Mexico‌    

Assessment In the last decade, environmental sustainability has been recognised at federal level as a key dimension of Mexico’s development. It was identified as one of the five pillars of the 2007 12 National Development Plan and received additional budgetary resources (in particular for water and forest management). There have also been significant advances in environmental policy integration – including the establishment of a unit in SEMARNAT, the environment secretariat, to lead the environmental policy integration agenda, the implementation of tools to monitor line ministries’ contribution to environmental objectives and the development and implementation of the Special Programme on Climate Change, involving multiple ministries. However, further measures should be taken to better co-ordinate federal ecological land use plan (mostly indicative) and development plans of states and municipalities. The institutional framework has improved, but significant challenges remain. At federal level, a climate change directorate has been set up within SEMARNAT, and the National Water Commission (CONAGUA) has been empowered to act as a water authority. The key challenges relate to the distribution of policy-making, regulatory and implementation functions among SEMARNAT and other environment sector agencies. In addition, there are policy-making gaps, for example in biodiversity and coastal zone management, a regulation gap in water management, and low enforcement capacity. While there has been progress in creating inter-ministerial co ordination mechanisms (such as the Inter-ministerial Commissions on Climate Change, on Biosafety of Genetically Modified Organisms and on Sustainable Management of Coastlines and Oceans), no environment units have been created in other ministries. At subnational level, all but two states have ministries with environmental functions and some have developed environmental legal frameworks. Although the Environment Institution Development Programme provides useful support, the capacity of subnational environment institutions remains weak in general. Overall, there are significant institutional obstacles to efficiency and co ordination. These include the proliferation of subsector laws, inflexible budgets, the earmarking of resources to specific programmes and states, multiple representations of federal agencies at state level, and rules of operation for environment programmes that hinder exploitation of synergies among them. In addition, mayors serve three year terms and cannot be re-elected, which contributes to the weak environmental planning and performance of municipalities. There have been significant efforts to increase the quality of environment policies and programmes. Most programmes have been designed to be results-oriented (in particular, this is the case for 50 out of 80 SEMARNAT programmes) and a number of them are being developed in an integrated fashion – both vertically between government levels and horizontally between federal environment agencies. Policy instruments have started to be evaluated (so far 16 out of 122 Mexican Official Norms). Voluntary instruments such as the National Environmental Audit Programme and the Programme on Environmental Leadership for competitiveness have been developed to promote compliance and productivity. The information base for the environmental policy-making process has been further strengthened, particularly for pollutant emissions, contaminated sites, climate, biodiversity and biosafety. The Mexican system of economic and environmental accounts – an area where Mexico has been a front-runner – has been refined and is regularly updated. There have been important advances in raising public awareness and participation. The latest National Development Plan and Environment Sector Programme were formulated through intense consultation, which resulted in the adoption of a strategy on public participation. Mexico has created a National Consultative Council on Sustainable Development that reaches out to all 32 states. Urban environmental issues are being discussed in citizen councils, and rural populations are encouraged to participate in conservation and sustainable management of natural resources in protected natural areas. Recommendations More clearly distinguish the policy development and regulatory functions of SEMARNAT for natural resource and ecosystem management (coastal zone management, forests and biodiversity – including marine and freshwater ecosystems) from the policy implementation functions of its deconcentrated agencies (such as issuing permits, processing EIA applications and enforcing compliance with legislation). Further strengthen environmental policy integration by: (i) introducing strategic environmental assessment for sector programmes and state and municipal development plans; (ii) incorporating environmental criteria in the evaluation of public policies by the National Evaluation Commission; (iii) inviting other sector ministries to provide input to the formulation of federal environment programmes; and (iv) pursuing environmental policy integration in state development plans. Strengthen public participation in environmental policy making by: (i) extending the public participation strategy from the federal to other levels of government; (ii) providing environmental information to the public in a way that can be better understood; (iii) rationalising the system of consultative councils and providing them with sufficient resources to fulfil their role; and (iv) providing appropriate responses to citizens’ enquiries. Improve the efficiency of environment sector programmes by: (i) expanding results-based programming; (ii) reforming the operational rules of federal environment programmes to favour the development of “integrated packages” that exploit synergies among programmes; and (iii) evaluating the impact and cost-effectiveness of environment programmes. Strengthen environmental policy implementation by: (i) fully implementing the requirements of the environmental impact assessment system to include cumulative impacts, and ensuring that simplification of procedures does not result in weakened requirements; (ii) targeting enforcement programmes on activities with the greatest risk; and (iii) strengthening the human and financial resources for environmental enforcement and compliance. Reduce environmental sustainability gaps between states, and support the development of more effective and long-term environment plans in states and municipalities by: (i) earmarking additional budgetary resources for those states where capacity deficits impede the development and implementation of environment plans; and (ii) expand the Environment Institution Development Programme. ___________________________________________________________

