mechanism that lets regulated entities cancel up to 50% of their tax liability with carbon credits. That mechanism has been the main source of compliance-linked demand for Colombian offsets, and it is a key reason the country developed one of the more active project pipelines in Latin America.
The design question the decrees had to answer is how an emissions cap sits alongside a tax with an offset escape valve. If entities can shift between tax payment, offset surrender and allowance trading, the relative prices of the three routes, not the cap alone, will determine actual abatement. A generous offset channel can hollow out allowance demand; a tight one can strand project pipelines that were built to serve the tax mechanism. How the new rules calibrate that boundary is the single most important detail for market participants, and it is exactly where observers see unresolved tension.
The Capacity Constraint Is Real
An ETS is only as credible as its emissions data, and Colombia’s measurement infrastructure is still being built. The National Emissions Reporting System (ROE), the facility-level data backbone any cap-and-trade system needs, is in rollout. The ETS registry, auctioning and trading platforms are under development with support from the World Bank’s Partnership for Market Implementation, a US$5 million program running from 2024 to 2027 that also covers pilot phase design and an independent evaluation before full operation.
There is one genuinely encouraging data point. This week Colombia became the first country to submit its second Biennial Transparency Report under the Paris Agreement, reporting net greenhouse gas emissions of 276.7 million tonnes of CO2e in 2024. Being first in the BTR2 queue does not prove facility-level readiness for an ETS, but it shows a national MRV apparatus that is functioning better than the ETS delays would suggest.
What It Means for Buyers and Developers
For offset buyers, the immediate question is continuity. The carbon tax offset channel remains the demand engine for Colombian credits in the near term, and the decrees define how that channel evolves as the ETS phases in. Projects serving tax-liable entities face a transition window in which rules could tighten or broaden; contract terms written now should anticipate regulatory drift rather than assume the current 50% offset provision is permanent.
For project developers, the ETS is a medium-term demand story, not an immediate one. With a pilot phase ahead of the 2030 full-operation mandate, compliance allowance demand is years away, but entities that expect to be covered will start managing exposure earlier, and that typically pulls forward voluntary and pre-compliance offtake. Colombia also sits inside a wider regional pattern: industry voices argue that Latin America has the natural capital to lead global carbon supply, but must convert it into high-integrity projects capable of attracting investment. A functioning domestic compliance market would give that conversion a local anchor.
What to Watch
Three markers will show whether the decrees become a market or remain paper. First, the incoming government’s posture: the design was completed under an outgoing administration, and the pilot timeline depends on the successor treating the PNCTE as inherited infrastructure rather than a rival’s project. Second, the operational milestones, specifically the ROE rollout and the ETS registry, since a pilot cannot run on data systems that do not yet exist. Third, the treatment of offsets inside the ETS perimeter, which will decide whether Colombia’s existing project pipeline gains a second demand channel or loses its first one.
Colombia has spent eight years moving from legal mandate to regulation. The next government inherits a complete rulebook, an unfinished data infrastructure, and a market that will form its expectations in the first months of the transition.
