Author: IKI Alliance

The promotion of a global economy that takes into account natural environment preservation, biodiversity protection, sustainable management of resources and climate change mitigation and adaptation actions is one of the main challenges to be met in the future.  This challenge requires the inclusion of all actors (public, private, corporate, individuals) and a series of policy instruments, which highlight the regulatory framework and the incentives to mobilize the necessary financial flows.

International agreements such as the Paris Agreement, the 2030 Agenda or the Sustainable Development Goals (SDGs) have highlighted the need to find ways to support, but also to finance long-term solutions to solve environmental challenges. Consequently, the exchange of information and experiences offers an opportunity to promote new instruments and innovative mechanisms for green financing through efforts aimed at producing changes in common financial practices.

In conceptual terms, there is a debate about how to define finance according to its applicability in the environmental sector. In this regard, the following definitions stand out:

 

 

There is a variety of concepts and approaches to assess “financing”, even among development banks, international cooperation agencies and governments. Based on the above, the definition provided is based on the methodology and mapping used for its implementation.

International Context

Since the signing of the Paris Agreement in 2015, the need to identify and channel resources with the aim of keeping the global average temperature rise below 2 degrees Celsius, and as close as possible to 1.5 °C, has increased. Regarding financing, article two of the Agreement indicates the need to make financial flows compatible in order to move towards a development that is resilient to climate and low in GHG emissions. Under the principle of common but differentiated responsibilities, the document recognizes the leadership role that developed nations should have regarding the transfer of financial resources to developing countries in order to help them achieve their mitigation and adaptation commitments. However, the ninth article invites all countries to develop the capacity to do so.

With regard to biodiversity, the main objectives of the Convention on Biological Diversity (CBD) are the conservation of biological diversity, the sustainable use of its components and the fair and equitable sharing of the benefits derived from the use of genetic resources. Regarding financing, a recognition of the value of biodiversity is essential and allows the mobilization of financing from multilateral, national and innovative sources. The Global Environment Facility (GEF) is one of the most important financial mechanisms at global level administered by the World Bank.

There have been several mechanisms to channel resources, including the Special Climate Change Fund (SCCF), the Adaptation Fund (AF) and the Least Developed Countries Fund (LDCF). At the end of 2011, the Green Climate Fund (GCF) was established, with the purpose of assisting the efforts of developing nations to respond to climate change. According to data from the GCF, as of January 2019, an equivalent of 10.3 billion dollars has been collected in commitments from 48 countries, regions and cities.

In addition to international funds, there is a Permanent Funding Committee, which is a specialized technical team that supports the UNFCCC in providing assistance to the Parties (understood as the State that has consented to be bound by the treaty’s guidelines) for a correct use of resources. Since its creation, it has focused on improving the coordination strategies of the different financing mechanisms available, with the purpose of rationalizing and mobilizing resources efficiently, as well as promoting the monitoring, reporting and verification of the support provided.

In this sense, since 2008, the German government has supported the implementation of projects for the fulfillment of the NDC and the National Strategy on Biodiversity of Mexico (ENBioMex) through the International Climate Initiative (IKI) of the Federal Ministry for the Environment, Nature Conservation, and Nuclear Safety (BMU) of Germany. Based on the foregoing, 18 bilateral projects have been implemented with an amount of 69.5 million euros; eight regional projects and 44 global projects.

According to the information of the Mexican Commission for the Knowledge and Use of Biodiversity (CONABIO), the mobilization of resources by the GEF to Mexico in the 2015-2018 period was for the amount of US $ 88.1 million. On the other hand, international resources for climate change in Mexico, during the 2014-2018 period, around $61,165,646,524 pesos were received from multilateral and bilateral public sources, which were distributed in 75 projects. There are also 12 other global projects in which Mexico participates together with several countries (such as Argentina, Brazil, Colombia, Honduras, Guatemala, Costa Rica, Peru, China, India, Indonesia, among others) and that amount to a total of $ 7,142,604 pesos. Likewise, 23 projects were identified whose implementation is expected to be carried out until the year 2021. Adding everything gives a projected amount of $ 32,935,768,463 pesos.

As shown in Figure 1, 53 % of financing in the 2014-2018 period comes mainly from the Inter-American Development Bank (IDB), followed by KfW as implementer (31%), AFD/KfW (7%) and the World Bank (5%).

 

Image: ©GFLAC / GIZ, 2018. Main sources of international financing in Mexico for climate change.