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Assessment

In its transition to green growth, Mexico needs to address challenges that affect both developing and developed countries. On the one hand, population and income growth, urban sprawl and higher motorisation rates are placing growing pressures on natural assets and public health. On the other hand, the gap in living standards between Mexico and the rest of the OECD has widened, and Mexico’s income inequality and poverty rates are among the highest in the OECD. Mexico has a rich natural asset base and production and consumption patterns are less energy- and material‑intensive than in more developed economies, although this gap has narrowed over the last decade. The economic costs of environmental degradation and natural resource depletion have declined, but they still represented about 7% of GDP in 2010. As in other OECD countries, massive investment will be needed to support the transition to a low‑carbon, resource‑efficient economy and to enhance quality of life in Mexico.

As the last OECD Economic Survey recommended, Mexico needs to rebalance its tax structure by raising non-oil-related taxes and broadening the tax base. Extending the use of environmentally related taxes, and reforming environmentally harmful subsidies, could contribute to achieving this objective while also reducing environmental pressures. For example, Mexico does not apply excise duties on energy products. Prices of transport fuels are regulated via a price smoothing mechanism that results in an implicit subsidy at times of high world oil prices. This subsidy represented net expenditure of 1.2% of GDP in 2011, despite the fact that the government progressively raised fuel prices in the late 2000s. Overall, energy subsidies, including those for electricity consumption in the agricultural and residential sectors, averaged about 1.7% of GDP per year over 2005‑09. This policy is costly and inhibits incentive to reduce energy use.

There is also considerable scope to improve the tax treatment of motor vehicles. Vehicle taxes, while less economically efficient than fuel taxes and road charges in reducing emissions, can help renew the fleet in favour of cleaner vehicles. Mexico levies taxes on purchase and ownership of vehicles, but related revenue is lower than in most other OECD countries. In 2012, states were authorised to levy the annual vehicle ownership tax, but fewer than half have done so. While new electric and hybrid cars are exempt, tax rates are not linked to the environmental performance of vehicles. These taxes have not fostered the use of more efficient, lower-emission vehicles, and generally favour the better off. In addition, other distortionary incentives for road transport are in place. They include a 50% tax credit on road tolls paid by transport businesses and very favourable tax treatment of company cars and parking spaces for employees. Overall, this mix of incentives encourages vehicle ownership and use, exacerbating congestion, accident risks and environmental problems.

Wider use of market-based instruments, in addition to promoting more efficient use of energy and other resources, would help finance much-needed environmental infrastructure. Investment in water infrastructure nearly tripled between 2000 and 2010, enabling Mexico to exceed the water and sanitation Millennium Development Goals. However, substantial additional investment will be needed to bring the provision of environmental services up to the levels in other OECD countries. Mexico has made some progress in implementing water charging systems: abstraction charges vary according to water availability, and pollution charges are based on the status of water bodies and type of pollutants, thereby applying the polluter-pays principle. However, these charges have provided limited incentive to reduce water losses and improve efficiency of water use. Water abstraction for agriculture is virtually free of charge. Tariffs for public water services remain relatively low and do not allow service providers to cover their costs. The private sector has played a limited role in the water sector, not always improving the efficiency, or reducing the cost, of service provision. Very few cities charge for waste services, and investment in waste management fell by a third between 2000 and 2009. Weaknesses in local waste management have allowed the informal sector to play an important role in provision of waste services, with negative consequences for both the quality of service and the living and health standards of the workers. Governance in the water and waste management sectors needs to be strengthened in parallel with increased financing.

