On June 6, 2012, the General Law of Climate Change (the
"CCL") (Ley General de Cambio Climático)
was published in Mexico's Official Gazette of the Federation.
This law will enter into force on August 4, 2012.
The CCL is based on the premise that Mexico intends to (i) adopt
renewable energy resources, (ii) become more sustainable, and (iii)
control its carbon emissions footprint without halting the
country's economic development. These measures will permit
Mexico to take its place among environmental world leaders such as
the United Kingdom and the European Union.
Despite Mexico's efforts, it is still a significant emitter of
greenhouse gases. Mexico's economic growth is expected to be
sustained, which causes concern among the public and private
sectors as well as among environmental activists and NGOs because
this sustained growth, coupled with the increasing demands of a
growing national and global population, may require investments
that are not only efficient but also environmentally
sustainable.
Purpose of the CCL
The CCL purports to guarantee the right of access to a healthy
environment by regulating the emissions of greenhouse gases and
greenhouse compounds, as well as regulating the mitigation of and
adaptation to climate change, in order to reduce the vulnerability
of people and ecosystems in the country against the effects of
climate change.
The new legislation seeks to reduce greenhouse gas emissions by 30
percent in 2020 and by 50 percent in 2050. It also sets a goal of
at least 35 percent of Mexico's electricity coming from clean
sources by 2024 and reducing dirty carbon emissions by 30 percent
by 2020. In addition, the CCL establishes incentives developed by
the Ministries of Energy and Finances that will help to promote
alternative energy sources, and it provides for the creation of the
National Institute of Ecology and Climate Change (the
"NIECC") (Instituto Nacional de Ecología y
Cambio Climático) to assist the current and future
administrations in the determination of environmental public
policies related to climate change and sustainable energy
sources.
National Institute of Ecology and Climate
Change
The CCL creates the NIECC as a public decentralized federal agency
and a subdivision of the Ministry of Environment and Natural
Resources (the "Ministry"). The NIECC will substitute the
National Institute of Ecology (Instituto Nacional de
Ecología) (the "NIE"), and will be in charge
of carrying out the functions of the NIE in addition to providing
research, technical, and scientific support related to climate
change. The NIECC will also have the duty to incorporate the
National Registry of Emissions.
National Climate Change Policy
The CCL provides a National Climate Change Policy that will be
governed by the principles of sustainability in the exploitation or
use of ecosystems, responsibility of the state and society in
general, caution when there are threats of serious or irreversible
damage, citizen participation, environmental responsibility, and
use of economic instruments for mitigation and adaptation, among
others.
This policy should establish economic, political, and regulatory
instruments, plans, programs, and actions, for the gradual
reduction of specific emissions per sectors and activities. It
should take into consideration the Mexican government's
commitments to reduce emissions under international treaties
regarding climate change.
The National Climate Change Policy has the following planning
instruments: (i) the National Strategy and (ii) National and
Federal Entities Programs.
The National Strategy. The Ministry is required to
prepare the National Strategy for Climate Change with the
participation of NIECC, incorporating the opinion of the Council on
Climate Change ("Council"), and to obtain approval from
the Inter-Ministry Commission for Climate Change (the
"Commission"). Thereafter, the National Strategy will be
published in the Official Gazette of the Federation. The social and
private sectors should be consulted in the development of the
National Strategy, which will be reviewed at least every 10 years
with respect to mitigation and every six years with respect to
adaptation.
Federal Entities Programs. Programs will be
prepared by the Ministry with the participation and approval of the
Commission. This program will establish the objectives, strategies,
actions, and goals to address climate change by identifying
priorities for adaptation and mitigation, as well as allocation of
responsibilities, execution times, actions coordination, and cost
estimates, according to the National Development Plan and National
Strategy.
National Climate Change System. The federal,
state, and local governments, and their agencies and entities, will
establish the basis for coordinating the integration and operation
of the National Climate Change System, which will aim to serve as a
permanent mechanism for concurrency, communication, collaboration,
coordination, promotion, and consultation on National Climate
Change Policy. This system will consist of the Commission, Council,
the NIECC, and a representative from each of the national
associations, local authorities, and representatives of
Congress.
