Presentation
The Paris Climate Agreement’s first Global Stocktake challenged the international community to transition away from fossil fuels (TAFF) and to enhance international cooperation. How can this be done, while aligning with national pathways? This Study focuses on Mexico’s related challenges through three systems transitions (renewable energy, electric public transport, green iron and steel) which are necessary for the country to shift its development pathway in line with its 2050 climate goals. Analysis of the changes needed and barriers to success unveils the international cooperation actions most effective at enabling rapid and large-scale transitions.
Key Messages
- Delivering system changes requires detailed programmatic planning of short and medium-term actions to achieve long-term objectives through a sequence of actions across planning, regulation, investment, and implementation over years and decades. Dedicated in-country capacities need strengthening.
- Rolling out renewable power quicky enough to reduce current fossil-fuelled generation requires a rate of investment that exceeds the Mexican Government’s available fiscal space to for this purpose. However, Mexico’s abundant renewable resources mean the resulting energy will be competitive. International cooperation could boost rollout by ensuring sufficient volume of international public and private finance can complement the investments of the Mexican state in renewable generation and new transmission infrastructure without increasing Mexico’s cost of capital.
- Shifting urban passenger transport to electrified public transport in Mexican cities will also require high investment in enabling infrastructure and electric vehicle fleets. With many LAC cities facing similar challenges, there are opportunities for regional coordination to boost local supply chains and capture a greater share of the resulting manufacturing activity, promoting economic growth.
- Decarbonizing iron and steel needs the supply of green Hydrogen (GH2) to power the smelting of iron ore to create iron and primary steel. Although Mexico should be competitive in the production of GH2 from renewable electricity, it will remain more expensive than the fossil alternative, at least in the short term. Both internal and international trade conditions will be needed to boost initial GH2 and Green Iron and Steel facilities without causing undue price increases in end-markets, requiring coordinated international cooperation on tariffs.
- Based on these three case studies, six types of interventions are described which can enhance the impact of international cooperation in accelerating in-country TAFFs by aligning it with national pathways. These relate to: (1) financial support to reduce the cost of capital available; (2) financial support to increase the volume of capital available; (3) capacity building support for in-country planning and institutional capabilities; (4) technology and implementation support for new low-carbon product and industry development; (5) trade support to boost the viability of new low-carbon products and industries; and (6) collaborative governance structures to guide effective international cooperation.
