In Ecuador, the Constitution of the Republic of Ecuador (CRE) establishes special rules regarding nature, natural resources, biodiversity, natural heritage, and environmental services. In this context, the enactment of the Technical Standard for the Authorization, Registration, Traceability, and Transfer of Authorized Mitigation Outcomes (ARTTRAM) is particularly significant. The regulation seeks to organize the country’s participation in carbon markets without disregarding the applicable constitutional limits. This is especially relevant for companies implementing renewable energy self-generation projects, energy efficiency initiatives, or clean technologies, as such activities may generate emission reductions with climatic, regulatory, and potentially economic value.
1. Constitutional Framework for Environmental Services
There is a regime of non-appropriation and state regulation governing the powers of use, production, exploitation, and regulation of environmental services.
This clarification is essential for understanding carbon markets in Ecuador. The purpose is not to allow private appropriation of nature, ecosystems, or the environmental services they provide. Rather, what is regulated is the possibility of recognizing, registering, and eventually transferring a specific outcome: the quantified reduction, avoidance, removal, or capture of greenhouse gases.
In other words, the object of the market is not the environmental service itself, but the mitigation outcome derived from a measurable, verifiable, and traceable human activity. This distinction makes it possible to reconcile private participation with state stewardship and the constitutional prohibition against the appropriation of environmental services.
2. What Changes with ARTTRAM?
ARTTRAM establishes the framework applicable to the authorization, registration, traceability, accounting, international transfer, use, retirement, cancellation, and reporting of mitigation outcomes generated within Ecuadorian territory.
The regulation does not transform every sustainable project into a carbon credit. Nor does it allow any company to freely declare that its emission reductions are transferable. Rather, it establishes the conditions under which a mitigation outcome may be legally recognized.
In this regard, ARTTRAM introduces an important distinction between an environmentally beneficial activity and a regulated mitigation outcome. A company may install solar panels and reduce its energy consumption; however, for that reduction to have value within a carbon market, it must comply with technical requirements and, where applicable, obtain governmental authorization.
3. How Can These Benefits Be Accessed and What Are the Requirements?
For example, if a company replaces energy consumption from sources associated with emissions or reduces the use of diesel generators, a reduction in greenhouse gas emissions may occur. Such a reduction, if quantifiable, verifiable, and additional, could constitute a mitigation outcome.
Among other elements, the project must demonstrate the following:
- That the reduction would not have occurred in the same manner without the corresponding activity or incentive.
- That the project falls within an eligible economic sector.
- That the mitigation outcome will not be claimed twice by different parties.
- The intended use of the outcome, whether for internal use, the voluntary market, a domestic scheme, results-based payments, or international transfer.
The latter scenario is the most complex. If the outcome is intended to be used internationally, it will be necessary to determine whether a Letter of Authorization issued by the National Environmental Authority is required. Without such authorization, the outcome should not be presented as internationally transferable where the regulation so requires.
5. Matters to Consider
The first risk for companies is assuming that every emission reduction automatically qualifies as a tradable carbon credit. Such an assumption may create contractual, regulatory, and reputational liabilities.
The ownership of the mitigation outcome must also be carefully assessed. In self-generation projects, multiple parties may be involved, including the property owner, the owner of the solar system, the financier, the operator, the energy consumer, and potentially a purchaser of mitigation outcomes. If these elements are not contractually regulated from the outset, disputes may arise regarding who has the right to register, use, or transfer the outcome.
In addition, double counting must be avoided. The same reduction cannot be simultaneously claimed by the company, the Ecuadorian State, and an international purchaser for the same purpose. This is precisely one of the reasons why traceability and registration play a central role within the new framework.
ARTTRAM creates a significant opportunity for companies implementing renewable energy, clean technology, waste management, transportation, building efficiency, energy efficiency, sustainable agriculture, and other decarbonization initiatives. However, this opportunity should be understood as one that arises from the proper legal, technical, and accounting structuring of the mitigation outcome.
Is your company implementing clean technology or renewable energy projects? Our team can help you assess whether your project has the potential to generate mitigation outcomes and how to structure it legally under Ecuador’s new carbon market framework.
