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Ruling on the constitutionality of state “green taxes” in Zacatecas - decision

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On December 31, 2016, the State of Zacatecas, Mexico published its 2017 Treasury Bill, Expenditure Bill and Revenue Bill. The Treasury Bill established a tax on greenhouse gas emissions (GHG) produced by stationary sources.  A corporation dedicated to beer production sued the state legislature, challenging the constitutionality of the Treasury Bill of the State of Zacatecas. Specifically, the corporation argued that the State of Zacatecas was invading the national Congress’s powers by introducing the tax. On October 31, 2017, the Second District Judge in the State of Zacatecas agreed that state authorities could not tax GHG emissions without overstepping on Congress’s power. Particularly, the judge pointed to the fact that the Mexican Constitution reserves imposition of taxes on beers to federal authorities. Thus, it declared the taxes unconstitutional. State authorities appealed the decision to the appellate Collegiate Tribunal, and the Collegiate Tribunal sent the case to the Supreme Court for review. 

On February 20, 2020, the Supreme Court concluded that States were not prevented from implementing taxes on GHG emissions since, as a general rule, Federal and State authorities have joint powers to establish taxes unless the Mexican Constitution reserves a specific area to the federation. The Court noted that the tax on GHG emissions under analysis was not a tax on beer production but rather on the emission, deposition, or storage of substances in the atmosphere. The Court also noted that the State had acted pursuant to its responsibilities under Mexico’s General Law on Ecologic Equilibrium and Environment Protection and the General Law on Climate Change.
 
Responding to other arguments from the corporation, the Court noted that the tax intended to force polluters to internalize the costs of their GHG emitting activities, and this was a valid implementation of the “polluter pays principle.”  The Court also dismissed the corporation’s argument that the UNFCCC only called developed countries to take action on GHG emissions. In this sense, the Court noted that Mexican authorities have a duty to address the effects of climate change. Finally, the Court dismissed the argument that the tax was arbitrary since it only applied to GHG emissions and not to other gas emissions that also pollute the atmosphere. To do so, the Court carried out a proportionality analysis to conclude that the distinction made by the State was justified. 

Ruling on the constitutionality of state “green taxes” in Zacatecas

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Policy instruments are techniques or tools used by governing authorities to promote certain policies in order to achieve predetermined goals. Put simply, instruments are how a government tries to achieve its goals, with this taxonomy being focused on national policy instruments.

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Groups  of people who are adversely affected by climate change or the response to it

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Renewable energy means all forms of energy produced from renewable sources in a sustainable manner.

Fossil fuel is a generic term for non-renewable energy sources such as coal, fossil gas, and oil (including crude oil, and petroleum products), that can be used for electricity and heat generation. Fossil fuels are hydrocarbons formed from pressurised and heated organic material buried over millions of years.

Molecules in the atmosphere that play a key role in the greenhouse effect by trapping heat radiating from Earth’s surface.

Area of the economy in which actors engage in identical or related activities.

In human systems, the process of adjustment to actual or expected climate change and its effects, in order to moderate harm, increase resilience or exploit beneficial opportunities. In natural systems, the process of adjustment to actual climate change and its effects; human intervention may facilitate adjustment to expected climate change and its effects.

The management and allocation of funds, assets and investments to meet various objectives

Any compulsory, unrequited payment to the government levied on corporations or individuals. This can be for environmental reasons, such as introducing a Carbon tax to set a price that emitters must pay for the greenhouse gases they emit.

Terrestrial means "of the earth" and relates to the risks to ecological system that includes all living organisms and their interactions within land-based environments, such as forests, grasslands, and deserts.

Actions or measures to adapt terrestrial systems to climate change.

This sector includes firms and individuals offering specialised expertise in fields such as law, accounting, consulting, science and engineering.

A drought is an extended period of unusually dry weather marked by a significant and sustained lack of precipitation, falling below a specific threshold over a large area for more than a month

Energy derived from biological compounds that are renewable due to their short life cycle within the carbon dioxide cycle.

Activities involving the catching, processing, and selling of fish for food, recreation, and industry.

This sector provides medical services, manufactures medical equipment, and develops pharmaceuticals to maintain and improve health.

A tax advantage is an economic benefit applied to certain accounts or investments that are, by law, tax-reduced, tax-deferred, or tax-free. This can apply to investments in areas such as green energy projects or the agricultural sector, where tax advantages can help manage financial risks.

