The second largest economy in Latin America, Mexico is committed to the fight against climate change, environmental protection and the energy transition. Its objective is to halve its greenhouse gas emissions by 2050. The country is also rethinking its growth with the aim of making it more inclusive. AFD has been supporting Mexico in these efforts since 2009.

Produced by AFD's team of country-risk economists, macroeconomic country assessments provide an analysis of development processes in countries in which AFD operates. They also characterize their growth trajectory, and detect economic, social, political and financial vulnerabilities associated with these trajectories. AFD Group is thus in a position to properly measure the challenges and monitor the risks associated with each of its investments.

Emphasis is placed on developing countries, particularly in Africa, for which macroeconomic analyses are rare or infrequent. AFD seeks to complement existing production on the global economic situation, more focused on advanced economies and major emerging countries.

Country-risk analysis is based on a close follow-up over a long period of time and rooted in a fine knowledge of local contexts. Cyclical trends, often highlighted in the news, are always examined in the light of structural trends and of the regional context in which they take place. The aim is to highlight country-specific macroeconomic issues while assessing risks against comparable time- and space-based trajectories.

Country-risk economists place the study of socio-political vulnerabilities, the growth model, the viability of public debt, external balances and the soundness of the financial system at the heart of their assessment, and give specific attention to countries' exposure to climate risks.

All of our publications on the macroeconomic situation of Mexico are available in the MacroDev series.

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The energy transition is a challenge and a necessity for Mexico’s economic transformation as, on the one hand, the country spends 7.6% of its GDP on fossil fuel subsidies and, on the other hand, in 2020 it was estimated that the economic impact of climate disaster increased by 202%. In order to achieve a successful energy transition and secure a sustainable growth path, Mexico needs to modernize its energy sector, reduce reliance on fossil fuels, and ensure sustainability. However, it is necessary to start from the territory, involving communities in the co-construction of resilience and the strengthening of local productive chains. Community and cooperative models play an essential role in promoting the creation of collective businesses managed in a democratic and solidarity-driven manner.

An example of just transition opportunities are energy cooperatives. They are a clear and promising model that involves local communities in the production, distribution and consumption of renewable energy, promoting decentralization and democratization of energy, especially in those territories historically and systematically excluded.

However, research conducted in Mexico during the first phase of the Research Facility on Inequalities showed low wealth sharing and limited social mobility in the country. In this context, it is necessary to address the just energy transition from an intergenerational social mobility approach and a social perspective to ensure benefits for the whole society. 

This work is also part of AFD's dialogue with the Mexican authorities on options for diversifying the economy and reducing inequalities.

Find out more about the Extension in Mexico

In partnership with the Centro de Estudios Espinosa Yglesias (CEEY) and in collaboration with the National Institute of the Social Economy (INAES), this research project aims to develop a conceptual and analytical research input for a better understanding of the role that renewable energy cooperatives can play in reducing inequality and increasing social mobility, and how they can be financed. 

This input will:

• Conceptualise the just energy transition approach in the area of existing structural inequalities;
• Make a diagnosis from the perspective of intergenerational social mobility, as well as from the perspective of social and solidarity economy, and its relevance in the framework of just transitions, in order to establish identification criteria, social selection and prioritisation of projects;
• Use this diagnostic to propose criteria for the identification and selection of projects that prioritise the populations with the greatest disadvantages of origin (with the least space for social mobility), given the requirement of «no losers» of the just transition;
• Review and articulate technical issues related to decentralised energy and distributed generation, given their importance in the social economy in the just energy transition;
• Review the current INAES projects related to the subject in order, where appropriate, to guide the construction of identification and selection criteria.  

The research team will first conduct an exhaustive review of literature focused on environmental justice, climate justice, social mobility applied to environmental justice and intergenerational environmental justice. The literature will be analysed from the perspective of the energy transition and the intersection of these issues.

Based on this review of literature, researchers will develop a conceptual framework to understand the just energy transition in the field of current structural inequalities. It will also explain how this conceptual framework can be relevant for public policy decision-making.

The research team will also identify information gaps and research needs, with a special focus on the study of just energy transitions.

You will find below the research paper related to this project: Just Energy Transition, Structural Inequities, and Social Mobility: The Case of Mexico

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