Chilean Companies Ramp Up Use of Carbon Offsets in 2024

Chilean companies dramatically increased their use of carbon offsets in 2024, taking advantage of the country’s carbon tax system to meet emissions targets more affordably. According to the Ministry of Environment, over 4.4 million carbon credits—worth more than $22 million—were retired last year, a steep jump from just 260,000 in 2023, the tax’s first year in operation.

Lush and dense Valdivian rainforest landscape, Chile. AI generated picture.

Under Chile’s carbon tax, firms that emit more than 25,000 tonnes of CO₂ equivalent per year must either pay a levy of $5 per tonne or use verified carbon credits from local projects to offset their emissions. For many, offsets are becoming the preferred route.

‘The results demonstrate the growing interest in this instrument, which generates significant benefits for the country and its inhabitants,’ said Maximiliano Proaño, Chile’s Undersecretary of the Environment. ‘The emissions offset system not only allows progress in climate change mitigation, but also promotes a sustainable development model that generates positive impacts on people's quality of life.’

In total, nine companies used credits in 2024. Energy firm Guacolda led the way with more than 2.5 million tonnes of CO₂ offset, followed by Kelar’s gas plant with 627,368 tonnes. French energy giant Engie also used offsets at two of its facilities, contributing over 800,000 tonnes combined.

Most of the credits came from ten domestic projects. The Loma Los Colorados landfill gas project was the top source, supplying nearly 2.4 million credits. Other offsets were issued by wind farms, hydroelectric stations (including one run-of-river facility), and another landfill gas development.

To qualify, offset projects must be located in Chile and certified under one of several approved standards—Verra, Gold Standard, the UN’s CDM, or Colombian registries Biocarbon and Cercarbono.

However, growing demand is now putting pressure on supply. Many credits that meet the requirements are being sold at higher prices on the voluntary carbon market, making it more economical for some companies to pay the carbon tax instead.

The challenge became evident in February, when the first credit auction under the tax scheme was called off due to lack of available offsets. ‘People are talking to the government to increase the price, but nothing changing for now,’ said one institutional investor close to the issue. ‘The price is too low and they will probably end up with a lot of Cercarbono credits, just like Colombia did in its own carbon tax scheme.’

As demand continues to climb, the market for high-quality offsets in Chile and beyond is poised for growth. Companies and investors looking to stay ahead in this evolving space should start exploring their options now.