Activities of businesses and institutions that provide financial services and products to individuals and organisations.

Actions to adapt human health, healthcare systems and well-being to climate change.

Air pollution involves harmful contaminants in the air, affecting both indoor and outdoor environments. It can lead to health issues like respiratory diseases and heart problems, and climate impacts such as global warming. Pollutants can damage plants, trees, habitats, and water bodies like rivers and lakes.

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Activities of industries that extract natural resources, such as mining, oil, and gas, for commercial use.

Financial support to help individuals manage the effects of unexpected events, securing their livelihoods and increasing the resilience of people and businesses to the changing climate. It’s especially vital in developing regions where everyday risks, climate-related weather extremes, or crop failures can push people into poverty. Without insurance, people may have to resort to selling assets or cutting consumption to cope with losses.

Work that is productive and delivers a fair income, security in the workplace and social protection for all, better prospects for personal development and social integration, freedom for people to express their concerns, organize and participate in the decisions that affect their lives and equality of opportunity.

Oil is a combustible liquid fossil fuel composed mainly of hydrocarbons, occurring as crude oil and refined into petroleum products such as petrol, diesel and kerosene.

Actions or measures to adapt freshwater systems to climate change.

A financial institution that manages a country's currency and can promote climate-related initiatives through green monetary policy and other means.

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People who are less able to respond to the effects of climate change due to having limited financial or physical assets

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This sector involves the distribution, treatment, and conservation of water resources.

woman and genders outside of the gender binary

People whose health, both mental and physical, makes them more vulnerable to the effects of climate change

This sector involves activities to move goods and people, alongside the storage of products.

Fossil gas, commonly known as natural gas, is a fossil fuel consisting chiefly of methane with smaller amounts of other hydrocarbons and trace gases, found in underground deposits.

A long-lived, colourless gas, chiefly emitted from fossil fuel combustion, deforestation and cement production.

This sector involves the wholesale and retail selling of goods.

A subsidy is a direct or indirect payment to individuals or businesses, typically provided as a government cash payment or a specific tax reduction.

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People with different national or cultural traditions from the dominant population

Using laws and the legal system more broadly to protect vulnerable entities

Activities involving the management, development, and sale of property assets.

The activities of industries that transforms raw materials into finished goods through industrial processes.

The activities of industries involved in the production, distribution, and sale of energy, including electricity, gas, and renewables.

This sector creates and distributes information and entertainment through television, radio, print, and digital platforms.

The release of heat-trapping gases, primarily from human activities such as burning fossil fuels, agriculture and industry.

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Slow onset events evolve gradually from incremental changes over many years or from increased frequency or intensity of recurring events. As defined in the Cancun Adaptation Framework (2010), slow onset events include risks and impacts from rising temperatures, desertification, biodiversity loss, land and forest degradation, glacial retreat, ocean acidification, sea level rise, and salinization.

Climate change can have a range of impacts on technological system. Extreme weather events can cause infrastructure failures like power outages or damage to roads and bridges, as well as the impacts from waste following natural disasters. Human activities also cause technological impacts, such as the risks posed by oil spillage and leaks.

A target to reduce the prevalence of a greenhouse gas over a specific time frame

Activities that involve the cultivation of crops and raising of livestock for food, fibre, and other products essential for human life and industry.

Coal is a combustible sedimentary rock formed from carbonised plant matter, rich in carbon and hydrocarbons, and occurring in several main types including hard coal and brown coal.

Either money or something of monetary value is transferred between two or more organisations, people or countries.

Social protection systems consist of policies that help people manage social risks in order to prevent poverty and maintain decent incomes and living standards

A loan is a policy instrument where funds are provided to a borrower with the expectation of repaying the principal plus interest.

Actions or measures to adapt freshwater, coastal and marine systems to climate change.

A potent, short-lived greehouse gas, largely released from livestock, fossil fuel extraction and waste management.

Activities of government agencies and institutions that provide public services, enforce laws and manage public resources.

Extreme weather refers to events where a weather variable exceeds (or falls below) a threshold. Meaning it is significantly different from the average or usual weather pattern.

This sector involves activities that impart knowledge and skills to individuals, including formal schooling, vocational training and educational support.

Ruling on the constitutionality of state “green taxes” in Zacatecas - decision

Target

Policy instrument

Risk

Impacted group

Just transition

Renewable energy

Fossil fuel

Greenhouse gas

Economic sector

Adaptation/resilience

Finance