Over the last weeks, a lot has been said about the future of the United States – Mexico relationship under Biden and AMLO administrations. One of the areas that appears less promising, if not outright conflictive is energy and climate change.
I do not share the view that the Presidents and their governments will surely clash in the near future. The relationship has too much importance for both sides. Yet, I do believe that avoiding simply conflict sets the bar too low for what we want of this relationship, specially in the present context. Navigating the bilateral waters will require a diplomacy that is creative, smart, and realistic. The North American Development Bank (NADBANK) offers an opportunity to achieve this.
President Joe Biden considers climate change as “essential to U.S. foreign policy and national security” and clean energies are a key component of his strategy to “tackle the climate crisis at home and abroad”. Just a few hours after taking office, h signeed an executive order returning the United States to the Paris Agreement and announced that he will host a Leaders’ Climate Summit on Earth Day next April. Moreover, on the domestic front, government agencies have been ordered to procure carbon-free electricity.
President Andrés Manuel López Obrador’s policy approach here is quite contrasting. In his effort to strengthen both Mexico’s national oil company and power utility (Pemex and CFE), through a strategy I view as seriously flawed, he has pretty much stopped development of renewables, relied more on carbon and fuel oil to generate electricity and, some experts say, he has placed Mexico’s commitments under the Paris Agreement in jeopardy. Just this week a new proposal was submitted to Congress. The bill, among other things, would bring into the grid power irrespective of source and price, a move that will surely hurt private wind and solar generators. The fact that the bill was introduced as “preferential” (must be voted in 30 days), underscores how the López Obrador administration feels about this issue. Nevertheless, the proposal has quickly received harsh criticism from environmentalists, the private sector and opposition parties. Indeed, Mexico’s top business organization (CCE) has gone as far as labeling the measure as an indirect expropriation.
In a recent conversation with his Mexican counterpart, Arturo Herrera, the new Treasury Secretary, Janet Yellen, outlined U.S. priorities. Addressing “the threat of climate change” was front and center.
Taking all this into consideration, NADBANK, little-known bilateral institution, can hopefully bring closer both governments and foster cooperation in this area: The bank was created in 1994 in the context of the NAFTA negotiations to help develop and finance environmental infrastructure along the United States – Mexico border. Interestingly, it was crafted under a Democrat presidency (Clinton’s) as part of a trade agreement promoted by a Republican president (Bush). It has evolved over the last 25 years becoming an increasingly important tool of governments to address shared concerns along our common border, and it has produced significant results –albeit the difficult challenges. In the interest of full transparency, I note that I served as its Managing Director for almost seven years.
NADBANK, it can be argued, was the first green bank that ever existed. Its mandate has always been to help protect, preserve, and enhance the environment of the border region, one that is economically vibrant, with a rapid-growing population and extremely important for the overall bilateral relationship. What happens at the border resonates in American and Mexican public opinion.
More important perhaps, there are good reasons to believe that it can serve as a handle for Mr. Biden and Mr. López Obrador future agenda.
To start with, the institution is already there with 25 years of experience. Institutions have played a positive and stabilizing role for the bilateral relationship, as highlighted by a recent report from the U.S, Mexico Foundation (www.usmexicofound.org) and the Mexico Institute of the Woodrow Wilson Center (www.wilsoncenter.org/program/mexico-institute), with input form 12 former Ambassadors from both sides. Moreover, using the NADBANK comes with a relatively low-price tag for taxpayers.
The bank is healthy financially, moderately leveraged, with room to grow its portfolio, and recently had a capital increase authorized by its shareholders: the U.S. and Mexican governments. It has a whole of government approach since its Board of Directors includes representatives from the Treasury and State Departments, the EPA and their Mexican counterparts, along with civil society members and state government representatives.
NADBANK has focused on relevant areas of potential cooperation such as clean energies (facilitating the development of 3 GW of electricity through 35 wind, solar and biogas projects) and water (helping provide 160 million of gallons a day of improved water treatment capacity).
The San Antonio-based international organization, has dealt with the hardships of making sound financial decisions for sustainable infrastructure projects. This as an area, as many have found, that requires blending good economic judgement with environmental zeal.