 

As shown in Figure 2, the sectors that receive most support are energy (45%), housing, and environment sector. It is noticeable that the energy sector is the second most important emitter of greenhouse gases (GHG). However, it is important to continue encouraging the reduction of emissions in sectors such as transport and industry.

 

Image: ©GFLAC / GIZ, 2018. Public international financing by financed sector (2014-2018).

 

It is worth noticing that the main source of financing for climate change projects comes from the Multilateral Development Bank, which, although initially focused on offering technical and economic support at government level for issues of sustainable development and fight against poverty, now it has a greater role in providing financing to the private sector, as well as in leveraging resources from it.

According to the study “Diagnosis on multi-stakeholder coordination on Climate Finance“, Mexico is positioned as the second largest recipient of international resources for climate finance in Latin America, with a total of 686 million dollars approved between 2003 and 2017. This means that strengthening the capacity for management, allocation, use and transparency of resources obtained from international sources in Mexico would help to leverage greater resources from public and private sources to comply with their NDC.

National Context

In Mexico, the states have joined efforts in the development of a national policy on climate change and promotion of biodiversity, through the strengthening of their institutional capacities and the elaboration of a legal framework that allows the execution of public policies for the mitigation or adaptation. The General Law on Climate Change (LGCC), published in 2012, establishes a regulatory and national policy framework to address the causes and face the adverse effects of climate change, through the development and implementation of adaptation and mitigation measures and actions. The ENBioMex establishes the bases to promote, coordinate and harmonize government and society’s efforts for the conservation, sustainable use and fair sharing of the benefits derived from the use of the components of biological diversity and their integration in the sectoral priorities of the country.

The LGCC contains a variety of economic and financial mechanisms that stimulate the channeling of resources for the development of actions, projects and mitigation and adaptation programs in the public, social and private sectors. Funding in this area is mainly carried out in three ways: through the Climate Change Fund (CCF); through budget allocation reflected in Branch 16 of the Budget of Expenditures of the Federation (PEF) and the Transversal Annex 16.

  • Climate Change Fund (CCF)

The CCF aims to capture and channel national, international, public and private financial resources to finance actions against climate change. The Fund has as trustor the Ministry of Finance and Public Credit (SHCP), Nacional Financiera (NAFIN) as fiduciary and the Ministry of Environment and Natural Resources (SEMARNAT) as responsible and Technical Secretariat.

The Fund receives resources directly from the PEF and from other public funds, like contributions on payment of rights and uses according to the corresponding laws; donations from individuals or corporations; national or international, as well as contributions from governments of other countries and international organizations.

  • Branch 16 of the Budget of Expenditures of the Federation (PEF)

It is a legal and financial document that determines the expenditures made by the federal government from January 1 to December 31 of each year. Within the 16th Branch, for the year 2019, in terms of Environment and Natural Resources, resources are allocated to protect the flora and fauna, as well as the biological diversity of the country, also, various mechanisms of research, technological development and capacities to cope with climate change are considered.

  • Transversal Annex of Climate Change (AT16)

As part of the reforms for the restructuring and orientation of the budget, the PEF has integrated different cross-sectional budgets in order to identify and categorize the proportion of resources allocated to works, actions and services linked to a specific purpose; in this case, mitigation and adaptation to climate change. This is to expand or improve, in the short and medium term, public policies focused on guaranteeing the right to a healthy environment, as well as contributing to the monitoring and compliance with state, national and international commitments on climate change.

Resources are contemplated to: Secretariat of the Interior (SEGOB), Ministry of Agriculture and Rural Development (SADER), Ministry of Communications and Transportation (SCT), Ministry of Economy (SE), Ministry of Public Education (SEP), Ministry of Health (SSA), Ministry of the Navy (SEMAR), Ministry of Agrarian, Territorial and Urban Development (SEDATU), Ministry of Environment and Natural Resources (SEMARNAT), Ministry of Energy (SENER), Ministry of Tourism (SECTUR) and National Council on Science and Technology (CONACYT). It also considers state productive enterprises: Mexican Petroleum (PEMEX) and Federal Electricity Commission (CFE).

