Mexico’s new fuel standards on the right path

View of smog in Mexico City on July 2, 2016. Authorities announced recently new measures to combat an increase in air pollution in Mexico City, as officials reported an increase in related ailments such as asthma. Ozone levels surged in March, prompting authorities to declare the first air pollution alert in more than a decade. / AFP PHOTO / HECTOR GUERREROHECTOR GUERRERO/AFP/Getty Images
Smog hangs over Mexico City’s Paseo de la Reforma and the Angel of Independence monument in July. (Hector Guerrero/AFP/Getty Images)

By Gabriel Quadri

Identifying what is best for the environment can be difficult in a world full of ‘green’ marketing. This is especially true with ethanol’s decades-long campaign to portray itself as a ‘green’ renewable fuel.  While many in the U.S. have been drawn to its siren song, thankfully Mexico has examined it with clear eyes and made a wise choice for its future.

As Mexico has begun the historic opening up of its energy markets, the tendency to harmonize its regulations with the U.S. is understandable and, in fact, positive. The U.S. has had an open energy market far longer than Mexico, and because both nations are such close trading partners, it makes sense to seek to establish rules that facilitate commercial opportunities between the two markets.

Gabriel Quadri is a former presidential candidate in Mexico and an environmental consultant with Sigea.

But that doesn’t mean that duplicating U.S. policy is always the right choice.  This is clearly evident in Mexico’s recent revision of its fuel standards (NOM-016-CRE-2016).

While Mexico adopted, or is considering adopting, most of the US best practices in terms of fuel quality, it decided to move in the completely opposite direction on one key issue: ethanol use. Pushed by the corn lobby, the U.S. employs significant subsidies for ethanol production and even mandates its use in a way that increases over time. Mexico’s Energy Regulatory Commission (CRE), on the other hand, decided to place strict limits on ethanol—both nationally and at the local level.

The result is hardly due to a lack of discussion. Ethanol interests, including the U.S. Department of Agriculture, participated in the Mexican debate and many pushed for a 10 percent ethanol allowance throughout the country.  Some even argued for no cap at all.

Good science and real experience, however, advocated otherwise.  Ethanol’s hygroscopic and corrosive nature makes it incompatible with Mexico’s current distribution infrastructure and vehicle fleet. This was instrumental in CRE reaching its decision to reduce the permissible limits for ethanol, from an implicit 8% maximum under the previous standard, to an explicit 5.8% cap in the new one.

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More importantly, CRE also established a complete ban on ethanol use in large swaths of the market in order to protect public health.  As the president commissioner of CRE stated, “to limit ozone formation, ethanol blended gasoline is prohibited in the three largest metropolitan zones.”

A series of studies show that ethanol use among older vehicle fleets, like Mexico’s, significantly increase emissions that form ground-level ozone (smog). Still trying to recover from a very recent air quality crisis, Mexico City and other large urban centers are desperately trying to reduce ozone concentrations. Thus, it’s easy to see how increased ethanol use was accurately seen as both an environmental and public health concern—and how it became an issue that brought together the voices of environmentalists, think tanks, domestic and international NGOs, and authorities like the Ministry of Environment of Mexico (SEMARNAT).

When developing the ruling, the Mexican regulator understood that unchecked ethanol use would hurt Mexican consumers, Mexico’s national fuel distribution infrastructure, and cause significant negative impacts to Mexico’s air quality. To be sure, no regulation is perfect, and there is still room for improvement. In fact, it would be smart for Mexico to consider even stricter ethanol limits. In the US, the EPA’s inspector general recently recommended that the agency revises the environmental impact findings of ethanol use, and a recent study from the University of Michigan shows that ethanol has a higher carbon footprint than gasoline itself. In Mexico, the Ministry of Energy concluded in a recent publication that there wasn’t enough information to show that ethanol use would mean environmental gains.

In the same way, there are some important issues in the regulation that still need to be addressed. Mexico needs to adopt stricter sulfur standards, as well as stricter aromatics and olefins limits in metropolitan areas. In line with other regulatory practices regarding transport and air quality protection, it should immediately expand Mexico’s metropolitan area to include the larger area comprised by the seven states of the “megalopolis”.

Still, by avoiding the ethanol trap, Mexico has shown its ability to wisely pick and choose only what’s best from practices in other countries. The new standards safeguard security of supply and establish terms that are commercially viable to almost any party involved. They demonstrate that Mexico is serious about reform and serious about being open for business, but also serious about using best available data to protect air quality through fuel quality regulations.