U.S. envoy urges Mexico to ensure energy bill does not breach trade pact

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MEXICO CITY, Feb 9 (Reuters) - U.S. climate envoy John Kerry said on Wednesday he had urged Mexico's President Andres Manuel Lopez Obrador to ensure his plan to boost state control of the power market does not breach the United States-Mexico-Canada Agreement (USMCA) trade pact.

Lopez Obrador has pitched a bill to prioritize the state power utility over private firms, sparking criticism that it would undermine wind and solar power investment at a critical time for companies striving to use more clean energy.

Kerry spoke to Reuters after meeting Lopez Obrador and other officials in Mexico City for what he called "very constructive" talks. During them, the two sides "found an enormous amount to agree on" about the benefits of using renewable energy, he said.

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But he also flagged points of caution.

"We expressed concerns that we not run up against the USMCA, that it's important to have reforms that are going to be – and I think he wants this – that reforms will not act as a hindrance to an open and competitive market," Kerry said in an interview.

"The key ... is attracting investment and participation," he added, noting Mexico's proposals were not yet complete.

Kerry said he and Mexican Foreign Minister Marcelo Ebrard would work together over the next four to five weeks to see what kind of plan could be crafted that is "sensible for major renewable energy deployment, and as fast as possible."

Washington has repeatedly expressed concerns that the legislation will hamper investment in clean technologies.

Earlier, Kerry said the U.S. government is ready to be "as helpful as we can be" to push Mexico to ramp up its use of electric vehicles and renewable energy.

"Mexico can play a vital, extraordinary role in our efforts to combat the climate crisis," he said.

His remarks came just weeks after U.S. Energy Secretary Jennifer Granholm came to Mexico to underline U.S. concerns that Mexico's power bill "would not create a level playing field" for U.S. companies wanting to invest in renewable energy there.

Mexico's power utility, the Comision Federal de Electricidad (CFE), uses fossil fuels to generate much of its electricity.

Kerry said the U.S. government was willing to offer financing and technological help to speed up Mexico's efforts.

A day earlier, U.S. Ambassador Ken Salazar visited renewable energy and battery storage projects in the northern state of Baja California Sur, and stressed U.S. concern over the bill.

"The U.S. government has repeatedly expressed concern about Mexico's current energy sector proposal," the U.S. Embassy said in a statement following Salazar's visit.

"Promoting the use of dirtier, outdated and more expensive technologies over efficient renewable alternatives would disadvantage both consumers and the economy in general."

The top U.S. business lobby in Mexico this week raised concerns about the legislation, saying it would make it tougher for American companies to meet climate pledges, and possibly prevent them from operating in Mexico. The group also said the initiative would go against Mexico's commitments under the USMCA.

A study by think tank the Mexican Institute for Competitiveness (IMCO) said Lopez Obrador's initiative would violate aspects of the USMCA, and "makes the country less attractive as an investment alternative to China."

Lopez Obrador, who argues that past, corrupt governments rigged the energy market in favor of private capital to the detriment of the public, defended his proposal on Wednesday when asked about the U.S. embassy's comments.

"What we are doing," he said, "is seeking to repair damage that was caused to the nation, to the people of Mexico."

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Reporting by Daina Beth Solomon; additional reporting by Stefanie Eschenbacher; Editing by David Gregorio, Kenneth Maxwell and Kim Coghill

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