Mexico Proudly Controls Its Energy but May Struggle to Meet Its Climate Goals

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MEXICO CITY (AP) — Mexico’s takeover of control of its oil sector from U.S. and British companies is taught and celebrated in schools every year. Millions of Mexicans, including President Andres Manuel López Obrador, are proud of the nationalization in 1938.

The popular president hails from the heartland of Mexico’s oil industry and 16 years ago led a fight against energy reforms aimed at steering private investment into the giant state oil company Pemex. This year, the front-runner in the race to replace Lopez Obrador chose the anniversary of Mexico’s oil expropriation to announce her energy proposals, which include maintaining large-scale oil production by Pemex.

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Leading candidate Claudia Sheinbaum also wants to ensure that the state-run Federal Electricity Commission (CFE) generates the majority of the electricity that Mexico supplies to homes and businesses. Like the other two candidates to replace López Obrador, she wants only limited private energy participation, but continued favoritism for state-owned companies will make it harder for Mexico to meet its climate commitments, experts say.

Despite Pemex’s difficulties, Mexico remains one of the world’s largest oil producers. None of the candidates are talking about reducing that. The Federal Electricity Commission has held the monopoly over the transmission and distribution of electricity since its creation by presidential decree in 1937.

Mexico has committed to sourcing 43% of its energy from pollution-free sources by 2030. Today, about 22% of Mexico’s electricity production comes from clean sources, according to estimates from the Mexican Institute for Competitiveness (IMCO) think tank.

The scope for change in Mexico’s contribution to global warming appears to lie in where the government monopoly gets its electricity, and no participant in Sunday’s Mexican presidential debate discussed reducing Pemex production.

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Galvez said she wants Mexico to produce half of its energy from renewable sources within six years and that Mexico will once again become known for cheap energy “thanks to the participation of the private sector.”

Sheinbaum mentioned her climate science background and spoke vaguely about the need to reduce the emissions that cause climate change, advance the energy transition and adapt to climate change. She also said a massive new refinery that Lopez Obrador was building would help reduce Mexico’s gasoline imports.

Sheinbaum has promised to further increase refining capacity at Pemex, which is hardly a recipe for a concerted shift away from fossil fuels for a climate scientist-turned-politician. The 61-year-old former mayor of Mexico City has also said she wants CFE to continue generating the majority of Mexico’s electricity, further complicating the country’s stated desire to contribute less to global warming.

Lopez Obrador pushed for legislation to give CFE plants priority over private renewable energy and natural gas plants, even though many of the state-owned plants burn dirtier fuels such as heating oil, coal or diesel. The courts blocked the changes, and so last year Lopez Obrador bought 13 power plants – most powered by natural gas – from Spain’s Iberdrola for nearly $6 billion. He called it the “new nationalization” and ensured that CFE would generate the majority of Mexicans’ electricity.

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“It would be costly for them to deviate from that official line,” said Oscar Ocampo, energy and environmental coordinator at IMCO.

The opposition candidate Xochitl Galvez is the candidate of a coalition of ideologically different opposition parties. As a senator, she was a member of the conservative National Action Party, which previously pushed energy sector reforms that forced greater opening to the private sector.

In 2008, left-wing lawmakers allied with López Obrador – the 2006 PRD presidential candidate – seized control of both chambers of Congress to prevent votes on reforms. These reforms opened the industry to private contracting in services, but Pemex retained its monopoly in exploration, pipelines and gasoline distribution.

Galvez said she wanted to improve Pemex’s efficiency and profits and suggested closing two loss-making refineries. Longshot candidate Jorge Alvarez Maynez of the Small Citizens’ Movement has also suggested closing two refineries.

Julia Gonzalez Romero, a lawyer specializing in energy sector regulations at the Gonzalez Calvillo law firm, recalled that she was taught about oil expropriation in elementary school and said it was understandable that the debate over public versus private in the energy sector was heated.

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“It is in the DNA of our politics to argue about how much the private part should participate in the sector,” said Gonzalez Romero.

Sheinbaum wants to see the state’s energy sector expand to include lithium production and geothermal power generation. CFE developed geothermal power generation years ago. In 2022, Mexico nationalized lithium mining and extraction, giving a state-owned company exclusive rights to mine the metal used in electric car batteries and other devices.

She had said the energy transition should be one of her government’s “hallmarks” and spoke of leaving the door open for private energy companies. But Ocampo said there is “a fundamental difference in the level of (private sector) involvement” in the candidates’ proposals.

Galvez said she prefers to rely on the private sector to drive investments in renewable energy. The tech entrepreneur has also suggested Pemex switch to geothermal energy, but is touting a proposal that would make it easier for people to install solar panels on their properties across the country to access cheaper electricity.

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She also wants to bring back energy auctions, which had opened the power generation market to more private renewable energy companies but which Lopez Obrador suspended.

Climate action has declined under López Obrador, according to the Climate Action Tracker, which tracks countries’ commitments to limit warming.

“Mexico’s greenhouse gas emissions continue to rise – despite the brief decline caused by the COVID-19 pandemic – and are expected to continue increasing through 2030,” the independent scientific project says.

Edgar Olvera, a 45-year-old lawyer from Mexico City, said the private sector could invest more in exploiting Mexico’s natural resources.

“But we know that the money would be intended for the foreigners,” Olvera said. “It’s a very sensitive issue, very, very sensitive, because we know that the government doesn’t do things 100 percent right either.”

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