Low-Carbon Development for Mexico

Briefing Note 003/10 Low-Carbon Development for Mexico Low Carbon Growth Country StuDieS ProGraM Mitigating CliMate Change THROUGH DeVELOPMENT Mitigating Climate Change in Mexico | a Mitigating Climate Change in Mexico LOW-CARBON DEVELOPMENT IS POSSIBLE FOR MEXICO exico has the potential to rapidly move towards a low-carbon future. Currently, there are a broad number of cost-effective mea- Msures for reducing greenhouse gas (GHG) emissions, such as energy efficiency and sustainable transport interventions, being implemented in Mexico. At the same time, barriers exist to expanding many low-carbon interventions, ranging from information gaps to regulatory and policy barriers. By undertaking selective interventions, Mexico can benefit its national Low Carbon Growth Country StuDieS ProGraM economy, demonstrating to the world the importance of low-carbon development to avoid the negative impacts of climate change. Mexico is Latin America’s largest fossil fuel-consuming country. The majority of the country’s GHG emissions come from energy production and consumption. Low-Carbon Development for Mexico provides an analysis of tabLe of ContentS how the country could significantly reduce its GHG emissions without hin- dering economic growth (Box 1). Beyond Mexico, the report provides useful low-Carbon Development is Possible for Mexico 1 lessons on low-cost interventions commonly employed in a variety of developing and industrial countries. With climate change at the forefront of global Mitigation Options for Mexico 2 policy, low-carbon development is no longer an option for developing countries and middle-income nations like Mexico. a low-Carbon Scenario for Mexico 13 Climate change is a central part of Mexico’s national development policy as established in the National Climate Change Strategy (Estrategia Nacional de acronyms and abbreviations 20 Cambio Climático, 2007), which outlines medium- to long-term goals for adaptation and mitigation. Mexico has taken a committed stance to reducing GHG emissions, as seen in its targets announced at the United Nations Climate Change Conference in Poznan, Poland, in 2008, and its recently published Programa Especial de Cambio Climatico, which sets out a broad program to address climate change. This overview highlights the main findings ofLow-Carbon Development for Mexico, specifically the logic of low-carbon growth within the country’s development goals and priorities, GHG mitigation opportunities, and the additional costs and benefits of lower carbon growth. b b | low-Carbon growth Country Studies Program box 1 | Getting Started box 2 | Mexico’s Low-Carbon intervention analysis: Criteria to Prioritize options Low-Carbon Development for Mexico or México: Estudio Sobre la Disminución de Emisiones in Mexico, 40 near-term priority mitigation measures have been identified using 3 principal criteria to de Carbono (MeDeC)1, was two years in the making based on a study by the World Bank rank options to 2030: for the Mexican government, with the help of the energy Sector Management assistance 1. CO2 emission reduction potential. an intervention must generate 5 million tons of CO2 equivalent Program (eSMaP). it evaluates the potential for ghg reduction in Mexico over the coming (CO2e) emission reductions from 2009 to 2030. decades. a common methodology is used to evaluate low-carbon interventions across key 2. Low cost per ton of CO2e reduced. Only interventions with positive economic and social rates of emission sectors that form the basis for a low-carbon scenario to the year 2030. analysis return (at a given discount rate or cost of capital) and an abatement cost of US$25 per ton CO2e reduced or less were considered. interventions with positive net benefits are “no-regrets” measures is presented using reader-friendly charts, graphs, and annotations organized in chapters since the financial and economic benefits more than cover the costs. according to the key emission sectors, allowing for a quick overview of priority issues. 3. Feasibility of implementation. Determined by sector experts who considered technical potential, this volume is the work of an international team of economists and researchers. it was market development, and institutional needs; and by government officials who considered the politi- prepared by todd M. Johnson, an energy specialist in the Sustainable Development Depart- cal and institutional feasibility of scaling up interventions across the economy. Before adopting an ment of the latin american and the Caribbean Region; Claudio alatorre, a consultant with intervention, public discussion with sector experts, government officials, the private sector, and expertise in energy transition programs; Zayra Romo, a power specialist in the africa energy civil society will take