Mexico’s ‘green growth’ revolution gathers pace

We often hear that there is a crisis of leadership when it comes to addressing global environmental challenges. Government delegates travel from one multilateral gathering to the next, tied up in negotiations and burdened with the seemingly impossible task of gaining a globally accepted deal, without companies being directly involved in the process.

Meanwhile, the impacts of climate change are – extreme drought, heat waves, flooding, and deterioration of agricultural land – continue to be felt around the world.

There is good news, however.  The lack of progress in the national political sphere has catalysed business leaders, city mayors, and emerging economies to seize the initiative. They see great private sector investment opportunities in “going green”.

Mexico is one of the most interesting countries to watch. Mexican President Felipe Calderón has said that “the only way to grow is to grow green.”  Since 2009, when Mexico hosted the climate change talks in Cancún, Mexico has consistently advanced climate change and green growth on the international agenda, most recently at the 2012 G20.

The results are clear: between 2006-2011 the private sector in Mexico invested US$5.8 billion in clean energy, resulting in a vibrant wind power market. Then in October 2012, the Mexican Senate put the Climate Change Law into effect, committing the country to a 30% reduction of greenhouse gas emissions by 2020.

Achieving this goal will give a huge boost to Mexico’s renewable energy sector, moving it from today’s level of 3% of total power generation to 35% by 2024.

But achieving a green growth transition in Mexico will not be easy.  Nor will it be cheap:  the Institute of Ecology and Climate Change estimates that US$76 billion of investment will be needed to finance new clean energy, water infrastructure and agriculture resilience measures called for under the Climate Change Law.

The government will provide about a third of this amount; the remaining US$50 billion will need to come from private investors. How can the Mexican government attract the investment that is needed?

To explore investor appetites for green investment, the World Economic Forum and the newly-created Mexican Center for Sustainable Development co-hosted a workshop on 11 October in Mexico City. The event attracted over 80 participants from the Mexican banking, energy, infrastructure, and agribusiness sectors, as well as international public finance agencies and multinational companies.

The aim of the workshop was to identify private investment challenges and opportunities in four green sectors:  energy efficiency; renewable energy; water and infrastructure; and forestry.

Mexican banks were very interested in learning more, while public finance agencies like NAFIN, Mexico’s development finance bank, wanted to know how to target funding so as to draw in private capital.

One innovative solution proposed was to pool corporate energy renewable energy purchases to finance utility-scale solar parks. Another idea was to use government procurement to jump-start a market for building energy efficiency. The workshop elicited commitments from public, private and non-governmental participants to deliver workable solutions in 2013.

This initiative is part of the Green Growth Action Alliance, a coalition of public finance agencies, private banks, leading multinationals and NGOs, launched by business leaders at the 2012 G20 in Los Cabos. The Alliance, known as the G2A2, is demonstrating a new model for multistakeholder action and delivery on climate change (see www.weforum.org/issues/green-growth.)

Author: Thomas Kerr, Director Climate Change and Green Growth Initiatives at the World Economic Forum.

Image: The fruit from the toxic Jatropha plant in Mexico could be used to make biodiesel for jet planes. Just one example of Mexico’s “green growth” revolution in action. REUTERS/Daniel Leclair