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FEATURE STORY

Mexico: 'Green' Funds to Boost Low-Carbon Growth

July 22, 2010


STORY HIGHLIGHTS
  • Mexico gets two 'green' loans to support climate change policies
  • Substantial additional financing from the Forest Investment Program (FIP) is made available

MEXICO CITY, July 22, 2010 - "Mexico" and "green", "low-carbon" and "growth" are words increasingly found together not only in Google searches but also in discussions across the region's second largest economy as it increasingly takes the lead in the climate change debate and in the adoption of eco-friendly growth initiatives.

This week Mexico's green leadership was further recognized on a regional stage as the World Bank confirmed the country's stance as a trusted partner in adopting mechanisms to mitigate and adapt to climate change.

Ending a week-long tour of the region, World Bank president Robert B. Zoellick visited Mexico to sign two recently-approved 'green loans' worth US$800 million and to announce new Mexican participation in the Forest Investment Program (FIP), a global initiative that has received US$ 542 million in contributions for the reduction of greenhouse gas emissions from deforestation and forest degradation. Mexico was recently selected as one of eight countries worldwide by the governing body of the FIP to receive substantial financing.

Zoellick, who praised President Felipe Calderon for its leadership in climate change issues, said these decisions demonstrate the Bank's commitment to deepen its support to Mexico's already extensive program on climate change, especially in light of the upcoming United Nations Climate Change Conference COP16 in Cancun.

"Mexico, an influential country in the G20, is a major economic player in Latin America and is becoming a leader on climate change. Mexico's success will certainly have a great impact in the region as a whole," said Zoellick. In line with analysts' consensus estimates, Mexico's economy is expected to post a 4.5 percent real GDP growth for 2010.

Like few countries in the region, Mexico is at the forefront of efforts to address climate change with innovative environmentally-friendly policies to cut greenhouse gas emissions without affecting growth or jobs, said World Bank sustainable development expert Gustavo Saltiel.

From clean transportation projects to initiatives to protect water supply, produce renewable energy and reduce deforestation, Mexico has been in the last twenty years involved in developing eco-friendly policies in close association with the Bank. World Bank supported climate change projects in Mexico include 30 active initiatives, with transportation –responsible for 18 percent of emissions- receiving the most attention and accolades.

One such initiative, Mexico City's Metrobus, recently received the prestigious Roy Family Award for Environmental Partnership from Harvard University, which rewards "outstanding public-private partnerships that enhance environmental quality through the use of novel and creative approaches."

"There's a solid tradition of sound management of the environment that in the last few years has cemented Mexico's leadership thanks to the weight given to preserving the environment," said Saltiel while arguing that this is a direct result of Mexico's experiencing first-hand the effects of climate change in the form of frequents draughts, hurricanes and flooding.

Mexico's voluntary commitment in August 2009 to cutting its carbon footprint by 50 percent circa 2050 as stated in the government's Climate Change Special Program, is solid proof of its commitment to sustained growth with low-carbon emissions, notes Saltiel.

Furthermore, this commitment is embedded in public policy across all sectors which makes it more difficult to circumvent, the expert says.

The Bank's own study Low Carbon Development for Mexico highlights a path towards sustainable green growth where simple interventions in key areas would yield significant results. CO2 reductions would come mainly from agriculture and transport --two high-impact areas in climate change-- but the research also suggests economies in the energy, oil and electricity sectors. About 61percent of all carbon emissions result from energy consumption, especially in the industrial commercial and residential transport areas, while 21percenrt of CO2 gases are direct the consequence of land use, such as deforestation.

"Reducing greenhouse gas emissions is critical in Mexico, not only to address climate change but also to facilitate economic development, a key emphasis of the country's climate change agenda," the study notes.

Mexico's green leadership has allowed it to tap many sources of funding and grants from the World Bank and other institutions –notably the US$5.2 billion Clean Technology Fund-- but further funding could be an issue, as resources needed for adapting and mitigating could be enormous, says Saltiel.

This is where the COP16 comes in.

Building on last year's Copenhagen summit, Cancun's climate change meeting later this year will be the stage for new negotiations on emission caps but most importantly on a new financial architecture that should fund mitigation and adaption mechanisms. Climate change financing for developing countries would cost US$16 billion-US$19 billion annually, according to World Bank estimates.

Saltiel thinks that the Cancun Summit would get countries closer to a global climate change accord although progress is likely to take place in stages. "The negotiators would probably agree on parts of the issue such as setting up an adaption network, addressing some financing issues and, if time permits, the global overarching accord," said the expert.

The important thing –he noted- is keeping the winds climate change action blowing in the right direction. And that means being committed –like Mexico is- to working towards a more inclusive and sustainable low-carbon scenario.

"From south to north, east to west, climate change efforts need to be more inclusive and sustainable," said Zoellick. "Mexico has shown a clear commitment to sustainable development and has become a key voice in the global efforts on climate change. It has set an example through its commitments to reduce CO2 emissions, and the Bank is proud to be a partner in these efforts."

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