At a virtual climate summit hosted by U.S. President Joe Biden in April, Mexican President Andres Manuel Lopez Obrador made a bizarre boast: the discovery of three new oil fields. The crude, he insisted, would cover domestic demand and not be exported. “In that way, we will avoid the excessive use of fossil fuels,” he said.
The very next day, he set out on a weekend tour of Mexico’s refineries, including several installations in cities severely contaminated by the burning of bunker oil – a hyper-polluting fuel full of sulphur, which Mexico’s inefficient refineries produce in spades.
“Petroleum is the people. Petroleum is the nation,” he said at one of the refineries. “We’re going to rescue Pemex,” the troubled state oil company.
The President’s energy discourse – however archaic – draws on a deep vein of nationalism in Mexico, where state control of petroleum production and electricity generation are considered pillars of economic development and the 1938 expropriation of the oil industry is still seen as a singular expression of sovereignty and pride.
Which is why Mr. Lopez Obrador, popularly known as AMLO, is doubling down on fossil fuels.
The government is building a behemoth refinery, ramping up coal production and thwarting renewables. It’s also pushing for an overhaul of the electricity industry, which would require the state-owned power utility – the Federal Electricity Commission (CFE) – to prioritize the transmission of electricity from its own, often dirtier power plants ahead of privately owned solar and wind projects.
“There’s nothing you can point to with AMLO that leads me to believe they have any concern or interest in emissions reduction, climate, air quality – anything,” said Jeremy Martin, the vice-president for energy and sustainability at the Institute of the Americas. “Their principal energy project is a refinery.”
The President speaks in contradictions when the talk turns to climate change. But at COP26 in Glasgow, Mexico’s climate commitments are coming under international scrutiny.
AMLO seldom travels internationally and is not attending the UN climate conference, leaving Mexico’s representation to an undersecretary in the Foreign Relations Secretariat. No one from the Environment Secretariat will attend.
“They think it’s a rich-person problem. They truly don’t see climate change as one of the social imperatives of our time,” said Montserrat Ramiro, a former head of Mexico’s Energy Regulatory Commission.
“This administration just doesn’t care. They consider it a pretense from other politicians, a pretense from rich countries, that it’s posturing from industrialists who now seem to care about the environment.”
Analysts describe AMLO as holding antiquated views about economic development. He scorns renewables – other than hydroelectric power, which is produced by the CFE. He once called clean energy a “sophism” for allowing private participation in the energy sector. On a trip through Baja California, he complained that wind turbines along the highway produced “visual contamination.”
His preference for petroleum – and state-run industries pumping oil and generating electricity – reflects his upbringing in oil-rich Tabasco state at a time when fossil fuels promised to pull Mexico out of underdevelopment.
“The whole thing has become emotional … mixed up with notions of sovereignty, notions of independence, notions of honour, notions of dignity, xenophobia,” said George Baker, a veteran Pemex analyst and publisher of energia.com.
“They don’t like private operators and never have,” said David Shields, an energy analyst in Mexico City. “Their bias is basically against private operators, not against clean energy. But private operators are basically a synonym for clean energy.”
A transformation of the oil and gas industry, approved in 2013 and known as the Mexico Energy Reform, opened it to foreign investment. It opened up the electricity sector, too, and introduced clean energy auctions, which analysts say produced record-low prices for renewable energy, along with rules forcing the CFE to transmit the cheapest electricity, which often came from renewables.
AMLO compared it to treason. His administration suspended the auctions shortly after he took office in late 2018.
Few clean energy permits have been approved since then, according to analysts. Many operators – including Canadian companies – have taken legal action under the renegotiated NAFTA. Mexican courts have granted injunctions for clean energy companies, but the cases will be decided by the Supreme Court.
Canada’s ambassador to Mexico, Graeme C. Clark, said in a letter to Energy Secretary Rocio Nahle that Mexican policy “puts at risk the operation and continuity of Canadian companies’ renewable energy projects in Mexico.” Those projects, belonging to Atco, Canadian Solar, Cubico Sustainable Investments and Northland Power, are worth $450-million, according to the letter, which was dated May 15, 2020, and later published in Mexican media. Mr. Clark declined to comment on the matter.
A constitutional reform presented this month by AMLO proposes putting the electricity market back under the control of the CFE, eliminating regulators and limiting private generation to no more than 46 per cent of total output. Mr. López Obrador said it would “compensate for the damage caused by the so-called energy reform” of the previous administration.
Analysts and business groups have predicted chaos, rising prices and more pollution as the bill curtails clean energy use. Some fear investments in clean energy could become stranded assets. And the CFE’s control would be so strict that the installation of solar panels for self-generation might be outlawed.
Sergio de los Santos has used wind energy on his organic farm in central Morelos state to grow specialty herbs for posh restaurants in Mexico City. But he worries that with the new law he’ll be forced to buy electricity from the CFE.
The reform – which AMLO needs opposition lawmakers to approve – also puts supply chains at risk, as companies may not be able to decarbonize their operations in Mexico to meet international commitments, said Pablo Zarate, managing director at FTI Consulting.
AMLO insists Mexico will meet its climate targets. He says the country will refurbish its aging hydroelectric installations and promote a tree-planting program in southern Mexico.
Analysts are skeptical, given Mexico’s water shortages and human and agricultural requirements.
The success of his tree-planting program, known as Sembrando Vida, which pays small farmers to sow fruit and timber trees, is also dubious. An investigation by Bloomberg News found the program’s introduction in 2019 sparked a wave of deforestation as farmers cleared their land in order to plant trees and claim the 5,000-peso monthly stipend.
“It’s a social policy that he backs and fills into a climate policy when someone asks: ‘What’s your climate policy?’” Mr. Martin said.
In the meantime, Mexico continues burning large quantities of bunker oil. Pemex lacks markets for such a dirty fuel, so it goes to the CFE.
“The focus from the beginning was increasing oil production and refining,” Ms. Ramiro said. “This became a problem, so the administration began to look at electricity as a possible outlet” – with “nationalism” the argument for prioritizing bunker oil ahead of renewables.
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