Mexico’s Sustainable Future Still in the Making

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Climate change has already forced many countries to act but to complete the clean energy transition, much work remains to be done. For developing economies like Mexico, the challenge is even greater. How is Mexico doing regarding the decarbonization of its energy industry and what can it do to improve?

“We find ourselves in a decisive year, at the start of a decisive decade, when it comes down to really kickstarting the energy transition,” said Arturo Carranza, Independent Advisor at CFE. According to Carranza, there are several reasons why this transition is picking up speed. First, the effects of climate change are downright unsettling and people are strongly aware of this. To stave off effects worse than a temperature increase of 1.5°C, which is already expected to happen, as well as all the disastrous effects that would come with it, global greenhouse gas emissions need to be practically zero by 2050. The global energy sector causes 75 percent of these emissions, which means that decarbonization needs to be addressed the most urgently.

“To decarbonize, we need to mobilize massive amounts of financing and work together to obtain optimal results,” Carranza said. Another crucial reason is economics, as renewable energy is cheaper than ever beating fossil fuel-based power generation. The end of this price drop is not in sight yet, either. “In 2020, a dollar invested in wind and solar projects generated four times more than a dollar invested in the same technologies 10 years ago,” said Carranza. The social aspect is equally essential toward the energy transition. According to Carranza, 10 percent of the global population lives under extreme poverty, struggling to meet basic needs including energy. In general, Carranza stresses that poorer areas need to rely on dirtier forms of energy to generate electricity, giving governments plenty of incentives to rectify this inequality through a more sustainable and inclusive economy. “The energy transition should leave nobody behind,” Carranza underlined.

A growing number of countries has signed up to reach net zero emissions by 2050 to prevent the world’s temperature from increasing too much. Higher temperatures have already worsened the frequency and effects of natural disasters such as hurricanes, floods and droughts. A common, shared responsibility is crucial, said Carranza: “We are all responsible to reach the same global sustainability goals in the end. To achieve this, we need to completely transform the energy systems that support our economies.” This transformation requires investment, infrastructure and technology, all working at optimal levels. “It requires talent and insight from decision-makers to build the instruments we need to make the green energy transition happen,” he said. Reducing emissions means that energy use should become more efficient too. “By changing consumption habits drastically, 55 percent of global emissions can be avoided,” continued Carranza. People should not only think about how they produce energy but how they use it, as well.

The transition is already well underway. “Renewables were the only energy sources that did not suffer during the worst of the pandemic lockdowns,” explained Carranza. But the same pandemic has caused a lot of problems: “The economic recession has deepened in several countries and their ability to drive a sustainable recovery is limited,” he warns.

The different speed at which countries embrace sustainability deeply impacts the global energy transition. “Developing economies represent two thirds of the global population but only one fifth of the clean energy investment. What is more, they only have access to 10 percent of the world’s financial capabilities,” he stated. This poses a problem: if the energy transition does not accelerate, the goals that need to be achieved remain forever out of sight. The low costs of wind and solar energy luckily can turn the tables for developing economies, thinks Carranza. “Finding and establishing the right conditions for these grand investments and installing renewable energy rapidly is one of the biggest challenges of our time,” he said.

So, what is the status of Mexico’ developing economy within this transition? Carranza said that Mexico has committed to reducing greenhouse gas emissions by 22 percent and carbon emissions by 51 percent by 2030, against numbers from 2013. The country’s growing share of clean energy helps in this regard: the share of clean energy in the power production matrix has grown by 12.19 percent from 2020 to April 2021. This increase is driven mainly by wind and solar projects that were undergoing operational tests when the last PRODESEN concluded, giving clean energy a boost from 25,594 MW to 28,714 MW. Nevertheless, industry insiders warn that renewable energy development is not going as fast as it should in an uncertain environment. Carranza agrees that more renewable capacity is needed. Furthermore, energy use should be optimized, promoting electric vehicles, sustainable financing and a cleaner economy.

The role of the government is paramount: “The government has the opportunity to develop and implement credible plans to meet reasonable targets that foster investor, industry and citizen confidence,” stressed Carranza. Through concrete action, the integration of sustainable financing and the construction of the energy transition under a long-term vision can ensure Mexico becomes a sustainable economy. “The upcoming economic package for 2022 and a potential third package of infrastructure represent excellent opportunities to advance this on the short term,” Carranza concluded.