ndc implementation in mexico · 2017. 12. 12. · mexico´s indc proposal is innovative, given that...

NDC Implementation in Mexico:Identification and Costing of Feasible Mitigation Measures

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NDC Implementation in Mexico:Identification and Costing of Feasible Mitigation Measures

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Published by Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbHFriedrich-Ebert-Allee 36+4053113 Bonn, DeutschlandT +49 228 44 60-0F +49 228 44 60-17 66 E [email protected] www.giz.de

Studien- und Fachkräftefond, BMZ: Mitigation measures for the achievement of the conditional NDC targets in Mexico

ResponsibleDaniel Blank, Project [email protected]

For more informationwww.giz.dewww.transparency-partnership.net

AuthorR. Wences

Coordinated by:Green Growth Department, National Institute for Ecology and Climate Change (INECC), Miguel Breceda Department for Climate Policy of the Ministry for the Environment and Natural Resources of Mexico, Juan Carlos Arredondo

Layout and DesignUli Stehlik, Mexikuli Design, Mexico [email protected]

Legal NoticeGIZ is not responsible for the contents presented in this document. Neither can GIZ accept any liability or give any guarantees for the declarations and perspectives given by the authors of this document.

Supported by:German Federal Ministry for Economic Cooperation and Development (BMZ), Studien- und FachkräftefondandThe Support project for the Implementation of the Paris Agreement (SPA). The project is part of the International Climate Initiative (IKI). The German Federal Ministry for the Environment, Nature Conservation, Building and Nuclear Safety (BMUB) supports this initiative on the basis of a decision adopted by the German Bundestag.

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TABLE OF CONTENTS

1. EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3. SECTORAL AND TECHNOLOGICAL BOTTOM-UP COST ANALYSIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4. SECTORAL AND TECHNOLOGICAL TOP-DOWN COST ANALYSIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5. CONTINUOUS TECHNICAL DIALOGUE TO SUPPORT THE MITIGATION STRATEGIES ANALYSIS . . . . . . . .

6. IMPORTANT CONCLUSIONS ON NON-CONDITIONAL MEASURES COSTING . . . . . . . . . . . . . . . . . . . . . .

7. COST ANALYSIS OF CONDITIONAL NDC MEASURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8. NDC MODELLING STUDY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9. ANNEX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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EXECUTIVE SUMMARY

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1. EXECUTIVE SUMMARY

1 As the NDC’s baseline is extrapolated from 2013 values, the period 2014 to 2030 corresponds to the relevant reduction period, although the target is for the period 2020 to 2030.

The Mexican government has launched the important task of calculating the costs entailed by the mitigation targets of greenhouse gas (GHG) emissions and develop a list of possible mitigation measures based on an extensive exchange with sector representatives, so that the country could implement those measures to reach the targets to which it committed at the international level. This work has been conducted by the National Institute of Ecology and Climate Change (INECC) in coordination with the Environmental Ministry (SEMARNAT). To comply with its mandate, INECC evaluated the costs and benefits of implementing the Nationally Determined Contributions (NDCs) on climate change under the Paris Agreement, that is, to achieve 22% GHG emissions reduction by the year 2030 relative to the business-as-usual scenario. The Institute has started to evaluate the costs of those mitigation targets expressed in the NDC, but conditional on receiving international support. The conditional target is to reduce 36% of emissions compared to the BAU-scenario.

Thirty non-conditional measures covering all eight economic sectors have been identified and are sufficient to attain the unconditional or unilateral NDC mitigation targets. The estimated amount of investment and operating cost cumulated for the period from 2014 to 20301 is 120 billion US Dollars (at 2017 exchange rates) corresponding to a mitigation of 1,520 million tons of carbon dioxide equivalent (MtCO2e).

It is important to mention that half of the investment mentioned above is in the Electric Power Generation Sector and that fourteen of the 30 measures deliver inherent savings (mainly in fuel consumption), such that the costs become negative over the years, once initial investment costs have been compensated. Against this background, the average weighted abatement cost over all 30 measures goes down to minus 26.80 USD/ tCO2e in the year 2030. The investments are actually even more attractive, as benefits from the sale of products and co-products have not been included.