Financing in the area of Climate Change and Biodiversity in Mexico

According to the information presented during the dialogue “Perspectives on climate finance in Mexico 2018-2024“, since the CCF was created in Mexico, $ 183,012,375.32 pesos have been mobilized for 22 projects. The transversal informative Annex 16 of the PEF, in the last four years (2015-2018), has allocated $ 188 billion pesos. From green bonds, public entities have issued $ 3,714 million dollars; while the commercial bank 657 million dollars. Taking into account the tracking of the previous points, a mobilization of financing of $ 7,725 million dollars from 2014 to 2018 is estimated, which would represent approximately 6% of the goal of $ 126,000 million dollars that the implementation of Mexico’s NDCs would cost in terms of mitigation.

According to data obtained from BIOFIN, the estimation of the financial needs for biodiversity is around USD 461.9 million per year during the period 2017-2020, which represents a 46.7% increase in biodiversity spending, based on the exercise during 2015. The evaluation of financial needs includes: 1) Natural Protected Areas with an amount of 60 million per year estimated by the National Commission of Natural Protected Areas (CONANP); 2) Financing needs to cover the demand for Payments for Environmental Services (PES) estimated at USD 202.1 million by the National Forestry Commission (CONAFOR); 3) The financial needs of the ENBioMex and Plan of Action 2016-2030 are estimated at USD 191.4 million.

 

 

The Role of the Private Sector

There are several financing sources that come from public sources. However, they are not enough before scenarios of budget reduction at federal level or limitation of indebtedness with international organizations. Nevertheless, there are private sources that can help boost resources for leveraging projects and actions against climate change, and biodiversity promotion.

Governments must provide an environment of certainty and financial confidence to ensure that private actors see a potential market in climate change projects. The conditions at national, state and local level must generate the greatest possible certainty that investments in green projects will have a low risk and will be bankable, and it is important to clearly identify their environmental and economic benefits.

Private sources of financing include a wide range of local and international banks and financial institutions, commercial banks, private funds, pension funds and other sovereign funds, insurers, mortgage banks, and micro-financial institutions, among others. The opportunities have been given mainly in GHG mitigation projects, energy efficiency, renewable energy, waste management, green infrastructure and in the agricultural sector.

At the national level, the Green Finance Advisory Board (CCFV – made up of high-level representatives of the Mexican financial sector, such as: Pension funds, Insurers, Associations, Commercial Banking, Development and Multilateral Banking, Issuers, Investment Funds, etc.), has promoted the dialogue among different market players on how to encourage financing of green projects, influence market practices and mandates and/or investment regulations, in such a way that they contribute to the establishment of incentives to stimulate the development of the green finance market.

The CCFV launched the “green bonds principles MX“, with the purpose of establishing guidelines that help green bond issuers in the Mexican market in their bond issuance process; and at the same time, give certainty to investors about the benefits of financing of green projects. According to the information of the Advisory Council on Climate Finance (previous name of the CCFV), a “green project” generates clear and specific environmental benefits, which must be described in detail, and, whenever possible, the emitter must be able to quantify them.

After recognizing the negative implications of climate risks on private investment, the private sector and financial organizations have implemented different initiatives to move from carbon intensive projects to sustainable projects and programs. As an example, we can mention the activities of the Banks of Mexico Association (ABM) and the Mexican Stock Exchange (BMV).

The ABM decided to demonstrate its leadership in improving the financial system in matters of sustainability and climate change, through the Sustainability Protocol of the Banks of Mexico. The document recommends a management framework and guidelines on sustainability for Mexican banks.

On the other hand, the BMV generated a sustainability index (CPI-Sustainable), to encourage Mexican emitters to implement sustainable policies and systems. In addition, BMV signed the Sustainable Stock Exchanges Initiative, to improve accountability and transparency, after which the Sustainability Guide for Emitters was launched to support companies in the implementation of sustainability strategies and disclosure of sustainability programs in the field.

Challenges in Financing Matters

One of the main obstacles in the matter consists of limited information on the existence of financial mechanisms and how their resources are applied to certain projects. A mapping of the different sources of financing available in the country for the public sector could be very useful in this regard. In addition, an information system on the projects implemented on climate change and biodiversity would help to coordinate the different existing sources to meet the goals set at the national level.

Likewise, a coordination mechanism with multi-sectoral and multi-level vision could allow the articulation of climate change actions in all sectors of the economy, including the public, private, financial, social and academic sectors. Another option would be to facilitate access to climate finance and training for small and medium enterprises.

There must be a strategy to encourage and guide the financial sector to develop actions on climate change and biodiversity and improve the knowledge of public and private financial institutions on the regulations and operation of the institutional framework of both areas. In addition to the above, the projects that can be bankable in the short, medium and long term should be identified.

