This chapter presents the findings of a case study carried out in Mexico on scaling up the use of nature-based solutions to address water-related climate risks. Building on the initial policy framework developed, it presents insights into Mexico’s enabling environment for nature-based solutions, specifically with regard to policy, governance and regulatory frameworks, as well as technical capacity and funding for nature-based solutions. It presents challenges Mexico is confronted with as well as evolving good practices to address them.
Scaling up Nature-based Solutions to Tackle Water-related Climate Risks
Insights from Mexico and the United Kingdom
2. Managing water-related climate risks with nature-based solutions in Mexico
Abstract
2.1. Introduction
2.1.1. Context and objective of the case study
Healthy ecosystems and their associated services can provide effective protection against climate‑related variability and change, including extreme weather events. Nature-based solutions (NbS)1 have recently gained momentum as measures that protect, sustainably manage and restore nature, with the goal of preserving and enhancing ecosystem services to help address societal goals. For example, restoring a wetland can enhance its water storage capacity, thereby reducing flood risk in neighbouring communities, contributing to better water quality and enhancing species’ habitats. NbS can be used as an alternative or complement to service provision through engineered, grey infrastructure, such as by using green roofs or constructed wetlands to prevent drainage systems from being overwhelmed by surface run‑off (Depietri and McPhearson, 2017[1]). NbS tend to perform well across a wide range of conditions, and provide diverse benefits, making them particularly well-suited for adapting to a changing and uncertain climate (OECD, 2020[2]).
Recent OECD work on NbS has shown that despite their benefits in managing water-related climate risks, a number of bottlenecks, notably related to governance, regulations, policies and financing, hinder their uptake (OECD, 2020[2]). This paper is one of a series of country case studies that explore existing challenges and aim to identify potential ways to overcome them. This case study provides an overview of the actors and institutions, policies, regulations, technical capacity, and financing which make up the enabling environment for water-related climate risk management in Mexico. It is intended to share best practices and support policy makers in OECD countries in levelling the playing field for NbS. The series of case studies explore the following questions:
How are NbS mainstreamed into planning and investment decisions for managing water-related climate risks?
What tools and mechanisms are used to promote NbS?
2.1.2. Overview: Water-related climate risks
Mexico has a diverse natural landscape composed of many different types of ecosystems, ranging from deserts to mountains, lagoons, mangroves and forests (Government of Mexico, 2020[3]). It is widely recognised as being a mega biodiverse country, hosting between 10% and 12% of the world’s species (OECD, 2013[4]). Mexico’s rich nature has high value to its people and economy. For example, The Nature Conservancy estimates that mangroves protect 300 000 people from flooding and prevent USD 9 billion of property damage from floods annually in Mexico (Losada et al., 2018[5]). In Mexico’s Gulf of California and Baja California Peninsula, marine ecosystems support tourism activities. Each year, nature-based marine tourism in the area generates approximately USD 518 million in revenues and around 3 500 directly created jobs (Cisneros-Montemayor et al., 2020[6]). Furthermore, a study on the economic valuation of ecosystem services found that regulation services, which include erosion and flood control, are among the most valuable types of ecosystem services (INECC, 2020[7]). Beyond its abundant natural wealth, Mexico has a high amount of cultural wealth, which is closely linked to ecosystem conservation and the management of natural resources. Historically, the country has had large numbers of cultures settle within its territory, resulting in a diverse population with traditional knowledge regarding environmental conservation and practices (Government of Mexico, 2020[3]).
Due to its location in between the Atlantic and Pacific oceans and its complex topography, Mexico is highly exposed to different water-related hazards, many of which are fuelled or exacerbated by climate change.2 For example, the country is particularly vulnerable to tropical cyclones, with approximately 40% of the territory being exposed to high or medium tropical cyclone risk. In 2013, Hurricanes Ingrid and Manuel and the resulting heavy rains and landslides caused nearly 200 deaths, affected approximately 155 000 people, and caused around USD 5.7 billion in damages (OECD/The World Bank, 2019[8]). Although floods regularly occur, they are more frequent during the rainy season, between March and November. Furthermore, there is a particularly high risk of landslides and avalanches along Mexico’s Sierra Madre mountain range. Close to 300 municipalities are at risk of landslides (INECC, 2019[9]). Finally, Mexico is subject to frequent droughts, resulting in significant agricultural losses. For example, a severe drought heavily affected the region of Guerrero in 2015, ultimately causing around USD 26 million in total economic damages (OECD/The World Bank, 2019[8]).
