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Wind Energy Development in Mexico: at What Cost?

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Wind Energy Development in Mexico: at What Cost? Wind Energy Development in Mexico: At What Cost? Investigating social acceptance of wind farms in Oaxaca and Yucatán, Mexico Elizabeth Kim Harvard Kennedy School Master in Public Policy (MPP) Candidate This Policy Analysis Exercise (PAE) is being submitted in partial fulfillment of the requirements for the degree of Master in Public Policy. Expected graduation date: 5/24/2018 March 27, 2018 Clients: Maria V. Arsenova, International Finance Corporation Carlos Tomas Perez-Brito, World Bank (Joint advisory team to Government of Mexico) PAE Advisor: Professor Michael Woolcock, Harvard Kennedy School Seminar Leader: Professor Julie Boatright Wilson, Harvard Kennedy School This document reflects the views of the author and should not be viewed as representing the 1 views of Harvard University, its faculty, or International Finance Corporation and World Bank. 2 Acknowledgements My Harvard Kennedy School Advisors Professor Michael Woolcock and Professor Julie Wilson have been instrumental in guiding me through the PAE process, providing expertise and advice, and challenging me to dig deeper in exploring a meaningful public policy challenge. My deepest gratitude to Professors Woolcock and Wilson. I especially thank Dorothee Georg, Sergio Oceransky, Carlos Tornel and Naín Martinez, Ivet Maturano, Rodrigo Patiño, Jazmín Sánchez, and Shalanda Baker for your thought partnership and support, and the community leaders and people who offered their time and granted interviews. I would like to thank Sergio Tellez and Fidel Florian (HKS MPAID ’17), and Kamran Hakiman (HKS MPP ’18) for your encouragement and helpful feedback throughout my research process. I offer sincere thanks to my friends Susie Park, Diana Sheedy, and Diana Park for your support in achieving this PAE. I am grateful for the enduring support of my late father Moon Kim, mother Duk Kim, and sisters Deborah and Kathy. Special thanks to the Carr Center for Human Rights and Women in Public Policy Program at Harvard Kennedy School for the funding that enabled my travel to Mexico and field research. Visiting a wind farm in 3 Yucatán, Feb. 2018 Acronyms AMDEE: Asociación Mexicana de Energía Eólica (Mexican Wind Energy Association) BSMs: Benefit Sharing Mechanisms CFE: Comisión Federal de Electricidad (Federal Electricity Commission) CRE: Comisión Reguladora de Energía (Energy Regulatory Commission) EIA: Environmental Impact Assessment FPIC: Free, Prior, Informed Consent GoM: Government of Mexico GW/GWh: Gigawatt/Gigawatt-hour (1GW=1,000MW=1,000,000KW) ICM: Iniciativa Climática de México KW/KWh: Kilowatt/Kilowatt-hour MW/MWh Megawatt/Megawatt-hour MXN: Mexican peso SEGOB: Secretaría de Gobernación (Ministry of the Interior) SEMARNAT: Secretaría de Medio Ambiente y Recursos Naturales (Ministry of the Environment and Natural Resources) SENER: Secretaría de Energía (Ministry of Energy) SIA: Social Impact Assessment 4 Table of Contents Executive Summary - 6 I. Context of Wind Energy Development in Mexico - 9 1. Energy Sector Transformation - 9 • National Legal Reforms - 9 • High Hopes for Wind Power - 10 • Auction Schemes Facilitating Megaprojects - 12 2. Isthmus of Tehuantepec and Yucatan Context - 12 • Key Stakeholders - 13 • Socioeconomic Characteristics Contributing to Power Disparity - 14 • Indigenous Community Rights and Communal Land Ownership - 15 3. Mounting of Community Resistance - 16 • Wind Development Impact - 16 • Mareña Renovables to Eólica del Sur: Project Halt - 17 • Ixtepec, Oaxaca: Continued Rejection of Megaproject Model - 18 • Mérida, Yucatán: Multi-Stakeholder Efforts - 19 II. Methodology and Framework - 21 1. Overview - 21 2. On Local legitimacy and Social Acceptance - 21 3. Energy Democracy Framework - 22 III. Mapping the Engagement Process - 24 IV. Findings from the Isthmus of Tehuantepec and Yucatán: Substantive Rights - 30 1. Voices at the Table: Considering Community Perspectives - 30 V. Findings from the Isthmus of Tehuantepec and Yucatán: Procedural Rights - 34 1. Initial Negotiations and Contractual Abuses- 34 2. Environmental Impact Assessments - 36 3. Social Impact Assessments - 37 4. “Free, Prior, and Informed Consent” mechanism - 38 5. Distributive Justice - 40 VI. Closing - 42 1. Recommendations - 42 2. Conclusion - 48 Appendices – 50 APPENDIX A: Methodology and Limitations - 50 APPENDIX B: Stakeholders Interviewed and Sample Interview Questions - 51 APPENDIX C: On Legitimacy and Social Acceptance - 54 APPENDIX D: National Climate Change Strategy and Recent Auction Results - 57 APPENDIX E: Indigenous Rights - 62 APPENDIX F: Sample Environmental Impact Assessment - 63 Bibliography - 64 5 Executive Summary The Problem: Lack of Social Acceptance and Resistance to Wind