Guillermo Hernández
Energy Specialist at the Energy and Extractives Global Practice
World Bank
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Insight

A Pioneering in the Banking System

Wed, 02/24/2016 - 14:09

Mexico ranks highly on the list of countries receiving financing from some of the world’s major climate funds. The figures are staggering; so far it has received US$591.1 million, of which US$582.65 million were used for mitigating the effects of climate change. Given the sizeable chunk Mexico has received from international funds, some questions have arisen over the effectiveness of the use of the money in increasing renewable energy capacity and removing the focus from the historical domination of fossil fuels. Guillermo Hernández, Energy Specialist with the Energy and Extractives Global Practice of the World Bank, attempts to answer this query

Mexico has an ambitious climate change mitigation agenda, finishing ahead of many other countries by becoming one of the first to submit its national climate change plan to the UN, ahead of the climate summit to be held in Paris in December 2015. The World Bank, as one of the agencies with two major climate change funds, the Clean Technology Fund (CTF) and the Global Environmental Facility (GEF), has supported the Mexican government in the implementation of innovative projects. “The aim is to remove barriers in order to increase the prevalence of renewable energy in Mexico. So far, sound public policy and strong institutional capacity have allowed Mexico to make efficient use of those funds,” Hernández explains.

One of the five institutions of the World Bank that has developed a strong relationship with Mexico is The International Bank for Reconstruction and Development (IBRD), a division tasked with providing a combination of financial resources, knowledge, and technical services to developing countries and middle income states such as Mexico. “It has provided both financial and technical support for numerous energy projects whose purpose is to promote renewable energy and energy efficiency technologies in order to reduce greenhouse gas emissions,” he adds. These projects are seedlings that will serve as inspiration for the private sector and will help pave the way for the commercial and full-scale deployment of a renewable sector. One of these seeds is the 100MW wind farm La Venta III in the Isthmus of Tehuantepec. The World Bank has a pioneering spirit and is involved in the creation of unique developments, like the solar-thermal plant in Agua Prieta.

The World Bank has laid out two goals to be achieved by 2030: end extreme poverty by decreasing the percentage of people living on less than US$1.25 a day to no more than 3%, and promote shared prosperity by fostering the income growth of the bottom 40% for every country. These ambitions and are deeply rooted in every single project the bank decides to stage within the industry. “We are currently implementing the Integrated Energy Services Project, which supplies electricity to remote communities through solar PV energy,” Hernández boasts. “Through a strong partnership with the World Bank, the Mexican government is enhancing its institutional capacity in order to address its growing energy requirements with climate friendly technologies across the territory.”

Efficiency is a term that is beginning to be sewn into the very fabric of public policy. The World Bank has taken steps to incorporate this concept into its project portfolio and help its clients reach unprecedented levels of energy efficiency. “The Efficient Lighting and Appliances Project supported the Mexican government is replacing 1.8 million old and inefficient appliances, and substituting 45 million incandescent lightbulbs with compact fluorescent lamps,” Hernández describes. This project stands out by incorporating an integral approach that started from the acquisition of the goods and the creation of the distribution scheme through retail stores, to a promotion campaign for the effective disposal of inefficient products.

The World Bank does not stand alone in helping governments across the globe reduce poverty and inequality. In recent months, funding from Chinese development banks has increased across Latin America. While some would view this as the arrival of strong competition, this is not the case and according to Hernández, these entities serve more as partners than fierce competitors. The World Bank’s long history of fostering burgeoning clean energy markets positions it favorably when supporting Mexico in its transition to a low-carbon energy sector. “Ultimately, we can facilitate and promote collaboration between the Mexican government and other agencies across the globe, whose best practices can serve as an example for Mexico,” Hernández concludes.