A growing population and an increase in urbanisation have increased the country’s exposure to water-related climate risks. Mexico has a population of approximately 126 million people, with almost 80% of the population living in urban areas (UN DESA, 2018[10]). Approximately 200 cities with a population of more than 10 000 inhabitants are located in river basins with high flood risk (OECD, 2013[11]). Furthermore, many urban populations live in informal settlements that include limited access to services (e.g. emergency services) and housing (USAID, 2017[12]), thus contributing to the vulnerability to water-related risks. Indigenous populations, which compose 21.5% of the country’s population, are particularly vulnerable to the impacts of water-related risks, with up to of 70% of these communities living in poverty in 2016 (Roldan, 2018[13]; CDI, 2015[14]).
Climate change is expected to increase the frequency and magnitude of the impacts of water‑related climate risks in Mexico. Precipitation is projected to decrease between 10% and 20% in most of the country, while north-western Mexico might experience an increase in precipitation of up to 40% (SEMARNAT and INECC, 2018[15]). A decrease in average rainfall will likely impact the availability of freshwater supplies, while an increase in average rainfall could affect the severity and frequency of flooding. Additionally, with over 11 000 kilometres of coastline, and with about 66% of coasts already dealing with some level of erosion, climate change will exacerbate risks for coastal communities subject to the effects of coastal erosion and storms and flooding due to sea level rise (Score, 2020[16]; Valderrama-Landeros et al., 2019[17]).
Land degradation is also driving vulnerability and exposure to water-related climate risks. Land‑use conversion, plant pests and diseases, and overgrazing have degraded land over the past 25 years (CONAFOR, 2015[18]). Conversion of natural landscapes to agricultural and urbanised land has been identified as one of the primary drivers that leads to an increase in the frequency of floods in Mexico, particularly in the south-central region of the country (Zúñiga and Magaña, 2018[19]). Factors such as urbanisation and deforestation result in the deterioration of watersheds, consequently making them more vulnerable to heavy rains and flooding. At present, 50% of Mexico’s total land area shows some degree of deterioration, a factor that has made the country increasingly more vulnerable to water-related climate risks (Martínez-Garza, Ceccon and Guariguata, 2018[20]).
2.2. The enabling environment for managing water-related climate risks with nature-based solutions
2.2.1. Actors and institutional arrangements
Many institutions and actors at the national and subnational level play a role in the use of NbS for managing water-related climate risks. Their responsibilities encompass flood and drought management, environmental conservation but also urban planning and broader land-use management, as well as those in charge of environmental preservation measures. Figure 2.1 provides an overview of the national and subnational authorities responsible for implementing NbS to manage water-related climate risks.
Figure 2.1. Overview of the authorities responsible for implementing nature-based solutions to manage water-related climate risks in Mexico
Note: NbS: nature-based solution.
The Ministry of Environment and Natural Resources (Secretaría de Medio Ambiente y Recursos Naturales, SEMARNAT) is the federal authority with the most direct competencies for planning and implementing NbS for managing climate-related water risks. Together with its three decentralised public bodies, these authorities have responsibilities for conservation, restoration, land management and water management:
The National Commission of Natural Protected Areas (Comisión Nacional de Áreas Naturales Protegidas, CONANP) is responsible for creating and managing protected natural areas, such as national parks, biosphere reserves, sanctuaries or protected areas of flora and fauna. In recent years, this authority has started to incorporate climate change adaptation and disaster risk reduction into its work and to explore how protected areas can be a form of NbS, by leveraging ecosystem services that protected areas provide to the broader landscape. For example, CONANP undertook ecosystem valuation assessments of both sand dunes and coral reefs as a pilot project with the tourism sector.
