Progress report of the Green Economy Study for Mexico Dra. Amparo Martínez Arroyo Nineteenth Meeting of the Forum of Ministers of Environment for Latin America and the Caribbean Los Cabos, Baja California. March 13th, 2014

Why to undertake a Green Economy Study for Mexico? Need for an accurate and solid perspective about the possible futures to: – Reduce inequality – Increase welfare and economic growth – Preserve and improve the environment and natural resources Need to go beyon isolated sectoral analysis and link them to analysis of changes to the entire economy. Desire to enhance capacity to update and improve the analysis periodically, in response of the changing context (social, environmental and economic)

Formal launching UNEP SEMARNAT Institutional Collaboration Arrangements Analysis through an Steering Committee Review and Advisory work UNEP’s Green Economy Initiative Economic EXPERTS ADVISORS Institutes that contributed with financial and human resources to the study CONSULTANTSSPONSORS INECC Coordination, supervision and technical revision INECC Coordination, supervision and technical revision Economists that developed quantitative and qualitative analysis Expertos en cada uno de los temas sectoriales Well known experts in green economy studies Comisión Económica para América Latina y el Caribe Release of the Report Towards a Green Economy by UNEP Mario Molina Center for Strategic Studies in Energy and the Environment Validation by the Steering Committee Memorandum of Understanding about Green Economy Third Meeting: Preliminary Results Second Meeting: Presentation of the structure and the working team First Meeting: Introduction to the Green Economy Study for Mexico project Study Development Process

Sectors Analyzed in the Study Criteria for inclusion of sectors/relevant themes: Direct dependence on the natural capital. Contribution to employment and the population livelihood. Participation in the national production of the entire economy Agriculture Water Forestry Fisheries Industry Energy Tourism Transport

Methodological approach of the integrated cross-sectorial analysis National Analysis (general equilibrium model) National Analysis (general equilibrium model) Natural resources and environmental impact Availability and demand of natural resources Sectoral analysis (system dynamics model) Social impacts Employment creation/loss and income generated Economic impacts Investment required for green economy interventions and avoided costs General equilibrium model Analyzes the interaction of economic agents and the relationships of the markets that work simultaneously at a national level. System dynamics model Analyzes in detail the interaction of the economic, social and biophysical variables within each productive sector.

Example of green economy scenarios related to energy subsidy removal/ 1 Scenario Social expenditure Investment in renewable energy and energy efficiency Gross Domestic Product Investment Social welfare GHG emissions B No C Yes (100%) No D Yes (100%) E Yes (50%) Yes (50%) Note: /1. The energy subsidy includes electricity, gasoline, diesel, and liquefied petroleum gas. Results of the Green Economy National Analysis (modelling for the year 2030)

Modelling example: analysis of the energy subsidy removal What do we know about energy subsidies in Mexico?  They are regressive: 20% of the households with the greater income receive 50% of the subsidy. 20% of lower-income households receive only 4%.  They pressure the public finances : from the year 2006 till 2012, energy subsidies account for 1.8% of the national GDP.  They are environmentally harmful: foster the overexploitation of natural resources and encourage energy- intensive activities. ¿What do we need to know?  How to alleviate undesirable impacts of the subsidy removal (v.gr. Social conflicts, income of the poorest?  How to maximize the benefits of the freed resources?  How to incorporate externalities (social costs) of energy?

Development process of the Green Economy Study for Mexico Linkages between the Study and national policy Special Climate Change Programme Climate Change National Strategy vision Government plans and programmes Energy National Strategy Sectoral Programmes National Development Plan Appropriate time to influence current policy instruments as an input for its design

Next steps and final conclusion… ▪ This experience was useful to increase the national modelling and analysis capacities. ▪ The analysis enables a national dialogue to identify opportunities of technological development, the generation of employment and identifying the synergies in different sectors. ▪ Latin America and the Caribbean national studies can set up a dialogue that displays the elements for a regional initiative, using a bottom up approach. ▪ Mexico offers its expertise derived from the developing of this study that has to be dynamic and continuous work ▪ There is an opportunity to include young generations to the development of studies with a environmental integral approach

Main sponsors Green Economy Study for Mexico (May 2014) with the support of