In February 2007, Mexican finance minister Agustín Carstens made a surprise announcement that his country could become a fully developed nation within 20 years. He compared the nation’s position with that of Spain and Ireland in the 1980s: “There are countries that in 20 years have carried out significant changes in their productive structure, per-capita income, in the well-being of the population, and I believe that Mexico is in a position to do something similar,” he stated.
Improved competitiveness, a stronger inflation and growth record, and a rush of investor optimism all confirm that the nation is resting on a much firmer economic platform than it was during the 1990s, so there is some justification for this statement. Experts have noted that much of this economic recovery can be traced to successive governments’ patient construction of strong regulatory and technical foundations. Close attention to production and energy inefficiencies acted as one of the many key building blocks.
Through increasingly stringent product standards, energy consumption was slashed, leaving more funds in the nation’s coffers for other uses. FIDE, the national electricity power-saving fund formed in the 1990s, reports that it had saved 4046 GWh by December 2005—the equivalent of the power consumed by three Mexican states.
The government managed this through simple efficiency actions backed up by rigorous rules that, for instance, led to the substitution of millions of conventional lamps with more-efficient ones. Manufacturers have become more competitive because of disciplines such as these. For instance, the energy consumed in Mexico by washing machines and refrigerators fell by 30% and 52.7%, respectively, between 1992 and 2002 because of a series of new standards. That meant those products could compete more successfully, and in addition helped to lower users’ energy bills.
Other Central American countries are starting with a blank slate. For one thing, most organizations and households have never considered saving energy. “The issue of how to become more competitive by using more-efficient energy is not part of our culture—this is a common barrier we are up against,” explains José Ma. Blanco, the regional director of Biomass Users Network–Central America (BUN-CA).
BUN-CA and the Renewable Energy and Energy-Efficiency Partnership (REEEP) are working together to stamp the first characters of an energy efficiency motif into the heart of Mexico’s political and commercial establishment. All parties involved in the regional strategy have benefited from the expertise of the Collaborative Labelling and Appliance Program (CLASP), an international body advising governments and industry all over the world on standards and labelling.
Central American stakeholders have now been briefed. They have been introduced to the necessary knowledge through REEEP seminars and training courses in close cooperation with Mexican energy authorities. Policy makers have been taken out into the field to consider the problems at a grassroots level. Now the task is to convince national governments and overcome the practical barriers.
But Blanco says that public agencies “lack experience” and that there is not enough of a standards culture in the first place, for any industry.
“There are standards agencies, but they have focused their actions mainly [on] safety and food issues,” says Michael McNeil, a researcher from California’s Lawrence Berkeley National Laboratory who is collaborating with CLASP.
Intricate market barriers need to be removed. For instance, products with higher energy performance will often incur higher import duties. Small and medium-sized companies need to be persuaded and helped.
There is also a lack of baseline energy data. In addition, governments may be concerned by other issues they consider to be more pressing.
On the positive side, there is no backlog of inefficient products, and an opportunity exists to take advantage of lessons already learned by their Central American partners. McNeil points out that most Central American countries are importing nearly everything, so they are getting many effi- cient products already. Like many rapidly developing economies, most of the potential installed base has yet to be filled, so products can come in already meeting higher standards.”
Using the approach of a Minimum Efficiency Performance Standard (MEPS) combined with an endorsement label indicating the very highest efficiency models, minimum efficiency thresholds are set and updated regularly. A comparative-labelling program could also be put in place that rates the relative efficiency of all products in a way that’s clear to consumers.
The role of the appliance producers and major importers could be critical to the success of the region’s initiative, which is only at the seed-planting stage. To a certain extent, the deployment of standards can help resolve some of the thorniest contradictions faced by developing countries and aid agencies. Developing countries want their economies to grow further, yet they are faced with international constraints on high energy demand. Forcing product standardization in the earlier stages could help companies become more productive and more competitive more quickly.
Agents of Change
Executives from white-goods producers in Mexico showed a great deal of enthusiasm at seminars supported by REEEP to discuss relevant issues with stakeholders. Many companies manufacturing products based in Mexico and exporting to North America also distribute well-known global brands across Central American countries.
Project managers at REEEP and BUN-CA note that because of the commercial advantages of the new standards, air-conditioning and industrial motor producers could be key energy champions in the seven countries targeted by the initiative: Belize, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and Panama. The initiative is part of a large energy efficiency strategy that, in 2005, was approved by the Global Environmental Facility (GEF) as a full-sized project to trigger the development of markets for energy efficiency in the industrial and commercial sectors throughout Central America. This project, called PEER (Programa en Eficiencia Energética para Centroamérica) is now being implemented by the United Nations Development Program and executed by BUN-CA.
Fifty-six percent of electricity consumption in Central America originates from the industrial and commercial sectors, and industrial motors account for 44% of that alone. Industrial motors are a major component of most factory machinery. Air-conditioners make up the rest of this large portion of energy consumption.
McNeil notes that producers are actually helping drive standards in Mexico and starting to push the government to update them, which is an encouraging sign. He believes that electric equipment producers see the use of standards and labels as a route to high-quality products. Consistent regulations provide a level playing field in the market, which permits further development and investment.
Standards have benefits for consumers, too. End-users save money by using efficient appliances, and they will be keen to cut their bills because thermal power prices have been rising. “By reducing consumption at the end of the chain, Central American countries can displace investment, especially during peak hours,” remarks Blanco.
On a macro level, there are yet more good reasons for cutting back on energy use. In his statement last February, Carstens, the Mexican finance minister, pointed out that he believed Mexico could no longer rely on its oil income, because it was not certain of its production and exportation platform. Developing more clean energy and cutting back on consumption are other options open to him and to the customers who buy the oil.
Reducing oil consumption leaves oil in reserve for future years, thus allowing more time for alternative technologies to develop. It is also a cheaper option than new technology for combating climate change and energy security problems.
According to calculations by The Rocky Mountain Institute, a 2.5% decrease in U.S. energy intensity between 1975 and 2005 constituted by 2005 an effective energy source that was 2.1 times as big as U.S. oil consumption in 2005. The use of standards is one of the most powerful tools for driving continued productivity levels at these or higher rates. “Research shows that standards and labels are the most cost-effective way to promote energy efficiency,” comments Christine Egan, director of CLASP.