In terms of the more ambitious conditional 36% reduction target, a list of 100 potential measures have been identified from different sources, out of which 15 will be prioritized. For the prioritized measures a cost calculation will be appended in order to identify bankable projects for international donors and to be implemented in the short-run.

The Mexico-Denmark Climate Change Mitigation and Energy Program (CCMEP), through the Danish Energy Agency (DEA), supported INECC in the cost analyses of the mitigation measures for the non-conditional NDC targets. This support was essential in the costing analyses presented in this report.

After the completion of the cost analysis of the non-conditional NDC measures, the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH, on behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ), commenced support INECC and SEMARNAT in the priorization, cost analysis and definition of a stepwise approach towards bankable projects.

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INTRODUCTION

On 1 October 2012, the General Climate Change Law entered into force in Mexico, which helped develop a robust political and institutional framework for climate change. Its three main objectives are:

4Low carbon development to achieve a competitive, sustainable and low carbon economy.4Resilience to reduce vulnerability of people and ecosystems to climate change effects.4Inclusive policy to ensure the coordination among all government levels, with transparency and participation of all sectors of society.

These objectives defined an institutional framework to guarantee a crosscutting accomplishment of the climate change targets in Mexico, and tackles all governmental levels, private sector and civil society. Against this background, the Ministry for Environment and Natural Resources (SEMARNAT) established:

4The Inter-Ministerial Commission on Climate Change (CICC) as a permanent mechanism for the coordination across sectors, at the federal level. The Commission was officially installed in January 2013 and is integrated by 13 different ministries.4Climate Change Council (C3) as a permanent consultation organ, composed of renowned citizens from public, private, academic and civil society entities. It was officially installed in May 2013.4National Institute of Ecology and Climate Change (INECC) as a research institute.

On 27 March 2015, Mexico presented its Intended Nationally Determined Contributions (INDC) to the United Nations Framework Convention on Climate Change (UNFCCC), being the first developing country to do so. Mexico s INDC proposal is innovative, given that it includes a set of challenging commitments, not only for mitigation but also for adaptation, as it defines two sets of contributions (non-conditional targets to be developed indifferent of the international scenario and conditional contributions subject to the fulfilment of certain conditions in the international arena), and as it incorporates Short Lived Climate Pollutants (SLCP) as part of the mitigation efforts. On 22 April 2016 in New York, Mexico signed the Paris Agreement and confirmed its Nationally Determined Contributions (NDCs). At the national level the Ministry for Environment and Natural Resources (SEMARNAT) is in charge of high-level decisions on these matters and climate change policies. The National Institute of Ecology and Climate Change (INECC) has been appointed as the entity in the Federal Government in charge of evaluating the required efforts for delivering the NDCs and charting the technology pathways.

In terms of mitigation, the non-conditional commitment consists of a 22% reduction of national GHG emissions below the baseline by 2030, from 973 to 762 MtCO2e, while for Black Carbon as the main SLCP, the reduction is to be 51%, from 137 to 68 ktCO2e. See Figure No.1. With this effort the Mexican economy will decrease its carbon intensity by 37% compared to the BAU scenario, reducing it from the expected 534 to 338 tCO2e/1,000 USD.

As for the conditional commitments, the mitigation effort could deliver a reduction of 36% in GHG emissions and 70% for black carbon emissions. The conditional contributions are subject to the reception of support in terms of capacity building, technology transfer and finance for both mitigation and adaptation, including adequate market mechanisms that are fully functional carbon markets.

2. INTRODUCTION

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INTRODUCTION

Interestingly, although not communicated to the UNFCCC for the target of the Mexican NDC being economy-wide, domestically sector targets were defined and communicated to and discussed with sector ministries for the non-conditional mitigation targets.

The sector targets can be seen in Figure No.1. It is important to keep this in mind when it later comes to the definition of mitigation measures which, naturally, are also on the sector level and thus were adjusted to the sector targets.

