Clean Energy Transition in Mexico

In the past few days, legal and economic experts have discussed extensively the decision of Mexico′s Supreme Court regarding the 2021 reforms to the Electricity Industry Law. While interpretations of that resolution are complex and foster uncertainty and distrust in Mexico′s rule of law, the key issue is the impact that this decision will have on affordable access to electric power, private investment and greenhouse gas emissions (GHG).

More than ever, Mexico is at a crossroads to define its development model and its competitiveness perspective in a context of uncertainty and major global challenges. Given the Russia-Ukraine conflict and other breaking news in Mexico and elsewhere, the recent reports of the United Nations International Panel on Climate Change (IPCC) attracted minimal attention. Created in 1988, the IPCC serves as an advisory body to governments and decisions makers on the pressing risk of climate change and the ways to address its causes and impacts.

For over three decades, the IPCC has gathered the work of thousands of scientists around the world to develop the highest quality reports on climate change in the framework of three working groups. In August, 2021, Working Group I presented the physical bases of science report which concludes a systematic increase in temperature in all the regions of the planet and the oceans. This past February, Working Group II released the report on impacts, adaptation and vulnerability, highlighting that 45% of the world′s human population and several species are vulnerable to the impacts of climate change.

But the most compelling report was presented last week by Working Group III on mitigation. The report concludes that to stabilize the increase in temperature at 1.5°C by the end of the century and avoid catastrophic consequences, greenhouse gas emissions must peak by 2025 and decrease 50% by the end of the decade.?It is possible to achieve this target since the cost of clean technology has decreased exponentially since 2010. However, to capitalize on this opportunity, investment in these technologies will need to increase 6-fold.

Mexico′s trading partners in North America, Europe, and other regions are rising their GHG emission reduction ambition not only to comply with their global responsibility set by the Paris Agreement but because they see in this transition an opportunity to propel their competitiveness, reinforce their energy security, boost affordable energy access and create millions of new jobs. In the past few years, they have introduced different policy tools to penalize emissions and incentivize clean energy. From carbo taxes to green infrastructure incentives and climate risk disclosure rules to financial assets, the common denominator has been to allow markets to choose the most cost-effective options through private investment, competition, and effective regulatory oversight.

Last week, the US Department of Energy-Renewable Energy Laboratory released a study on Mexico′s clean energy potential. The study concludes that Mexico has the potential to meet 100 times its electric energy needs through solar, wind, geothermic and hydro technologies. It is possible to develop at least half of this potential in the short run through private investment allowing to save $1,1 billion dollars on the electric system, propel $17 billion dollars of additional investment and create 72,000 new jobs. It will also help Mexico meet its 35% clean energy goal by 2024.

Next week, the Deputy Chamber of Congress will be voting on a constitutional energy reform to the electric sector. They will have a historic responsibility for the development model they propose for Mexico.

Article originally published in Reforma News: https://www.reforma.com/energia-limpia-2022-04-16/op224777?pc=102

Contact the author: [email protected]