Mexico pouring money into Pemex, at the environment’s expense
MEXICO CITY (Bloomberg) --Five years ago, Mexico was the first developing country to submit a plan to cut carbon emissions in the lead up to the landmark Paris Agreement. Last month, it joined climate recalcitrants like Russia and Brazil in failing to boost efforts to combat global warming.
Mexico’s updated proposal to the United Nations capped two years of environmental backsliding under nationalist President Andres Manuel Lopez Obrador. Members of the Paris accord are expected to boost their targets every five years, but Mexico instead maintained its goal of cutting emissions 22% by 2030, compared to business as usual.
The decision encapsulates the approach AMLO has taken toward the environment since coming to power in a landslide victory in 2018. He’s cut the knees off a booming renewables market, ploughed money into Pemex, and pursued two major infrastructure projects that environmentalists consider ecological disasters.
The government’s stance has been “emissions be damned, environment be damned, air quality be damned,” said Jeremy Martin, vice president for energy and sustainability at the Institute of the Americas. “There's just not anything you can point me to that makes me feel confident in its ability to be anything other than poor stewards of their environment and emissions profile.”
Born in an impoverished oil town in the southeastern state of Tabasco, AMLO has staked his political capital on returning debt-laden Pemex to its 1970s role as a major driver of the Mexican economy. Pemex and state electricity company Comision Federal de Electricidad, or CFE, are at the heart of his plan for an energy self-sufficient Mexico.
His record gives him the rare distinction of being a leader with leftist roots whose environmental policy is closer to right-leaning climate deniers like Brazil’s Jair Bolsonaro. Unlike Bolsonaro, who has advocated opening up the Amazon rainforest to mining and agriculture, AMLO has embraced green rhetoric even as his resource-nationalist agenda takes priority.
“The president’s actions reflect his vision for Mexico, which can be summed up as returning the country to the control of the two main state energy companies,” said Rodolfo Rueda, an attorney with Thompson & Knight LLP, whose clients include renewable energy companies.
That push has come at the cost of a booming clean-energy sector. The year before AMLO took office, renewables projects fetched some of the cheapest electricity prices in the world. But the president has canceled further auctions and changed rules to help the state utility maintain its market share. About 200 wind farms, solar arrays, natural gas plants and other mostly private projects are in limbo after he ordered regulators to favor the electricity giant and Pemex.
The protectionist policies have upset business executives and environmentalists. Dozens of renewables companies have sought to halt regulatory changes that hurt their investments in Mexico. Antitrust agency Cofece and activist group Greenpeace both won recent injunctions over actions that would prevent new clean-energy power plants from moving forward.
Mexico is committed to protecting the environment while closing the country’s inequality gaps, the Ministry of Environment and Natural Resources said in an emailed statement. It cited steps taken including guaranteeing water access to the country's poorest, halting mining concessions and the sustainable use of natural resources and livestock.
Asked how Mexico plans to meet its legal commitment of producing 35% of its energy through renewables by 2024, AMLO said at a daily press conference on Thursday that the country will boost its hydroelectric capacity by updating 60 plants. While using water to generate power doesn't generate carbon emissions, the creation of dams can release large amounts of trapped carbon.
AMLO argued that critics of his energy policy are cynically using the environment to attack the government. "There's a lot of deception. I would tell you that they have grabbed the flag of clean energy in the same way they grab the flag of feminism or human rights. Since when are conservatives concerned about the environment?" he said.
Over his presidency, the environment ministry’s budget has been slashed even as overall spending increased. AMLO has cut resources across government departments in order to ramp up funding for Pemex and social programs and trim what he sees as a bloated bureaucracy.
Turning Tide
In his bid to revive Pemex, AMLO is building a new mega oil refinery in his home state. A forest of protected mangroves—which absorb more carbon than other trees—was cut down in the process. Few analysts consider the multi-billion dollar project to be economically viable. AMLO has also called for Pemex to ramp up output at Mexico’s six existing refineries, which use highly polluting fuel oil.
Meanwhile, the CFE has been burning greater quantities of high-sulfur fuel oil, which is worse for the environment than coal. It also recently bought 2 million metric tons of coal to burn in its plants. Standing in front of a reopened coal plant in October, AMLO rejected concerns about the fuel’s environmental impact as “sophistry.”
Even his other major governing agenda, the fight against poverty, has come at the cost of the environment. A 900-mile railway known as the Maya Train that seeks to fuel development by connecting tourist attractions in the impoverished South is being built through miles of rainforest, threatening hundreds of endangered jaguars.
Mexico is the 14th largest emitter of greenhouse gases, below Brazil and above Australia. While large emitters like China and Japan boosted their emissions pledges in their updated Paris commitments, called Nationally Determined Contributions, some major economies including the U.S. have yet to put forth their latest goals.
Mexico’s new NDC “doesn’t live up to the responsibility” the country has, said Anaid Velasco, research director at the Mexican Center for Environmental Law. “Mexico had stood out for taking international leadership. In the last two years, that leadership was lost.”