Defining the non-conditional and conditional contributions implied an extensive effort at a national level, not only for the federal government, but also for the private and academic sectors, in order to set an effort level that is feasible and challenging at the same time without threatening economic growth or social concerns. The current situation in the Mexican energy sector, for example, which is involved in a deep reform that opens the market to private national and international corporations, constitutes a source of both opportunities for mitigation while maintaining welfare generation and difficulties for defining the proper policies to secure their sector s contribution to the national mitigation efforts.

During the process implemented to define the NDCs, INECC used several tools to evaluate mitigation alternatives, costs and benefits in order to generate a set of proposals designed to find the optimal route and the best course of action in the different sectors of the economy. Consequently, INECC, or more specifically the General Coordination for Green Growth, performed both top-down and bottom-up analyses with robust tools that take account of technological, financial, economic and environmental aspects.

FIGURE 1: EMISSIONS UNDER THE MEXICAN NDC

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INTRODUCTION

The Mexico-Denmark Climate Change Mitigation and Energy Program (CCMEP) supplemented the activities for the non-conditional NDC cost analysis. The output of the project constitutes a key element in the design of the national public policies for the following years, from a cost and economic perspective. It is complementary to other efforts being under development, particularly those referred to technology and mitigation strategies, being implemented by INECC s General Coordination for Climate Change Mitigation (GCCCM), and is expected to open up a whole range of possibilities for the implementation of mitigation actions.

After the cost analysis of non-conditional NDC measures had been completed, the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH on behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ) commenced support for the cost analysis and prioritization of mitigation measures that could be implemented to reach the conditional NDC mitigation targets. Results are expected in early 2018 and will be shared with financial institutions in terms of financial cooperation.

The activities performed in order to obtain results in NDC costing so much needed for NDC implementation planning can be summarized as follows:

4Sectoral and technological bottom-up cost analysis4Sectoral and technological top-down cost analysis to supplement and verify the bottom-up analysis4Continuous technical dialogue and exchange with sector representatives to support the mitigation strategies analysis4Inclusion of various criteria beyond economic factors such as social and ecological co-benefits or others linked to the Sustainable Development Goals4Reach out to financing institutions to include financing criteria in the analysis from an early stage onwards.

Finally, with these five activities the Mexican government seeks to evaluate the costs and benefits of NDC implementation routes and reinforce institutional capabilities to analyse the economic aspects of the mitigation strategies. It further aims to strengthen Mexico s position in UNFCCC negotiation, and to provide follow-up and responsiveness to the UNFCCC process.

Early engagement was a key element for the determination of the Mexican NDCs. The Mexico-Denmark cooperation has provided INECC with a set of national experts that support INECC’s analyses. This represents an impor-tant basis to deduce mitigation targets from the sum of measures. The experts did bottom-up cost calculations and cross-checked with top-down modelling results. This success has been taken up and is being continued by support of GIZ in terms of prioritizing and evaluating measures for the conditional mitigation target. The earlier work has been fundamental for Mexico to submit its iNDC as the first developing country.

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SECTORAL AND TECHNOLOGICAL BOTTOM-UP COST ANALYSIS

3. SECTORAL AND TECHNOLOGICAL BOTTOM-UP COST ANALYSIS

The Mexican Government, through the Inter-Ministerial Commission on Climate Change (CICC), defined 30 non-conditional measures for eight economic sectors:

4mobile sources,4electric power generation, 4oil and gas,4industry,4residential and commercial,4 solid waste,4agricultural, and4land use, land use change and forestry

These 30 measures were costed in a bottom-up approach for the period from 2014 to 2030, whereby initial investments, operating costs and maintenance costs were identified in detail, and crosschecked with sector experts. Cross-functional teams were organized to gather relevant information which allow to calculate the estimated costs and benefits of each greenhouse gas mitigation measure.

There are four sources of information that were taken into account as shown in Figure No.2:

a. Component A. Information within INECC and within SEMARNAT. b. Component B. Information in other governmental institutions (Energy Ministry, Petróleos Mexicanos - PEMEX, National Forestry Commission, etc.) c. Component C. Information that Private Companies, Key Stakeholders, Universities, etc. have. d. Component D. Information regarding financial markets, project financing, specific financial instruments.