Mexico has continued to reform its support policy to agriculture and fisheries: the level of support has declined since the early 2000s and is well below the OECD average. However, subsidies linked to production still account for half of overall agricultural support, which is higher than in a number of other OECD countries. As these forms of support stimulate production and input use, they provide environmentally harmful incentives and encourage intensification and expansion of agriculture. Overall, many energy and agricultural subsidies have been intended to address social concerns. However, they have not efficiently supported low-income households and farmers: the poorest 20% of the population captures only 11% of residential electricity subsidies and less than 8% of transport fuel subsidies; similarly, 90% of agricultural price support and 80% of electricity subsidies for water pumping benefit the richest 10% of farmers. All these subsidies could be replaced by direct social spending. Programmes such as the one to replace electricity subsidies for pumping irrigation water with direct cash transfers illustrate the way forward and should be scaled up.

Tackling poverty and improving affordability of basic services have long been high on the political agenda in Mexico. New targeted cash transfer programmes such as Oportunidades have helped improved education and health outcomes. In the late 2000s, SEMARNAT launched a programme for indigenous people and the environment. The government also implemented programmes, such as ProÁrbol, that aim to alleviate poverty in rural communities by promoting sustainable management of their natural resources.  However, Mexico spends more on regressive and environmentally harmful energy and agricultural subsidies than on direct social transfers.

The need to boost the productivity and competitiveness of the economy through innovation has been recognised in Mexico for some time. However, the overall framework for innovation has not been effective, and Mexico has fallen short of its objectives. It has the least R&D-intensive economy in the OECD and one of the lowest private sector shares in gross expenditure on R&D. Innovation outcomes have been weak, though there have been somewhat higher levels of patenting activity for some environmental technologies and renewables. A widespread preference for imported technology has hindered technology diffusion and transfer to Mexican firms, particularly small and medium‑sized enterprises. Programmes to promote sustainable urban transport and efficient buildings have potential for creating green markets.

Mexico receives very limited official development assistance (ODA), equivalent to about 0.02% of GDP over the last decade. However, it has received increased support for climate change since the Copenhagen pledges, in sectors such as forestry, which could play a strategically important role in leveraging domestic efforts. Mexico is among the most active countries in triangular co‑operation in Latin America, particularly on environment, climate change and green growth. In 2011, a law on development co‑operation was passed and an aid agency was established with the obligation to report on ODA flows both received and granted. Trade agreements have also provided mechanisms for environmental co‑operation and compliance. However, further efforts could be made to better integrate environmental and trade policies.

Recommendations

• Gradually replace the diesel and petrol price smoothing mechanism with an excise tax on transport fuels; introduce excise duties on other energy products; differentiate the excise tax rates to reflect the environmental externalities associated with the use of these products, including their contributions to greenhouse gas (GHG) emissions and local air pollution; where needed, provide social transfers for those adversely affected by increased energy prices.
• Restructure vehicle taxes to take account of vehicles’ environmental performance, including emissions of GHGs and local air pollutants; ensure that the vehicle ownership tax is applied in all states; reduce perverse incentives for vehicle use by removing tax credits for fuel use and road tolls, and by reforming the tax treatment of company cars and parking spaces.
• Regularly assess the environmental, social and economic impacts of existing and proposed direct and indirect subsidies in an integrated way, with a view to improving transparency and identifying trade-offs and subsidies that could be removed, reduced or redesigned; replace perverse subsidies to energy use, agriculture and fisheries with targeted cash transfers to low-income households and small farmers (e.g. building on the Oportunidades programme).
• Building on the 2030 Water Agenda and the OECD-Mexico water dialogue, develop a strategic financing plan for the water supply and sanitation sector, based on a projection of the medium-term public expenditure required and a gradual introduction of pricing based on sustainable cost recovery; implement the proposed policy and institutional reforms; identify ways to ensure that even the poorest people have adequate access to water services.
• Extend the waste charging system; develop a sound waste management system that includes the participation of workers currently part of the informal waste sector; promote and monitor the performance of public-private partnerships in waste management.
• Strengthen innovation capacity, including by greater support for higher education, international co‑operation in science and technology, and public-private partnerships; strengthen the capacity to absorb and adapt cleaner technology, particularly in small and medium‑sized enterprises.
• Develop a strategy for development co‑operation focusing on areas where Mexico has expertise, such as forestry, biodiversity and climate change; speed up the development of the Mexican Information System on International Co‑operation for Development in line with international methodology and guidelines.
• Continue to promote integration of environmental and trade policies, including by enhancing co‑operation to address environmental issues in the northern border region; reinforce efforts to assess the environmental impact of trade, including by involving the public.

