Spotlight Activity: New Government’s Proposed Energy Policies
The Mexican economy has always been closely linked to oil. Historically, the national budget has heavily relied on PEMEX (the parastatal company in charge of oil and gas exploitation), with the company contributing with more than 35% of the national budget. In recent years, PEMEX lost its priority role as budget contributor and, due to corruption, decline in oil prices, fuel theft, lack of re-investment, among other factors. The company is in crisis, with some predicting its bankruptcy.
Because of this, the entering administration, which was sworn in December 2018, has placed energy as one of the main axes in the new plans and policies, with the aim of achieving “energy self-sufficiency” by 2024. The new government grounds its energy – and fiscal – strategy in the rescue of PEMEX through generating a greater influx of national and foreign investment, achieving energy self-sufficiency, and changing the balance of fuel imports. Unfortunately, the new plans and policies are heavily reliant on a revamp of the oil industry, most notably, the National Plan for the Production of Hydrocarbons (PNH) and the National Refining Plan (PNR).
The PNH looks to achieve energy self-sufficiency, increasing in 40% the annual fossil fuel extraction, from 1.8 million to 2.4 million barrels of oil per day by 2024. In the incoming year, 175 billion pesos (roughly 9.225 billion dollars) will be allocated to “rescue” the oil-related energy sector, while 20 billion pesos (1.1 billion USD) will be invested to increase electricity production in the CFE (Federal Electricity Commission), which includes hydroelectric plants.
On the other hand, the PNR looks to generate a surplus in the oil trade balance. It promotes the rehabilitation of six refineries and the construction of a new one. In the first year, it is expected to increase production significantly, and, by mid-2020, reach the goal of producing 600 thousand barrels of gasoline per day, meeting the national demand. The plan seeks to end fuel imports, which currently represent 80% of national consumption. Once the country is self-sufficient, it will aim to lower fuel prices.
These strategies are not compatible with Mexican GHG mitigation goals and renewable energy commitments (35% of clean energy for electricity generation by 2024). Although the energy agenda hints at the use of renewable energy – especially PV panels in rural areas – and the expansion of hydroelectric energy through the rehabilitation and re-powering of 63 hydroelectric plants, the budget and official discourse are entirely focused on carbon-intensive technologies.
This carbon-intensive pathway entails not only environmental and health risks, but also economic ones. It is highly possible that the penetration and cheapening of green technologies, more stringent international regulation, and shift in public perception, will cause a fall in demand for fossil fuels before 2030. This will create stranded assets – such as worthless pipelines, refineries and oil wells – and lead to massive monetary losses by 2035. Delaying action increases environmental, humanitarian, and economic costs and thwarts climate stabilization.
The future of Mexico’s energy sector is still uncertain. While it is understandable that energy self-sufficiency, accessible electricity, and low fuel prices are sought for, it is imperative to fast-track the transition to a low-carbon economy. Continuing with the uptake and advance of clean energy technologies should be a policy priority. Solutions exist in the energy and industry sectors to significantly curb emissions, but they must be accelerated to reach the necessary diffusion and scale through strong national and city policies, greater incentives for clean energy, more investment in research and development, and climate leadership.
Status: Falling Behind
The country’s current energy strategy is not compatible with mitigation goals and renewable energy commitments. This entails not only environmental and health risks, but potentially a huge economic misstep. Developed and developing nations alike are increasingly looking towards greener and more efficient options for energy and fuel generation, sending a clear signal as to where future investment and R&D will be allocated.
Please send the following message to the policymaker(s) below.
We are aware of the necessity of ensuring energy and fuel access for all. However, we are concerned that the current strategy is not compatible with national mitigation and energy penetration goals and commitments. Moreover, it could affect air quality, local ecosystems, and dramatically increase the country’s GHG emissions. It will swell the carbon bubble, which is soon to burst. Therefore, we ask the new government to ensure that the energy initiatives are consistent with national climate goals and commitments, this is not only for the better of the planet and future generations, but also for population health as well as long-term economic stability.
Secretary of Environment and Natural Resources- Josefa González Blanco
Telephone: 54900900 Ext. 12000/12076/12001
Address: Ejercito Nacional 223,
Col. Anáhuac, Delegación Miguel Hidalgo,
Ciudad de México, México,
Secretary of Energy- Rocío Nahle
Address: Insurgentes Sur 890,
Del Valle, Ciudad de México. C.P. 03100
Director of PEMEX- Octavio Romero
Telephone: 1944 2500
Address: Avenida Marina Nacional 329, Colonia Verónica Anzures,
Miguel Hidalgo, Ciudad de México, CDMX C.P. 11311
Director of CFE- Manuel Bartlett
Address: Paseo de la Reforma 164, Col. Juarez, Cuauhtémoc,
Ciudad de México. C.P. 03100
Con Nahle, Sener recibirá 1000% más de presupuesto durante 2019 https://www.forbes.com.mx/con-nahle-la-sener-recibira-1000-mas-de-presupuesto-durante-2019/
Exponential Climate Action Road Map https://exponentialroadmap.org/wp-content/uploads/2018/09/Exponential-Climate-Action-Roadmap-September-2018.pdf
Plan Nacional de Hidrocarburos: https://www.gob.mx/sener/articulos/presentacion-del-plan-nacional-para-la-produccion-de-hidrocarburos?idiom=es
Plan Nacional de Refinerías: http://www.pemex.com/saladeprensa/boletines_nacionales/Paginas/2018-093-nacional.aspx
PEMEX crisis: http://www.nexos,com.mx/?p=37935