The Business Year

Juan José Guerra Abud

MEXICO - Energy & Mining

The Benefits

Secretary of Environment and Natural Resources (SEMARNAT), Mexico


Juan José Guerra Abud was born in 1952 and has an educational background in electrical mechanical engineering, economy, and fundraising. He was Secretary of Economic Development between 1994 and 1999 and a member of the Mexiquense Infrastructure Council in 2007. Since December 1, 2012, he has been the Secretary of Environment and Natural Resources (SEMARNAT).

"The country’s government assumes full responsibility for promoting sustainable growth in harmony with our natural resources."

The latest National Institute of Ecology and Climate Change (INECC) figures shows that Mexico released 748 million tons of carbon dioxide equivalent (MtCO2e) in 2010, which represents 1.4% of the world’s emissions. What specific programs is SEMARNAT implementing to reverse this trend?

On April 28, 2014 the Ministry of the Environment and Natural Resources (SEMARNAT) launched the Special Climate Change Program 2014-2018 (PECC). The PECC is one of the policy planning instruments derived from the General Climate Change Law (LGCC), and is aligned to the National Development Plan (PND), cross-sectional programs from the federal government, and the sectorial programs from 14 federal ministries that participate in the Inter-Ministerial Commission on Climate Change. The PECC lays out a diagnosis of the present situation of Mexico regarding climate change. It comprises five objectives, 26 strategies, and 199 lines of action, of which 77 focus on adaptation, 81 on mitigation, and 41 on the construction of public policies for tackling climate change. It also includes an annex with 31 complementary climate change-related activities and 10 performance indicators to monitor the results of the program during the 2014-2018 period using a 2013 baseline, a 2018 goal, and a calculation methodology. The PECC aims to reduce the vulnerability of the population, ecosystems, and productive sectors to climate change, as well as increase resilience in strategic infrastructure. This program presents the federal government’s contribution to the greenhouse gases (GHG) emission reduction indicative goal prescribed by the LGCC for the 2014-2018 period, specifically 30% GHG emission reductions with respect to the business-as-usual scenario by 2020. The total amount of GHG reductions to be accomplished by the implementation of PECC mitigation actions is 83 MtCO2e. The contribution of states and municipalities (sub-national governments) and the private and social sectors will be essential to attaining the goals adopted by Mexico both in adaptation and mitigation.

What is going to be the impact of the pilot program for using natural gas in transport that SEMANART recently launched?

The pilot program is considered a part of the National Development Plan 2013-2018, and aims to strengthen national climate change policy and environmental care for the transition to a competitive, sustainable, and low-carbon economy as well to reduce risks to health and mitigate the emission of compounds and GHGs. As a starting point, a pilot program has been established in the city of Monterrey, which will equip the latter with the largest natural gas infrastructure for vehicular use in the country, both in number of compressor stations and transport units that use natural gas vehicles. The pilot project aims to be implemented in the metropolitan area of Monterrey, and pursues the goal of 8,000 vehicles using natural gas in the medium term, of which approximately 18% will be taxis, 38% heavy vehicles (including passenger and heavy duty trucks or light duty trucks), and 44% light vehicles. The environmental benefits of using natural gas, relative to gasoline and diesel, for example, are there. Decreases were recorded in the range of 25% for CO2 emissions compared to gasoline and 35% compared to diesel. For mono-nitrogen oxides (NOx) and carbon monoxide, emissions are estimated at being 35% and 95% lower, respectively. In the case of sulfur dioxide, the reduction would be 100% using natural gas. Other benefits include not contaminating soil or groundwater, while combustion is practically odorless and the noise level is much lower than conventional motors. The economic benefits are that natural gas is the cheapest fuel available and all varieties are tax-free. Vehicle natural gas, currently distributed in Monterrey, presents ample competitiveness with conventional fuels, 50% from Magna gasoline, up 51% compared to diesel, and up to 26% compared to LPG. In matters of security, natural gas is safer because it is lighter than air, dissipates immediately, and has a low risk of detonation. It is stressed that this project is now in its infancy and is expected, in the short term, to be replicated in other states around Mexico.

What is the significance for Mexico of being a founding member of the Global Environment Facility (GEF)? And what is the importance of the “National Dialogue” program that the government and GEF recently announced?

Mexico was a founding member of the GEF from the pilot phase in 1991 and, together with Colombia and Venezuela, was one of the few developing countries that supported the GEF as the financial instrument of the Rí­o Conventions. Following objections from the G77, the final decision that was reached was for the GEF to be the interim financial instrument. Mexico participated in the first replenishment exercise and, in March of 1993, the first round of commitments to the instrument, the GEF trust fund, was reached, with financial support from developed countries and some developing countries, including Brazil, China, Egypt, India, Mexico, Pakistan, and Turkey. That converted GEF from a pilot project into a reality. Mexico has participated in all six replenishments and, recently, in Cancún, we announced it will double its financial commitment to the GEF from $10 million to $20 million. As both a donor and recipient country since 1991, Mexico has contributed a total of $32 million to the GEF and has received more than $450 million in grants. During GEF-5 (2010-2014), Mexico contributed $10 million to the GEF and received an allocation of $98.25 million. This is 2.3% of the entire allocation of GEF-5, and makes Mexico the fifth-largest recipient of resources following China, India, Brazil, and Russia. So it is clear that Mexico has been an important partner with the GEF since the beginning, both as a donor and a recipient country. The National Dialogue that was carried out last November as part of the preparatory activities for the GEF 5th Assembly included a roundtable between the GEF CEO and President, Naoko Ishii, and more than 30 representatives from the private sector, chambers of commerce, and development banks. It was very important because Mexican businessmen and women were able to discuss elements of the GEF’s strategy to engage the private sector directly with Naoko Ishii and her senior staff prior to the final rounds of the replenishment negotiations. Other issues that were discussed included public-private partnerships (PPPs), the possibility of GEF support for nationally appropriate mitigation actions (NAMAs) in the private sector, investment in clean-energy projects, and areas of opportunity for co-financing activities in the GEF’s Small Grants Program. More recently, during the GEF 5th Assembly in Cancún, the government of Mexico and the GEF Secretariat convened at a side event that was attended by a large number of relevant actors from the private sector from all over the world. Some of the issues raised included potential roles for commercial banks, development banks, and the private sector in financing sustainable projects, and how to improve coordination between the different actors to advance more rapidly on the issues of finance for sustainable development and how to foment need-based innovative finance.

