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November 2008

Country Profile Mexico

Mexico Flag Mexico, the second-largest economy in Latin America (GDP in 2007: US$ 839.4 billion), has agreed to reduce its annual greenhouse gas emissions by more than 100 million CO2e between 2007 and 2012. The measure is designed to counter desertification and strong hurricanes. Apart from mitigating the effects of climate change, the CDM could also be used to remedy a wide range of environmental, social and infrastructural problems. These include forest loss and soil erosion, air and water pollution, the lack of secure landfill sites and rural/urban migration.

With its large domestic market (107 million inhabitants) and position as a bridge-head to markets in North and Latin America, Mexico is of great interest to multinational businesses. Macro-economic stability (between 3 and 5 percent growth) and the lowest tax rates of all the OECD countries provide attractive opportunities for investment. More than 1,000 German businesses are already represented in Mexico. To reduce one-sided dominance of its foreign trade segment by the US (approx. 66.7 percent), Mexico is looking to step up cooperation with the EU. In 1997, it became the first Latin American country to sign an Economic Partnership Agreement with the EU. The resulting free trade zone proved to be a catalyst for trade and currency flows.

Mexico is rich in natural resources such as gas, oil, precious and industrial metals. Its manufacturing, agriculture and energy sectors are energy-intensive and produce significant quantities of emissions. Take the state-owned oil company, Pemex, for example. Pemex has identified no less than 66 potential CDM projects to reduce its own carbon emissions. Given that the baseline can be set high in most instances, considerable quantities of CERs are expected. But first, the Calderón government must implement its planned reforms in order to open up the state-run, monopolistically organised energy industry – wide-ranging restrictions on investment are still in place despite the country having opened its markets to foreign trade (13 free trade agreements have been signed with some 42 states; NAFTA 1994, EU 2000).

With 188 projects in the pipeline, Mexico is the fourth-largest CDM host country behind China, India and Brazil. Its 106 registered projects will generate over 44 million CERs by the end of the first commitment period. The 88 projects with British and Swiss involvement are backed by AgCert, an internationally active certificates producer and seller. As a subsidiary of energy corporation AES, AgCert is able meet EU ETS reduction targets on a quasi-unilateral basis. All projects focus on methane capture and combustion in agro-industrial facilities. Around 30 projects involve energy production. While few other project types are featured, there are five wind energy projects, four of which involve Spanish cooperation partners, and three hydropower projects. Germany is not involved in any of the Mexican projects. This situation could soon change given Mexico’s plans to sign what will be its eighth MoU with Germany.

Comité Mexicano para Proyectos de Reducción de Emissiones y de Captura de Gases de Efecto Invernadero (COMEGEI) serves as Mexico’s DNA. It was called into being in 2004 by the National Climate Secretariat (Comisión Intersecretarial de Cambio Climático, or CICC) and is an arm of the Secretariat for the Environment and Natural Resources (Secretaría de Medio Ambiente y Recursos Naturales (SEMARNAT). The DNA comprises six ministries (including the ministries for energy and economic affairs, and the foreign office) and is the interface for Mexico’s CDM activities.

Although the CDM Executive Board has yet to approve a PoA, Mexico wants to press on with the programmatic CDM. The first such project, which focuses on energy-saving lightbulbs, has already been approved on the Mexican side.