Soffia Alarcón-Díaz
Director General
The Carbon Trust

Financing Still Difficult For Green Developments

Wed, 02/22/2017 - 10:23

Affordable financing remains one of the main obstacles for the development of energy-efficiency and carbonreduction projects in Mexico even as renewable electricity generation sees a boom in terms of both private and awarded projects, with potential financiers still not fully aware of the benefits of these initiatives. That is something the UK-based nonprofit Carbon Trust is looking to leave in the rear-view mirror by working with the Mexican government and local authorities to improve upon the Energy Reform’s initial steps toward a cleaner future, according to Soffia Alarcón-Díaz, Carbon Trust Mexico’s Director General.

“We help both the government and the private sector transition to a low-carbon economy. The main challenge to achieve that is financing. Some projects are great ideas but remain as such due to a lack of understanding between the funders and the developers. Carbon Trust supports the translation of great ideas into investment opportunities,” Alarcón-Díaz says. Mexico’s new look electricity market has been partly designed around the country’s ambitious target of obtaining 35 percent of its energy from clean sources by 2024, as well as the government’s commitment to the UN’s Conference of the Parties (COP) on climate change to reduce carbon black emissions by 51 percent by 2030. The Carbon Trust, Alarcón-Díaz adds, fits into this framework as a facilitator and mediator with Mexico’s Ministry of Finance for funding low-carbon programs in states like Jalisco and Tabasco.

“Our process begins with the design of carbonmanagement plans. We lay out activities and recommendations to achieve a desired goal, then we prioritize them for investment considering the timeline we wish to follow, and finally we select five or six projects that could be supported. We then encourage the Ministry of Finance to invest money earned through energy savings to develop the selected projects. We also help the states to identify funding from international and commercial banks, donors or national funds,” Alarcón-Díaz says. Energyefficiency projects should be designed to include both GHG emission-reduction goals and financial savings, she says. “We support companies, state governments such as Jalisco, Tabasco, Yucatan, Baja California and Morelos to create energy-efficient business models. We engage with the Ministry of Finance to explain the potential financial savings resulting from such a project. We understand that low-carbon projects, in the end, make sense financially.”

The Carbon Trust uses a methodology called Technology Innovation Needs Assessment (TINA), which explores innovation for clean technologies to help governments establish their priorities. Technologies like wind, solar and thermal energy should be among the authorities’ priorities, she says. “We support the government in climate change and clean energy-related policies. In climate change we are supporting the roadmap to develop the carbon market in Colombia and we hope to do the same here in Mexico. With the states, we are helping them develop a climate change program. We are also working on the TINAs and the low-carbon states project and soon we would like to start a TINA project to prioritize technology in the public and private transportation sector. Smart grids, transmission cables and energy storage are also areas that need a lot of development and we have the vision of aiding them in any way we can.”

The Trust also works with private companies by helping them with the process of carrying out their mandatory carbon footprints, which have to be logged onto Mexico’s National Emissions Register (RENE). On the subject of finance, the Trust is a supporter of green bond initiatives. Mexico, Alarcón-Díaz says, needs a “real” carbon market that promotes and mandates companies to reduce emissions and invest in low-carbon solutions. “China, for instance, is doing it and boosting its competitiveness because they are including more efficient industrial processes that pollute less. Private companies everywhere should follow that example to contribute to the global mitigation goal.” The Energy Reform is a good first step, “but we need to create more opportunities, which come from the economic and financial sectors. Right now we are developing a project to identify the amount of investment needed in Mexico to catalyze green investment."