Committing to clean up cars and trucks

On Friday, March 27, Mexico issued its commitment to reduce greenhouse gas emissions as part of the U.N. Framework Convention on Climate Change (UNFCCC). Although at first glance the INDC (Intended Nationally Determined Contribution) might appear to be just another clumsy acronym to enter the UNFCCC COP fray, in Mexico’s case, the proposal to reach their commitment appears to be paved with real and actionable policy goals. The bilateral clean energy and climate policy task force announced by the White House on the same day will provide Mexico with critical technical resources and support necessary to finalize and effectively implement these policies.

Building off the findings that transportation is the top source in Mexico of greenhouse gas emissions in total and black carbon emissions in particular, SEMARNAT has proposed a list of policies to meet Mexico’s climate goals that includes harmonized greenhouse gas standards throughout North America for light- and heavy-duty vehicles, as well as the reduction of black carbon from heavy-duty vehicles through the finalization of recently proposed revision to NOM-044 emissions standards (see here for the standard or here for our update). These policies were presented during the public consultation process but have not yet been announced publicly as part of the INDC commitments.

Harmonization with North American GHG standards for light- and heavy-duty vehicles is some of the lowest hanging fruit in Mexico’s transportation sector. Mexico’s vehicle market is closely aligned with the U.S., and the great majority of the vehicles sold there are also sold as U.S. models. The light-duty vehicle models not sold in the U.S. range from the micro cars (such as the popular Nissan Micra) that are not predicted to appeal to a U.S. market to the “indestructible truck” that has not been updated to meet U.S. standards (see the Top Gear episode on the Toyota HiLux). Harmonization of light-duty emissions standards at the same time will bring slight additional black carbon benefits and tremendous health and air-quality benefits, especially to Mexico’s most famously polluted city, all at a very low cost to consumers. Renault and Peugeot would have some catching up to do on conventional pollutants, but a European product slate should be slightly ahead in terms of GHG standards. In other words, automakers may have some work to do, but all should have the tools and vehicles that they need to meet the standards.

All these clean new vehicles will, of course, need the cleaner fuels that have been overdue for many years now. Mexico’s Energy Sector Reform provided enough of a distraction as to who would solve that problem and how (CRE has now been given that role), that the money intended to upgrade the refineries has since evaporated. The math is not difficult: a ~50% cut in global oil prices means a ~15% budget cut for a government that gets one-third of its revenue from oil. Low oil prices have spurred recent announcements that PEMEX will once again delay refinery investments and fears that foreign investors will not show up to the newly open market. Luckily, the reform laws safely in place will open up the market for sale of gasoline and diesel to consumers to market competitors, with service station permits issued starting in 2016, importations allowed in 2017, and market pricing in 2018. That gives PEMEX a strong incentive to support finalization and implementation of stringent fuel-quality specifications harmonized with the U.S. Not only does PEMEX not want to have to compete against cheap providers of high-sulfur fuel, but with a commercial market in place, there will finally be a transparent and real return on investments to upgrade refineries.

Mexico is clearly on the right path, but that doesn’t make it a smooth one. The support of the bilateral task force described above, along with the tremendous technical support being offered by the State of California, as part of its bilateral agreement with Mexico (see here, or my blog post here), will be critical. By including ambitious reductions in black carbon in its climate goals and making real progress on cleaning up the transportation sector, including non-motorized and public transportation (also being considered to help meet the climate commitments), Mexico is well on its way towards becoming a model for countries around the world to follow.