Author: IKI Alliance
The book “Towards an Emissions Trading System in Mexico: Rationale, Design and Connections with the Global Climate Agenda” is the result of a multi-stakeholder dialogue between the public, private and academic sectors about Mexico’s Emissions Trading System, the first in Latin America and the Caribbean.
The presentation of this work took place last Thursday, 20 October, during the 12th National Congress on Climate Change Research, an event hosted by the Climate Change Research Programme (PINCC) of the National Autonomous University of Mexico (UNAM). This year’s event focused on decision-making and public policy making, with the aim of reducing climate change risk and vulnerability.
Stakeholders involved in the production and design of the book, as well as the project “Preparation of an Emissions Trading System in Mexico” (SiCEM) of the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH, participated in the event, which was moderated by Dr. Simone Lucatello, book coordinator.
On behalf of the SiCEM project, María Fernanda Suárez presented the contextual framework under which this initiative was coordinated and formalised. Subsequently, Juan Carlos Mendoza highlighted the importance of international cooperation to strengthening dialogue and informed discussion through the development of mechanisms and tools that promote Mexico’s climate agenda.
From academia, Ms. Neydi Cruz from the Mora Institute highlighted Mexico’s participation in different international climate initiatives, as well as the benefits of international collaboration in climate change mitigation efforts. Finally, Dr. Alicia Gutiérrez from the Universidad Anáhuac reflected on the adoption of the system in the context of Mexico’s climate policy and legal framework.
The publication includes contributions from more than 20 authors who, through an interdisciplinary approach, combine theory and practice to provide a comprehensive perspective on the development of Emissions Trading in Mexico. The work was published by Springer in an Open Access format, thus seeking to promote open and plural access to the report for society and the public. So far, the digital version has been downloaded more than 32,000 times and can be consulted and downloaded free of charge through this link.
The SiCEM project seeks to create more spaces for informed and science-based discussion on the Emissions Trading System in Mexico. The participation of academia and civil society contributes to an open, plural and participatory debate on the design and operation of market instruments that seek to contribute to the fulfilment of Mexico’s climate goals.
Local action is key to moving towards sustainable and low-carbon models. This requires strengthening state capacities to respond to climate challenges and identifying local causes of emissions and vulnerabilities. This is achieved through collaborative work across sectors that promotes innovation and knowledge sharing.
As a result, the Mexican-German Climate Change Alliance, implemented by the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), works with Mexico’s national and state governments to support local actions that increase the ambition of climate change adaptation and mitigation goals in Mexico.
We invite you to learn more about the local actions carried out by the Mexican-German Climate Change Alliance:
To achieve global goals, the mobilisation of public and private resources is key. The participation of financial institutions, banks, institutional investors, corporations and capital markets play a crucial role in aligning financial flows with sustainable and green finance.
For this reason, it is essential to provide investors with information on activities that contribute to meeting climate change and natural resource conservation objectives. Green or sustainable taxonomies are designed as classification systems with criteria and indicators to classify different economic activities according to their contribution to climate change mitigation and adaptation, or to the sustainability of the country. In other words, it classifies funds according to their objectives, thus giving certainty to the market, avoiding green and social washing. Thus, the creation of green, sustainable or climate finance taxonomies helps in this process and becomes the foundation of a green financial system. The financial sector must consider environmental issues – in particular climate change – as inherent to its business and continuously conduct risk and opportunity analyses related to the environment and climate.
This guide seeks to draw on the experiences of the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH, through the Mexican-German Climate Change Alliance, in developing two processes for the creation of taxonomic classification systems for finance; one with the banking sector through the Association of Banks of Mexico (ABM), focused on green assets; and the other with the Government of Mexico, in the identification of economic activities and a methodology for defining metrics and thresholds for the country’s sustainable financing taxonomy. The objective is to share with other countries the lessons learned and best practices for implementing and operating a classification system for economic activities that contribute to sustainability and/or climate change within their country.
Consult the Guide for Creating a Green and Sustainable Finance Taxonomy: Lessons Learned from Mexico’s Government and Banking Sector, click on the following image:
According to the Organisation for Economic Co-operation and Development (OECD), the transition to low-carbon and climate-resilient economies will need to include the private sector to help mobilise resources, knowledge and innovation. The private and financial sector have recognised the importance of their role in mitigating and adapting to climate change, as well as the importance of considering climate issues when managing investment risks.
However, companies still lack knowledge about the risks and benefits of addressing climate change for their business. Therefore, the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH, through the project Financing for Climate Action in Mexico (FINACC) and the Mexican-German Climate Change Alliance, participated in the first Training Workshop on Corporate Climate Action Initiatives and Instruments. The training was promoted by UK-PACT together with WRI Mexico, South Pole, WWF, the United Nations Global Compact and CDP.
The objective was to raise awareness and provide key information to companies in Mexico on the science of climate change and its implications for the private sector, as well as the opportunities to undertake decarbonisation plans for green growth and their business models.
On behalf of GIZ, Gabriela Niño, Climate Finance Advisor and FINACC project preparation officer, gave a training on the basics of physical and transition risks for a resilient and low-carbon economy in the country. During her presentation, she explained to Mexican business leaders the importance of considering physical and transition risks to climate change, which require a strategic response to address them.
Physical risks refer to damages and alterations caused by climate variability, such as heat waves, droughts, floods, storms, sea level rise, among others, which have negative impacts on companies’ supply chains and in turn affect the financial sector. On the other hand, transition risks refer to changes in policy, technological innovation and market paradigms, where, by prioritising sustainable activities that help decarbonise and build resilience in economies, activities causing climate change become stranded assets.
