The residential building sector is responsible for approximately 17 per cent of Mexico’s total energy consumption. As the population grows by approximately 1.7 million per year and an increasing number of Mexicans aspire to better housing, an estimated 600,000 new residential units will need to be built every year over the next decade. In the absence of measures to increase energy efficiency, these new housing units alone would lead to additional greenhouse gas (GHG) emissions of approximately 25 Mt CO2e per year by 2020.
To address the problem, in 2012 the National Housing Commission CONAVI developed the world’s first National Appropriate Mitigation Action (NAMA) in the sector. The Mexican New Housing NAMA is based on the whole-house approach focusing on the total energy performance of a building and is a so-called ‘Supported NAMA’, meaning that it aims at acquiring international climate finance for its implementation.
- Lack of awareness about energy efficiency technologies and their benefits in the housing sector;
- Lack of technical knowledge on sourcing and proper installation of new energy efficient building materials and technologies;
- Lack of incentives as energy prices are highly subsidized, especially for the lower-income groups;
- Lack of comprehensive and formal regulations for energy efficiency in housing;
- Financial barriers due to a short term focus on up-front acquisition costs and not on life-cycle costing by builders and buyers, and
- Limited and expensive eco-technologies
Concept and methodological approach
This NAMA Support Project combines technical assistance to CONAVI (technical cooperation component) as well as financial incentives and project-related technical support in cooperation with the Mexican development bank SHF (financial cooperation component) to path the way from the initial NAMA development towards a broad sector-wide implementation of sustainable housing, focussing on:
- Improvement of capacities of federal, state and local authorities on energy efficient and sustainable housing, as well as building codes and the legislative framework conditions;
- Development of a local market for environmentally friendly technologies;
- Improvement and application of existing Mexican promotion and incentive instruments with more ambitious energy efficiency standards at federal and state level;
- Fostering the application of more ambitious energy efficiency standards through the provision of investment grants for incremental costs as well as the inclusion of additional eco-technologies.
Relevant national strategies
In 2009, Mexico formulated its Special Climate Change Programme (PECC), which describes more than 100 activities around the country to reduce greenhouse gas (GHG) emissions. SEDATU and CONAVI intend to establish the Housing NAMA as public policy in 2015 with the aim of coordinating the diverse actions and providing funding across Mexico’s Housing NAMA initiatives.
- The Mexican housing sector includes a range of key players at national and local level: At a political level the national government is represented by SEDATU and CONAVI as well as local governments and municipalities;
- The large public housing mortgage funds, INFONAVIT and FOVISSSTE, which provide long-term saving schemes based on mandatory contributions, as well as the Mexican development bank SHF, which acts as a secondary mortgage market facility;
- Private small and medium housing developers with the focus on increasing their capacity in promoting, planning and constructing energy efficient houses;
- Private financial intermediaries, which provide financing to housing developers;
- Mexican households (home-buyers, home-owners) of the low and medium income sector (from 1 to 12 minimum wages per month) are the main target and beneficiary group.
Aspects of technical and financial cooperation
The technical cooperation (TC) component in particular will address the following:
1. The political framework and support mechanisms:
- Strengthening of the NAMA as public policy support framework;
- Harmonising the support mechanisms, efficiency and eligibility criteria for new sustainable houses in Mexico;
- Systematisation of the Monitoring, Reporting and Verification (MRV).
2. The supply side for energy efficient houses:
- Capacity building to medium and small housing developers;
- Technology transfer and development of environmentally friendly technologies in Mexico;
- Integrated application of the Housing NAMA.
3. The demand side for energy efficient houses:
- Awareness-raising and information for end users and local authorities.
The financial cooperation (FC) component in particular will provide the following:
1. For financial intermediaries
- Provision of guarantees for financial intermediaries at attractive premiums in order to facilitate developer’s access to commercial financing.
2. For small and medium project developers
- Financial incentives to partially compensate investment costs in eco technologies;
- Specific advisory services to identify and prepare suitable projects and obtain funding.
What is the transformational change potential of the NAMA Support Project?
The overarching goal of the NAMA Support Project is to contribute significantly to the transformation of the Mexican housing sector from the baseline situation, where energy efficiency considerations were largely absent, to a sustainable housing sector where effective energy efficiency technologies have penetrated the market. In addition to reduced GHG emissions, the transformation of the Mexican housing sector will potentially contribute to
- improving the living conditions of the residents;
generating additional employment and growth in the construction sector;
- generating higher tax revenues due to the increased economic activity in the sector and
- lowering fiscal expenditures for energy subsidies, which currently amount to approximately 60 per cent of the residential energy costs.