Additionally there are two approaches to determine the financial projections (costs and benefits). One is a ‘Bottom-Up’ approach, which means to quantify, item by item, each cost element identified to enable the mitigation measure. The other is a ‘Top-Down’ approach, where models are used to generate proxies for the development of economic framework conditions.

In general terms, for all 8 sectors, the first three information categories or components have applied within a bottom-up approach. Component D is mainly worked through close and established working contacts with relevant finance institutions.

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FIGURE 2: BUILDING BLOCKS FOR THE FINANCIAL PROJECTIONS

On a regular basis, an Executive Dashboard is published which shows the latest overview of cumulated costs and benefits at the NDC level. The latest version is version 14, depicted in Figure No.3.

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Preliminary estimates, based on parameters updated to October 2017. All amounts are in US dollars 2017 base.

FIGURE 3: MEXICO NDC COST PROJECTION DASHBOARD. VERSION 14

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In this version 14 of the executive dashboard it can be seen that the preliminary estimates result in a minus 26.80 USD weighted average cost per ton of carbon dioxide equivalent (tCO2e) for the year 2030. Additional and updated information were taken into account continuously such as updated energy prices, exchange rates, solar and wind technology costs and so forth. The sum of the investment cost plus operational costs, to implement the 30 measures totals 120 billion USD in the period from 2014 to 2030, with which the total mitigation achieved in the period will be 1,520 million tons of carbon dioxide equivalent (MtCO2e).

Electrical power generation and transport represent the sectors with the highest absolute costs to achieve their mitigation targets. Specifically, the Electric Power Generation Sector represents one half of all investments.

The investments to achieve Mexico s NDC (initial and operational costs) can be seen in the Figure No.4. The cost curve tapers off in the year 2035.

FIGURE 4: TOTAL INVESTMENTS FOR MEXICO´S NON-CONDITIONAL NDC´S

Preliminary estimates, based on parameters updated to October 2017. All amounts are on a USD 2017 base.

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FIGURE 5: MEXICO´S NDC. AVERAGE WEIGHTED ABATEMENT COSTS VS. TOTAL COSTS PER SECTOR IN PERIOD 2014 TO 2030.

It is important to mention that the estimated costs are based on specific narratives of mitigation actions and a series of specific assumptions and projections (GDP growth, exchange rates, and oil and gas prices), whereby regular updates are generated and improvements incorporated. It is estimated that there is a margin of error of plus-minus 5 per cent in the cost projections.

The fact that the weighted average costs become negative by 2030 can be understood better by looking at Figure No.5. It shows the total costs per sector alongside the inherent savings the measures per sector create (for example: improved fuel efficiency in transport measures), showing that in some sectors the savings outweigh the costs, already over the relatively short timeframe until 2030.

In Figure No.6 the different costs per sector are compared to the average cost savings on a sectoral level, showing which require higher investments. In this Figure, it can also be noticed that the most attractive and impactful sectors from a financial point of view are: Electric Power Generation, Transport and LULUCF, i.e. the sectors that have significant mitigation outcomes and negative or insignificant weighted average abatement costs.

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FIGURE 6: MEXICO´S NDC. MITIGATION COSTS AND SAVINGS IN THE PERIOD 2014 TO 2030.


Combining the previous information, the weighted average cost per ton of carbon dioxide equivalent can be calculated, see Fig Figure No.7.

The initial average mitigation costs are at 64.10 USD/ tCO2e in 2014. However, the inherent savings especially in the transport and the electricity generation sectors influence the average costs in such a way that the mitigation costs start to become negative in year 2019, that is, the savings outweigh the operational costs. After several years, when the area below the curve of costs equals the area below the curve of negative costs (savings) is equal, from thereon the investment has paid off (roughly from 2024 onwards).

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FIGURE 7: MEXICO´S NDC. WEIGHTED AVERAGE COST PER TON CO2E IN THE PERIOD 2014 TO 2030.