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Assessment

In 2008, Mexico had the world’s 13^th highest GHG emissions, excluding land use, land-use change and forestry (LULUCF). Between 2000 and 2008, GHG emissions increased by 13% while energy‑related (mainly CO₂) emissions increased by 17%. Urban population growth, economic growth and the associated increased demand for transport have been the main drivers. Some progress was made in improving the carbon intensity of the economy between 1990 and 2010, however, the carbon intensity increased between 2000 and 2010. In 2009, Mexico had the second lowest CO₂ emissions per capita in the OECD, reflecting its relatively low income level. As income increases, GHG emissions are expected to rise. The 2009 scenario prepared within the Special Climate Change Programme (PECC) suggested that, without additional policy measures, total emissions could increase by 70% by 2050, compared to the 2000 level.

In recent years, Mexico has assigned a high political priority to tackling climate change. Since 2005, it has substantially strengthened the institutional framework (including the scientific and economic base for decision making), increased the resource allocation and promoted greater public awareness of climate change. The Inter-Ministerial Commission on Climate Change has been a key driver. It developed the 2007 National Strategy on Climate Change and the PECC 2009-12. States and municipalities have been engaged, as have the private sector and civil society. Mexico’s achievements were consolidated and reinforced by the adoption in June 2012 of the General Law on Climate Change. It confirmed Mexico’s aspirational targets of reducing GHGs to 30% below a business-as-usual scenario by 2020, and 50% by 2050 from the 2000 level, conditional on international financial support. Mexico was one of the first developing countries to adopt an emission reduction target for 2050.

PECC set an objective of reducing GHG emissions (including LULUCF) by 51 Mt CO₂ eq, compared to business as usual, by 2012. By June 2012, nearly 95% of the target had been achieved. Measures in the oil and gas sector and in forestry were effective in achieving targets, but those for energy use and waste fell short.

Reducing the carbon intensity of the economy is a huge challenge. Fossil fuels account for 89% of Mexico’s energy supply, compared to the OECD average of 81%. Oil is dominant in the energy mix at 55%, but the proportion of natural gas grew from 20% in 2000 to 30% in 2010. Mexico is one of the few OECD countries where total primary energy supply increased faster than GDP over 2000‑08, in part due to low efficiency in extracting and distributing oil and gas, though some progress has recently been recorded. Total final consumption of energy grew in line with GDP. Nevertheless, energy intensity remains below the OECD average.

The price signals needed to provide adequate incentives to reduce GHG emissions should be significantly strengthened. This is an essential prerequisite for an efficient and effective climate mitigation policy. Although the government has reiterated its goal of reforming energy prices and subsidies, little progress has been made. While Mexico does not have a GHG emission trading system in place, the state-owned oil and gas company implemented a voluntary, intra-company cap-and-trade system in the first half of the 2000s. This was the first of its kind in Latin America. Its re‑establishment could provide the basis for developing a national system, with the possibility of eventually linking it to other systems.

Promoting renewable forms of energy was one of a package of measures adopted as part of the 2008 energy reform that seeks to address the decline in oil production. Considerable renewables potential exists. A variety of programmes have been implemented, resulting in an increase in wind power installed capacity from 2 MW in 2006 to 1012 MW in 2012. However, the share of renewables in electricity production declined from 20% in 2000 to 18% in 2010, when the share of non-hydro renewables was 3.9%. It is not clear whether the 2012 target in the Special Programme for Use of Renewable Energies – 7.6% of total power capacity and 4.5% to 6.6% of total power generation from renewable sources except large hydropower – will be met. Mexico has adopted a new target of providing 35% of electricity from non-fossil sources (including nuclear power and carbon capture and storage) by 2024. However, the potential contribution of the various renewables technologies to this target remains to be clarified.

The organisation and regulation of the electricity sector is an impediment to the further development of renewables. The Federal Electricity Commission, the state-owned electricity company, has a monopoly on public supply of electricity. It is required by the Mexican constitution to purchase electricity at least cost, which, narrowly interpreted, does not include consideration of environmental externalities or other policy objectives. Because of this, renewables are not competitive. In addition, large subsidies for electricity consumption have increased demand, and contributed to the increased supply of electricity from fossil fuels. In a welcome move, the government amended the Public Electricity Service Law in 2011, to require the consideration of environmental externalities in the least cost criterion when purchasing electricity. Other obstacles to the further deployment of renewables include limits on access to finance, the need to further develop the grid and compensation for land use. Further efforts are needed to expand access to energy by developing decentralised renewables in remote areas. The 2012 target of supplying 2 500 rural communities with renewables-based electricity will not be met.