The National Forestry Commission (Comisión Nacional Forestal, CONAFOR) is responsible for facilitating sustainable forestry development. While it doesn’t have any explicit policies or programmes that consider forest restoration as an NbS, CONAFOR is responsible for forest restoration projects in watersheds, which can address both flooding and drought risk.
The National Water Commission (Comisión Nacional del Agua, CONAGUA) is responsible for water management, planning and implementation at the national level. Its responsibilities cover flood control infrastructure development, with a focus on major grey investments, as well as a large hydraulic infrastructure network of about 4 000 dams producing electricity, supplying drinking water and regulating water flows (OECD, 2013[11]).
SEMARNAT is also responsible for climate change policy. Its scientific institute, the National Institute of Ecology and Climate Change (Instituto Nacional de Ecología y Cambio Climático, INECC) contributes to the development, conducts and evaluates national policy, and supports capacity building, including on climate change adaptation. INECC works with international donors on climate-related projects, including on NbS pilots. Furthermore, INECC developed action plans for integrated watershed management (planes de acción para el manejo integral de cuencas hídricas) that promote integrated management of coastal watersheds to preserve biodiversity and contribute to climate change adaptation and mitigation. Additionally, INECC developed the National Atlas of Vulnerability to Climate Change that includes recommendations for floods, landslides and water stress that encompass the conservation of natural vegetation in basins, payment for ecosystem services and the creation of natural protected areas (INECC, 2019[9]).
The Mexican Institute of Water Technology (Instituto Mexicano de Tecnología del Agua, IMTA) is a decentralised public body of SEMARNAT. It is a public research centre focused on technology development and research on water resources protection, including NbS for water management.
National actors working on environmental issues are considered to have a high level of awareness of NbS and have made efforts to promote their use. However, there are some actors and institutions with key responsibilities for influencing the use of NbS which tend to have a lower awareness of NbS, of their ability to provide multiple functions, as well as of their potential economic benefits. Institutions with great potential to influence the use of NbS include:
The Ministry of Agriculture and Rural Development (Secretaría de Agricultura y Desarrollo Rural, SADER) is responsible for planning and implementing support programmes for the agricultural sector to help adapt to the effects of severe droughts. NbS present a major opportunity within the agricultural sector in Mexico as they can be used for groundwater recharge, which can then support farms. There are several examples of this having already been implemented, such as in the reforestation that was done in the Izta-Popo National Park (Sonneveld, Merbis and Arnal, 2018[21]). Within SADER, the National Commission of Arid Zones (Comisión Nacional de las Zonas Aridas, CONAZA) has a mandate to manage droughts, as well as rainwater capture. SADER’s regional offices provide an opportunity to work directly with local stakeholders as well as to transmit local information back to central authorities.
The Ministry of the Interior (Secretaría de Gobernación, SEGOB) holds a potentially important role in the use of NbS to reduce exposure to hazards, as its National Centre for Prevention of Disasters (Centro Nacional de Prevención de Desastres, CENAPRED) is responsible for planning for disasters. CENAPRED conducts research and training on the causes of, and how to mitigate the consequences of, disasters. Decision makers use the information collected and recommendations made by CENAPRED to take actions for the prevention of disasters. This provides CENAPRED with a unique opportunity to influence how risks are managed, and for the role of NbS.
The Ministry of Agrarian, Territorial and Urban Development (Secretaría de Desarrollo Agrario,Territorial y Urbano, SEDATU) is responsible for policies pertaining to urban planning, land use and land tenure. It regulates settlements of both urban and rural communities, land and water related to agriculture, and government strategies for infrastructure. As land use is a critical component of NbS, SEDATU has the opportunity to consider these approaches when going forward with infrastructure projects.
The National Institute of Indigenous Peoples (Instituto Nacional de los Pueblos Indígenas, INPI) is responsible for recognising, protecting, defending and conserving the lands, territories, assets and natural resources of indigenous peoples. In addition, it promotes and implements measures in co‑ordination with indigenous and Afromexican peoples for the conservation and protection of biodiversity and the environment in order to maintain sustainable lifestyles that are resilient to the adverse consequences of climate change.