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SECTORAL AND TECHNOLOGICAL TOP-DOWN COST ANALYSIS

4. SECTORAL AND TECHNOLOGICAL TOP-DOWN COST ANALYSIS

On the other hand, seeking to compare and validate the bottom-up calculations, a top-down model was used, in the Mexican case, POLES. POLES (Prospective Outlook on Long-term Energy Systems) is a partial equilibrium simulation model for the world energy sector, modelling upstream production through to final user demand and greenhouse gas emissions. It has been used in more than 60 countries or regions. The model was developed by a Europe-based firm called Enerdata. It is an independent information and consulting firm specializing in global energy and carbon markets, and detailed energy demand analysis. In the Mexican case, POLES was used as a means to validate and calibrate the cost calculations. Thereby, several scenarios were built:

Scenario 1. Use of a single carbon pricing scheme in all sectors of the Mexican economy, to attain long-term de-carbonization.

Scenario 2. Use of a mix of Policies and Measures (P&M), to attain long-term de-carbonization. The main P&M considered were:

A. Emissions Trading Scheme (ETS): specific sectors of the economy (indicatively: power generation, industry) are subject to emission caps strengthened over time.

B. Carbon taxation: in non-ETS sectors through taxation of fuels according to their carbon content.

C. Renewable Energy policies: Promoting the use of renewable energy sources in final demand (e.g. subsidies) or enhancing the competitiveness of renewable technologies (e.g. clean energy certificates).

D. Energy efficiency schemes: promotion of energy efficiency in specific sectors (e.g. buildings) using price-based mechanisms on the basis of the energy content of fuels (e.g. white certificates), or using standards that induce an objective (e.g. consumption or emission limits in road transportation).

E. Energy subsidies removal: gradual convergence of prices to national or international market prices, plus taxes.

INECC identified two scenarios as interesting and relevant from the above: a single carbon price across all sectors and a mix of Policies and Measures. Two main work streams were applied to those scenarios:

a. Emissions baseline update and comparison. The NDC’s baseline is for 2013. In continuity of this work, an updated POLES baseline scenario for Mexico was created in 2015 using certain key drivers from INECC’s latest available data.

b. Cost-oriented analysis of emission reduction routes. Once the baseline scenario had been created and the information gathering was complete, two alternative emission reduction pathways for Mexico were defined that are in line with Mexico’s NDCs. These pathways deviate from the baseline and aim towards a significant decarbonisation of Mexico’s energy mix.

The results of the POLES scenario modelling have been very encouraging. In summary:

1) The POLES model was able to replicate the Emissions Baseline with a difference of only 2%.

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SECTORAL AND TECHNOLOGICAL TOP-DOWN COST ANALYSIS

2) The scenarios in POLES resulted in emission reductions reaching from 17% to 22% below the BAU-scenario in 2030, i.e., they are in line with Mexico s commitments. 3) The costs projected by POLES for the most impactful measure, being clean energy power generation, were only 4% off the bottom-up calculations (based on 2015 values).

On top of the business-as-usual (BAU) scenario modelled by POLES, three different mitigation scenarios were worked out: Non-conditional NDC, conditional NDC and Carbon Price NDC. This was done to achieve a higher level of confidence in the results. Figure No.8 shows one of the three scenarios built with the top down modelled BAU and Carbon Price scenario.

Finally, once the results of both bottom-up calculations and top-down analysis were done, a comparative and an integration analysis followed.

FIGURE 8: MEXICO´S NDC. TOP-DOWN SCENARIO. CARBON PRICE IN THE PERIOD 2000 TO 2050.

Preliminary estimates, based on updated 2015 parameters, all amounts are on a US dollar 2015 base.

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CONTINUOUS TECHNICAL DIALOGUE TO SUPPORT THE MITIGATION STRATEGIES ANALYSIS

5. CONTINUOUS TECHNICAL DIALOGUE TO SUPPORT THE MITIGATION STRATEGIES ANALYSIS

As part of the process to obtain relevant and updated information for the Bottom Up estimates and to promote mitigation actions, a series of Public-Private-Dialogues (DPP, for its abbreviation in Spanish) have been organized. After each dialogue there was a follow-up with key stakeholders and identified experts. These dialogues are very important for they allow INECC and the Ministry of Environmental Affairs at large:

a. To continue to share information with key stakeholders regarding climate change and mitigation actions in the country. b. To discuss the effectiveness of each individual measure and to design new measures. c. To agree how to address possibly contentious issues, agree priorities and define working groups. d. To finally increase the level of ambition. e. And to identify measures which can be presented to financial institutions.

