By Rory Carroll

SAN FRANCISCO (Reuters) - California Governor Jerry Brown and Mexican environmental officials signed a pact on Monday aimed at reducing greenhouse gas emissions, an agreement that could eventually expand the market for carbon credits.

The six-page memorandum of understanding calls for cooperation in developing carbon pricing systems and calls on the partners to explore ways to align those systems in the future.

“California can’t do it alone and with this new partnership with Mexico, we can make real progress on reducing dangerous greenhouse gases,” said Governor Brown.

California operates a carbon cap-and-trade system, which sets a hard limit on the carbon output from large businesses and requires them to either reduce emissions or purchase credits to meet the target. The state is on track to meet its goal of 1990 emissions levels by 2020. 

California plans to link its nearly two-year-old market with a similar effort in the Canadian province of Quebec, but officials are eager to expand its reach further to keep carbon prices stable and enhance the program’s environmental impact.

Mexico is the world’s 11th largest emitter of greenhouse gases, with electricity generation accounting for the largest share of output, followed by transportation and industry.

In June 2012, then-President Felipe Calderon signed into law a goal to cut Mexico's emissions 30 percent by 2020 from projected business-as-usual levels. Lawmakers are considering implementing a carbon tax to help achieve the goal.

“Mexico and California have a long and rich history of environmental cooperation, and recognize each other as strategic partners in coping with climate change challenges and protecting and preserving our natural resources,” said Rodolfo Lacy, undersecretary of Mexico’s Ministry of Environment and Natural Resources.

The agreement, which came on the first full day of Brown’s trade and investment mission to Mexico, also called for collaboration on fire emergency response along the shared 136-mile border, improving air quality, and strengthening fuel efficiency in vehicles, including trucks carrying freight.

Last year, the Brown Administration signed similar agreements with the governments of the Canadian province of British Columbia and the U.S. states of Oregon and Washington. None of those partners have yet implemented a law putting a price on carbon.

The administration also signed a pact with the leader of China’s National Development and Reform Commission that called for sharing information related to carbon trading, the first time China signed such an agreement with a U.S. state.


(Reporting by Rory Carroll; Editing by David Gregorio)