National Registry of Emissions. The Ministry will
put together a National Registry of Emissions for stationary and
mobile sources of emissions subject to reporting based on the items
listed in Article 87 of the Law. In this sense, the individuals and
companies responsible for the sources subject to reporting are
required to provide information, data, and all the necessary
documents evidencing their direct and indirect emissions for
integration into the registry.
In addition, individuals or companies that carry out projects or
activities that result in mitigation or reduction of emissions may
enter that information in the National Registry of Emissions,
according to the regulations to be issued for that purpose.
Climate Change Fund and Economic Instruments. The
CCL creates the Climate Change Fund (Fondo para el Cambio
Climático) (the "CCF"), substituting for the
current Mexican Carbon Fund (Fondo Mexicano de Carbono),
in order to capture attention and raise public, private, national,
and international funds to support the implementation of actions to
address climate change through a public trust created by the
Ministry of Finance and Public Credit (Secretaria de Hacienda y
Crédito Público). Some of the purposes of the
Fund for Climate Change are:
- Projects related to energy efficiency, development of renewable energies, and second-generation biofuels;
- Elimination and use of fugitive emissions of methane and gas associated with the exploitation of carbon mineral deposits;
- The development of sustainable transportation systems; and,
- The purchase of certified emission reduction bonds issued in connection with projects registered at the National Registry of Emissions or any other project approved by international agreements ratified by the Mexican government.
In order to reach the emission reduction target, the CCL
mandates that the federal and local governments of Mexico and the
Federal District implement financial, tax, and market instruments
to provide incentives for private entities and individuals.
With regard to tax instruments, the CCL considers the granting of
incentives for the research and implementation of:
- Mechanisms, equipment, and technology to avoid, control, or reduce emissions;
- Energy-efficiency systems, development of renewable energies, and low-carbon emissions technologies; and,
- Activities regarding adaptation to climate change and mitigation of emissions.
Regarding market instruments, the Commission has powers to enact
a voluntary "emissions trading" system where "carbon
bonds" and other financial instruments may be traded in Mexico
and internationally.
Surveillance and Compliance
In the event that the individuals or companies responsible for the
emission sources subject to reporting fail to provide the
information, data, or documents required by the Ministry in the
specified period, the Federal Environmental Protection Agency
(Procuraduría Federal de Protección al
Ambiente) (the "PROFEPA") may impose a fine of 500
to 3,000 days of general minimum wage in Mexico City, 1
(approximately US$2,227 to US$13,356)2without prejudice
of the need for immediate compliance with this obligation.
In the event that parties give false or inaccurate information or
fail to meet deadlines and terms for its delivery, the PROFEPA will
apply a fine of between 3,000 to 10,000 days of general minimum
wage in Mexico City (approximately US$13,356 to
US$44,521).3 The fine shall be without prejudice of any
further civil or criminal liabilities that may arise
therefrom.
The PROFEPA is obliged to make the acts described above known to
the competent authorities. In the event of recidivism, the amount
of the fine may be up to three times the original amount.
Conclusion
With the CCL, Mexico's renewable energy future is closer at
hand than ever before. As the CCL enters in force, the Mexican
government will have additional authority to create incentives for
future investment in the country's renewable energy sector that
will push Mexico toward a "green" future, in both
economic and environmental terms.
From the energy industry's perspective, this is translated
into, on the one hand, a more diversified investment portfolio in
which "green" companies or low-emission businesses are
presented as an investment alternative vis-á-vis the
traditional investments in the extractive industry (where
permissible in Mexico). On the other hand, this may result in
obligations concerning the registration of current emissions that
may prove cumbersome.
Footnotes
1. The current minimum wage of Mexico City is 62.33 pesos.
2. Taking into consideration a 14.00 pesos per U.S. dollar exchange rate.
3. Taking into consideration a 14.00 pesos per U.S. dollar exchange rate.
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