At the end of last July, 41% of the Republic of Mexico suffered from moderate to exceptional drought. On the 12th of this month, the National Water Commission declared a drought emergency in the country. It is a visible sign of the effects of global warming that experts have been predicting for decades due to increasing and unstoppable industrial activity and the resulting concentration of greenhouse gases.
Water scarcity, combined with periods of flooding like the one recently seen in Nuevo León, is just one of the expected weather phenomena, but increased frequency and intensity of cyclones and hurricanes, forest fires and their negative effects are also expected. population and biodiversity.
The recent drought in the country leads us to examine what Mexico is doing to mitigate the effects of climate change and the challenges ahead. One of the strategies is the emissions trading system that the federal government put in place after the reform of the climate change law in 2018. After three years of implementation, the system will complete its period of trial on December 31 and will officially start working.
“Right now, it’s the transition phase to the operational phase. In the case of Mexico, Semarnat [Secretaría de Medio Ambiente y Recursos Naturales] it is responsible for publishing the rules of what goes into the emissions trading system”says Jessica Jiménez, director of sustainability at KPMG.
For now, only companies responsible for emitting more than 100,000 tonnes of carbon dioxide into the atmosphere per year have had to comply, including the hydrocarbon and electricity industries, the automobile , cement, chemicals, food and glass.
Mexico, carbon bonds
“In Mexico, there are between 60 and 70 companies that are required to reduce their emissions and can do so by modifying their processes, becoming more efficient or buying so-called carbon bonds”says Eduardo Piquero, CEO of Mexico2, which develops environmental markets and is a subsidiary of the Mexican Stock Exchange.
Additionally, there are about 200 companies, he says, that voluntarily comply with emissions reductions, either because their parent company and customers are from another country or because their investors demand it. In turn, according to Piquero, there are about 170 emissions offset projects, from which carbon credits are obtained. “If we want to beat climate change, we need to have more and more companies and more projects that offset emissions, double what we have now”he rocks.
A new market in Mexico
To avoid an extreme situation, the international community and Mexico, which is part of it, have been committed since 1997 to reduce greenhouse gas emissions under the Kyoto Protocol. In 2015, as part of the Paris Agreement, Mexico set itself the goal of reducing its emissions into the atmosphere by 22% by 2030. To achieve these goals, the Mexican government published in 2012 the General Law on climate change and created the emissions trading system, which sets a limit of 100,000 tonnes of carbon dioxide emitted.
Carbon bonds are a financial instrument that derives from the reduction of carbon dioxide obtained by an environmental project, the conservation or reforestation of forests and jungles, and is equivalent to one ton of carbon absorbed from the atmosphere. Before buying bonds, a company must maximize the reduction of its greenhouse gas emissions.
“The first objective is for a company to take inventory, quantify the number of emissions it generates and try to reduce them through internal initiatives such as, for example, the acquisition of clean and renewable energy. , the change of technology, the updating of equipment, prior to the transaction or the purchase of bonds”says Jiménez, director of sustainability at KPMG. But there comes a time when it is no longer operationally possible to reduce emissions and that is where emissions trading comes in.
Being new and in the testing phase, the carbon market in Mexico faces various challenges. On the demand side, there are companies that do not clearly know that they are obligated subjects and that do not have personnel competent at the technical level in the calculation of emissions. “It’s a matter that requires a high degree of specialization and they may have staff in-house, outsource it, or hire a consultancy firm that does it”explains Jéssica Jiménez, of KPMG, a company that has been accredited as a greenhouse gas verification body.
Although this is a good opportunity for those who have some type of energy efficiency project, for example forestry, they must meet international standards for the project to be accepted in the carbon bond market.
In theory, projects should verify that they actually capture carbon or reduce carbon emissions. In a reforestation project, for example, a verification agency tallies the impact and tells landowners how much bonus they equate to.
Another challenge to overcome is that the owners of the land receive fair payment for the carbon bonds generated by their projects, explains Santiago Espinosa de los Monteros, CEO of Toroto, a start which has environmental projects and a map of all the natural areas in Mexico where carbon credits can be applied.
“There are players who try to abuse the owners of the grounds on what they would have to bring for these activities”, says Espinosa, that from the company he leads, he guarantees the return of up to 70% to those who own the development. But the biggest challenge is to achieve the expected emission reductions in the time frame planned, for which it will be necessary for more companies and projects to join this important goal.
Character font: VERONICA GARCIA DE LEON R. / EL PAÍS
Reference article: https://elpais.com/america-futura/2022-09-07/los-retos-de-mexico-ante-el-inicio-del-comercio-formal-de-los-bonos-de-carbono.html