The project focusses on a long-term impact leading to an increased construction and use of energy efficient houses, decreasing GHG emissions, and will therefore contribute to a sectorial transformation towards a less carbon intensive housing sector.
What is the mitigation ambition of the NAMA Support Project?
The NAMA Support Project will contribute to:
- direct impacts: increasing the market penetration of basic energy efficiency standards from support programmes of large public housing financiers and;
- indirect impacts: harmonizing the support mechanisms and increasing awareness and capacities of key stakeholders such as national and local authorities, housing developers and households, as well as facilitating the introduction and application of new eco-technologies.
- Direct impacts : The theoretic market potential of the Housing NAMA if a 100 per cent penetration of the average efficiency standard Eco Casa 2 was applied across all four Mexican major climate zones and building types from 2015 to 2020 (assumption of 600,000 housing units per annum) can achieve cumulative emission reductions ranging from 13.5 Mt CO2e until 2020 to 108 Mt CO2e after 20 years of life span of applied eco-technologies. A more realistic medium penetration scenario can achieve cumulative emission reductions ranging from 0.2 Mt CO2e in 2020, up to 2.7 Mt CO2e after 20 years of life span (assumption: dynamic market penetration of 0 per cent in 2014, 0.5 per cent in 2015, 1 per cent in 2016, 2 per cent in 2017, 3 per cent in 2018, 4 per cent in 2019 and 5 per cent in 2020). However, instead of forecasting exact mitigation expectations for the NAMA Support Project, emphasis is put on illustrating the overall potential of the Housing NAMA to affect long-term emission reductions by the Mexican housing sector.
- Indirect impacts: The project outputs of the TC component will contribute to the transformation of the Mexican housing market, thus, contribution to direct mitigation achievements. The harmonisation of the Housing NAMA criteria, increased capacities of middle and small developers, increased knowledge about energy efficient houses by end users, reduced end user prices, the use of alternative eco-technologies and the availability of reliable mitigation data about realized NAMA measures will enable policy makers, housing financiers, private developers and households to take action at large scale to achieve direct mitigation impacts.
- Direct impacts: the financial incentives and project-specific advisory services are expected to lead to the construction of approximately 11,000 energy efficient housing units by small and medium-sized project developers. With an assumed average CO2e emissions reduction of 20 per cent, this would contribute to up to 400,000 t CO2e emissions saved during the lifetime of these buildings.
What is the financial ambition of the NAMA Support Project?
Through the combination of the loan guarantee to financial intermediaries and subsidies for small and medium-sized developers with SHF’s standard programmes, of guarantees and bridge loans, it’s expected that between EUR 80 and 120 million will be mobilized for the construction of low carbon houses within the implementation period of the FC component of 7 years.
What are the sustainable development co-benefits of the NAMA Support Project?
The NAMA Support Project will lead to several co-benefits for various stakeholders:
- End users: Decreased energy demand for single houses will lead to decreased energy costs for the end users in the long term which implies financial savings for end users. Furthermore, energy efficient houses will increase the comfort and the quality of life for the residents as energy efficient measures lead to more comfortable indoor temperatures;
- National government: The NAMA Support Project will also create co-benefits from a macroeconomic perspective. Energy prices are highly subsidized by the government meaning that reductions in energy demand lead to reduced subsidy requirements, and therefore, to savings in the national budget;
- Private sector: The increased demand for energy efficient technologies and houses as well as the measures within the technology transfer activities will increase capacities and the competitiveness of private housing developers, create new market opportunities, may lead to further job creation (e.g. local construction companies) and additional local added value;
- The creation of new markets for energy efficient system components, products, building materials with increased added-value;
- Cost reductions of energy efficient products and building materials for the construction sector as well as increased availability of the related products;
- Generation of know-how by suppliers and institutions helping to develop the whole construction sector (including the renovation of existing buildings).
- CONAVI (2012): ‘Supported NAMA for Sustainable Housing in Mexico – Mitigation Actions and Financing Packages’. www.conavi.gob.mx/viviendasustentable
- El Economista, 2014: México recibirá recursos para fomentar casas sustentables. January 16th. http://eleconomista.com.mx/sistema-financiero/2014/01/16/mexico-recibira-recursos-fomentar-casas-sustentables
 CONAVI. 'Supported NAMA for Sustainable Housing in Mexico – Mitigation Actions and Financing Packages', 2012, p.2
 GIZ. Assumptions: annual saving of 1.5 t CO2e per housing unit as average considering the four major Mexican climate zones, Eco Casa 2 as medium efficiency level and an expected life span of 20 years for the energy efficiency measures (before exchanging eco-technologies), 2013