Current Policy Projections
Economy-wide
According to our assessment, Mexico’s current policies will lead to emissions between 723 MtCO2e and 736 MtCO2e excl. LULUCF in 2020. In 2030, the emissions level is projected to reach 803–843 MtCO2e, excl. LULUCF. We estimated a range (see the Assumptions section for more details) as we consider it unrealistic that Mexico will achieve its target of 7% nuclear electricity generation in 2030 (lower end) and because it is uncertain which electricity source would be used to fill the gap. If instead of nuclear generation, gas combined cycle (gas CC) systems were used, Mexico would have higher emissions by 2030 (upper end). This scenario suggests that Mexico will neither meet its 2020 nor 2030 emissions targets and will need to implement additional policies to do so.
Historically, Mexico’s emissions have been increasing since 1990. GHG emissions have steadily shifted away from agriculture and LULUCF towards energy-related emissions. While in 1990 agricultural emissions represented 31% of Mexico’s GHG emissions, by 2015 their share had declined to 18%. Over the same time period, energy-related emissions increased substantially—by almost 40%.
The basis for climate policy in Mexico is its ‘General Climate Change Law’—which was adopted in 2012—translates the overarching targets into strategies and plans, and provides the institutional framework for implementation. The law does not include concrete political instruments, rendering it impossible to quantify its direct effects. Notably, the most recent reform to this law includes the addition of Mexico’s NDC sectoral emission reduction targets for transport, electricity generation, buildings, oil & gas, industry, agriculture and waste sectors.
The National Strategy on Climate Change (NSCC), published in June 2013, implements one of the requirements of the General Law. The NSCC is designed towards a long-term strategic development, but only provides very general guidance. How this will be translated into concrete action remains to be seen.
The 2nd Special Programme on Climate Change (PECC 2014–2018), published in 2014, includes the most relevant mitigation measures to 2018. The programme summarises 23 quantified mitigation-relevant measures that lead to a reduction in emissions by 83 MtCO2e in 2018 compared to the baseline presented in the same document. Mexico’s General Climate Change Law establishes that a new PECC will be developed with every incoming administration (Cámara de Diputados del H. Congreso de la Unión. Diario Oficial de la Federación, 2012). This means that Mexico’s new president—Andrés Manuel López Obrador—and his team are responsible for the development of the PECC 2018–2022.
López Obrador´s campaign did not have a clear position on climate change, focusing instead on the energy sector. Here, he stressed the need to achieve energy security to replace oil and gas imports from the United States. To achieve this, the president proposed sectoral changes that include fostering national extraction of oil & gas, building new refineries, remodelling old refineries and increasing electricity production. To increase electricity production, he proposes three actions: 1. increase the load factor of hydro power plants, 2. avoid the planned retirement of thermal—fossil fuel—power plants (by converting old ones to cogeneration and all units over 150 MW to gas CC) and 3. create programmes to foster energy transition to RE—solar PV, wind and hydro. Depending on whether and how these campaign promises will develop into actions, it remains to be seen what the impacts on climate change will be.
In 2014, Mexico implemented a carbon tax that is set at approximately at US$3.5/tCO2e differentiated by fuel type (SEMARNAT, 2014). This tax is expected to generate an annual revenue of about US$1 billion. However, its impact on GHG emission reduction is unclear and, given its low rate, a substantial emission reduction is unlikely. At the end of 2017, the regulation for the use of emission reduction credits for compliance under the carbon tax in Mexico came into force. This regulation establishes the allowance of Certified Emissions Reductions (CERs)—from CDM projects in Mexico—as well as Green Certified Emission Reductions—in the EU ETS—as payment means under the carbon tax (Diario Oficial de la Federación, 2017; World Bank Group and Ecofys, 2018).
In 2017, Mexico began a simulation of a voluntary Emissions Trading Scheme (ETS). The General Climate Change Law was amended later that year to make the scheme mandatory as soon as its three-year pilot phase concludes. The ETS will not replace the existing carbon tax. The ETS’ pilot phase—originally programmed to start in August 2018—will begin operation in 2019 (Secretaría de Medio Ambiente y Recursos Naturales (SEMARNAT), 2017, 2018).
A further reform to the LGCC in 2018 lays the foundation for the establishment of the mandatory carbon market by putting in place mechanisms for cost-efficiency, MRV, deadlines and obligations following the pilot-phase (Congreso General de los Estados Unidos Mexicanos. Diario Oficial de la Federación, 2018).
The formal start of the ETS—originally planned for August 2021, together with the entry into force of the Paris Agreement—has been delayed to 2022 (Secretaría de Medio Ambiente y Recursos Naturales (SEMARNAT), 2017, 2018). Between 400 and 700 companies are expected to participate in the market (Santiago and Rodríguez, 2017).(Secretaría de Medio Ambiente y Recursos Naturales (SEMARNAT), 2017, 2018).
A further reform of the LGCC in 2018 lays the foundation for the establishment of the mandatory carbon market by putting in place mechanisms for cost-efficiency, MRV, deadlines and obligations following the pilot-phase. The formal start of the ETS—planned for August 2021, together with the entry into force of the Paris Agreement—is estimated for 2022. Between 400 and 700 companies are expected to participate in the market.
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