Farm Megaprojects In 2012, the Government of Mexico (GoM) began enacting a series of legal and regulatory reforms to transform their energy sector, a heavily fossil-fuel dependent and state-owned system. The GoM aimed to catalyze an energy transition that would attract greater private investments and enhance economic growth, harness diverse sources of energy to meet Mexico’s energy demands and generate 35% of energy from renewables by 2024, and reduce greenhouse gas and black carbon emissions by 24% compared with business as usual levels by 2030. In this vein, the GoM has sought to leverage the country’s wind energy potential – particularly in the Isthmus of Tehuantepec, in the southern state of Oaxaca. Known as one of the windiest regions in the world, Oaxaca is also the second poorest state in Mexico with a large proportion of indigenous populations. GoM and private sector interest in wind energy development has also heightened in the Yucatán, home to indigenous Mayan communities and characterized by sensitive environmental features such as cenotes (sinkholes providing freshwater). Some local community members, largely indigenous, are actively opposing the development of wind farm megaprojects in communities throughout Mexico. Conflicts with private developers and government agencies have led to multiyear lawsuits and protests, halting nearly billion-dollar projects. Intra and inter-community confrontations have spurred violence and death threats against individuals opposing the megaprojects. Private developers are wary of investing in potentially high-risk environments and struggle to navigate legal ambiguities regarding indigenous community engagement. The GoM continues to seek renewable energy expansion while recognizing the need to address resistance from community factions. Method: Literature Review and Stakeholder Interviews This Policy Analysis Exercise (PAE) seeks to understand local communities’ lack of social acceptance of wind farm development projects, particularly in the Isthmus of Tehuantepec and Yucatán. Gaining a deeper understanding of why and how social acceptance levels are low is crucial to protect the constitutional and internationally recognized rights of indigenous peoples and to sustain the viability of wind energy development in Mexico. Therefore, a central question for the International Finance Corporation and World Bank team advising the GoM to consider is: Do wind farm megaprojects lack social acceptance with certain local communities because those communities believe the engagement process with companies and the GoM lacks legitimacy? If so, what points of interaction do these communities perceive as illegitimate, and why? What alternative policy options can the GoM implement to address underlying community concerns, and gain social acceptance with local communities for wind farm development? To investigate this question, we mapped key steps in the engagement process between community members, and government officials and private developers in wind farm development, and identified 6 “pain points” that local stakeholders viewed as lacking legitimacy. We interviewed 35 indigenous community leaders, state and federal government officials, and academics and advocates throughout Mexico and the US. Our interview findings are supported by a literature review. Findings: Communities are not opposed to wind farm development in and of itself, but rather the way in which current development processes violate the substantive and procedural rights of indigenous people Our findings revealed that the lack of social acceptance of wind farm projects is tied to: (1) The failure to meaningfully include indigenous communities in the energy policy design and wind farm development processes that impact their livelihoods, cultural identities, and connection to indigenous lands. This violation of substantive rights leads to a perceived lack of legitimacy for Mexico’s energy transition and auction system, which sets the stage for the interactions between community members and private developers and government agencies. (2) Perceived procedural injustice regarding the Environmental and Social Impact Assessments; failure to implement the Free, Prior, and Informed Consent (FPIC) mechanism; inequitable contractual arrangements with private developers; and regulatory exclusion of community- owned projects. (3) Perceived distributive injustices in wind farm megaprojects benefiting some community members at the expense of others. Essentially, our findings reveal that a key factor influencing community opposition is the top-down way in which the wind farm projects are being developed, rather than wind farm development in and of itself. Community stakeholders seek wind project development models and a renewable energy transition that (1) meaningfully involve indigenous communities’ values,
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