Gabriel Quadri
Partner and Director
SigeaCarbon Mexico
View from the Top

Environmental Impact Assessment Are Key in Low-Carbon Economy

Wed, 02/24/2016 - 14:18

Q: Given Mexico’s vulnerability to the effects of climate change, how can the country benefit from climate change economics?

A: Before considering a comprehensive cap-and-trade system, Mexico should explore the possibility of a carbon tax. A carbon tax has many advantages, as it has almost no administrative costs and it can generate a substantial amount of revenue for the government. Mexico has a CO2 tax but it is insignificant. The cap-and-trade system would be an unnecessary change given that the Law of the Electricity Industry and the Energy Reform offer certificates for clean energy, making a carbon market redundant.

We will run out of oil and, in the long run, what will transform Mexico into a sustainable productive economy will be electricity. Therefore, a carbon tax could be an interesting possibility, marking a new architecture and increasing the possibility of a low-carbon economy. This, in turn, could become a major source of government revenue and it may lead to an opportunity to reduce income taxes, making the Mexican economy more competitive and attractive, with a broader growth potential. If we raised the prices of gas and diesel to the same levels of Brazil, Chile, or any European country, the resulting revenue from this tax would be immense. Annually, Mexico consumes 80 billion liters of fuel. If we add a tax of just MX$10 (US$0.66) to every liter, we could generate MX$800 billion (US$60 billion) in revenues, which is about 80% of the revenue obtained from income taxes.

Q: What are the most important externalities to be considered in the renewable energies market in Mexico?

A: Sigea works closely with renewable energy developers in environmental impact assessments. For wind energy the most important aspects would be birds and bats, visual impact, noise, and sometimes opposition from local communities. For hydro plants the main problems are catchment area management and confrontations with local communities. Additionally, there is a considerable deficit in meteorological stations in Mexico, so we need a more efficient and comprehensive network that can provide information about water, precipitation, and other important variables that hydro energy requires. Finally, for geothermal, the most important concerns are pollution, wastewater disposal, reinjection of water, and hazardous waste.

Q: What are some of the challenges that companies like Sigea experience?

A: The relationships with local communities and political groups are usually out of our control. Therefore, we work alongside other companies to try to disseminate the best possible information based on experience in order to incorporate local suggestions and concerns. In the end, it is a complex political operation, especially in states like Oaxaca, Guerrero, and Veracruz. We work as a team with a group of the most competent environmental lawyers in Mexico and we have a protocol for public consultations with indigenous people, as stated in Article 169 of the Constitution.

Q: Considering that Sigea aspires to be the workplace epitome for environmental experts, what is your perspective on the available talent pool?

A: Nowadays there are many universities that offer environmental engineering programs, and we employ people with other types of backgrounds like civil engineering, chemical engineering, and environmental economy. Rather than a deficit of professionals gravitating toward environmental issues, we probably have a lack of opportunities and an excessive supply of professionals.

The environmental consulting business in Mexico is closely tied to the GDP growth; in other words, if there is no growth, there is a lack of jobs. It is cyclical, so if the US economy grows, the Mexican economy grows. Other contributory factors are public and private investment, productivity, violence and crime, and education. The productivity in Mexico is extremely low and we need a profound educational reform. Besides that, the fiscal structure of the country is a major factor that explains the economy’s behavior. Investment plays a pivotal role too, since if there is no investment in new projects, then there is no sufficient demand for environmental consultancy. The projects to develop the trains to Queretaro and Yucatan have been shut down and many infrastructure projects are being cancelled. This could mean a failure to capitalize on a promising growth opportunity for the environmental industry.