Current Policy Projections
Economy-wide
Emissions in Mexico have continuously increased since 1990, with emissions shifting away from agriculture and LULUCF towards energy-related sectors. While agricultural emissions represented 31% of national emissions in 1990, by 2015 their share had declined to 18%. Over the same time period, energy-related emissions increased by almost 40%. It is worth noting that as of 2013, historical emissions as reported by the inventory are higher than the - already high - emissions projections under the NDC baseline.
Looking at Mexico’s current policies and taking into account the impact of COVID-19, we estimate that emissions will decrease in 2020 to between 664-696 MtCO2e per year, excluding LULUCF, which represents a 51-58% increase above 1990 levels, and 3-7% decrease below 2010 levels. We project that emissions will ramp up again as the economy recovers, climbing to up to 774-852 MtCO2e in 2030 (76-94% above 1990 levels and 19-31% above 2010 levels), excl. LULUCF.
We estimated a range based on the likelihood of implementation of major policies in the electricity, transport and buildings sectors (see the Assumptions section for more details). The upper end assumes that Mexico will not achieve the clean electricity targets set 50% by 2050 under the electricity policy “Prospectiva del Sector Eléctrico para 2017-2031”; while the lower end assumes that they will, its mitigation impact is taken as reported in the 6th National Communication (SEMARNAT, 2019a). In both cases, we assumed the mitigation potential of major transport and buildings policies would be achieved.
Under currently implemented policies, and even despite the dip in emissions expected for 2020 as a consequence of the pandemic, Mexico will not achieve its 2020 pledge. Our analysis also suggests that Mexico will need to implement additional policies to meet its unconditional and conditional NDC targets in 2030, although the lower bound of the current policy range gets very close to reaching Mexico’s insufficient unconditional NDC target.
The basis for climate policy in Mexico is its ‘General Climate Change Law’ (LGCC)—adopted in 2012—which 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. The most recent reform to this law includes the addition of Mexico’s first NDC sectoral emission reduction targets for transport, electricity generation, buildings, oil & gas, industry, agriculture and waste sectors. The fact that the sectoral targets have been included in national legislation is now, unfortunately, being used as an argument against updating and increasing ambition of Mexico’s NDC in this new round, as argued by representatives of the Ministry of Environment during public consultations (SEMARNAT, 2020b).
Part of the institutional framework required by this law includes the development of a National Strategy on Climate Change, providing long-term planning, and a Special Programme on Climate Change (PECC) for the short-term planning. Mexico’s last National Strategy on Climate Change was published in 2013, and its last PECC in 2014. A third PECC has already been developed and approved by the Intergovernmental Climate Commission but second approval is needed by the Regulatory Body of Federal Government and Treasury (SEMARNAT, 2020a). It is expected to be published this year, covering the 2020-2024 timeframe. This document is to include short-term mitigation and adaptation goals per sector, as well as a list of concrete actions, budget and clear responsibilities at federal and state level to achieve the goals (Cámara de Diputados del H. Congreso de la Unión. Diario Oficial de la Federación, 2012; art. 67).
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 and its pilot phase—originally programmed to start in August 2018—was planned to start operation in January 2020 (SEMARNAT, 2019b).
The preliminary regulations indicate that the emissions cap for the trial phase will be determined 30 days before its start based on the reported historical emissions of participants and Mexico’s NDC (SEMARNAT, 2019b). Defining the ETS cap on historical emissions puts the programme at risk of not achieving substantial emissions reductions. The cap should instead be set based on ambitious international climate commitments that are in line with the Paris Agreement goal.
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