The Role of Energy Efficiency in Long-Term Climate Change Planning
Energy production and consumption is the largest source of global greenhouse gas (GHG) emissions. The energy sector therefore plays a critical role in countries’ efforts to develop and implement long-term strategies to meet climate goals. Many international organizations, such as the International Energy Agency (IEA), have assessed the impact of energy sector policies (buildings, industry, transport, among others) on the projected path of GHG emissions, and the implications for meeting the world’s climate goal under the Paris Agreement (to hold the increase in global average temperature to well below 2°C above preindustrial levels and to pursue efforts to limit the increase to 1.5°C). The Intergovernmental Panel on Climate Change has stated that continuing business as usual, with the existing energy system and current levels of CO2 intensity, would likely lead to over 4°C of warming by the end of the century.
The Special Report on Energy and Climate Change, part of the World Energy Outlook published by the IEA in 2015, found that while global energy-related emissions should slow as a result of the climate pledges, they will still increase. To compensate for this, governments should increase their efforts, reviewing pledges regularly, setting realistic and attainable longer-term goals, and tracking their progress. This report also suggested the adoption of measures such as increasing energy efficiency in the industry, building, and transport sectors. The report also argued that energy efficiency is key to the transformation of energy systems and will play an important role in cutting the growth of world energy demand to one-third of the current rate by 2040.
Research conducted by the World Energy Council (WEC), together with the French Environment and Energy Management Agency (ADEME), has concluded that the efficiency of energy production and consumption continues to improve all over the world but that much more can and should be done.
Considering all of these documents, reports, and arguments, it becomes clear that decreasing energy demand and focusing on energy efficiency is vital if countries really want to reduce GHG emissions to the levels and within the time frame set by the Paris Agreement.
Also, in the context of the Sustainable Development Goals (SDGs), the United Nations Development Programme (UNDP) argues that energy efficiency offers a unique opportunity to reconcile economic competitiveness with sustainable development, simultaneously reducing the cost of energy and increasing productivity. The UNDP supports the implementation of business models and financing mechanisms to facilitate energy-efficient investment by private sector partners. Key to all such efforts to increase energy efficiency will be long-term planning, which countries should begin now.
At the beginning of Mexico’s current presidential administration (2012–18), Mexico committed to transform its energy sector, bringing it into line with international best practices, and to transition to a new framework that will open the country to international private investment. The reform was grounded in participatory exercises in which academic, nongovernmental, private, and public representatives explored planning in the sector. This led to the implementation of the Consultative Council for Energy Transition. The purpose of the council is to advise Mexico’s Ministry of Energy on the actions necessary to comply with the country´s clean energy and energy efficiency goals. The council is chaired by the minister of energy and composed of deputy secretaries, a technical secretary, a representative of the state ministries involved on energy matters; a representative of technical organizations (the National Commission for the Energy Efficient Use, or CONUEE, the Energy Regulatory Commission, or CRE, and the National Center for Energy Control, or CENACE), three representatives of the energy industry, two academic institutions, and two nongovernmental organizations.
In December 2015 the Energy Transition Act was enacted, mandating the creation of the Consultative Council for Energy Transition (CCET), with the participation of the bodies mentioned above and the purpose of designing the planning instruments to transition toward a sustainable energy future. One of the CCET’s first tasks was to draft the Transition Strategy to Promote the Use of Cleaner Fuels and Technologies. This policy document provides a roadmap to the sustainable use of natural resources, encouraging the development of new markets and a more efficient and competitive energy system in the long term.
For the first time, Mexico established a nationwide energy efficiency goal: to reduce energy intensity (energy used per unit of gross domestic product) by 1.9 percent per year from 2016 to 2030, and 3.7 percent from 2031 to 2050.
To reach this goal, the following actions are being implemented:
- Strengthening the regulatory system. From January 2013 to June 2018, with the support of National Energy Efficiency Commission, 21 official Mexican standards (normas oficiales mexicanas, or NOMs) for energy efficiency were published and updated, more than 67 percent of the 32 NOMs in force. The proper use of the conformity assessment system was strengthened through the approval of 10 certification bodies, 74 test laboratories, and 214 verification units.