Knowledge of the costs and risks associated with investments must be promoted, so that the financing is granted to projects with environmental and social benefits. Based on the above, a mapping of the existing financial mechanisms and their functioning should be carried out, so that biodiversity and climate change issues can be considered as important investment themes. Subsequently, indicators of the impact and results of the financed projects have to be created to know the effectiveness of the funds assigned to them.

Through a taxonomy on what climate or green financing means, channeling of resources to projects that have sustainable characteristics or benefit the environment could be facilitated. To do this, it will be vital to work within the framework of the Planning Law to integrate all the concepts that are key to identify such actions.

The IKI in Mexico in terms of financing

In order to support climate action and biodiversity protection, IKI projects in Mexico are working in the field of financing. So far, the IKI has encouraged cooperation with financial institutions to integrate environmental and social indicators in the decisions of loans and investments, development of financial products and risk management. In this sense, the IKI of the Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (BMU) of Germany supports the implementation of the NDC and the ENBioMex in Mexico.

With the aim of exchanging experiences and sharing knowledge about energy efficiency and energy management systems learning networks (RdA), the National Commission for the Efficient Use of Energy (Conuee) and the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH (German Cooperation for Sustainable Development) presented the video Energy Efficiency and energy management systems Learning Networks.

The video introduces the concept of RdA, what are the implementation phases, what is its main objective and what actors are relevant for their development and implementation. Also, the video shares the experience of the pilot networks in municipalities of Aguascalientes, Coahuila and Morelos, and the benefits achieved through the implementation of this mechanism is mentioned. For example, in Coahuila, the implementation of the energy efficiency network in the pumping of drinking water, and the measures identified foresee an electric power saving that translates into the mitigation of almost 3,000 tons of CO2 eq and the saving of more than twelve million pesos.

In addition, success stories are presented in Germany with the implementation of learning networks supported by the National Climate Initiative (NKI) of the German government, where in some projects up to 15-20% reduction in energy expenditure has been obtained. The information, testimonies, and case studies presented in the video will help disseminate the learning networks mechanism at the municipal level in Mexico, and its potential to promote energy efficiency measures that translate into cost reduction, capacity building and, low carbon municipal management.

The video was presented through the network of States and Municipalities of Conuee in an Online transmission about Municipal Energy Efficiency Learning Networks; as well as in the First Meeting on Energy and Energy Management Systems Learning Networks.

The following GIZ projects participated in the elaboration of the video: Vertically Integrated Climate Policies (VICLIM), Sustainable Energy Program (PES), and Energy Transition Preparation Program in Mexico (TrEM)

In light of the upcoming pilot phase of the Mexican ETS, which is set to begin in 2020, the GIZ project “Preparation of an Emissions Trading System in Mexico” (SiCEM) has been conducting a series of activities which include the development of technical studies to inform decision-making with regards to the use of Blockchain technology for an Emissions Trading Registry.

Following up on a previous study on the Potential of Blockchain Technology for Climate Policy, a more in-depth analysis was performed to evaluate the suitability of the technology for the Mexican ETS, generating specific recommendations for the Blockchain architecture and alternatives for developing the blockchain-based registry, including estimated development costs and timeframes.

In particular, the analysis identified that neither a centralized standard registry nor a decentralized blockchain-based registry was clearly superior in terms of its application to an ETS registry. Some of the crucial tasks performed in an ETS registry, such as emitting and allocating emission allowances, recognizing offset credits or opening and closing accounts, among others, are clearly the prerogative of the government and should be kept centralized. However, blockchain pre-defined smart contracts could improve the transparency of the cap-setting, allocation and offset-generating processes, as well as facilitate linking.

An interesting alternative is developing a hybrid architecture, using as blueprint that of crypto exchanges. In such exchanges, different layers could exist: a governing, centralized layer where the government could issue emission allowances and offset units; and a decentralized, permissioned blockchain layer where tokens corresponding to the number of units and allowances of the governing layer would be issued and distributed to different administrative wallets.

 

 

Such innovative approach to Emissions Trading would require both private and public sector involvement, as well as a clear regulatory framework such as that offered by Mexican Fintech Law. Further detail can be found in the publication.

The upcoming months previous to the pilot phase implementation provide with an opportunity to develop and test a hybrid centralized-blockchain approach to an emissions trading registry. Additional studies covering a variety of technical issues be published in the “IKI-Alliance Mexico” blog in the coming months.