In 2015 a first general meeting with key stakeholders took place, as an overall consultation regarding iNDCs and an internet survey was launched before the submission of Mexico s iNDC to the UNFCCC in order to consult the public.

Several agencies have been supporting the Dialogues. The three following a particularly noteworthy:

4Danish Energy Agency through the Mexico-Denmark Climate Change Programme (CCMEP);4United Nations Development Programme (UNDP); and4Worldwide Wildlife Fund (WWF).

Hereunder in Figure No.9 the calendar of the Public-Private Dialogues can be seen.

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FIGURE 9: MEXICO´S NDC. PUBLIC-PRIVATE DIALOGUES.

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The detailed outcomes are made publically available through INECC.

Hereunder are the main statements made within the Public-Private-Dialogues:

4Electric Power Generation:

a. The planned measures fall short by 20% to 30%. b. Nuclear energy is considered an option by some participants. c. Add measures: ‘distributed power’ and ‘non-technical losses’. d. Consumption-side efficiency is a very important measure. e. Finance is available, but there is a general lack of knowledge on how to access.

4Residential and Commercial:

a. There are very good existing programmes for green housing developments. b. Expectancy that photovoltaic will grow annually by more than 4% until 2030. c. A growth of 500,000 m2 per year of solar collectors is forecasted. d. Need proper laws, standards and regulations for the commercial sector to help jumpstart mitigation actions.

4 Industry:

a. Requested a revision of the sectorial baseline. b. Cement industry requested a fairer distribution within the sector. c. Large opportunity to increase energy efficiency. d. Coordinate agenda of all ministries involved. e. The need for preferential financing conditions was highlighted.

4Transport:

a. Strong criticism that ultra-low-sulphur diesel is not yet available. b. SEMARNAT mentioned that the Efficiency Standards are almost ready for light (update) and heavy duty vehicles. c. Urban Densification highly recommended. d. Banobras Bank presented financing tools for mass public transportation. e. Most participants agree that there is potential for more train usage.

4Waste:

a. Communicate the waste disposal standard NOM-083. b. Generate legislation with all the elements of an integral waste management. c. Harmonization of existing local regulations for waste landfills. d. Promote the implementation of local tariffs for waste disposal activities. e. Showcase examples of the States of Queretaro, Hidalgo and Colima.

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4Agriculture:

a. There is the need to develop new sources of finance and provide better public policy framework. b. The use of bio-digesters is the most efficient measure in the sector. c. There is potential for a three-fold increase in mitigation. d. Develop tailor-made forms of subsidies for each scale of economy. e. Develop a measure for enteric fermentation.

4FOLU:

a. Need to enforce forestry regulation by strengthening the Enforcement Bodies and combatting illegal acts. b. Diminish the over-regulation in the sector which hampers sustainable forestry growth. c. Establish more guaranteed funds for plantations and reforestation. d. Seek more public funding as seed capital to stimulate wood markets.

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IMPORTANT CONCLUSIONS ON NON-CONDITIONAL MEASURES COSTING

6. IMPORTANT CONCLUSIONS ON NON-CONDITIONAL COSTING

A. The sectors that require the largest amounts of funds for their implementation are: Electric Power Generation, Transport and Industry. The lowest levels of investments are required in: agriculture, solid waste, LULUCF and residential & commercial. Whereby the sectors with the highest negative costs (hence, with the largest inherent savings) are: Transport, Power Generation and Industry. Mexico, by implementing the measures of these sectors, can achieve important economic improvements and become more competitive.

B. The measures with the highest negative costs (hence, highest inherent savings) are the ones substituting heavy oil fuel with natural gas and the introduction of an efficiency standard for light vehicles. Some of the more expensive measures in terms of average weighted abatement cost USD/MtCO2e in 2030 are open field burning of waste, railway modal change, cement sector NAMA, and reduction of technical losses in the electricity grid.

