Low-Carbon Development: Case Study for Mexico Todd M. Johnson The World Bank

Low-CarbonDevelopment: Case Study for Mexico

Todd M. JohnsonThe World Bank

Stockholm – February 23, 2010

Ele

ctric

ity

En

erg

y e

nd

-use

A

gric

ultu

re a

nd

fo

rest

ry

Tra

nsp

ort

Oil

an

d g

as

Why “Low-Carbon” Development?

DOMESTIC BENEFITS•Distributed generation, diversification, energy security•Sustainability of renewable energy•Reduce losses associated with deforestation

INTERNATIONAL COLLECTIVE ACTION•Reduction commitments (e.g., NAMAs)•Carbon revenues, technology transfer•Overlap with forestry, biodiversity goals

THE FUTURE OF ENERGY•Major investment in renewables by many countries•Technologies developing, costs falling

“Low-carbon development means having the same level of social and economic development with lower GHG emissions.”

Global Emissions Reduction Pathways

1-

Source: IEA WEO 2007

Global CO2 Emissions by Country

14th largest emitter worldwide (1.5% of the global emissions)

61% of Mexico’s CO2 emissions from energy consumption

Source: 3ra. Comunicación Nacional, Mexico

Mexico – GHG emissions

MEDECMéxico: Estudio sobre la Disminución de Emisiones de Carbono

Low-Carbon Methodology

MITIGATION OPTIONS -- SELECTION CRITERIA. (1) large-scale reduction potential (5 mt CO2e); (2) low cost (US$25/tCO2e), and (3) options should be “feasible” -- already undertaken on a commercial scale in Mexico or internationally.

CARBON BENEFITS. Cost per ton of carbon estimated for each intervention.

NEAR-TERM FOCUS. Only existing technologies and current costs of those technologies considered.

Key-word Year

Positive investment

costs

Negative investment and

salvage Energy costs Other costs Externalities EmissionsMitCost without

MitCost with

Maximum annual

mitigationUS$ US$ US$ US$ US$ Ton CO2 US$/Ton US$/Ton Ton CO2

2009 $0 $0 $0 $0 $0 02010 $0 $0 $0 $0 $0 02011 $0 $0 $0 $0 $0 02012 $0 $0 $0 $0 $0 02013 $868,589,103 -$233,531,491 -$27,371,768 $6,147,171 -$2,320,887 -1,258,0412014 $881,965,581 -$320,255,139 -$55,425,149 $12,389,010 -$4,677,517 -2,535,4572015 $881,965,581 -$376,379,350 -$83,742,441 $18,630,849 -$7,034,146 -3,812,8722016 $881,965,581 -$915,670,651 -$112,325,509 $24,872,688 -$9,390,776 -5,090,2882017 $881,965,581 -$831,526,979 -$141,176,231 $31,114,527 -$11,747,405 -6,367,7032018 $881,965,581 -$594,164,184 -$209,865,651 $39,929,585 -$12,738,557 -7,212,0072019 $881,965,581 -$569,569,984 -$276,204,704 $48,571,484 -$13,821,596 -8,085,4552020 $881,965,581 -$544,164,059 -$340,150,480 $57,037,628 -$14,997,899 -8,988,4862021 $881,965,581 -$525,926,813 -$402,845,747 $65,402,405 -$16,227,992 -9,908,5792022 $881,965,581 -$512,199,253 -$464,868,834 $73,703,414 -$17,491,924 -10,839,4042023 $881,965,581 -$501,492,711 -$526,544,171 $81,961,705 -$18,778,524 -11,777,4202024 $881,965,581 -$492,908,790 -$588,068,139 $90,189,982 -$20,081,051 -12,720,4872025 $881,965,581 -$485,873,191 -$649,566,812 $98,396,366 -$21,395,196 -13,667,2402026 $881,965,581 -$480,001,652 -$711,125,043 $106,586,289 -$22,718,076 -14,616,7632027 $881,965,581 -$475,027,351 -$772,802,213 $114,763,525 -$24,047,688 -15,568,4212028 $881,965,581 -$470,759,223 -$834,641,276 $122,930,776 -$25,382,598 -16,521,7602029 $881,965,581 -$467,056,859 -$896,674,204 $131,090,027 -$26,721,754 -17,476,4462030 $881,965,581 -$463,814,758 -$958,925,402 $139,242,769 -$28,064,364 -18,432,2272031 -$2,037,851,910

NPV/TOTAL $4,932,178,644 -$3,093,158,527 -$1,728,573,737 $283,859,280 -$72,843,344 -184,879,057 $2.13 $1.74 -18,432,227

Win

d

ECONOMIC AND EMISSIONS MODEL. Baseline and low-carbon scenarios constructed to 2030.

LOW-CARBON INTERVENTIONS. Assessed 40 interventions (economic cost-benefit analysis) for energy, transport, end-use energy, and agriculture and forestry.