- Implementation of energy management systems. To promote the sustainable use of energy across all high-consumption-pattern users, the use of voluntary agreement and the implementation of ISO-50001 are being promoted by CONUEE, with the support of the Commission for Environmental Cooperation, the German Corporation for International Cooperation, the Danish Energy Agency, and Mexican organizations and institutions.
- Accelerated adoption of efficient technologies. To foster the use of appliances that consume less energy, innovative financial instruments and energy incentives are tailored to the needs of industry, businesses, households, and municipalities.
- Energy efficiency financing. This financing encourages the sustainable use of energy and the development of new markets.
Energy efficiency financing cuts across all the other actions above, and Mexico has established different programs in this regard. For example, a program was developed to replace incandescent light bulbs with more efficient, environmentally friendly compact fluorescent lamps (CFLs). By 2012, Mexico had installed almost 46 million CFLs. Currently by the end of 2017, Mexico had installed 40 million more in rural areas all over the country.1
With the support of the World Bank, Mexico also developed a financing scheme to replace electric appliances. So far the country has replaced almost 2.7 million units, including refrigerators and household air conditioning systems. This innovative scheme provided low-interest loans that consumers could repay with the energy savings on their electricity bills.
Following up on the appliance-exchange program, Mexico developed a similar scheme, colloquially known as Eco-crédito empresarial, for small and medium-sized enterprises (SMEs). Through this program, Mexico has helped more than 28,000 SMEs replace inefficient technologies such as air conditioning systems, refrigerators, and lighting systems. Similar to the program for households, this initiative offers SMEs a reduced interest rate and allows them to pay off their debt through savings on their electricity bills. In many cases, this has reduced energy consumption by 50 percent.2
Additionally, also with the support of the World Bank and other agencies, Mexico has committed to supporting energy efficiency finance in municipalities and developed a scheme to enable the assessment of energy efficiency potential in different areas. This program will make the difference whether the projects are financed through their own budgets or through commercial and development banks. Currently, Mexico has a program to replace inefficient lighting and water pump systems, as well as recondition municipal buildings. The scheme is similar to the programs for households and SMEs. Together with the World Bank and the Inter-American Development Bank, Mexico is scaling up this program to support hospitals, schools, and federal buildings.
International collaboration has been a key element in the success of Mexico’s energy sector transformation. In the field of energy efficiency and sustainability it can help countries implement energy efficiency measures more quickly and cost effectively than would be possible if the nations acted alone. It helps countries share information about best practices and technological developments. Collaboration that supports consistency of regulation across national borders also helps businesses achieve economies of scale in the production of more energy-efficient products and improve international trade.
Some would argue that it is not necessary for countries to collaborate on energy efficiency, as each country can work out for itself what works best. But imagine how much time and effort can be wasted when each country tries to reinvent the wheel. Collaboration can help identify the most promising energy-efficient techniques or systems and the best practice policy design or project implementation that will help countries reach energy intensity goals, and thereby climate change goals.
Mexico is on its way to transitioning to greater energy efficiency and the use of clean energies. This is a long-term process that will involve all levels of government, several economic actors, and Mexican society in general. Mexico has taken a big step forward in the modernization of its energy sector by transforming the legal and institutional framework to promote the transition toward an energy and economic model that is sustainable in the long term.
Long-term planning is key to dealing with complex and unstable scenarios that could hinder stability and growth, especially in times of constant change.
1 Secretaría de Energía, “Ahórrate una luz: Programa de sustitución de focos,” 2014, http://www.ahorrateunaluz.org.mx:8081/MicroSitio/.
2 Fideicomiso para el Ahorro de Energía Eléctrica, home page, n.d., http://www.fide.org.mx/index.php?option=com_content&view=article&id=774&Itemid=315.