Mexico awash with spending it has mislabelled as green
‘Climate funds’ allocated to fortified milk, the navy and fossil fuel infrastructure
Mexico City/Dubai — Mexico has labelled hundreds of millions of dollars in spending on fossil fuel infrastructure at state energy company Pemex and state electricity utility CFE as expenditure to address climate change and promote energy transition over the past decade, documents show.
In an effort to track Mexico’s spending on those green goals under President Andres Manuel Lopez Obrador, Reuters analysed public accounts and obtained Pemex documents and databases through a freedom of information request showing budget items designated with those labels.
The documents showed that the government also labelled as part of its climate change efforts items as disparate as navy security operations and distributing fortified milk among the rural poor.
Under Lopez Obrador, who took office in December 2018, various government branches said they have spent 462-billion pesos ($27bn at the current exchange rate) on tackling climate change and 99-billion pesos on energy transition. The numbers include those proposed for 2024, the last year of Lopez Obrador’s six-year term.
Of this, Pemex spent 5.6-billion pesos on climate change and 1.3-billion pesos on the energy transition in the same period, the public accounts show. Pemex lists no renewable energy projects in its public accounts.
Since Lopez Obrador took office in late 2018, Mexico has boosted fossil fuel exploration and production despite mounting environmental concerns. It has also built a new refinery and acquired another one, while stalling renewable energy projects and weakening independent regulators.
Lopez Obrador has come under pressure from the US and others, especially over Pemex’s environmental record.
The information from Pemex shows spending on fossil fuel infrastructure was frequently labelled as green, complicating an assessment of Mexico’s efforts to tackle climate change as it pledged in the 2015 Paris Agreement.
Mexico and other nations are under pressure to do more ahead of the UN’s COP28 climate meeting in Dubai this week.
The pattern of labelling such spending as green dates back a decade and continued throughout Lopez Obrador’s presidency.
Neither the presidency, the finance ministry, Pemex nor CFE responded to repeated requests for comment.
Victor Gomez, a former finance ministry official, said loose rules and a lack of transparency mean that the different government branches are able to declare almost anything to be green.
Government branches “can allocate resources without being too selective in terms of projects”, Gomez said. “Since climate change issues have received little attention by this government, the selection of projects has focused more on the social than the environmental impacts.”
More than a dozen government and finance sources told Reuters that Mexico, once seen as a pioneer in global efforts to slow climate change, has been backsliding on its commitments under Lopez Obrador, who has vowed to reduce reliance on energy imports from the US.
In 2012 Mexico became the first large, oil-producing emerging economy to pass a broad law paving the way for measures to cut emissions. The law did not commit to a particular amount of spending.
And in 2015 Mexico, along with the rest of the world, pledged at the UN Climate Change Conference in Paris to take steps to contain global warming. Mexico committed to “decouple greenhouse gas emissions from economic growth” as well as achieve zero deforestation and take measures to increase the resilience of its population, ecosystems and infrastructure.
“Mexico started really strong,” said Maria Jose de Villafranca, the lead researcher for Mexico at Climate Action Tracker. “There’s been a lot of dismantlement under the umbrella of energy security and self-sufficiency.”
Mexico was the only country in the world to have the rating for its climate change efforts cut by Climate Action Tracker twice in three years (in 2021 and 2022) to “critically insufficient”, the lowest level. It said Mexico’s updated targets “lack transparency and disguise its lack of ambition”.
Complying with the Paris Agreement is voluntary. Legal experts in Mexico said it will be difficult to hold the government accountable for not being more ambitious.
The government did not make officials available to discuss its climate change plans. In 2022, Mexico said it would rely more on forests to compensate for emissions as well as seek innovation and tighter regulation of the industrial and transport sectors.
In response to the Reuters freedom of information request, Pemex provided three previously unreleased databases and one other document listing expenditures on fighting climate change and energy transition.
The documents contain 709 entries related to Pemex’s vast fossil fuel infrastructure, ranging from wells to pipelines to gas processing centres, identified by location and year, and designated as part of climate change efforts and energy transition over the past decade.
In many cases, it is not clear what work the entry referred to and Pemex did not respond to requests to elaborate.
Some funds were spent on studying the effects of greenhouse gases at ailing gas processing centre Cactus and monitoring air quality at offshore oilfield cluster Ku-Maloob-Zaap.
Half a dozen Mexican researchers who reviewed the documents said it is difficult to calculate the sums of money spent on projects that might be of questionable environmental value because of the lack of transparent criteria for allocations and vagueness in details of the entries.
But they said that much of the spending paid for ordinary operations that any responsible energy company should do. This included the disposal of dangerous residual waste, cleaning up contaminated land, and maintaining and repairing infrastructure such as pipelines. CFE put green labels on building natural gas infrastructure.
Some of these efforts may have helped to reduce overall emissions, the researchers said, but they are not the transition away from fossil fuels towards renewables that scientists have called for to cap the worst effects of climate change.
Reuters identified more than a dozen projects in 2023’s budget across government branches labelled as related to “climate change” and “energy transition” that three government sources, who spoke on the condition of anonymity, said did not appear to meet those definitions.
The agriculture & rural development ministry, for example, allocated funds to a private company distributing fortified milk to rural areas; the navy to “safeguard the sovereignty and security of national waters”; and the environmental & natural resources ministry to treat drinking water and build drainage. Those departments also did not respond to requests for comment.
Mexico has not released information about its strategy, which has been criticised by climate change experts as non-compliant with the Paris Agreement. It stipulates that countries must become more ambitious over time.
However, Lopez Obrador has often said his priority is helping the millions of Mexicans living in poverty.
His finance ministry raised about $56bn on bond markets since late 2018, LSEG data showed, $7.7bn of which was in the form of sustainable bonds. Funds have mostly gone towards healthcare, education and subsidising small-scale farmers, one government report showed.
“Their priority is quite clearly social development goals,” said Jason DeVito, an emerging-market debt manager at Federated Hermes, echoing half a dozen other investors who spoke to Reuters.
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