Climate finance in Mexico integrates public, private, and multilateral resources to support initiatives to reduce emissions and adapt to the impacts of climate change, fulfilling national and international commitments under the United Nations Framework Convention on Climate Change (UNFCCC) and the Paris Agreement.
This complex system involves legal frameworks, channeling and monitoring mechanisms—notably Measurement, Reporting and Verification (MRV) methodologies—and is operationalized by Mexican institutions such as the Secretariat of Environment and Natural Resources (SEMARNAT), the Secretariat of Finance and Public Credit (SHCP), the National Financiera (NAFIN), and the National Bank for Public Works and Services (Banobras), as well as by multilateral organizations such as the Green Climate Fund (GCF) and the Global Environment Facility (GEF).
However, despite advances in thematic instruments (green, social and sustainable bonds), national projects and international partnerships, a significant financing gap remains, with institutional challenges but also prospects for expanding the sustainable market.
Definition
There is no definitive consensus on the definition of climate finance, but the term is widely used to designate financial resources mobilized by public and private actors, at the global and local levels, to support climate change mitigation and adaptation activities. According to the UNFCCC, climate finance should be characterized by the nature of the activities financed—rather than by the providers, intermediaries, or financial instruments—focusing on adaptation and mitigation results. The COP (United Nations Climate Change Conference) 15 in Copenhagen, in December 2009, established the political commitment to mobilize US$100 billion annually by 2020 for climate action in developing countries, enshrining the target in subsequent agreements. At COP16 in Cancun in November 2010, it was decided to create the GCF as a multilateral fund to provide long-term financing for mitigation and adaptation projects, formalized in 2010 and operationalized from 2015.
Mexican context
Climate vulnerabilities
Mexico has seen an increase in average annual temperature of approximately 0.9 °C between 1950 and 2020, coupled with irregular variations in precipitation, which intensifies extreme events such as prolonged droughts and flash floods in different regions of the country. In 2024, the country faced its third heat wave of the year, with temperatures exceeding 45 °C in 19 states and more than 70% of the territory in a moderate to severe drought situation, causing at least 61 deaths directly attributed to extreme heat. According to the Notre Dame Global Adaptation Index (ND-GAIN), which measures exposure, sensitivity, and adaptive capacity, Mexico obtained a vulnerability score of 0.368 in 2021, placing it among the countries with "medium-high vulnerability" and indicating significant social and economic adaptation challenges.
The National Atlas of Vulnerability to Climate Change (ANVCC) of Mexico's National Institute of Ecology and Climate Change (INECC) has mapped, at municipal level, risks such as water stress, landslides, and floods, identifying more than 1,200 municipalities with high or very high territorial vulnerability, especially in the north-central and mountainous regions of the country. According to the G20 Climate Risk Atlas, Mexico faces simultaneous threats from heat waves, wildfires, floods, and tropical cyclones, creating a multifaceted risk landscape that demands integrated responses.
In coastal areas, recent modeling predicts that parts of the northwestern mangroves and Atlantic sandflats will be at risk of permanent submersion under moderate sea-level rise scenarios, compromising protective ecosystems and local livelihoods. The town of El Bosque, on the Campeche coast, illustrates this process: accelerated sea rise and recurring storms have reduced its population from 700 to fewer than 12 residents in less than a decade, highlighting the rapid exposure of coastal communities to sea-level rise and erosion. Finally, the 2025 Atlantic hurricane season reinforces Mexico's heightened exposure to high-intensity tropical storms, particularly in states such as Guerrero, Oaxaca, and Quintana Roo.
Mexico faces a significant deforestation challenge, driven primarily by expanding agricultural facilities and growing urban sprawl across the country. Mexico has one of the highest deforestation rates in the world, with 1,380,000 hectares of forest lost annually. The Mexican government implemented the $3.4 million "Sembrando Vida" program in 2018, which strives to combat rural poverty and environmental degradation through reforestation. More than 400,000 people have been hired to support reforestation efforts in 24 states. However, critics report that participants are clearing jungle to plant trees, rather than preserving and expanding existing forests. In 2016 Mexico devised and published a national strategy to take action on the topic of its Biodiversity by 2030, this plan is to understand, conserve, and restore it. | url= https://www.mdpi.com/1424-2818/17/3/185 A drastic change in water patterns has affected Mexico's agricultural sector, with prolonged droughts and limited access to water resources. This has forced farmers to rely on irrigation to maintain production or switch to crops that require less water. In 2024, Mexico faced a three-year drought that caused agricultural concerns and water scarcity issues, with an estimated 20% to 40% reduction in corn production due to the prolonged drought. Regarding agricultural policy, President Sheinbaum announced a plan to guarantee prices for farmers for national staples—corn, beans, and coffee—with the goal of achieving "food sovereignty" by October 2024.