place. all selected interventions have already been implemented, at least on Unit; and Feng liu, an energy specialist with the energy Sector Management assistance a pilot level, in Mexico or in other countries in similar conditions. Some interventions face barriers in the short term (next five years) but it is considered that these barriers can be removed in the Program. medium term. english Paperback 7 x 10 January 2010 | World Bank iSBn: 0-8213-8122-9 | iSBn-13: 978-0-8213-8122-9 Step 1. Step 2. Step 3. Potential Net Cost Feasibility of 1 Johnson, t. M., C alatorre, Z. Romo, and F. liu. 2010. México: Estudio Sobre la Disminución de Emisiones for GHG of GHG Implementation de Carbono (MeDeC). the World Bank, Washington, DC. Reduction Reduction MEDEC Interventions MITIGATION OPTIONS FOR MEXICO figure 1: Mexico’s GhG emissions inventory, 1990, 1996, 2002, and 2006* Current GHG emissions and trends in Mexico indicate future potential for reduc- excluding Land-use, Land-use Change, and forestry (LuLuCf) tion. Energy consumption currently dominates Mexico’s GHG emissions, 700.00 accounting for 61 percent of GHG emissions in 2002; followed by land-use, forestry, and agriculture (21 percent) and wastes—solid and liquid (10 percent; 600.00 Figure 1). Waste Low-Carbon Development for Mexico evaluates low-carbon interventions in 500.00 Agriculture five principal sectors: e 2 • Electric Power—the production and distribution of electricity 400.00 Industrial • Oil and Gas—the extraction, processing, and distribution of oil and gas MtCO Processes 300.00 • Energy End-Use—the potential for energy efficiency in the manufacturing Energy Production and construction industries, and the residential, commercial, and public 200.00 & Consumption sectors • Transport—primarily road transportation 100.00 • Agriculture and Forestry—crop and timber production, forest land management, and biomass energy It uses a cost analysis to look at interventions projected to 2030 and also considers 1990 1996 2002 2006* immediate changes that can be implemented and operational within 5 to 10 years (Box 2). Source: national greenhouse gas inventory, 1990-2002 *Preliminary data from the national ecology institute 2 | low-Carbon growth Country Studies Program Mitigating Climate Change in Mexico | 3 electric Power | Supply efficiency and renewables Demand for electric power has been growing faster than gross domestic product (GDP) in recent decades and is likely to continue for the foreseeable future with associated growth in electricity use across the economy. In a business-as-usual (BAU) scenario, total carbon dioxide equivalent (CO2e) emissions from power generation would increase by 230 percent between 2008 and 2030—from 138 to 312 Mt CO2e—to meet the increasing demand for power. In this scenario, the use of fossil fuel-fired power generation would increase— because they are least-cost without considering global environmental externalities—with coal accounting for 37 percent of new installed capacity, and natural gas 25 percent. If the net cost of CO2e is set at US$10/ton, additional low carbon energy technologies— small hydropower, wind, biomass, geothermal, cogeneration—could replace much of the fossil fuel generation, principally coal, but also natural gas, in the BAU scenario. Then, power generation would look very different in 2030 (Figure 2). Under the low-carbon scenario, cogeneration (i.e., the combined generation of heat and electricity in the same facility) could provide 13 percent of new power capacity at net costs1 that are less than current marginal costs of power generation in Mexico. Expanding renewable energy and energy efficiency in the power sector would require several policy and regulatory changes (Table 1). For example, the cost of wind power generation is among the lowest in the world due to high-quality wind resources in the Isthmus of Tehuantepec. Unfortunately, excessively low planning prices that do not account for fossil-fuel power generation, a lack of recognition of the portfolio effect in power planning, and ill-fitting procurement procedures hamper the development of wind and other renewable energy projects. figure 2: Power Generation in 2030: BAU vs. Low Carbon Scenario 700 Eciency 600 Biomass Wind 500 Hydro 400 Geothermal 300 Nuclear Natural gas cogeneration 200 Power generation [TWh] Natural gas 100 Fuel Oil + other fossil fuels 0 Coal and coke 2008 2030 2030 Baseline Medec 1. Costs were calculated by comparing the net costs (including capital, energy, operations, and mainte- nance) of each low-carbon technology with the costs of the displaced coal and natural gas capacity. 4 | low-Carbon growth Country Studies Program Mitigating Climate Change in Mexico | 5 table 1: barriers to Low Carbon Development

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