 

For more information, please contact us at: Comercio.Emisiones-MX[AT]giz.de

 

Click on the image below to download the publication:

 

Puerto Vallarta continues to work for the development of its Municipal Climate Change Program (MCCP). The municipality conducted a workshop for the characterization and pre-prioritization of adaptation, mitigation and cross-cutting measures to climate change. The workshop was attended by different sectors to ensure the characterization of comprehensive measures.

With the Workshop for the characterization and Pre-prioritization of measures for the MCCP, Puerto Vallarta advances in the development of actions that will make up its Program and ensures that the latter is transversal and integrates all sectors. The workshop took place in Puerto Vallarta, Jalisco on May 20th and 21th, 2019.

 

Photo: GIZ Formation of the Working Group

 

This event was divided into two parts. The first consisted of the formation of a working group with representatives of five sectors: tourism, urban, fishing, agriculture and forestry. This is to ensure a transparent and participatory process in the definition of adaptation, mitigation and cross-cutting measures. Once the working group was formed, the previously developed measures were resumed, to complement them with the participation of the attendees. In addition, new issues of interest emerged, such as strengthening and promoting eco-tourism activities in the municipality, among others.

The second part consisted in the characterization and pre-prioritization of measures, where previously the prioritization methodology had been presented and the importance of considering measures that can be implemented in the long term was emphasized. Initially, the mitigation and adaptation measures identified in the previous workshop were presented and afterwards the cost estimation was carried out, as well as the estimation of the co-benefits considering the environmental, economic and social benefits. The last step was the estimation of the success factors taking into account the municipality’s capacities, compatibility with the regulatory framework and public policy, vision with the local actors and probability of success.

 

Photo: GIZ Dynamics for pre-prioritization of measures

 

The integrated results of all the sectors point out that in terms of adaptation measures it is important (in hierarchical order) to implement conservation and restoration actions in the basin, to separate the pluvial and domestic drainage, to establish a network of parks in the urban area, to protect the reefs, among others. In terms of mitigation, the results indicate with greater priority the installation of silvopastoral systems with a climate change perspective.

The elaboration of the MCCP of this municipality was supported by the Ministry of Environment and Territorial Development (SEMADET) of the State of Jalisco, as well as the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH, through the projects Vertically Integrated Climate Policies (VICLIM) and Ecosystem-based adaptation to climate change with the tourism sector (ADAPTUR).

 

Photo: GIZ Round Tables Discussion

 

Through the participation of different sectors, the integration of actors and experts visión is strengthened for the definition of adaptation and mitigation measures, as well as the transversality of these within a long-term vision to combat climate change .

For more information about the progress of Puerto Vallarta in the development of its MCCP, see the following links:

Animal pollination is a fundamental ecosystem service for human life and wellbeing, since pollinators are responsible for 35% of world agricultural production and play a fundamental role in food production. In Mexico, it is estimated that the value of pollination could reach 63 billion pesos per year. However, this important component of biodiversity has been affected by human activities worldwide, causing great concern in various sectors of society.

 

Photo: Shutterstock. Pollinators provide an essential ecosystem service for agricultural production.

 

To address this problem, the Ministry of Agriculture and Rural Development (SADER), in collaboration with the Ministry of Environment and Natural Resources (SEMARNAT), the National Commission of Natural Protected Areas (CONANP), the National Commission for Knowledge and Use of Biodiversity (CONABIO) and with the support of the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH, began the process of building the National Strategy for the Conservation and Sustainable Use of Pollinators, a document that will establish the strategic lines and joint actions between the agricultural and environmental sectors at the national level. This public policy tool is of high interest to the country, since it will support the conservation of key ecological processes contributing to guarantee the country’s food security and sovereignty.

 

Photo: IKI IBA project. The Coordination Group was installed for the construction of the National Strategy for the Conservation and Sustainable Use of Pollinators

 

On June 7th, 2019, the Coordination Group of the strategy was installed in the SADER Biodiversity Integration Center, which will have the support of the Integration of Biodiversity in Mexican Agriculture Project (IKI IBA) of GIZ for the facilitation of the process.

 

Photo: IKI IBA project. The event was inaugurated by the Assistant Secretary of Agriculture Miguel García Winder.

 

Photo: IKI IBA project. The event was held at the Center for Biodiversity Integration of SADER and 28 representatives of federal government institutions related to the subject participated.