Various opportunities exist to improve energy efficiency at little or no cost. However, the continued subsidy of energy undermines the incentives and effectiveness of energy efficiency initiatives. On the production side, further fuel switching to natural gas and reduction of losses in transmission and distribution could reduce emissions in the electricity sector by 20% by 2030. Significant emission reductions could be achieved, with a net financial gain, by reducing gas flaring. In end-use sectors, Mexico’s minimum energy performance standards have been regularly updated and are among the world’s most stringent. However, more emphasis should be given to improving the energy efficiency of buildings, both new and old.

The transport sector is the largest energy consumer. Transport energy use rose by 40% over 2000-09, largely because of growth in road traffic. Motorisation rates have risen, driven by increasing income levels, a large supply of inexpensive vehicles (many of them imported, and not fuel efficient by international standards), the lack of fuel pricing incentives, urban sprawl and the lack of alternative transport modes. Programmes to promote sustainable urban transport have been successfully implemented in several big cities. However, they would need to be significantly scaled up to have an impact on car use, and it will take many years to overcome the lock-in effect of the current organisation of cities. Government control of energy prices has been a major obstacle to improving energy efficiency in the transport sector. The price smoothing mechanism for transport fuels has given little or no incentive to reduce fuel use. A package of measures should be adopted to reduce emissions from vehicle use, in conjunction with a gradual increase in fuel prices to reflect environmental costs. The government should address the social impact of rising fuel prices by introducing compensatory measures not linked to energy consumption.

In recent years, Mexico has shown great leadership in, and a strong commitment to, supporting international efforts to address climate change. For example, in 2010 it hosted the 16^th Conference of the Parties to the UN climate change convention and was instrumental in brokering the adoption of the Cancun Agreements. Mexico is a non-Annex I country which does not have binding GHG reduction targets under the Kyoto Protocol. But by adopting voluntary emission reduction targets for 2012, 2020 and 2050, it has provided an important example for both developed and developing countries. It also served as an example by submitting four National Communications under the convention, the only non-Annex I country to do so. Mexico has benefited from international co‑operation as well; for example, it has the fourth largest number of registered projects under the clean development mechanism (CDM). Expanding the use of market mechanisms such as the CDM to reduce emissions from large energy-intensive industries and in the waste sector could help leverage the additional funding needed to achieve Mexico’s objectives. Mexico is actively involved in the design of pilot projects under the REDD+ initiative to reduce emissions from deforestation and forest degradation.

Mexico is vulnerable to climate change: 15% of the country, 68% of the population and 71% of GDP are highly exposed to climate change risk. In addition to increased temperatures, potential impacts include reduced rainfall in the north, storms and heavy seasonal rainfall in the south, increased hurricane activity and intensity, and a sea level rise of 20 cm by 2050. PECC has identified eight areas for developing adaptation policies, including water, agriculture, ecosystems, health, energy and transport infrastructure. It has also identified 37 objectives and 142 targets, and proposed a three-phase programme to address them. By June 2012, three-quarters of the general adaptation goals had been achieved including emergency plans for extreme weather events in 70 vulnerable areas and modernisation of the national meteorological service. The national vulnerability atlas is near completion. Further development and implementation of this programme will require close co‑operation among sectors and with subnational governments, business and civil society, as well as a robust, indicator-based monitoring framework.