Given the multi-faceted character of NbS, their uptake could benefit from effective institutional co‑ordination and collaboration. There are examples where ministries with different mandates have collaborated on an NbS project. In a project implemented by WWF-Mexico, CONAGUA and CONANP collaborated to ensure that mangrove conservation projects happen in tandem with watershed restoration. This collaboration is key, as mangroves restoration efforts are much more likely to be successful in healthy watersheds (Barrios Ordóñez, 2015[22]). However, despite overall efforts to collaborate, interviewees recognised that much more could be done to highlight ecosystem interdependencies and systematically bring forward projects with co-benefits across sectors.
In Mexico’s federal system, regional and municipal authorities are responsible for land use; construction and zoning permits; housing and ecological preservation; as well as for the creation, evaluation and enforcement of urban development plans (OECD, 2013[11]). This mandate provides municipalities with a potentially important role for promoting the use of NbS. For example, the city of Xalapa introduced rainwater harvesting systems in public buildings and schools to ensure adequate water supplies against unpredictable rainfall (GEF, 2019[23]). In Mexico City, the local government grants a 10% reduction in property tax to incentivise the installation of green roofs to manage storm water runoff and generate other benefits (such as mitigating the urban heat island effect) (Mexico Daily Post, 2019[24]). There is scope for national actors to more systematically monitor and bring forth local level initiatives to promote the uptake of such good practices among subnational peers.
Non-governmental actors, such as landowners (e.g. farmers and forest managers), water utilities, property developers, or sectors with explicit interest in the environment (such as tourism) and insurers can make important contributions to the use of NbS. For example, the car manufacturer Volkswagen de México partnered with CONANP in Puebla-Tlaxcala valley to replant nearby deforested volcanic slopes to improve groundwater replenishment in the valley and build resilience against drought in the region. Increased water supply benefited both the nearby city of Puebla, as well as the operations of the Volkswagen plant (WBCSD, 2018[25]). The tourism sector has also been involved in the deployment of NbS, given the clear business value of protecting coasts and infrastructure from extreme weather events. The national government is working to find more ways to encourage private sector involvement and investment in NbS. A notable ongoing initiative to encourage their involvement is the issuance of green certificates for tourism operators that implement measures to protect the coast, such as dune restoration for the purpose of erosion prevention.
Landowners, including farmers, forest managers and indigenous peoples, are key non‑governmental actors. With the Program for the Economic Enhancement of Indigenous Peoples and Communities (Programa para el Fortalecimiento Económico de los Pueblos y Comunidades Indígenas, PROECI), INCI supports conservation strategies and the sustainable management of natural resources by indigenous communities. This programme enabled the implementation of an NbS project of construction and rehabilitation of rainwater catchment works in Oaxaca.
Environmental non-governmental organisations (NGOs), which collaborate with relevant stakeholders and provide local knowledge for NbS projects, are key non-governmental actors. Almost all NbS pilots in Mexico thus far have had NGO involvement. One example of this is the support NGOs provided the city of Merida in accomplishing goals in its Green Infrastructure Plan, specifically through collaborating with the city’s tree-planting programme. The plan includes additional projects such as the creation of water bioretention areas, runoff management, and storm water containment in urban parks and roads (The Yucatan Times, 2017[26]).
2.2.2. Policies and regulatory frameworks
Policies, strategies and plans
Table 2.1 illustrates the inclusion of NbS in some of Mexico’s key policy documents guiding the country’s general, but also sectoral, development (such as in water or climate change). Mexico has traditionally relied on grey infrastructure to manage water-related risks. The incorporation of NbS as a core concept in policies such as the National Water Program (Programa Nacional Hídrico, PNH), the Sector Program for the Environment and Natural Resources (2020-2024) (Programa Sectorial de Medio Ambiente y Recursos Naturales, Promarnat) represents a fundamental shift in the way both risks and management responses are conceived.
Table 2.1. Selected national bills and policies with relevance to nature-based solutions in Mexico
Notes: NbS: nature-based solutions. Bills and policies marked with an asterisk are forthcoming.
✓ = yes, × = no.
Sources: Government of Mexico (2019[28]); CONAGUA (2020[29]); CONABIO (2020[30]); SEMARNAT (2016[31]; 2020[32]); CONANP (2017[33]); Fedowitz (2020[34]); Oxford Business Group (2019[35]).