 

Photo: IKI IBA project. The team of the IKI IBA Project of the GIZ will facilitate the process of strategy construction.

The policy of housing and urban development implemented in recent years has opted to promote mechanisms that foster more compact and dense city schemes, with a better location with respect to facilities and employment centers, as well as more sustainable housing with better quality of life for its inhabitants, and savings associated with their consumption in terms of electricity and water.

The Federal Mortgage Society (SHF) is the housing development bank of the Federal Government in Mexico. During the last years, it has promoted a series of initiatives with the purpose of guaranteeing better conditions both in homes and their environment.

 

Credit: Federal Mortgage Society (SHF). SHF logo.

 

SHF identified the difficulty of housing developers to carry out the urbanization tasks for housing, especially when seeking the integration of sustainability criteria in the developments. In this sense, it is necessary to establish that the provision of equipment and infrastructure corresponds to the municipalities, but given the financial conditions that most of them have, they end up being built by private agents who need to make additional capital efforts in order to ensure the minimum operating conditions for the projects, since in the market there is no financing product for urbanization. This situation has an impact on the final price of homes, and in some cases, generates pertinacious incentives, since the criteria under which such facilities and infrastructure are built are not the most appropriate.

 

Credit: LaPolítica. Urban Development.

 

Consequently, during 2017 the SHF designed a financing product for sustainable urbanization through the Housing Operation and Bank Financing Fund (FOVI), in order to ensure the provision of equipment and infrastructures “walls in” of the housing developments, as well as ensuring that the materials, construction systems, and technologies, would guarantee sustainability in terms of energy and water consumption use efficiency, as well as with respect to other socio-economic externalities associated with the inhabitants of the housing developments.

Aligned with this, SHF received support from the Inter-American Development Bank (IDB) with resources from the International Climate Initiative (IKI) of the Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (BMU) of Germany to develop a methodology and impact assessment tool that helps mobilize financing in this type of development.

One of the great challenges of this project is to create awareness of sustainability in the developers; and to quantify the mitigation of Greenhouse Gases (GHG), in order to develop the ability to participate in a carbon market that economically encourages this sector.

Mexico has the opportunity to become a leader in financial innovation and sustainable transportation, through economically viable long-term projects. Mexico’s transportation sector is fundamental to the country’s economic growth, but it also represents significant risks. In Mexico, transportation is the largest source of climate pollutants (25% of greenhouse gases and 38% of black carbon emissions).

 

Photo: SDP News. Public Transportation in Mexico City.

 

Last April 9th, a workshop on sustainable transportation financing was held in Mexico City, where the main stakeholders of the sector met. It served as a framework for discussion to design a road map to invite to action.

 

Photo: Adalberto Padilla. Event Inauguration.

 

This workshop was the first activity of the Financial Innovation Lab promoted by the Inter-American Development Bank (IDB) with resources from the International Climate Initiative (IKI) of the Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (BMU) of Germany , and in collaboration with the Banks of Mexico Association (ABM) and the Green Finance Advisory Board (CCFV) where an agenda of meetings and discussions that seek to mobilize financing in the area of climate change in the main sectors such as transportation, agriculture, industry, housing, among others, was developed.

The workshop analyzed the role of development banking to accelerate public and private investment in sustainable transport infrastructure in the country. In addition to seeking to strengthen the collaboration among financial institutions, technology manufacturers, and public and private agencies to promote investment in addressing climate change.

 

Photo: Adalberto Padilla. Discussions and presentations during the workshop.

 

The multilateral bank is a relevant agent in the promotion of investments that induce the development and welfare of nations. Thus, the IDB is an actor in the promotion of sustainability and green finance, providing resources and promoting the innovation of financial instruments that adapt to the needs of the different sectors that require an impulse for their growth and maturity.

The IDB works with multi-sectoral actors to identify bottlenecks to private investment in sustainable solutions, analyze and design innovative financial instruments and good practices that support Mexico’s sustainable development.

The project specialists in sustainable transport and Green financing who participated in the workshop focused on the planning of portfolios of sustainable transport, its financing, the definition of sustainable projects and the measurement and evaluation of climatic impacts in them. The panelists shared experiences about the integration of sustainability considerations into the planning process, evaluating the experience of the Subway of Los Angeles, California and the vision of Mexico City.

 

Photo: Adalberto Padilla. Discussions and presentations during the workshop..

