AMLO’s Heat Level: Blazing new energy policy puts Mexico back and AMLO forward

  • + AMLO blazes through environmental regulations with new policy 
  • + The new policy prohibits new investment projects on renewable energy
  • + AMLO’s new policy adds to a history of acting against climate change efforts
Source: Forbes Mexico

Why is AMLO’s heat level blazing?

Answer: Mexican President Andres Manuel Lopez Obrador (better known as AMLO) is doing whatever it takes to get it his way; even if it means ignoring his previous environmental commitments.

Ever since he came to power, AMLO’s government has been characterised by his controversial (and personal) decisions. AMLO’s latest decision makes one wonder if it is time to say goodbye to the possibility of a  future with renewable energies for Mexico. On April 29th, the Mexican Ministry of Energy (SENER) alongside the Mexican National Energy Control Center (CENACE), published an agreement in which they formalized a radical shift in national electricity policy: restricting any form of private investment related to clean or renewable energy. While a decision like this would seem unthinkable these days, AMLO’s administration was able to bring forth such a policy that stops all private investments in electricity generation; thus, prioritizing fossil fuel energies domestically while internationally they’ve been discouraged.

The new policy embodied in The Reliability Agreement published by the SENER is a major step backwards in the fight against climate change and global warming. The concern of many is that the agreement does not have to specify the temporality of the emergency measure. As a result, any project concerning renewable energy is suspended until further notice. In other words, the door to renewable energies has been closed for the immediate future in Mexico, just as AMLO wants it.

Just one year ago, AMLO ratified The National Development Plan (PND) which aimed to transform the electrical energy produced in Mexico to clean energy by 2024; aligning with the UN’s Sustainable Development Goals (SDGs). However,  this new policy, alongside some of AMLO’s projects for his presidency, radically accelerates climate change. These policies and projects effectively close the door to any alternative to the burning of fossil fuels for energy in Mexico. Sadly, one can assume that by going down this path, AMLO will not be meeting the UN’s nor Mexico’s climate goals of reaching zero emissions. At the moment, all that he seems to care about is paving the way for the new projects he has for Mexico (and himself), at whatever the cost. 

What is changing AMLO’s temperature?

Answer: The new energy policy endorses AMLO’s personal project: Dos Bocas Refinery

To understand why AMLO is promoting this particular policy, we must take into consideration the New Dos Bocas Refinery Project which AMLO has been passionately promoting since he came into power. This project is expected to become a landmark of his presidential term once it is completed as the oil refinery will have a capacity of 340,000 barrels per day. Its goal is to achieve self-sufficiency in the production of gasoline and diesel, allowing Mexico to produce more gasoline in the country and to modernize the country’s oil industry by reducing the cost of fuel production. All of this, of course, in coordination with the Mexican Secretary of Energy, Rocio Nahle, refusing to cut Mexico’s oil production in the latest OPEC meeting.

Since his mandate began, AMLO has been very clear about what projects he wishes to develop for the nation; one of which being the Dos Bocas Refinery. These projects AMLO (and others) consider “untouchable” have not been postponed or canceled during Corona times; despite the fact that they represent a great financial investment for the country. Many have criticized this continuation, arguing that the hundreds of billions of pesos of investment could be used to meet the financial thresholds needed to combat the economic recession in Mexico which has been accentuated by the coronavirus crisis. 

Nevertheless, AMLO has been loyal to defending Dos Bocas against all the criticism made concerning the project’s environmental and economic impact. For instance, Greenpeace has been strongly advocating against the project, arguing that it does not have the environmental impact authorization required. Moreover, two of the companies that participated in the bid for construction ultimately decided to not continue in the project. These should be alarming signals for domestic and international groups. Since Greenpeace has been the only one to respond, AMLO has remained confident about the project; apathetic as to whether it seems to accelerate climate change or go against national and international commitments. 

Who is changing AMLO’s temperature? 

Answer: Chinese investors and anti-corruption campaigners are driving AMLO to pursue his latest energy policy.

In order to better understand who is driving AMLO to make these decisions one must comprehend the controversial role of China in Mexico’s projects.. According to the Mexican government, the Dos Bocas refinery will be built by PEMEX; the state-owned oil company in Mexico, in collaboration with the Ministry of Energy. However, Zhu Qingqiao, China’s ambassador to Mexico, declared that Chinese banks would invest 600 million dollars in the Dos Bocas refinery in Tabasco. In response, the Secretary Nahle denied that the Dos Bocas refinery project will have financing from any Chinese banking institution. Obviously the two statements contradict each other and leave space for speculation of corruption; making AMLO’s aggressive anti-corruption campaign a bit harder to sell.

Even so, AMLO has persisted in creating an anti-corruption image by promoting that all he wanted to do with the new policy and Dos Bocas project was to shift the benefit from private to public as he believes the energy sector has long been favoring only private interests. Thus, according to AMLO, what he is doing is simply “putting order” and “ending corruption.” That said, the president ruled out the possibility of ‘nationalizing’ the energy industry as under the new policy, the contracts that were previously acquired by private companies are not taken away, only new ones prevented. 

Ultimately, this new energy policy mostly affects private companies producing electricity from renewable sources. As the renewable energy sector is highly dominated by private operators, the policy eliminates any investment incentive and absolutely destroys the electricity market. According to the Financial Times, this elimination of private competition appears to be in the best interest of Mexico’s state-owned electricity company. Eliminating the private sector from the energy business allows the government and its state-owned companies to have a greater monopoly over the nation’s energy sector, giving AMLO and his administration total liberty to select their new energy partners and investors (e.g. China). 

What does this mean for you? 

Answer: If you’re a Mexican citizen, you care because it’s your environment, your health and your economy. If you’re not Mexican, you care because it breaks international laws, sets back the world on greenhouse emissions,  promoting climate change.

First and foremost, the biggest loser of this new policy is the Mexican population. The policy has empowered the authorities to hold a monopoly over energy generation even if that means that many Mexican citizens will be exposed to GHE, CO2 emissions, and increasingly polluted air. Thus, Mexican citizens are living in an ecosystem where climate change and the well-being of the environment, not to mention the population, are not a priority for their representatives. This can (and will) severely affect AMLO’s support and approval rate. According to an approval survey in April from MITOFSKY, AMLO has received the lowest approval since he assumed the presidency. It is also the first time that average disapproval (52%) exceeds presidential approval. 

Besides the public being concerned, Greenpeace and environmentalists are also worried that AMLO and his government will continue making decisions like this one that could mean serious setbacks for some key environmental goals. As such, on May 30th, Greenpeace obtained a provisional judicial suspension of the new electricity policy. This was referred to as a “citizen’s victory” in the matter of human rights to ensure a healthy environment, health protection, participation in environmental issues and legality (the main interest of the organization). For now, civil society has marked a temporary win.

Nevertheless, decisions like these are a major obstacle to economic growth in the post-Covid recovery; for Mexico and surrounding/trading nations. Mexico’s trade agreements with the EU as well as USMCA are already at risk as both external partners have voiced their concern over the policy. Moreover, experts agree that a tremendously big opportunity is being lost since the nation’s sunlight, wind and water resources could be used for energy. The policy concludes that Mexico has chosen to go the opposite direction of its previous goal to transform its energy industry to renewable sources; choosing liquid gold over the solid stuff. Unfortunately, AMLO seems to forget that if Mexico manages to meet the SDGs in their energy sector, he could substantially save the nation billions of their budget; meaning development and sustainability do not need to imply a trade-off.  

Isabel Barquin

Research and Analysis Intern