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29/11/2019 | Mexico - How AMLO Is Undermining Mexico’s Clean Energy Goals

Jeremy M. Martin

AMLO’s efforts to chip away at Mexican energy reforms could have dire implications for renewable energy in the country and Mexico’s commitments to the Paris climate agreement.


President Andres Manuel Lopez Obrador entered office nearly a year ago promising “profound and radical” change to just about everything in Mexico. One of his main targets was the country’s energy sector, which had been overhauled and opened up to private investment for the first time in many decades by his predecessor, Enrique Pena Nieto, in a sweeping 2013 reform.

So far AMLO, as Lopez Obrador is widely known in Mexico, has not reversed that energy market liberalization, which he strongly opposed. But he has sought to chip away at it. Those efforts could have dire implications for the expansion of renewable energy in Mexico and, in turn, the international effort to fight climate change.

Mexico, the world’s 12th-largest greenhouse gas emitter, had pursued a leadership role on climate policy for several years before AMLO took office. Different governments demonstrated a desire for strong regional action on climate change and positioned Mexico as an international leader, particularly after hosting COP16, the United Nations Climate Change Conference, in 2010. Indeed, Mexico was the first developing country to submit its climate action plan in advance of the 2015 COP meeting in France that sealed the Paris climate agreement.

Mexico’s position wasn’t altruistic. Like many countries in the Americas, Mexico is highly vulnerable to the impacts of climate change, in the form of more extreme weather patterns such as severe hurricanes, droughts and floods, which could exacerbate existing social and economic challenges.

Starting in 2012, under then-President Felipe Calderon, Mexico’s Congress approved the General Law on Climate Change, which provided a mandate to craft comprehensive long-term national climate policy. It was followed by the Energy Transition Law in 2015, under Pena Nieto, which sought to transform Mexico’s energy sector by adopting clean energy technologies and targets, including decarbonization strategies for the electricity sector.

As an incentive for private sector investment in renewable energy, the law introduced clean energy certificates, known as CELs, similar to renewable energy credits in the United States. In addition to awarding these certificates to energy companies that complied with national climate goals by generating a set amount of electricity from clean or renewable sources, the government would also oversee long-term electricity auctions to drive competition and boost the development of clean energy.

From 2016 to 2018, three power market auctions resulted in almost 60 long-term commitments to clean energy projects that would add more than 7,000 megawatts of installed capacity, on the order of $8.6 billion in investments. The auctions were open to all energy technologies, but given the prices offered by wind and solar projects, those technologies prevailed. But in late 2018, just days after AMLO took office, the Ministry of Energy indefinitely delayed another auction.

Halting that fourth power auction was widely seen as a way of derailing elements of Pena Nieto’s touted energy reform—part of AMLO’s plan to reestablish a larger state role in energy policy and energy markets. Echoing his championing of Pemex, Mexico’s beleaguered state-owned oil company, AMLO’s suspension of the auction reflected his desire to reassert the role of the state in the power market, put coal back in the mix, and revive existing state-operated hydroelectric dams rather than encourage private investment in new renewable energy projects. Adding some ambiguity, his government didn’t clarify whether the power auction was canceled, or just delayed in order to ensure that appropriate infrastructure was in place.

But then, in late October, AMLO’s government threw many of Mexico’s renewable energy goals into doubt when it announced it was changing the market rules for clean energy certificates. The credits were created to incentivize producers to help Mexico transition to more renewable energy under its national climate goals. As mandated by the Energy Transition Law and the General Law of Climate, those goals include increasing clean energy’s share of the national energy market from 25 percent in 2018 to 35 percent in 2024 and 50 percent by 2050.

Clean energy certificates are awarded to clean power generators for each unit of energy produced. In return, they are mandated to demonstrate that their energy consumption complies with increasing proportions of clean energy, year after year, in order to contribute to national goals for diversifying energy generation. The certificate requirements started at 5 percent in 2018 and increased to 5.8 percent in 2019, 7.4 percent in 2020, 10.9 percent in 2021, and ultimately 13.9 percent in 2022.

But critically, these certificates were only awarded to projects that opened after 2014. The recently announced rules make older producers, including state-owned hydroelectric dams, eligible to receive the incentives too. Beyond the obvious market interference, the changes further compromise Mexico’s clean energy goals by effectively allowing the Federal Electricity Commission to double-count older energy production—first as part of the base toward incremental clean energy targets and then again by assigning it clean energy certificates.

The decision has led to legal action against the government, with six energy companies filing legal injunctions against the move, which they say will cripple their investments in clean energy. In a joint statement, the Mexican Association of Wind Energy and the Mexican Association of Solar Energy said the decision has “destroyed the value of renewable energy project assets already in operation.” They added that the credits “were the main mechanism by which Mexico was to meet its national and international clean electricity generation goals.”

The changes to the clean energy certificates are an ominous signal not only for Mexico’s renewable energy market but also for the government’s commitments to the Paris climate agreement. By altering the rules, the Ministry of Energy is dramatically changing the key policy mechanism to achieve the binding commitment of reaching 35 percent of all power consumed with clean energy sources by 2024. This new path seriously undermines Mexico’s leadership on climate change and makes it virtually impossible to meet its pledges under the Paris agreement.

These moves raise a bigger question: whether AMLO’s administration is quietly leaving the Paris climate agreement, or will soon make that an explicit goal.

***Jeremy M. Martin is vice president for energy and sustainability at the Institute of the Americas, an inter-American public policy think tank located at the University of California, San Diego.

World Politics Review (Estados Unidos)


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