 

In Mexico, the transport sector is the largest source of climate pollutants and transport infrastructure is increasingly exposed to the physical risks of climate change. There is a real need to promote financial solutions that allow a transition in the transport sector; so that buses, trucks and other vehicles are friendly to the environment and human health, low in carbon and climate resilient. Mexico’s financial sector can and should be part of the climate solution.

 

This article belongs to the Inter-American Development Bank (IDB). Its content is the sole responsibility of the autor.

In light of the upcoming pilot phase of the Mexican ETS, which is set to begin in 2020, the GIZ project “Preparation of an Emissions Trading System in Mexico” (SiCEM) has been conducting a series of activities which include the development and dissemination of information to support a better understanding of the ETS and its interaction with other policy instruments.

Mexico is committed in the fight against Climate change. Such commitment is reflected in the Climate mitigation targets set both in its Nationally Determined Contributions (NDCs) and its reform to the General Climate Change Law in 2018. To address its commitments, the Mexican government has established a variety of measures: among them, the ETS emerges as a key instrument in the promotion of a low-carbon development and the achievement of its sectoral climate targets.

An ETS is a market-based instrument to reduce Greenhouse Gas emissions. It operates under the principle of ‘Cap and Trade’ (see factsheets), creating a market for emission permits and incentivizing regulated entities to comply in the most cost-efficient way. In parallel, other economic instruments have been implemented in Mexico, creating additional incentives to encourage the transition to a low carbon economy: the carbon tax, and the clean energy certificates (CEL, for its acronym in Spanish).

Experience from other jurisdictions (e.g. California, Switzerland or UK) shows that an appropriate coordination between these different instruments allows for the conformation of a well-balanced and effective Climate change mitigation policy portfolio. Two analyses performed for the Mexican context (Interaction between ETS and CEL, and Options for an Effective Carbon Policy Mix) culminated in a series of recommendations for the simultaneous operation of the ETS, carbon tax and CEL, creating synergies and harnessing the individual potential of each policy instrument to potentialize climate mitigation efforts. The key recommendations have been included in the following document (in Spanish):

 

Photo: GIZ SiCEM. Interaction between economic instruments for the reduction of Greenhouse Gases

 

The upcoming pilot phase provides with an opportunity to test the interaction between the Mexican ETS and other policy instruments. Additional studies covering a variety of technical issues be published in the “IKI-Alliance Mexico” blog in the coming months. For more information, please contact us at: Comercio.Emisiones-MX[AT]giz.de

In the framework of the project Integration of Biodiversity in Mexican Agriculture (IKI IBA), on June 3rd, a local subsidy project was formalized with Farmers in Sustainable Axes AC (ASEAC), an organization formed by small corn producers of temporary project of the municipality of Apaseo el Grande, Guanajuato, with the objective of contributing to integrate biodiversity into agriculture, improve the quality of life of farmers, support food security, mitigate and adapt to climate change.

 

Photo: IKI IBA project. Creole corn produced with sustainable techniques in Guanajuato

 

The project seeks to consolidate the productive model of sustainable corn that has been promoted by this group of producers in the eastern region of the State of Guanajuato, Mexico, for more than 10 years. This model, implemented with the support and help of Dr. Alfonso Aguirre of the National Institute for Forestry, Agriculture and Livestock Research (INIFAP) Experimental Campus Celaya, uses five main areas: conservation tillage, soil nutrition, ecological pest management, selection of seeds and adequate storage of the selected seeds, which is of great relevance for being native maize. Prior to this change in the production model, farmers harvested around 300 to 500 kilograms of corn per hectare. Today they produce between 4 and 5 tons of corn per hectare without the use of agrochemicals.

 

Photo: IKI IBA project. Signing of the agreement with Guanajuato producers

 

Currently, these farmers recognize and disseminate the importance of sustainable soil management practices that respect biodiversity, and maintain healthy ecosystems in their environment for the success of their crops. With these productive models adapted to the local context, made by the local farmers themselves who directly receive the benefits, and which are sustainable with the planet, they contribute to food security, conservation and sustainable use of biodiversity as a new model to face climate change.

 

Photo: IKI IBA project. Group of producers with GIZ Mexico staff

 

The local subsidy project formalizes the collaboration of ASEAC with the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH and forms part of the International Climate Initiative (IKI) of the Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (BMU) of Germany.