C. In this study we have not included detailed co-benefit estimates.

D. When comparing with other studies regarding NDC costing in Mexico, the costs calculated have basically a similar trend. The table in Figure No.10 compares the most important studies.

E. Most countries have been working on estimating not only the weighted average abatement cost of their NDC, but also the marginal abatement cost. That is, the extra financial effort to mitigate one additional ton of carbon dioxide equivalent. Hereunder is a first Marginal Abatement Cost Curve (MACC) for the year 2030 which can be helpful to compare to other studies. Figure No.11 shows a MACC for Mexico s 30 non-conditional NDC measures. The horizontal axis represents the mitigation (in MtCO2e) and the vertical axis represents the abatement cost (USD/ tCO2e). The total cost per mitigation measure is the area produced by the intersections. The surrounding contour line represents the marginal abatement costs. The measures on the left side of the MACC are the most financially interesting.

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FIGURE 10: TABLE OF MEXICO´S NDC MITIGATION COSTS- COMPARING RESULTS OF DIFFERENT MODELS AND STUDIES

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FIGURE 11: MEXICO NDC´S. MARGINAL ABATEMENT COST CURVE (VALUES FOR THE YEAR 2030).

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COST ANALYSIS OF CONDITIONAL NDC MEASURES

7. COST ANALYSIS OF CONDITIONAL NDC MEASURES

Once the non-conditional measures had been analysed, the Mexican Government started to calculate the costs of additional measures that go beyond the 22% mitigation target, but could be implemented to achieve the more ambitious 36% target. This analysis is being supported by the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH. The so-called conditional measures, i.e., the measures that are subject to international technical and financial support, are being selected from a longlist of candidates. The longlist has been elaborated drawing from a broad range of sources:

4The list of 12 conditional measures defined in 2015 by the Interministerial committee on climate change (CICC).4The list of measures compiled by the National University of Mexico (UNAM) and the National Commission of Science and Technology (CONACyT) in the book: ‘Hacia un sistema energético mexicano Bajo en Carbono’, published in 2015.4The list of measures presented by the World Resources Institute (WRI) and the Mario Molina Center (Centro Mario Molina) in the document: ‘Achieving Mexico s Climate Goals: An eight point action plan’, published in 2016.4The list of measures prepared in the Fifth National Communication supported by the United Nations Development Program and published in 2012.4Measures derived from the Public Private Dialogues on the NDC.4Measures proposed by GIZ s experts in Mexico.4Measures proposed by SEMARNAT and by INECC.

The longlist consists of 100 mitigation measures, whereby some had overlaps and some contained duplicated mitigation actions. To be able to rank them for subsequent priorization, these measures were normalized by defining the expected mitigation in the year 2030 and the similar basis for cost per ton mitigated in 2030 as well as other criteria were applied:

4Total mitigation in the year 2030 (MtCO2e)4Average abatement cost in 2030 (USD 2017/tCO2e)4Technical implementation difficulty4Administrative implementation difficulty 4Expected benefits and co-benefits4Difficulty to realize the cost calculation

Once the ranking was performed, 26 conditional measures were selected, see Figure No.12. Due to budget limitations in this study, costing will be done for 15 initial measures, while aiming at defining a methodology that can later easily be expanded to the analysis of additional measures.

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FIGURE 12: TABLE OF SELECTED CONDITIONAL NDC MEASURES FROM THE INITIAL LIST OF 100: 26 POSSIBLE CONDITIONAL MEASURES

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NDC MODELLING STUDY

8. AVAILABLE MODELS FOR ANALYSIS OF NDC MITIGATION MEASURES

Depending on the type of research question, the degree of definition of measures to implement the mitigation targets, and the availability of resources (human and financial), the planning of the NDC implementation represents a tremendous challenge for the government in terms of overall planning, the creation of enabling environments, the coordination and monitoring as well as the institutionalization of a continuous adjustment process. For those NDCs that are economy- or sector-wide, mitigation actions still often need to be identified. Beyond that, implementation requires a reasonable estimate of expected costs and identification of barriers in terms of designing adequate environments.

