You can also call us on +44 (0)20 7170 7000, or select 'Live Chat' to chat with one of our advisors

Mexico’s energy reform challenges in the context of Nationally Determined Contributions on Climate Change

Posted by Soffia Alarcon-Diaz | 26 January 2017 | Viewpoint
Mexico

On March 27th 2015, Mexico became the first developing country to present its nationally determined contribution (NDC)[1] to the United Nations Framework Convention on Climate Change (UNFCCC), establishing an unconditional goal[2] to reduce carbon emissions by 22 percent by 2030 and black carbon by 51 percent over a baseline representing a business-as-usual growth trajectory. Mexico also reaffirmed the goal of generating 35 percent of its electricity from clean energy sources by 2024.

In 2013, Mexico’s greenhouse gas (GHG) emissions rose to 633 million tonnes of carbon dioxide equivalent, with transport and electricity generation accounting for almost half of the total emissions.

 

Figure 1. Mexico’s Emissions in 2013

Source: SEMARNAT, 2015

 

Even though Mexico’s NDC will enter into force in 2020, meeting the country’s commitments will require major transformations of the transport and electricity sectors, at the same time as addressing some significant legal, regulatory and institutional challenges. Looking at the electricity sector, in 2015 Mexico generated 310 GWh in total, of which 63 GWh were generated by clean sources (see Figure 2). So there is no doubt that accelerating investment in clean energy will be a hugely important part of the shift to a low carbon model of economic development.

 

Figure 2. Sources of electricity generation in Mexico in 2015 (GWh)

 

Source: SENER, 2015

 

Energy reform has been enacted with the intention of reducing energy costs and introducing innovations into a market that had been monopolised by a single company. However, the deployment of clean energy will require solving a number of the following challenges:

  • Introducing a carbon price. As electricity consumption will continue to increase throughout the next decade in Mexico (see Figure 3), along with associated GHG emissions, putting a price on carbon can channel the flow of public and private sector capital towards more efficient technologies, prioritising the use of cleaner energy and incentivising innovation in the development of low carbon products.

 

Figure 3. Expected emissions trends in Mexico’s electricity and transport sectors 2013-2030

 

Source: SEMARNAT, 2015

 

  • Improve Energy Efficiency. Although the deployment of renewable energy is the central component to achieve a decarbonisation of the economy, energy efficiency remains an area of enormous potential. Greater energy efficiency in transport and electricity consumption will ensure that investment in clean infrastructure will actually result in a substantial reduction of losses and inefficiency.

     

  • Participation of states and municipalities. Within the framework of Mexico’s NDC, individual states should now integrate their mitigation actions into national efforts. This implies that each Mexican state should take advantage of their particular geographic conditions in order to generate clean electricity and improve the efficiency of the electricity and transport sectors.

     

  • Fossil fuel prices. The drop in world oil prices should be seen as a great opportunity to incentivise research and development into clean energy, as well as to build and improve the necessary infrastructure to accommodate investments into clean energy.

     

Without a doubt, climate change will affect the whole energy sector, both through its direct impacts and through the policies that are put in place to limit emissions. While the cost of mitigating emissions in other sectors may be cheaper, the annual growth in electricity consumption – and the scale at which investments in the sector are growing – is facilitating the deployment of more clean energy.

However, increased investment in the clean energy is still required to keep global warming well below 2°C compared to the pre-industrial era, or even to reach the higher goal of keeping it under 1.5°C. Additionally, this investment could unlock a number of important social and economic benefits.

Once built, infrastructure tends to be used for at least 30 years, so the actions taken over the next decade will be crucial in deciding whether or not the energy sector of the future is compatible with our ambitions to address climate change. The big question for Mexico is whether today’s commitments will allow it to meet its own goals in 2030.

 

[1] Before the ratification of the Paris Agreement in November 2016 NDCs only represented the intentions of countries under the agreement, so were referred to as INDCs.

[2] The fact this is an unconditional goal implies that Mexico will carry it out using its own public resources, without need for additional international assistance.

 

This article first appeared in Spanish in El Colegio de México’s Perspectivas Energéticas journal in January 2017.

 

References

Gobierno de la República. (2015). Compromisos de mitigación y adaptación ante el cambio climático para el periodo 2020-2030. México. Consultado el 19 de noviembre del 2016 en: http://www.inecc.gob.mx/descargas/adaptacion/2015_indc_esp.pdf

Gobierno de la República. (2016). “Reporte de Avances de Energía Limpia. 2015”. México. Consultado el 19 de noviembre del 2016 en: http://www.gob.mx/cms/uploads/attachment/file/118995/Informe_Renovables_2015_2.pdf

 

Back to top