Recommendations

• Take all necessary measures to implement the General Law on Climate Change; clarify the domestic emission reduction target and define an indicative allocation among sectors; identify least-cost ways to achieve the target within sectors and in general; ensure that targets and measures are adjusted on the basis of systematic, regular and independent assessments of progress; publish annual progress reports, and a GHG emission inventory at least every two years.
• Consider re‑establishing the PEMEX intra‑company emission trading system, and gradually extend it to other large emitters, in parallel with the reform of energy subsidies and the establishment of a robust system for monitoring, reporting and verifying emission reductions; consider how it could be linked to similar systems in other countries.
• In conjunction with gradually removing energy subsidies, identify and implement more cost-effective approaches for further improving energy efficiency, such as reducing losses in electricity distribution and transmission, reducing gas flaring, promoting co‑generation in large industries, establishing a mandatory energy efficiency standard for new buildings and providing targeted support to enhance the energy efficiency of existing buildings.
• Promote production and use of renewables, including by developing a sound methodology for valuing environmental and social costs of electricity production for use when purchasing electricity at least cost; developing a support system for renewables based on a careful assessment of potential, cost and benefits; establishing an independent mechanism to review and adjust objectives and the means of achieving them in light of market developments; and developing decentralised energy systems for renewables provision to rural communities.
• Further develop sustainable urban transport systems by scaling up and rolling out investment in low-carbon mass transit and strengthening regional and local capacity for development of integrated transport and urban planning policies.
• Take further steps to reduce GHG emissions and local air pollutants from motorised transport, including by adopting vehicle fuel efficiency or CO₂emission standards, making vehicle inspection programmes mandatory in all states and examining the potential role of indigenous biofuels as a transport fuel on the basis of a full life-cycle assessment of their environmental impacts.
• Continue to show leadership, and to share experience, in international efforts to mitigate climate change, including by expanding the use of market mechanisms such as the CDM to reduce emissions from large energy-intensive industries and the waste and wastewater sectors, and developing a system for measuring, reporting and verification of GHG emissions and sinks.
• Further develop and implement the climate adaptation strategy by involving all relevant sectors, subnational levels of government, business and civil society, for example by developing technical guidelines for sectors such as forestry; establish a robust, indicator-based mechanism for monitoring and assessing progress in achieving objectives.

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Assessment

Mexico is one of the most important countries globally in terms of biological diversity. It is home to 10‑12% of the world’s biodiversity, and is one of 17 “mega‑diverse” countries. Mexico has been ranked in the top five on a number of biodiversity indicators, including reptiles, mammals, amphibians and flora. Forests cover one-third of the land area and provide a home for 11 million people living in extreme poverty. Between 1976 and 2007, the area covered by tropical forests declined by 10%, though the rate of deforestation has been significantly reduced over the last decade, particularly for primary forest. Around two‑thirds of forests are fragmented, which results in reduced quality and quantity of wildlife habitat. More than 2 600 species are listed under different categories of threat, and the share of known mammal and bird species threatened is high compared to levels in other OECD countries.

The conversion of natural ecosystems to crop and livestock production, either directly or indirectly, continues to be the main driver of deforestation and land use change. Secondary drivers include urban expansion and construction of infrastructure for roads, telecommunications, ports, tourism, energy supply lines, and pipes and ducts. The main driver of forest degradation is forest fires, with illegal logging, fuel wood collection and natural disasters exerting further pressure. Key pressures on marine ecosystems include overexploitation of fisheries, pollution including nitrogen deposition and eutrophication from agricultural run-off and domestic and industrial sewage waters, habitat modification such as wetland loss, and climate change.

Over the last decade, Mexico has developed a number of strategies and programmes to promote conservation and sustainable use of biodiversity and forests, and the budget of the National Forestry Commission has nearly tripled, in real terms since 2002. The environmental axis of the 2007‑12 National Development Plan includes several objectives related to biodiversity and forests. The 2000 National Strategy on Biodiversity sets out a 50 year vision to avert large-scale conversion of natural ecosystems. The Strategic Forest Programme presents a strategy for sustainable forest management to 2025. These and other laws, strategies and programmes, together with a strong set of institutions, provide a good basis for conservation and sustainable use of forests and biodiversity. Consideration should be given to how the agreements reached under the Convention on Biological Diversity at the tenth Conference of the Parties in 2010 should be integrated into the policy framework.

Significant progress has been made in developing more comprehensive monitoring and reporting frameworks to support policy development and implementation. Better scientific information is crucial to policy development, and further progress in this area will help in reinforcing and assessing policy performance over time. However, the information base for policy development could be further strengthened through a better understanding of the main drivers of biodiversity and forest loss (at national and state level) and how they are likely to change in a business-as-usual scenario. While a few economic valuation studies have been undertaken, economic analysis of biodiversity should be strengthened with a view to adopting more efficient policy approaches.

Mexico has a wide set  of policy instruments to promote the conservation and sustainable use of biodiversity and forests. It is largely dominated by subsidies, many of which also aim to improve the conditions of local indigenous communities living in forests. Federal protected areas and their associated resources have increased significantly over the last decade. In 2010, there were 174 protected areas covering 25.4 million ha, equivalent to 12.9% of national territory. However, further expansion of protected areas is needed to achieve the goal of 16% by 2020. Additional resources, including from access fees, will be needed to continue this expansion and to assure effective management. The ecosystems covered should be more representative, and take into account the conservation gaps identified in 2010. Further support should be provided for the establishment and effective management of biological corridors and management programmes should be developed and implemented in all protected areas.