History of climate finance Mexico took its first formal steps in climate finance with the creation of the Special Climate Change Program (PECC) 2009–2012, published in the Official Gazette of the Federation on August 28, 2009, aiming to integrate mitigation and adaptation policy without compromising economic development. Through the PECC 2009–2012, the federal government established four strategic components—Long-Term Vision, Mitigation, Adaptation, and Institutional Strengthening—to consolidate a comprehensive climate policy.
In 2012, with the enactment of the General Climate Change Law (LGCC), Article 80 established the Climate Change Fund Trust, structured as a public trust administered by the Secretariat of Finance and Public Credit (SHCP), with the objective of raising and channeling financial resources to support climate projects. According to operational rules from November 2018, this trust was established on November 30, 2012, formalized by contract on the same day, under the presidency of SHCP as sole trustee and with the participation of SEMARNAT and NAFIN as technical fiduciaries.
In 2015, NAFIN issued the first green bond in US dollars worth US$500 million, marking Mexico's debut in international climate debt markets. The following year, NAFIN launched its first green bond denominated in Mexican pesos, consolidating the framework for national thematic climate finance. These national milestones laid the foundation for multilateral cooperation, as noted in the UNFCCC framework report, which highlights contributions from seven partner countries and four international organizations— the World Bank, the IDB, the Clean Technology Fund, and the GEF—to climate projects in Mexico.
Legal frameworks The Federal Budget and Fiscal Responsibility Law (LFPRH), in force since 2006, regulates the incorporation of financing revenues into the Revenue Law and establishes transparency and accountability criteria for the use of public resources, including those earmarked for climate change.
The General Climate Change Law (LGCC), enacted on May 28, 2012, establishes the basis for Mexico to contribute to compliance with the Paris Agreement and regulates principles, objectives, and strategies for mitigating and adapting to climate change at the federal, state, and municipal levels. Article 2 defines the objectives of promoting "mitigation of greenhouse gases and adaptation of Mexican society" and guarantees the right to a "healthy environment for current and future generations."
The Energy Transition Law (LTE), published on December 24, 2015, sets objectives for the diversification of the energy matrix, promotes the sustainable use of energy, and imposes obligations to purchase clean energy on suppliers, establishing specific funds for energy efficiency and distributed generation projects.
Energy panorama
Energy matrix
In October 2024, Mexican President Claudia Sheinbaum championed the expansion of renewable energy in the country and unveiled a plan to increase the share of renewable energy in the country's energy mix to 45% by 2030. In March 2025, Sheinbaum approved a series of laws known as the "Energy Reform," which aims to add about 23 gigawatts of additional capacity by 2030, along with 100 transmission and distribution projects. While the reform focuses on strengthening state-owned energy companies, it also reserves 46% of the electricity on the grid to be generated by private companies.
Mexico 's abundant natural resources present potential for wind and solar energy projects off the coast. Innovation in the fields of climate technology and finance has led to the development of the venture capital market and a rise in startups focused on renewable energy. The largest sources of total energy supply are crude oil (42.6%) and natural gas (41.3%). Other sources include coal (4.7%) and biofuel (4.7%). Net energy imports totaled 13.9% in 2023, growing significantly since 2000. The United States is Mexico's largest energy importer due to strong pipeline connections.
Total electricity production in the country in 2023 was 356,416 GWh. The largest electricity consumption comes from industry (59%), the residential sector (23.7%), and the commercial and utilities sector (6.7%). Electricity demand growth has slowed in recent years due to improvements in energy efficiency and a shift to less energy-intensive sectors. Mexico's per capita electricity consumption was 0.0024 GWh in 2023. In 2023, electricity prices in the country averaged approximately $0.15 per GWh, a value that has fluctuated over the last 5 years between $0.11 per GWh in 2017 and $0.15 per GWh in 2023.
The largest source of energy for electricity is natural gas, imports of which from the United States have increased by 400%, from 0.5 trillion cubic feet to 2.0 trillion cubic feet since 2011. The government's goal is for renewable energy to constitute 45% of electricity production by 2030, a significant increase from 23% in 2023.
Mexico's National Electric System (SEN) is one of the largest in the Western Hemisphere, consisting of nine regions and a binational system in Baja California, with most regions interconnected as part of the National Interconnected System (SIN). The total installed capacity of Mexico's electricity grid reached 87,130 MW in 2022, marking a 1.3% increase over 2021, with a broader capacity of 92,503 MW when including interconnected plants and distributed generation. The grid includes both public and private generating plants. In 2022, 30% of the grid's electricity was generated by the private sector.
On March 7, 2025, new regulations established a framework for energy storage in Mexico, defining its role in stabilizing the grid, supporting renewable energy, and increasing industrial energy security. According to PRODESEN 2024–2038, Mexico will need 8.4 GW of energy storage capacity by 2038 to ensure grid stability and facilitate the integration of renewable energy, which will require strategic incentives, market access, and solid financing.
Renewable energies