“The country’s government assumes full responsibility for promoting sustainable growth in harmony with our natural resources.”

You recently defined the energy reform as an environmental reform. What will be the contribution of the new regulation in attracting investment for renewable energy?

The energy reform established obligations of clean compounds and reductions in GHGs and energy for participants in the electricity industry. The renewable resources are sufficient to double the installed capacity so far and to meet the goal by 2024 to generate electricity with 35% renewable energy capacity. The transition to renewables in terms of economic costs is not higher compared to conventional sources, especially when considering their co-benefits, including not depleting a non-renewable natural resource like natural gas, which can be made available for better uses in petrochemicals. The old fuel-oil plants will be gradually updated, operating with cleaner fuels such as natural gas, which is less harmful to the health of the communities living in the vicinity of old thermal power plants. Pipeline investments that are being made right now and the plans to make use of shale gas will certainly be useful toward the 2024 goal. The growth of the grid will be a recoverable investment for the state since the electricity market itself will take care of paying the amortized cost corresponding to the wheeling fee. The reform has multiple benefits and democratizes the power supply by making it cheaper in the medium term for many users of high domestic rates under current conditions. In the long term, it will mean huge savings by avoiding energy losses in transmission and distribution, and this will be the true reduction in electricity rates for much of the population. Positive for GDP, the generation of jobs and tax revenues, if 60,000 GWh of renewable technologies were to be developed by 2024, about 150,000 jobs would be created, similar to the current workforce of the Federal Electricity Commission (CFE), considering retiring employees and assets, and the tax revenues would total $23 billion.

What is the role of SEMANART in boosting green business in the country?

Actions in the environmental sector are aimed at the promotion, regulation, and support of improved environmental performance in the productive sector, both directly and through joint efforts with other federal programs and state and municipal governments. As part of SEMARNAT’s strategy to boost linking actions with the private sector, environmental care is a window of real opportunity to promote financial development in Mexico, as well as a mechanism to boost domestic and international tourism. In Mexico, only 0.6% of GDP comes from green business like recycling garbage in a comprehensive manner, forest sustainability, green transportation, renewable energy generation, and ecotourism, which generate economic resources and provide added value each year, increasing its demand and acceptance among the people. It is intended that the increases in productivity and economic growth will be linked to the lower emission of GHGs, less environmental damage, and an increased contribution of environmental goods in GDP, as well as the formal creation of green jobs, particularly benefiting populations living in vulnerable areas and/or with high and very high marginalization rates. The National Special Program on Sustainable Consumption and Production, established by the National Development Plan 2013-2018, aims to link the different public sector bodies involved in production and consumption as well as the private sector and social elements to move toward lifestyles and sustainable patterns of production and consumption. This program involves all producers and service providers to adopt standards that reduce dependence on natural resources and the generation of emissions and waste, and promote recycling and the reuse of materials, making their supply chains sustainable sectors. One of the most strategic sectors in Mexico is micro, small, and medium enterprises (MSMEs), which represent 99.8% of business units in the country, 52% of GDP, and 72% of employment and manufacturing, and to which SEMARNAT will boost funding for renewable energy and energy efficiency, promote the development of sustainable projects, and incubate companies, as well as certify sustainable production and consumption based on recognized standards; likewise, chaining federal and international economic instruments promotes and generates cross-sector partnerships and public platforms to support the transition to sustainable production and consumption practices.

What strategies should be taken over the medium term in terms of increasing Mexican competitiveness and taking advantage of the natural resources of the country?

The country’s government assumes full responsibility for promoting sustainable growth in harmony with our natural resources through the 4th National Goal of the National Development Plan 2013-2018, called México Próspero, through an extensive process that incorporates experiences and proposals from various sectors of society. To achieve sustainable and inclusive economic growth, as well as meet the goal of reaching better wellness for all families, it is necessary that the search for greater productivity concatenates efforts for economic growth with purposes of greater social inclusion and the sustainable use of natural resources and ecosystem services. The planning, development, regulation, and direct support to the conservation and restoration of ecosystems, their biodiversity, and the environmental services they provide, as well as their sustainable use, contribute to increased productivity and job creation and welfare between the owners and beneficial owners of these resources, and so favor compliance with México Próspero as the strategy to protect the natural heritage of the country. To achieve reforms and public policies, including environmental stewardship, it is essential to trigger greater economic development, increase productivity, create jobs, and overcome poverty in the long term. Aligning the different federal programs will promote a mainstreaming scheme in order to enhance the efforts of the environment sector.

© The Business Year – July 2014



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