Mexico

Mexico can meet the objectives of the Paris Agreement through profound structural transformations across all economic sectors. This research analysed the main system transformations required throughout the whole economy to obtain a decarbonisation pathway, as well as assessing the ways in which a number of national companies are aligned with this required transition.

All changes required – be they of a technological or behavioural nature, or changes in business models, or even changes that involve the creation of whole new industries and new services – will have to be swift, and in keeping with the rest of the economy and the climate targets set. They will also need to be geared towards solving the most pressing domestic issues (poverty, energy, food and water insecurity, etc.).Success in this endeavour will not come about through incremental adjustments to Mexico’s current plans. A different development narrative, which seeks sustainable social and economic development by simultaneously addressing policies, regulation, public prices and social attitudes, will have to inform national decision-making and result in clear investments – and disinvestments – starting now.

Economy-wide deep decarbonization pathway

Reaching net zero is possible for Mexico, but doing so requires a progressive decrease in emissions until a reduction of 90% is achieved by 2050 compared with 2020 levels – namely a decrease down to 51 MtCO2e. This will require significant changes across the highest-emitting sectors (electricity generation, transport and industry), and in sector that functions as the country’s principal CO2 sink: the AFOLU sector.

Population

millions inhabitants

GDP

Billion $ USD (2015)

Emissions per capita

tCO2e/Capita

GDP Carbon intensity

tCO2e/Bn USD$ 2015

CO2 emissions from combustion

MtCO2

(1) except electricity

GHG and gases breakdown, sinks

MtCO2e

(1) without energy & IPPU
(2) Non-CO2 for Energy, N2O – CH4 – HFC – PFC – SF6 – mix
(3) forest and all other fluxes

Electric Utilities

A deep decarbonization pathway for power generation

Electricity generation must lead the way in Mexico’s decarbonisation. The sector can be decarbonised to the tune of around 15 gCO2e/kWh by 2050. Mexico’s vast renewable resources can provide clean electricity, but they require a major boost, in terms of generation capacity (wind and solar especially), as well as in infrastructure for storage, transmission and transformation (into hydrogen, for example). In this regard, reliable power delivery is possible (even though the power sources are highly intermittent), and without curtailment. This can be achieved by balancing load across the whole country and storing and transforming surplus electricity.

Electricity demand

TWh

Carbon intensity of electricity

gCO2/kWh

Power Generation capacities

GW

Power generation production

GWh

Climate transition performance and scenario alignment of Electric Utilities companies

The three companies assessed under the ACT EU methodology obtained scores of between 6 and 8, for an average performance score of 7/20, between E to B, for an average narrative of C, and an average trend score of “-“. Overall, companies obtained reasonably similar scores, indicating that the panel is relatively homogeneous in terms of its levels of maturity regarding the alignment to the country-sectoral decarbonization  pathway.

Average ACT score, Electric Utilities companies, Mexico
7 C
Performance Narrative Trend
  • Most of the companies evaluated have defined low-carbon strategies for themselves. Still, their emissions have increased over the past five years and continue on an upward trajectory.
  • Most of the companies evaluated have not set medium- or long-term emissions reduction targets, but have started or are about to start doing so.
  • None of the companies are investing in R&D into low-carbon alternatives or technologies, limiting their ability to develop new business opportunities with lower climate impacts.
  • Most companies have defined a strategy and action plans to meet their climate goals; however, those plans are often not budgeted and lack sufficient detail to ensure consistency with the aims and goals set.
Performance modules scores

(%)

Mexico
Quantitative indicators scores

(%)

Mexico

Mexico, Electric Utilities companies : Average Performance modules and quantitative indicators scores.
Note: Average calculated for a sample of three Mexican companies in the sector, including one of the five largest companies in the country.

Most of the companies assessed play an essential role in increasing renewable energy capacity in Mexico. Their installed renewable energy capacity currently accounts for a high share of the country’s renewable energy supply. Furthermore, the companies assessed are starting to phase out fossil fuels and have identified successful and profitable business models for non-carbon electricity.

