Why Mexico is ideally placed to become a zero-carbon shipping fuels hub

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Emma Skov Christiansen, Lead, Shipping Emissions and Ocean Agenda, World Economic Forum Geneva, Rosa Esi Ennison, Project Specialist, Shaping the Future of Mobility, World Economic Forum

• Mexico holds great potential for a robust zero-carbon shipping fuels sector.
• Its abundant supply of renewables means it has the capacity to produce zero- carbon for local supply and export.
• This will fast-track Mexico’s transition to a low-carbon economy and provide new green jobs.

With the International Maritime Organization calling for a 50% decrease in international shipping emissions by 2050 compared to 2008 rates, stakeholders across the maritime value chain are committed to commercializing and scaling zero-carbon vessels and fuels by 2030.

According to a study conducted by Ricardo and the Environmental Defense Fund for the P4G-Getting to Zero Coalition Partnership, which also includes the World Economic Forum, Mexico has the potential to play a key role in transforming global shipping through green hydrogen-derived fuels and clean electricity.

The report takes Mexico as its primary focus to understand the potential for adopting zero-carbon fuels through the local shipping and energy landscape. The report is published as part of a wider series of studies exploring opportunities for zero-carbon shipping fuels in emerging economies like Indonesia, South Africa and Mexico.

Between two oceans

Mexico’s proximity to important trading partners on the North American coastline along both the Pacific and Atlantic Oceans eases access to Asian, European and African markets. This could position the country as a leading supplier for vessels that visit its ports, as well as a leading exporter of clean fuels.

“Our study has found that Mexico’s access to busy shipping routes and abundant renewable energy potential puts it in a good position to help drive the zero-carbon fuel market. Mexico can potentially supply both its domestic electrical demand as well as the production of zero-carbon fuels to supply commercial vessels bunkering in its ports by use of renewable energy,” says Olivia Carpenter-Lomax, Future Energy Specialist and Project Lead, Ricardo.

“The many international vessels bunkering in Mexican ports need to be able to refuel along their journey,” Ingrid Sidenvall Jegou, Project Director, Global Maritime Forum, also points out.

The study presents case studies on three major ports along the coast of Mexico to highlight avenues for reaching local decarbonization targets, opportunities for diversification of port activities, and the potential for trade in zero-carbon fuels.

• Manzanillo: The busiest port in Mexico and a significant point for imports and exports. It has a high renewable potential and could be a major export hub for locally produced electrofuels.
• Cozumel: A major tourist attraction with dense marine traffic. Supporting local production and uptake of electrofuels can aid the transition to low carbon vessels while protecting biodiversity.
• Coatzacoalcos: A key centre for oil logistics in Mexico. Coatzacoalcos holds significant resources to support renewable energy and the production of electrofuels as Mexico works to phase out fossil fuels.

The renewables opportunity

Mexico has rich renewable energy potential: the countryhas set targets for a minimum decrease of 22% in greenhouse gas emissions by 2030 and 50% by 2050, compared to the year 2000. Decarbonizing the local shipping sector through the exploration of green fuels like hydrogen and ammonia is one way for it to reach this goal.

“The study has identified hydrogen and ammonia as the most suitable options for large commercial vessels such as tankers, containers and bulk carriers, while small vessels such as port service vessels can be supplied through electrification. The renewable energy potential along with the advantageous locations of ports gives Mexico the opportunity to play a crucial role in driving the zero-carbon shipping fuel transition,” says Dr. Santiago Suarez de la Fuente, Lecturer in Energy and Transport, UCL Energy Institute.

The benefits of adopting zero-carbon fuels go beyond facilitating shipping decarbonization. With the exploration of low-carbon fuel production, Mexico could see an increase in green job creation and subsequently a need for reskilling the workforce. Furthermore, the transition could support decarbonization in other hard-to-abate sectors and put Mexico in the position to be a major exporter of green commodities, supporting global demand for low carbon products.

“Mexico may benefit in various ways from carrying a zero-carbon shipping fuels sector. Apart from ensuring that the country reaches its wider decarbonization goals, locally deployed renewables can also create energy security and help catalyze the low carbon economy in Mexico by supporting decarbonization of other sectors, creating a wide range of jobs,” states Pedro Gomez, Head of Shaping the Future of Mobility, Member of the Executive Committee, World Economic Forum.

How does Mexico reach its green potential?

Handling zero-carbon fuels is not without its risks. The study outlines the importance of regulations and best practices to support the safe roll-out of these clean energy sources. The IMO’s International Code of Safety for Ships using Gases is a key example of standards and guidelines that encourage safe practices for transportation, storage and use of fuels like green hydrogen and ammonia. As the adoption of clean fuels increases and pilot projects are put in place, industry and policy-makers will identify additional pathways to mitigate associated risks.

There is also is a growing need for investment in renewable electricity, clean fuels and their supporting infrastructure to meet future demand. At the moment, there is an investment potential of 130-188 billion Mexican pesos for infrastructure to enable a 5% adoption of zero-carbon vessel technologies by 2030, the minimum rate of adoption determined to enable alignment with Paris Agreement targets.

Attracting foreign and private investment would require regular demand from the global shipping sector and a supportive political landscape. As actors within the shipping value chain support Mexican policy-makers and demonstrate that shipping decarbonization is feasible, Mexico’s potential to supply zero-emission fuels could give way to real growth and business opportunity.

In summary,Mexico’s outstanding renewable energy potential, geographical proximity to key shipping routes and strong trade agreements could catalyze shipping decarbonization through scaling zero-carbon fuel bunkering and expanding exports in hydrogen fuels. This would have a long-lasting impact on the local economy as green jobs are created and local supply chains are strengthened.

What is the World Economic Forum doing on natural climate solutions?

The world faces converging environmental crises: the accelerating destruction of nature, and climate change.

Natural climate solutions (NCS) – investment in conservation and land management programmes that increase carbon storage and reduce carbon emissions – offer an important way of addressing both crises and generate additional environmental and social benefits.

Research conducted for the Forum’s Nature and Net Zero report confirms estimates that NCS can provide one-third of the climate mitigation to reach a 1.5° and 2° pathway by 2030—and at a lower cost than other forms of carbon dioxide removal. This report builds on the recommendations from the Taskforce for Scaling Voluntary Carbon Markets, and identifies six actions to accelerate the scale-up of high-quality NCS and unlock markets through the combined efforts of business leaders, policymakers and civil society.

To foster collaboration, in 2019 the Forum and the World Business Council for Sustainable Development came together to establish the Natural Climate Solutions Alliance to convene public and private stakeholders with the purpose of identifying opportunities and barriers to investment into NCS.

NCS Alliance member organizations provided expert input to develop the Natural Climate Solutions for Corporates, a high-level guide to the credible use of NCS credits by businesses.

Get in touch to join our mission to unleash the power of nature.

“The shift towards zero-carbon shipping needs to accelerate within the next decade and effective regulation will also create opportunities for countries to catalyze and benefit from this necessary transition. By moving early, Mexico can become a central actor in supplying the global demand for green fuel and a pioneer within zero-carbon shipping fuel production,” says Panos Spiliotis, Global Climate Shipping Manager, Environmental Defense Fund.