Climate change and business

Moving towards a green economy is essential not only for minimising environmental negative effects of development, but also for economic development. The EU's trade policy contributes intensively to the fight against climate change as it helps countries shift to a low-carbon economy by encouraging innovation and international investment in low-carbon production. Internally, it has set up many incentives for businesses to translate intentions into actions. Internationally, the EU has sought to export its green economy policy to third countries, notablydeveloping onres, through cooperation instruments.

The role of the EU in promoting a green economy in Mexico:

Mexico has not served as a pollution haven for dirty firms from developed countries, since it has established a solid environmental legal and institutional framework. However, enforcement of environmental legislation still has room for improvement while market-based integration has remained very limited. There have been many proposals to improve energy pricing and transport taxation, but few have been put into practice. Furthermore, despite its great potential for energy from the sun, wind and water, Mexico has not taken advantage of the Clean Development Mechanism laid out in the Kyoto Protocol on climate change, nor of the various loans from international financial institutions. With certain key sectors such as energy and transport (which together account for nearly 70% of the country's GHG emissions) still closed to foreign investment, transfer of green technology and know-how from green European pioneers has also remained very limited.

To help implement its international green policy in Mexico, the EU has developed several business tools, available to European and Mexican firms alike established in Mexico. The first one concerns access to financing; two types of loans are available to both the private and public sector through the EIB (insert hyperlink to EIB's ppt) and Bancomext (insert hyperlink ppt), to finance projects related to sustainable development.

Success to financing: a European solution

 

The European Union’s long-term lending bank, the EIB, implements the financial components of agreements concluded under European development aid and cooperation policies. It supports investment projects in some 150 non-member countries throughout the world. In Latin America alone, the EIB's mandate amounts to 2,800 million EURO, to finance projects from 20 to 200 million EURO in all sectors focusing on environmental sustainability and climate change mitigation, among others. For smaller projects, the EIB finances indirectly through Bancomext projects between EUR 0.5 and EUR 12.5 million.

 

Examples of Climate Change Mitigation projects include:

  • to stabilise the atmospheric concentrations of greenhouse gases (GHG) at a level that will not cause unnatural variations of the earth’s climate by reducing GHG emissions and to increase the share of renewable energy
  • Energy efficiency (including fuel switching, CHP, district heating & plant modernization)
  • Renewable energy (wind, solar, biomass, biofuels, etc.)
  • Measures to reduce GHG other than CO2 (including methane capture from landfills and plant modernization)
  • Biological sequestration (including afforestation and reforestation) and carbon storage

The EIB has so far approved two environmental in Mexico:

  1. La Ventosa: EDF, through one of its affiliate Eléctrica del Valle de México, is developing a 180 MW windfarm in Oaxaca, for which the EIB approved some 71.6 million EURO. The Project is being developed under Mexico’s self-supply or “autoabastecimiento” framework and will sell its energy to four Wal-Mart de México subsidiaries (“WMS”) under 15-year selfsupply power purchase agreements.
  2. la Venta III: The EIB approved which 78.5 million EURO for Iberdorla's wind farm project, also in Oaxaca. The project comprises the construction and operation of a 103 MW wind farm that will consist of 120 turbines with a nameplate capacity of 850 kW. It will sell its power directly to CFE.

EIB contact: Andrew Beikos

Responsable de operaciones senior

tel: (352) 4379 86526

e-mail: a.beikos@eib.org

 

 

 

 

Another tool includes the Mexican Carbon Fund (FOMECAR), trusteeship partly financed by the BEI, which aims to establish a national carbon market, encouraging more Mexican companies to take part. Considering how electricity, which contributes some 114 million tons of carbon emissions annually in Mexico, is primarily produced in plants run on fossil fuels, FOMECAR has pushed for Mexico to make better use of CDM projects to develop wind, solar and geothermal sources, improve energy efficiency and replace fossil fuels. The number of projects and quantity of credits issued however remains low.