The companies assessed are not reducing their emissions at the speed necessary to achieve the level of decarbonisation expected for the sector and the country. Significant efforts will be needed to reduce emissions from the sector, including setting more ambitious medium- and long-term targets and investing more in decarbonising their assets. Also, developing new low-carbon production technologies and creating structured and coherent transition plans for achieving these targets.

An appropriate regulatory framework could facilitate and promote the transition of companies in the sector by establishing incentives for investment and greater accountability in terms of climate performance.

Cement

A deep decarbonization pathway for cement production

Decoupling cement production from GHG emissions is very important given how extensively used this material currently is, and will remain so in the future. By 2050, sectoral annual emissions could decrease by 77% compared with the Current Policy Scenario (CPS), falling to around 12 MtCO2e. A suite of interventions – including new technology R&D and plant retrofitting, changing consumer behaviours, modifying construction practices and introducing regulation – will all need to be coordinated throughout the whole production-consumption-reuse chain.

Due to their central role and large industrial capacity, cement manufacturers are in a privileged position for spearheading many of the transformations required in association with other sectorial stakeholders. Doing so would potentially bring enormous benefits to the sector and society, beyond reducing GHG emissions.

Production

Mt

Decarbonisation drivers

MtCO2e

Carbon intensity

tCO2/TJ

CO2 emissions

MtCO2e

(1) Final heat
(2) industrial process calcination emissions
(3) Energy Consumption Emissions
(4) On-site CCS U net

Climate transition performance and scenario alignment of Cement companies

The four companies assessed under the ACT Cement methodology obtained scores of between 3 and 10, for an average performance score of 6/20, between D to B, for an average narrative of C, and a trend score of “-“ as all companies presented a negative trend. Overall, companies obtained low scores, indicating that the panel is not yet transitioning towards a low-carbon economy.

Average ACT score, Cement companies, Mexico
6 C
Performance Narrative Trend
  • Most companies have set medium- or long-term emission reduction targets, but these targets do not align with the compatible 1.5C° scenario decarbonisation trajectory proposed by the DDP initiative.
  • All companies will need to decarbonise at a faster pace as their locked-in emissions exceed their theoretical carbon budget, and they have increased the carbon intensity of their emissions over the last five years.
  • None of the companies are investing in R&D into low-carbon alternatives or technologies, limiting their ability to develop new business opportunities with lower climate impacts.
  • All companies have integrated climate issues into their executive management; however, transition plans are not sufficiently detailed. Half of the companies have not implemented climate scenario testing or climate change management incentives, and none share expertise with the board or executive management about topics relevant to climate change and the low-carbon transition.
  • Only one company disclosed a clear strategy and associated activities for influencing its suppliers and clients in such a way as to reduce their GHG emissions.
Performance modules scores

(%)

Mexico
Quantitative indicators scores

(%)

Mexico

Mexico, Cement companies : Average Performance modules and quantitative indicators scores.
Note: Average calculated for a sample of four Mexican companies from the sector, including the sector’s leading company.

Companies are not reducing their emissions at the speed necessary to achieve the level of decarbonisation expected for the sector and the country. Although these companies have identified initiatives for helping to reduce emissions resulting from cement production – such as replacing the clinker, using alternative fuels and investing in energy-efficient equipment –  it is necessary to implement these solutions on a large scale and put more effort into addressing the structural barriers to the penetration of low-carbon cement into the market and optimising its use in construction. In that sense, public infrastructure construction offers an opportunity to boost demand for low-carbon cement.

Passenger transport

A deep decarbonization pathway for transportation

Decarbonising passenger transport, historically one of the largest sources of emissions in the country, is crucial to achieving net zero emissions by mid-century. But to fully decouple personal mobility from emissions, several changes are needed encompassing many areas, from spatially reorganising our cities, to developing new technologies and changing people’s behaviour By combining all these systemic changes, passenger transport can reduce its annual emissions by 89%, bringing them down to under 20 MtCO2e by 2050.

Emission drivers

index=1 in 2015