Mexico's Energy Prospects: Gains from Renewable Sources Over A Fossil Fuel-Dominated Environment

Abstract

Changing political conditions in Mexico threatens the future of clean energy inthe country. A competitive electricity market and ambitious environmental goalswere among the priorities of the previous administration, but the current administrationaims to increase revenues from the national power company and acquirecontrol of the electricity market at the expense of consumer welfare and the environment.In the medium and long term, however, renewable energies are expectedto make significant progress as a very competitive energy source. In this work, wedevelop an economic framework to provide insights into the economic and environmentaleffects of promoting the renewable energy industry. Results show thatmaintaining the status quo will only favour electricity company revenues (for alimited time), but renewable energy won’t take off, while a green strategy wouldboost economic growth, reduce emissions, and ultimately improve social welfare.