On September 1, 2025, Colombian President Gustavo Petro introduced a global finance bill to Congress. The bill featured major reforms to the nation’s carbon tax, reshaping both its structure and its purpose.
If approved, the bill would nearly double the carbon tax while cutting the use of voluntary offsets by 40%. Although designed to boost Colombia’s budget, the measure would also shift funds away from environmental programs and redirect them into the national treasury.
Colombia's Carbon Tax Structure
Colombia introduced its Carbon Tax in 2017, becoming the first South American nation to implement such a measure, alongside Chile. The tax applies to all producers, importers, and distributors of fossil fuels. After its most recent adjustment in 2023, the rate was set at COP 18,829 (approximately USD 4.75). It is indexed to inflation and increases by 1% annually, bringing the current rate to COP 27,398 (about USD 6.90).
A defining feature of Colombia’s framework is the use of offsets from the voluntary carbon market (VCM). Companies can currently cover up to 50% of their taxable emissions with VCM credits, a cap introduced in 2022 following President Petro’s election (previously, offsets were permitted up to 100%).
To qualify, credits must have a vintage within five years of the emissions being offset and be verified by recognized third parties. Eligible frameworks include the CDM, Verra’s VCS, Gold Standard, Cercarbono, ColcX, Biocarbon Registry, and GHG Clean Projects. Credits must also be registered with ReNaRe, Colombia’s official domestic registry and, more importantly be issued from Colombian projects.
Proposed Changes to the Carbon Tax
The proposed changes target four key aspects of the carbon tax:
- Tax rate: The rate would rise sharply from COP 27,398 (USD 6.89) in 2025 to COP 42,600 (USD 10.62) in 2026, representing a 55% increase.
- Annual growth: Currently indexed to CPI plus a 1% annual rise, the tax would instead grow at CPI plus 2% under the new framework.
- Use of funds: At present, 80% of proceeds go directly towards climate mitigation. The proposal would cut this share to 45%, with much of the remainder redirected into the national budget.
- Offsets: The cap on VCM credits would fall to 30% of taxable emissions, down from the current 50%. This marks another tightening after the reduction from 100% to 50% introduced shortly after Petro’s inauguration.
The Proposed Bill’s Implications
In 2023, Colombia’s carbon tax covered roughly 32% of the country’s greenhouse gas emissions. At that time, about 35 million tonnes of CO2 could be offset. Over the past year, nearly 45% of taxable emissions were offset through VCM credits.
Colombian projects on the VCM largely rely on the Colombian Carbon Tax. In 2025, over two third of Colombian credits were disclosed as being retired in the context of compliance requirements for the carbon tax. Notably, 95% of Cercarbono’s Colombian retirements in 2025 were retired for the carbon tax. A 20 percentage point reduction in the amount of credits allowed could significantly disrupt the market within the country, particularly regarding Cercarbono credits..
The proposal has drawn sharp criticism. Opponents argue that it prioritizes fiscal revenue over environmental policy. While the tax rate itself will rise and be paid more often in cash (given the lower use of offsets), revenues will also be redirected away from climate action programs into the national budget.
In response, Assocarbono (the country’s carbon market association) issued a public statement calling the bill a major setback for environmental policy, warning that it undermines climate action in favor of fiscal goals.
Next Steps
Debate on the bill is expected to begin in the Colombian Congress by mid-September, though no formal vote has yet been scheduled. If passed, the measure would have wide-ranging implications for the VCM in Latin America, with significant effects on registries, project developers, and other market participants.
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