 

Photo: IKI IBA project. Cornfield producers in Guanajuato

The Biodiversity and Agriculture Initiative in Mexico (TEEB AgriFood Mexico) unites the efforts of two projects that are being implemented in the country: “The Economics of Ecosystems and Biodiversity (TEEB): Promoting a Sustainable Agriculture and Food sector“(European Union-UN Environment) and” Integration of Biodiversity in Mexican Agriculture “(IKI IBA Project). It aims to recognize the values of biodiversity and ecosystem services in production systems, demonstrate its economic, social and cultural importance and provide recommendations to the public policy of the agricultural sector in Mexico, on how to integrate these values into decision making and in the planning instruments of the agri-food sector.

 

Photo: Shutterstock. Agricultural policies must recognize the values of ecosystem services to achieve sustainable food systems

 

The AgriFood TEEB is designed to provide a detailed economic, social and cultural evaluation of complex eco-agri-food systems, demonstrating that the environment where producers operate is subject to negative and positive externalities that cause a lack of understanding of their dependence on natural capital . This initiative seeks to demonstrate that the entire agricultural chain of value (production, processing, distribution, consumption and waste) not only has impacts on the environment, socioeconomic well-being and human health, but also depends largely on these factors. Finally, the results seek to encourage key stakeholders to change decisions and behaviors, highlighting the different values of nature.

 

Photo: IKI IBA project. First meeting of the TEEB Steering Committee AgriFood Mexico

 

On May 30th, 2019 the Steering Committee of the initiative met for the first time in order to discuss and select two specific study topics and provide recommendations for the scope of work and the key elements for next year’s actions, considering the priority issues that were decided during the Startup Workshop in February: monocultures (eg., technified corn, avocado, palm oil, protected agriculture), agroforestry systems (coffee, cocoa, silvopastoral) and traditional systems (traditional milpa, agave mezcalero).

 

Photo: IKI IBA project. Welcome by (left to right) Harald Lossack (GIZ), Maria Buzdugan (EU), Sol Ortiz (SADER), Dolores Barrientos (UN Environment).

 

Photo: IKI IBA project. Presentation TEEB Initiative – Mónica López Conlon (ONUMA)

 

Photo: IKI IBA project. Presentation of the results of the Startup Workshop – Jasmin Hundorf

 

Photo: IKI IBA project. Round tables to decide on priority issues

 

Photo: IKI IBA project. Question and answer session in plenary

How will the Nationally Determined Contributions (NDC) be financed in the Latin American region?

The long-term objectives, NDCs, were proposed in 2015 as the core of the Paris Agreement with a goal of reducing national emissions (by country) and adapting to the impacts of climate change by adding efforts from each country with their respective opportunity costs in terms of development.

Within the framework of the V Regional Dialogue on Climate Finance in Latin America, experiences were exchanged about the main advances, challenges and opportunities on NDCs for Latin America, in terms of financing, public and private investment; the current status of the sources and financial resources to face climate change was presented; and improvements as well as needs and investment opportunities in different sectors to obtain new financing in order to meet the ambitious goals defined in the NDCs and in other climate agreements were identified.

 

Photo: Itzel Alcérreca, 2019. Legend: Exercise of supply and demand of institutions at a regional level

 

This event took place on March 19th and 20th in San José, Costa Rica, organized by the Ministry of Environment and Energy of Costa Rica, the Economic Commission for Latin America and the Caribbean (ECLAC), the EUROCLIMA+ Secretariat, the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH, the Development Bank of Latin America (CAF), the Inter-American Development Bank (IDB), the United Nations Development Programme (UNDP), the LEDS-LAC Platform, the United Nations Environment Programme (UNEP / UN Environment), among others.

The Global Program for Financing Energy for Low-Carbon Investments – City Advisory Facility (FELICITY) had the opportunity to participate in panel 5 where the solutions, tools and instruments to facilitate access to financing at the subnational level were presented . The challenges and opportunities faced by municipalities and cities to access climate finance, as well as some initiatives available in the region, were also mentioned.

 

Photo: Fabiola Gómez, 2019. Panel of solutions, tools and instruments to facilitate access to financing at the subnational level

 

FELICITY is the initiative implemented by GIZ; with the support of the European Investment Bank (EIB) and the Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (BMU) of Germany that provides technical assistance in the preparation of projects focused on low carbon infrastructure in cities.

 

Photo: Itzel Alcérreca, 2019. Session of the Regional Dialog

 

For more information, see the GIZ-FELICITY sites. These actions continue to promote the preparation of projects and financing for low carbon implementation at the regional level that contributes to international climate commitments.