Despite the recognition of NbS in major policy documents, the suggested actions are not underpinned with budgets or implementation responsibilities. For example, in the PNH (2020-2024), the promotion of natural rainwater drainage and restoration measures in high-priority watersheds for building resilience to floods and droughts is highlighted as an action, but information regarding implementation, funding and monitoring is lacking (CONAGUA, 2020[29]). Furthermore, the term NbS is often not specifically mentioned in sectoral policies where NbS could potentially play a key role, such as policies related to infrastructure. Nonetheless, some strategies and plans, such as the Sectoral Program for Tourism 2020‑2024 (Programa Sectorial de Turismo, PROSECTUR), emphasise the importance of conserving and restoring ecosystems for adapting to climate change, actions that are considered to be a form of NbS.
While strategic national policies in Mexico are set on a six-year cycle and hence subject to changing priorities, enshrining these policies into law is seen as a way to ensure long-term continuity of objectives, which is essential for NbS. For example, the updated General Law for Water presents an opportunity to put that in practice. While it is not certain whether NbS will be mentioned in the final draft,3 incorporating an emphasis on natural approaches to water management in this document is a significant opportunity to promote widespread use of NbS.
An ongoing policy challenge is the misalignment of objectives within strategies, which can at times discourage the use of NbS. For example, conservation polices such as the National Biodiversity Action Plan (2016-30) aim to promote the connectivity, conservation and sustainable use of ecosystems. But there are also agricultural and food security objectives that promote an increase in productivity and production goals which often lead to the expansion of agricultural land and can be at odds with the ambition of conservation policies (Cotler and Martínez-Trinidad, 2010[36]; Ojeda, 2017[37]).
Finally, international commitments can play an important role in driving domestic policy. Mexico’s first nationally determined contribution under the United Nations Framework Convention on Climate Change (2016) directly refers to NbS such as reforestation and the restoration of ecosystems, bringing prominence to these approaches. Box 2.1 provides an overview of relevant international commitments that Mexico has made in relation to NbS.
Box 2.1. Mexico’s international objectives and progress relevant to nature-based solutions for water-related climate risks
Mexico has committed and set objectives that are relevant to nature-based solutions (NbS) through several international frameworks and agreements, demonstrating high-level awareness and commitment to the issue. These include:
Mexico’s 2015 nationally determined contribution submitted under the United Nations Framework Convention on Climate Change includes specific commitments on ecosystem-based adaptation, such as reaching a rate of 0% deforestation by the year 2030. Mexico emphasises the use of NbS for managing water-related risks, with actions listed including the protection, conservation and restoration of watersheds in its updated nationally determined contribution.
Through the Aichi Target 15 of the Convention on Biological Diversity, Mexico has committed to restoring 15% of its degraded ecosystems, thereby contributing to climate change mitigation and adaptation and to combating desertification.
Through the Bonn Challenge, Mexico pledged to restore 8.5 million hectares of degraded and deforested landscapes by 2020.
Through the 2030 Agenda for Sustainable Development, Mexico’s Voluntary National Review (2018) includes the country’s progress in wetland conservation to meet water-related (SDG 6) goals.
Sources: Government of Mexico (2015[38]; 2018[39]); Ortega-Rubio, (2018[40]); OECD (2018[41]).
Legal and regulatory frameworks
The regulatory framework, which shapes procurement, land-use zones or impact assessments regulations, has an important impact on project level decisions on NbS taken by local governments and non‑governmental actors. According to stakeholders that were interviewed (see Annex 2.A.), regulations applying to flood defence infrastructure have been found to be complex and at times to discourage the use of NbS in Mexico.
In order to identify regulatory bottlenecks to the use of NbS, the Mexican Institute of Water Technology initiated research in 2020 to evaluate the regulatory framework for water infrastructure at all levels of government. While the IMTA review is ongoing, examples of potential regulatory obstacles for NbS are emerging:
National building code guidelines (and most local building codes) do not include NbS as an approach for surface water and run-off management.
NbS are not considered as a risk reduction measure in disaster models, which are then used to understand vulnerabilities and plan risk reduction investments.