The National Ecological Land Use Plan (ELUP), adopted in 2012 is an important step for the conservation and sustainable use of ecosystems. This instrument establishes land use planning and zoning principles to promote development that simultaneously protects and conserves the environment. By July 2012, SEMARNAT had supported the development of 85 ELUPs at different geographic scales, of which 43 were decreed in the last six years. Further efforts are needed to ensure that the regions with the highest development potential for tourism, industry, agriculture, aquaculture and fisheries are covered by ELUPs.

Mexico has pioneered several economic instruments for the conservation and sustainable use of biodiversity.  The national programme on payment for ecosystem services (PES) under ProArbol (the federal umbrella programme that promotes sustainable forestry), covers 3.25 million ha of forests and represents one of the largest PES programmes in the world. Other examples of economic instruments include a form of biodiversity offsets for projects involving deforestation – the Forest Land Use Change mechanism; reforestation programmes; controls on illegal hunting of wildlife; and fishery buybacks for more sustainable fisheries management. Some of these have produced positive results (e.g. reforestation), but there is insufficient evidence to fully evaluate the effectiveness of others (e.g. controls on illegal hunting of wildlife). Some can be refined to more cost-effectively attain their environmental goals (e.g. PES and the Forest Land Use Change mechanism). The proposed national study on the economics of biodiversity should examine opportunities to apply further economic instruments based on the polluter‑pays principle. The various programmes that have been established to support indigenous people and the environment would also benefit from review. There seems to be a proliferation of small programmes providing temporary income, as opposed to building capacity.

A few voluntary approaches have been put in place, such as green certification of coffee production; about 10% of all coffee producers in Mexico participate in this agreement. However, there is considerable scope to develop such approaches further; for example, while progress has been made in timber certification which can also help combat illegal logging, procedures should be strengthened to consolidate the national market for certified products; efforts to promote sustainable tourism, including eco‑tourism certification should be strengthened as to help reduce the environmental footprint of this large and growing sector. More generally, opportunities exist to further engage the private sector in conservation and sustainable use of forests and biodiversity through regulatory, economic‑based and voluntary approaches.

Conservation and sustainable use of biodiversity will not be achieved only by applying policy instruments in the environment sector. It will also be necessary to reform policies in other sectors, such as agriculture, tourism, fisheries and energy, that exert significant pressures on ecosystems and biological resources. For example, a variety of support programmes for farmers contribute to deforestation and the intensification of agricultural production. While agricultural subsidies have been reduced, a large share of agricultural support programmes is still made up of production-related measures, which are the most environmentally damaging. There has been only limited uptake of agri‑environment payments that could support more environment-friendly farming practices. Given the environmental and economic significance of biodiversity, establishing an inter-secretariat commission for biodiversity along the lines of the one for climate change could support a more focused and coherent approach for promoting its conservation and sustainable use.

Recommendations

• Update the 2000 National Biodiversity Strategy and Action Plan to reflect the 2011‑20 Aichi biodiversity targets and other measures agreed under the Convention on Biological Diversity in 2010; develop an action plan to achieve the target for protected areas that optimises the conservation   of biodiversity and ecosystems, and provides adequate management and financial resources.
• Establish a high level inter-secretariat task force (similar to the one for climate change) to promote economically and environmentally sustainable use of ecosystems and biodiversity.
• Strengthen economic and social analysis of biodiversity to support implementation of more efficient and effective policies; complete the planned study of the economics of biodiversity; develop business-as-usual projections to identify future pressures on biodiversity.
• Review the efficiency and effectiveness of economic instruments for the conservation and sustainable use of biodiversity and forests; assess the feasibility of new instruments based on the polluter-pays principle.
• Review programmes to support indigenous people and the environment with a view to streamlining them, increasing the focus on capacity building, and achieving social and environmental objectives more efficiently.
• Identify opportunities to further engage the private sector in the conservation and sustainable use of biodiversity through, for example, the strengthening of timber and eco‑tourism certification.
• Ensure that conservation and sustainable use of biodiversity form part of more general efforts to integrate environment into sector policies, e.g. in application of strategic environmental assessment.

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