In the last several years Mexico has lost its way as a regional climate leader, choosing to resist the energy transition and embracing the development of new oil refineries instead. That said, the current policy is not one of open resistance, but rather of passive aggressive foot-dragging.
Last year, Mexico signed the Global Methane Pledge put forth by the US and the EU and the government has publicly said that it is on board with climate change abatement. It all sounds good, but there is no real plan. And no significant action has been taken to abate emissions. In fact, a recent United Nation’s Environment Program (UNEP) report shows that oil and gas methane emissions in Mexico are approximately 45 percent higher than officially reported. As the saying goes, mucho ruido, pocas nueces.
Reducing methane emissions in the oil and gas industry is particularly important to increase energy efficiency in Mexico, given that methane is essentially natural gas and can be captured and reused. According to the World Bank, Mexico is one of the countries that burns the most natural gas into the atmosphere, signifying as much as 18 percent of national gas production, according to statistics from the Secretary of Energy. This is why President Andres Manuel López Obrador has latched onto the idea of reducing methane emissions from Pemex operations by 98 percent. This is a laudable goal, but again, where is the action plan?
The COP27 is set to start on November 6th In Egypt and while climate change is the most important issue facing the world, it is not viewed as the most urgent in the context of the Russian invasion of Ukraine, potential famines, economic instability, rising inflation and extreme politics. Getting countries to agree to redouble efforts to reduce emissions – both carbon dioxide and methane – will be no simple task. For Mexico’s part, its National Determined Contribution (NDC) has not budged since 2015, but it seems persistence on the part of the US government, particularly John Kerry – the White House climate emissary who has visited Mexico five times in over the last year – may soon bear fruit with the announcement of more ambitious targets.
The need for reliable energy supplies has put the oil and gas industry back in the driver’s seat; it is vital to keep the lights on, particularly in Europe, which is vulnerable to Vladimir Putin’s energy blackmail. That said, while switching to cleaner energy sources is a heavy lift – in terms of investment, infrastructure and logistics – the transition to renewables is also being boosted under the same logic of energy security. Despite market disruptions, the trend toward renewables and away from hydrocarbons will continue unabated.
Mexico is a country that has a lot to lose from the effects of a changing climate. The issue is not just environmental in nature, but affects the economy and social justice.
With two long coastlines, Mexico is particularly vulnerable to rising seas; the country also has deserts and mountainous regions that will suffer from drought and landslides. In 2019 the National Institute of Climate Change and Ecology (INECC) estimated that 1,385 municipalities in Mexico are vulnerable to climate events like floods, landslides, droughts, heat waves and disease transmission. From a social justice perspective, the groups most vulnerable to these climate-change induced events are lower-income households and indigenous populations.
Environmental, Social and Governance (ESG) considerations are not going away, despite the recent criticism of the veracity of corporate reporting. Why is this important for Mexico? First, the country should be benefitting more than it is from nearshoring trends. What is holding some investors back? One critical factor is the lack of legal certainty related to private sector investments in the energy sector and scarce clean energy sources. Multinationals have made commitments to reduce their emissions and if operating in Mexico will prevent them from doing so, they will be forced to go elsewhere.
Pemex, the hulking state-owned oil company, needs to up its ESG game. Why? Because if the organization ignores the need to reduce both carbon and methane emissions, it will be unable to refinance its considerable debt. Investors will be loath to put their money into organizations that are not moving in the proper environmental direction.
Mexico has everything to gain from implementing serious emissions reductions and has commitments on paper that indicate that it plans to do so, but the clock is ticking. One can only hope that COP27 will fuel the energy behind real action so that the country can both strengthen its energy security and protect the health and livelihoods of its most vulnerable citizens.
* Amy Glover is president of Agil(e) and Co-Chair of 5050 Women on Boards in Mexico. Twitter: @chilangagringa