Electric Mobility: Can Mexico Lead in Latin America

Last January, the Latin American Energy Organization (OLADE) published its most recent Energy Panorama of the region, including the latest energy matrices of its 27 member countries. There are two elements that stand out.  First, Latin America and the Caribbean (LAC) is a marginal emitter of greenhouse gas emissions (GHGs), with 4.5% of GHGs (1.515 billion tons of CO2), and two countries represent more than half of those emissions: Mexico contributes 357 Mt or 23.6% and Brazil with 471 Mt or 31.1% of LAC´s GHGs. This points to the opportunity for the region to focus its efforts on reducing its environmental footprint in these two countries. Second, two sectors, transport (37%) and industry (29%), are the most energy intensive, using 2 out of every 3 units of energy, indicating that policies to reduce GHGs in these two sectors would be the largest opportunity to advance toward a net-zero path by 2050.

In Mexico, the transport sector is the largest final energy consumer (38%) and the user with the greatest opportunity to contribute to climate action. The main source of energy for the transport sector is hydrocarbons, as almost all its energy comes from oil-related products (gasoline, diesel, kerosene, jet fuel, and liquefied petroleum gas).

On March 20, the Intergovernmental Panel on Climate Change (IPCC) issued its latest report stating that “urgent climate action can secure a liveable future for all,” and included a series of options to reduce or eliminate GHGs in several areas comprising the transport sector. The measures included improving fuel efficiency, increasing the use of electric vehicles, public transport, active mobility (walking and cycling), and biofuels. 

In fact, Mexico can embrace climate action and not only contribute to reducing its environmental footprint, but attract investments, create long-term jobs, and reduce GHGs from refining and combustion of hydrocarbons.

There are two levers that can support Mexico in this effort. On the one hand, last year, the US Congress approved the Inflation Reduction Act (IRA), a policy that aims to reduce emissions by 40% by 2030 with a series of fiscal incentives worth US$369 billion to invest in energy security and climate change programs, including clean energy production and manufacturing. The IRA allows for investments in Mexico, which would attract a lot of interest in manufacturing, especially in the auto sector, given that North America is one of the top auto-producing hubs worldwide, manufacturing around 2 of every 10 cars globally since 1995. In fact, Tesla announced the construction of a gigafactory in Mexico on its investor day, a US$5 billion investment creating up to 6,000 jobs, therefore generating incentives to set up other trains of production that can supply not only Tesla, but Ford, GM, JAC, and Zacua, and help expand electric vehicle production. The need to reduce the environmental footprint of the transport sector not only in Mexico but worldwide, the development of cleaner and more efficient technologies (low or zero emissions transport), a global alignment to phase out internal combustion engines, and the evidence and call to action put forward by the IPCC should be enough incentive to join efforts and mobilize action to expand electric mobility in Mexico. On the other hand, electric mobility is starting to see a higher profile in Mexico´s public policy. In the energy sector, the Ministry of Energy in its Program for the Development of the National Electric System (PRODESEN) has included in its planning scenarios up to 2036 electric mobility as one of the elements that will moderate the surge of power demand. On foreign policy, the Ministry of Foreign Affairs (SRE) last January published a report from the US-Mexico Electrification of Transport Working Group, including a diagnostic and recommendations for the transition of the auto industry in Mexico. On climate change policy, the Ministry of Environment (SEMARNAT) last year submitted a revision of Mexico’s Nationally Determined Contribution before the United Nations Framework Convention on Climate Change, which included an effort to promote electrification of public transport as one of the areas to mitigate GHGs. Consequently, the direction we are heading in is clear, and the roadmap is there.

Can Mexico lead in electric mobility in Latin America? It can and it should, by embracing climate action. If Mexico aligns its economic, energy, and environmental policies it would create unparalleled conditions for attracting billions of dollars of investment to become an EV powerhouse, taking advantage of the existing value chains of the automotive sector; supply the clean energy needs of new and existing manufacturing companies, especially from the car industry on its path to a low carbon economy; and ensure that the uptake and scale up of these clean industries contribute to reduce the GHGs of a net-zero trajectory. There is no doubt that Mexico’s future lies on a sustainable climate and energy policy consistent with our current legal framework.