The Dominican Republic is developing a pilot Emissions Trading System (ETS) to support its environmental governance goals and meet net zero targets under the 2021 Climate Change Law. ESG BROADCAST shares key takeaways.
The Ministry of Environment and Natural Resources of the Dominican Republic has initiated the design of a national Emissions Trading System, positioning the country among a growing group of Latin American nations leveraging market-based mechanisms to reduce greenhouse gas (GHG) emissions. This move stems directly from Article 129 of the Climate Change Law No. 94-20, which mandates the establishment of carbon pricing instruments to support national decarbonisation.
The ETS design process is being carried out in partnership with the United Nations Framework Convention on Climate Change (UNFCCC) Regional Collaboration Centre, with technical and institutional support from the World Bank’s Partnership for Market Implementation (PMI). This effort marks a significant policy shift toward market-driven climate governance, enabling regulated sectors to cost-effectively manage their carbon footprint.
The pilot ETS will focus initially on sectors with high emissions intensity—primarily energy and industrial processes—covering selected installations based on emission thresholds, reporting capabilities, and mitigation potential. A legal and regulatory framework is currently being drafted, including provisions for cap-setting, allowance allocation, monitoring and verification (MRV), and compliance enforcement.
The initiative will include a national registry, data management systems, and sectoral benchmarks to ensure transparency and accountability. Stakeholder consultations are underway, with businesses, civil society, and subnational authorities engaged to co-design rules that reflect both environmental integrity and economic competitiveness.
In line with global good practices, the Dominican Republic’s ETS will feature both fixed allowances and auctioning mechanisms, with a portion of revenue directed towards adaptation and low-carbon transition funds. The system is also being designed to ensure compatibility with future international carbon markets, enabling potential linkages under Article 6 of the Paris Agreement.
By launching this pilot, the Dominican Republic aims to test operational readiness, refine institutional arrangements, and assess market behaviour before scaling the ETS to a broader economy-wide coverage. Lessons from the pilot will inform future regulatory reforms and sectoral expansion plans through 2030.
The ETS initiative is embedded in the Dominican Republic’s Nationally Determined Contributions (NDCs) and long-term climate strategy, supporting efforts to achieve a 27% reduction in GHG emissions by 2030 compared to business-as-usual scenarios.
Strategic significance lies in how the ETS supports environmental legislation while offering regulated industries a flexible pathway to decarbonise. For ESG stakeholders, it introduces a new compliance architecture and signals investment readiness for climate-aligned sectors.
ESG BROADCAST will continue monitoring the updates related to this topic. Stay tuned to be updated on the related policy and pivotal regulatory shift.
