October 19, 2010 / 3:56 PM / 7 years ago

Mexico stretches funds to cut greenhouse emissions

<p>Buildings stand shrouded in smog in Mexico City December 11, 2009.Daniel Aguilar</p>

MEXICO CITY (Reuters) - Hopes are dim for a global agreement to help developing nations cut carbon emissions, so Mexico is relying on an imperfect blend of grants, loans and ingenuity to meet self-imposed limits on greenhouse gases.

Mexico, which will host world delegates at a climate change conference in late November, aims to become a laboratory for cutting carbon, which scientists say contributes to devastating global warming, without hindering economic growth.

But funding Mexico's ambitious environmental goals is a big challenge as the country recovers from its worst recession since the 1930s. Lack of money is a problem faced by many developing nations who say rich countries should help pay for expensive environmental initiatives.

Mexico has pledged to slash 50 million tonnes of carbon per year by preserving forests and cleaning up the state-run oil industry. It says the strategy will bear fruit by 2012.

A global deal to limit greenhouse gases, if it ever comes, is expected to pour capital into emerging economies for new technology and to make industry less polluting. Policymakers meeting in Geneva last month said a "Green Fund" to help pay for climate change initiatives could be established during the talks in the Caribbean resort Cancun.

Mexico says it could be a model for a mix-and-match approach to finding money for climate change initiatives if the idea of a fund, which it supports, failed to materialize.

"When developing countries argue they have nothing to do ... we are giving the rich countries the perfect alibi to keep doing nothing, or nothing relevant, in the fight against climate change," President Felipe Calderon said at an energy efficiency forum last month.

The country has set the goal of cutting total emissions in half by 2050 without crimping its economy but says the goal hinges on a commitment of more funds from the developed world.

"Mexico has taken a first step in tackling climate change alone," Fernando Tudela, Mexico's top climate negotiator, told Reuters in an interview. "But our long-term plans are contingent on financial and technological support."


To pay for the projects that will help it reach its near-term goals, Mexico has taken out loans, looked to end unsustainable practices in oil extraction and encouraged companies to keep track of their carbon footprints.

In July, the World Bank loaned Mexico, Latin America's No. 2 economy, $350 million to expand public transport.

By 2012, the government says state-run oil company Pemex will stop burning off gases released in oil production, a major part of the 54.9 million tonnes of greenhouse gases the company emitted in 2008.

Pemex has also turned to the carbon trading market -- a scheme that lets polluting companies trade emissions credits -- to provide key funds for new projects.

CleanTech Fund, a private equity group that invests in green projects estimates Latin America could generate up to $42 billion per year by 2020 from carbon trading.

The government is also looking to the private sector driving Mexico's economy to take the lead cutting pollution.

Some 30 businesses and organizations in Mexico, including beverage giant Coca-Cola FEMSA and top retailer Wal-Mart de Mexico, have signed up to voluntarily monitor their emissions.

Entrepreneurs also are tapping heaps of garbage to generate power in Cancun, and Cemex, the world's No. 3 cement maker, is turning to wind energy to meet its power needs in the southern state of Oaxaca.

But creative private-sector climate initiatives face financial obstacles. Mexican banks consider the projects high risk and some companies say the government could do more.

"There is still a long way to go to secure debt financing for these projects," said Ernesto Hanhausen, CleanTech Fund's managing director, which helped secure funding for the electricity generation project at Cancun's landfill.

Editing by Paul Simao

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