Ele

ctric

pow

er

Electric power

2008

2030

Bas

elin

e

2030

Med

ec0

100

200

300

400

500

600

700

800

Energy Efficiency

Renewable Energy

Nuclear

Fossil Fuels

Pow

er

genera

tion (

TW

h)

Baseline and Low-Carbon Scenarios


Tra

nspo

rt

Source: Dargay, Gately, and Sommer 2007.

Motor vehicle ownershipHistorical and Projected Growth for Selected Countries

Transport

2008

2011

2014

2017

2020

2023

2026

2029

0

50

100

150

200

250

300

350

400

Fuel con-sumption per vehicle

Urban transporta-tion

Other

MEDEC emissions

yearem

issio

ns (

Mt

CO

2e/y

ear)


Agriculture & Forestry

Source: Ghilardi and Guerrero 2009, based on REMBIO 2008; INEGI 1995, 2000, 2002.


Energy Efficiency

InterventionsMaximum Annual

Mitigation (Mt/year)

Benefits of mitigation

(US$/t CO2e)

Residential air conditioning 1.0 0

Residential lighting 5.0 42

Solar hot water heaters5.0

9

Street lighting 0.8 55

Industrial motors 0.9 31

Non-residential lighting 4.2 51

Non-residential air conditioning 1.9 30

Residential refrigerators 4.7 27

Industrial cogeneration 12.6 2.0


MEDEC low carbon scenario

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

0

200

400

600

800

1000

1200

Em

issi

ons

[MtC

O2e

/yea

r]

baseline scenario

+ 1137 Mt

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

0

200

400

600

800

1000

1200

Em

issi

ons

[MtC

O2e

/yea

r]

baseline scenario

Agriculture and forestry

+ 1137 Mt

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

0

200

400

600

800

1000

1200

Em

issi

ons

[MtC

O2e

/yea

r]

baseline scenario


+ 1137 Mt

Oil and gas

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

0

200

400

600

800

1000

1200

Em

issi

ons

[MtC

O2e

/yea

r]

baseline scenario


+ 1137 Mt

Oil and gasStationary energy end-use

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

0

200

400

600

800

1000

1200

Em

issi

ons

[MtC

O2e

/yea

r]

baseline scenario


+ 1137 Mt


Transport

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

0

200

400

600

800

1000

1200

Em

issi

ons

[MtC

O2e

/yea

r]

baseline scenario


+ 1137 Mt


Transport

Electricity

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

0

200

400

600

800

1000

1200

Em

issi

ons

[MtC

O2e

/yea

r]

baseline scenario

MEDEC emissions


+ 1137 Mt

+ 660 Mt


Transport

Electricity

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

0

200

400

600

800

1000

1200

Em

issi

ons

[MtC

O2e

/yea

r]

baseline scenario

MEDEC emissions


+ 1137 Mt

+ 660 Mt

PECC


Transport

Electricity

+ 493 Mt


0 1,000 2,000 3,000 4,000 5,000150

100

50

0

50

100

Cumulative mitigation 2009-2030 [MtCO2e]

Net

ben

efits

←

→

Net

cos

ts [U

S$/t

CO2e

]


Investment and Financing. Higher up-front costs, lack of credit markets.

Regulations. Regulations for renewables and energy efficiency (cogeneration). Energy price distortions.

Institutions. Governance and management by state energy companies (LFC). Coordination of federal, state and municipal policies (ex: transport).

Information. Lack of knowledge by consumers (EE). New systems required by producers (intermittent RE).

Barriers to Large-scale Implementation


Mexico has significant GHG reduction potential that could be tapped in the near term.

Mexico could keep emissions relatively constant over the next twenty years and without affecting economic growth by undertaking a number of low-carbon interventions.

Two-thirds of MEDEC interventions have positive financial and economic benefits regardless of climate change considerations.

Conclusions for Mexico


Global Lessons

What does a low-carbon development path look like and what tools are needed?(Economic and emissions model, cost-benefit methodology, geographical

(GPS) tools)

How much might it cost to reduce global emissions?(Mexico: ~$64 billion to 2030 ($3b/year) or less than 0.4% of GDP)

Which Interventions can be done in the near term? (Energy efficiency, transport, low-cost renewables, and forestry)

Why aren’t low-carbon measures happening faster? And why are further incentives needed?


Low-Carbon Development for

MEDEC – México: Estudio sobre la Disminución de Emisiones de Carbono

Full report can be found at:

www.worldbank.org/mx Todd M JohnsonClaudio Alatorre

Zayra RomoFeng Liu

Low-Carbon Development: Case Study for Mexico Todd M. Johnson The World Bank

Documents

estudio sobre

lowcarbon interventions

lowcarbon development

ton of carbon

carbon benefits

number of low

low cost us

enduse energy