Remarks by Ángel Gurría
2 May 2019 - Mexico City, Mexico
(as prepared for delivery)
Minister González-Blanco, Deputy Minister Delgado, Ladies and Gentlemen,
I am delighted to be in Mexico to present one of the OECD’s most important reports, entitled “Financing Climate Futures”.
The fight against climate change is one of the OECD’s top priorities, and Mexico has been one of the countries at the forefront of this combat. That is why we are pleased to present this report in Mexico, one year after the start of the implementation phase of the Paris Agreement, when more purposeful and decisive actions against climate change are expected.
Climate change is one of the greatest threats facing humanity. The number of countries alarmed by the seriousness of this phenomenon is increasing every day. More than 180 nations ratified the Paris Agreement. They recognised the need for immediate action. However, efforts to achieve global climate goals remain insufficient.
In 2018, carbon dioxide emissions reached an unprecedented level. After stagnating for three years, they increased by nearly 3% compared to the previous year. We are talking about the emission of 37 billion tonnes of carbon dioxide from the burning of fossil fuels alone.
The damage caused by extreme weather events is also increasing. The recent floods in Mozambique and Iran affected millions of people; the recent tornadoes in the United States attest to the unprecedented forces unleashed by regionally differentiated global warming. Here in Mexico last year, Hurricane Willa hit four states. It affected 180,000 people in Nayarit alone, 100,000 of whom lost absolutely everything; in Sonora, the summer temperature reached a historic peak of 52°C and the Northwest of the country has already experienced warming of 1.2°C so far this century.
We are facing a global emergency, an emergency of historic proportions. We can no longer move forward “little by little”; there is an urgent need for radical measures. According to the latest report by the Intergovernmental Panel on Climate Change (IPCC), we must reduce greenhouse gas emissions by 45% by 2030 to prevent a temperature increase of more than 1.5 degrees Celsius and thus avoid a catastrophe on a scale beyond comprehension. This urgently requires a profound economic transformation in each of our countries.
Some national and local governments have taken the lead, and I am very proud to say that Mexico has been one of them.
Mexico is very vulnerable to climate change, given its location in the Northern Hemisphere, inside the hurricane corridor, with large water-stress areas and an ecologic transition zone (between the Nearctic and Neotropical regions), where it is difficult for species to adapt to new temperature and rainfall conditions.
That is why the Government of Mexico has decided to confront this threat and develop international leadership through strong decisions at home and active participation on the multilateral stage.
Mexico's leadership has been based on robust policies consistent with its commitments under the United Nations Framework Convention on Climate Change. In fact, Mexico was the first developing country to have a Climate Change Law, to submit its Nationally Determined Contribution (NDC), to deliver its Long-Term Strategy by 2050, to impose a universal carbon tax and to contribute economically to the Green Climate Fund.
This clear roadmap to sustainable low-carbon development requires Mexico to guarantee a massive flow of investment into infrastructure works which will allow it to be resilient to unpredictable climate futures. The aim is to protect the population, increase competitiveness and maintain the natural wealth of our ecosystems. To achieve this, we need to align financial policy and the financial sector with Mexico's objectives and commitments.
In this respect, we were delighted to see that on April 13, during the spring meetings of the G20, IMF and World Bank in Washington, Mexico joined the Coalition of Finance Ministers for Climate Action, where more than 50 nations endorsed the Helsinki Principles, which aim to mobilise fiscal instruments and public finance in favour of low-carbon investments.
To help countries and their governments meet these challenges, the G20 called on the OECD, the United Nations Environment and the World Bank to work together on a proposal to make financial flows consistent with the objectives of the Paris Agreement. The report "Financing Climate Futures" that we are presenting today is the result of that work.
The report includes a programme for integrating climate issues into all the activities of our societies and establishing the right incentives to better align financial flows. To this end, it proposes actions for six key areas of transformation.
First, plan sustainable and resilient infrastructure for a low-emission and resilient future. Mexico has already done this and so set an example. Now it is time to turn plans into standards, and make infrastructure investment decisions consistent with a sustainable future. In this respect, it is worthwhile mentioning some of the new administration's infrastructure investment projects, such as the plans to build a coal-fired power plant, a new oil refinery in Dos Bocas and the Maya train route. These types of investment should be coherent with Mexico's international climate commitments and the global effort to combat climate change.
Second, unleash and promote innovation to accelerate the transition. Clean technologies have only penetrated 10% of the global market. It is therefore necessary to overcome the financial obstacles hindering the demonstration and early marketing of these technologies, to give them real comparative advantages. In the case of Mexico, the digitalisation of urban mobility, the sale of carbon credits and self-sufficiency in a regulated scheme of distributed and clean power generation are emerging innovations that can be developed to accelerate the transition.
Third, ensure fiscal sustainability. In Mexico, government revenues from fossil fuel taxes are double the world average. In other words, the fiscal burden in Mexico is still highly "fuel-dependent”. In addition to the fact that it is constantly necessary to diversify sources of income, it is now essential to align fiscal and budgetary incentives with climate objectives, in order to discourage economic actors from making investments or adopting technologies with high carbon emissions.
Fourth, reset the financial system in line with long-term climate risks and opportunities. This is a central recommendation of our study, as it is necessary to eliminate incentives encouraging our countries to adopt a short-term approach to their strategic investments. These days, it is possible to estimate the climate risk of a new infrastructure project and it should be mandatory to disclose this information to the partners of and investors in public and private financial institutions. A completely transparent approach to the assessment and management of climate risks will be a decisive factor in attracting the necessary financing. We hope that projects such as the coal plant, the oil refinery and the Maya train route will comply with this requirement.
Fifth, rethink development finance, taking into consideration the preservation of the environment and the fight against climate change. Now that the multilateral development banks have become a growing source of climate finance - by 2017 they had already committed more than 35 billion dollars – they need to be given a clear and strong mandate which emphasises the quality and conditions for promoting credits and investments that are consistent with these concerns.
Finally, empower local governments to build low-emission and resilient urban societies, to help strengthen our climate ambition and to be more inclusive and fair in the planning and implementation of measures.
These are the six priority areas in which we suggest strong action should be taken to align financing with climate change objectives. The study contains more concrete proposals for each of these areas, including 20 actions to align financial flows with climate goals and sustainable development objectives.
Ladies and Gentlemen,
We hope that this report will help strengthen the efforts by Mexico's new government to consolidate and expand its leadership in the global fight against climate change.
Remember that to place hope in fossil fuels is to turn against the planet, against the life and health of our citizens, against history. Reducing our emissions and promoting strong, inclusive and sustainable growth is not only possible, but the only intelligent development option we have. Let us continue to work together to achieve this. The OECD is ready to continue to help Mexico in its efforts to design, promote and implement better environmental policies for better lives. You can count on us!
Thank you very much