This challenge is common to most countries. Although considerable experience exists in many countries in terms of informed policy making and creation of enabling environments, the sheer extent of the effort is unprecedented for most governments and their institutions. International support is available for developing country Parties, especially in terms of finance and capacity building. However, countries still need to have a solid estimate of costs of NDC implementation in order to be able to identify and channel adequate international support. In terms of supporting the costing, several models exist nowadays to help assist in these tasks. Actually, selecting among the available models is a first challenge.

In the case of Mexico, several models have been used, most important are:

4The POLES model from Enerdata. Prospective Outlook on Long-term Energy Systems is a partial equilibrium simulation model for the world energy-economy.

4LEAP, the Long-range Energy Alternatives Planning System, is a widely-used software tool for energy policy analysis and climate change mitigation assessment developed at the Stockholm Environment Institute, and

4TIMES, The IEA-ETSAP methodology (the TIMES energy system model) offers solutions for compilation of long term energy scenarios and in-depth national, multi-country, and global energy and environmental analyses. It can assist in the design of least-cost pathways for sustainable energy systems and Nationally Determined Contribution (NDC) roadmaps.

Although there is general overview over these and many other models provided by the Tool Navigator of the NDC-Partnership (www.ndcpartnership.org), the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH on behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ) commissioned a study to identify and define additional criteria including such criteria that are common to the developing country context that can ease the model selection and breaks the decision down in various steps. The Mexican Government welcomes this effort which will not only benefit future analyses within the country, but also be helpful to other countries that find themselves in the situation to plan NDC implementation.

The study considers all emission sectors (energy including transport, industry, residential and commercial, oil and gas, solid waste, agriculture and FOLU). It seeks to evaluate and compare available and tested types of tools of economic analysis of single or a set of mitigation measures in order to provide countries with a valuable overview and methodological approach to decide on a certain or a certain combination of models for a concrete research question, in the context of NDC implementation planning.

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NDC MODELLING STUDY

The work will build on the work done by the NDC-Partnership in terms of listing available models. It gathers supplementary information on the research questions and applications that different models address. The main tasks are:

4Reach out to relevant providers of simulation models in academia and/ or programs managed by international institutions or governments (e.g., ESMAP, NREL, LEDS GP or IEA).

4Investigate different research questions (cost projections for existing and new technologies together with mitigation models, single and joint implementation of measures, or linkage to mitigation co-benefits) relevant in the context of the economic evaluation of NDC mitigation options.

The report is structured as follows:

4Possible policy questions related to the implementation or updating of NDCs that could be informed or answered by the outputs of computer simulation models.

4Outlining of the range of tools and resources that are available to assist governments and stakeholders to address policy question and to develop NDC implementation plans.

4Methodology for selecting a possible modelling tool (or tools) that is (or are) best suited to addressing different policy questions in light of the available data and resources.

4Details of the features and capabilities of a selection of the most commonly used modelling tools, along with examples of previous applications in developing countries, with some further sources of advice on the selection and use of modelling tools.

The work has been concluded and the report will soon be available and be shared on website of the NDC-Partnership and GIZ.

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ANNEX

9. ANNEX

FIGURE 13: AVERAGE WEIGHTED AVERAGE COST OF EACH OF THE 30 NON-CONDITIONAL NDC MEASURES. YEAR 2030

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ANNEX

FIGURE 14: AVERAGE WEIGHTED AVERAGE COST OF EACH OF THE 30 NON-CONDITIONAL NDC MEASURES. YEAR 2030

Preliminary estimates, based on parameters updated until 06/2017, all amounts are on a USD 2017 base.

Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH

Agencia de la GIZ en MéxicoTorre Hemicor, PHAv. Insurgentes Sur No. 826Col. Del Valle03100 CDMX, MéxicoT +52 55 55 36 23 44E [email protected] www.giz.de/mexico-mx www.youtube.com/user/gizmexico

ndc implementation in mexico · 2017. 12. 12. · mexico´s indc proposal is innovative, given that...

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