In Mexico, a country highly vulnerable to climate change (INECC, 2022), it is a high priority to address the risks and impacts that will produce losses for businesses, the financial sector and communities. Therefore, the work of the Task Force on Climate-related Financial Disclosures (TCFD), which seeks to provide a framework for the transparency of climate-related financial risks so that companies can provide information to investors, lenders, insurers, etc., stands out. The TCFD provides recommendations to properly assess climate-related risks and opportunities and thus green the financial system.
During the presentation, two reports were shared with the companies:
- “Integration of environmental scenario analysis in day-to-day financial decision-making in Mexico” by GIZ, the University of Cambridge, the Bank of Mexico and ITAM.
- “Climate and environmental risks and opportunities in Mexico’s financial system, from diagnosis to action” by Banco de México.
Digital tools and databases such as GIZ’s Environmental Scenario Analysis (ESA) are key elements for promoting business sustainability, managing and mitigating risks, and supporting financial decision making. These fundamental tools help financial and non-financial companies with business decisions about physical and transition risks for a resilient and low-carbon Mexico, while at the same time allowing them to move towards appropriate information management processes linked to these risks, as well as financial disclosures under ASG criteria.
The pandemic caused by COVID-19 has had a devastating impact in all regions of the world. According to the World Bank, in 2020 the global economy began to suffer the worst recession since World War II. The World Economic Outlook Report (World Bank, 2022) notes that global growth slowed from 5.7% in 2021 to 2.9% in 2022, and in Latin America the economy was projected to decelerate sharply to 2.5% in 2022, after a 6.1% rebound in 2021. The economies of Latin America and the Caribbean have been hard hit by economic shocks, and, in parallel, the effects of climate change have exacerbated vulnerabilities.
In the findings of its sixth assessment cycle, the Intergovernmental Panel on Climate Change (IPCC) confirmed the importance of acting now on climate resilient development to cope with the increasing negative impacts of climate change.
In this context, meeting the goals of the Paris Agreement and limiting the adverse effects of climate change, while greening economies, is an opportunity to move beyond the crisis and build a sustainable and inclusive future.
In the framework of the Environmental Management and Rural Development Sectoral Network of Latin America and the Caribbean (GADeR-ALC) of the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH, through the Workstream “Aligning climate action (NDC) with green recovery in Latin America”, a study was developed that explores and shows eight noteworthy examples of green recovery integrated into economic recovery processes and NDC implementation in four countries in the Latin America and Caribbean region: Chile, Colombia, Costa Rica and Mexico. These examples identify “best practices” in NDC implementation that can inspire and be applied and scaled in other countries in the region.
Consult the study by clicking on the image below:
Blue carbon ecosystems cover less than 0.5% of the world’s marine area but can sequester more carbon than mature tropical forests. For this reason, it is possible that these ecosystems capture the equivalent of almost half of the emissions generated by transport worldwide (Mexico is the country with the fourth largest extension of mangroves in the world (CONANP, 2017)). In the municipality of Angostura, in the state of Sinaloa, there is an area of 9,051.28 hectares of mangroves (CINAM, 2022).
Taking these considerations into account, the Secretariat of Welfare and Sustainable Development of Sinaloa (SEBIDES), with support from the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) through the Mexican-German Climate Change Alliance, and in conjunction with the College of Environmental Engineers of Mexico (CINAM), are developing an analysis of coastal vulnerability and carbon pool dimensions in the Santa María – La Reforma lagoon system. The objective is to determine the size of the carbon reservoir contained in a specific area of the mangrove, as well as to prioritise those areas susceptible to restoration, conservation and sustainable management through a participatory process involving the communities.
The analysis has been underway since December 2022 and will conclude in November 2023. To date, several activities have been carried out, including three workshops to analyse the problems of the lagoon system and its contribution to climate action. Different actors have participated, such as the government, civil society, academia, communities and children.
First Virtual Workshop
The first workshop was held to identify the economic, cultural and social actions taken by the actors in the site for the preservation of the system. During the session, the inhabitants and workers of the area participated, as well as the National Commission of Natural Protected Areas (CONANP), the Ministry of Aquaculture and Fisheries, Pronatura A.C. and the Ministry of Tourism.
Some of the problems identified include:
- The lagoon system is an area of economic exploitation for fishing.
- Aquaculture is the main phenomenon affecting the lagoon system.
- It is necessary to reinforce the surveillance of the application of the norms.
- Civil society is disconnected from mangrove efforts.
The conclusions of the problems identified were presented and the participants were offered various alternatives, projects and initiatives to help resolve the conflicts.
Second in-person Workshop for Public Officials
In the workshop for public officials, two notable participants were Nicté Loi Ceceña, Undersecretary of SEBIDES and Miguel Ángel Angulo Acosta, Municipal President of La Angostura. Indicators were built to solve the pollution problem. In addition, some actions oriented to ecological management were shared.
Angostura Municipal Palace © Yuriana González Ulloa, GIZ Mexico
Third in-person Community Workshop
In the community workshop, the participation of women, children and workers from the areas surrounding the mangrove swamp was encouraged. The places perceived to have the greatest environmental deterioration were identified, as well as the factors that allowed the actors, economic activities and sites of interest to be identified. In addition, the participants presented the actions necessary for the conservation of the lagoon system.
The results of these workshops, together with the bibliographic analysis and the sampling of the mangrove area, will allow for the quantification of the carbon reservoir. The assessment and protection methodology will help replicate the process in other coastal regions of the country with similar problems and to catalyse blue carbon opportunities.
The results of the carbon sequestration potential assessment are coming soon – don’t miss it!