Case study interviewees flagged that hazard insurance policies do not consider NbS as an option to manage risks. For example, many hazard insurance policies require coastal tourism operators, such as hotels, to have a cement wall as storm surge and erosion protection in order to be insurable. However, this fully excludes the use of options that fall under the umbrella of NbS, such as gardens, dunes or vegetation.
There are many opportunities to overcome these regulatory challenges. First, a regulatory review, such as the one IMTA is undertaking, can be a critical first step in both understanding the implementation failures at the local (municipal) level and normative gaps and raising awareness of the issue. Second, the use of guidelines and manuals geared towards actors involved in the planning and implementing stages, such as hydraulic engineers, can be effective in navigating regulatory challenges. The city of Hermosillo, for example, has developed several technical guidelines, including a Green Infrastructure Design Guidelines Manual for Mexican Municipalities and a technical standard for green infrastructure that all industrial, commercial and housing developers are required to comply with (Villa, 2018[42]).
2.2.3. Tools and technical capacity
One challenge in Mexico is the limited data that can be readily used to plan NbS. The performance of NbS is highly site-specific and at times complex to assess, and a wide array of data, local information and methodologies may be needed to conduct technical feasibility assessments. While platforms for information sharing on water-related risks and ecosystem conservation exist in Mexico, the information is dispersed across multiple agencies’ portals and platforms, making it difficult to obtain all of the information needed to plan an NbS project. For example, CONAGUA is responsible for creating flood hazard maps, while CONANP has previously mapped ecosystems within protected areas and completed ecosystem valuation assessments for several regions of the country. CENAPRED has yet another separate web application that provides layers of geographic information related to disasters such as floods, erosion and fires. In the National Atlas of Vulnerability to Climate Change, INECC assesses the vulnerability to climate change of human settlements to floods and landslides, of livestock production to floods and water stress, of forage production to water stress (INECC, 2019[9]).
Another key gap identified by stakeholders is the lack of historical performance data available on previously implemented NbS projects, and most notably the lack of information on the costs and benefits of NbS compared to other measures. This is in part due to the generally low level of monitoring of NbS‑type projects throughout their duration, resulting in little evidence being collected on the projects’ costs and benefits, particularly over the long term once the project has been completed. This can represent a major barrier to implementation, as it further prevents the creation of data. Some methods have nonetheless proven their values over time, such as illustrated by the Chinampas system (Box 2.2).
One additional bottleneck to the implementation of NbS is the lack of specialised education in ecological processes for water risk management. Most individuals working in the water sector in Mexico have engineering backgrounds with a focus on building infrastructure that can resist disasters. To increase collaboration, education regarding NbS needs to be mainstreamed across all sectors, rather than just in those related to the environment. Doing so can help to improve awareness and the ability for actors to effectively work with NbS, potentially leading to an increase in the consideration and uptake of these solutions. In recent years, some initiatives and pilots have begun to address this issue. For example, the Engineering Department of the National Autonomous University of Mexico (Universidad Nacional Autónoma de México, UNAM) is integrating green infrastructure into curricula and post-doctoral research projects, providing graduates with skillsets relevant to NbS projects (Watkins et al., 2019[43]). Courses include the use of sand dune conservation and restoration to prevent coastal erosion.
Box 2.2. The role of traditional knowledge in the implementation of nature-based solutions
The Chinampas system, known as a “Globally Important Agricultural Heritage System”, is an agro‑hydrological system developed by the Aztecs and nowadays used by farmers in Mexico City. It relies on traditional ecological knowledge and understanding of soil conditions to build resilience against drought, using farming methods such as multiple cropping and the shifting of crops. This is in addition to the “Milpa System” of sustainable food production, recognised by the Food and Agriculture Oganization. Currently, the Intersecretarial Group for Health, Food, Environment and Competitiveness (Grupo Intersecretarial de Salud, Alimentación, Medio Ambiente y Competitividad, GISAMAC) promotes the transformation of the food system, through food production based on the knowledge of indigenous peoples and with agro-ecological practices, to improve soil conditions, water conservation and strengthen resilience to the adverse effects of climate change.
Sources: Robles et al. (2018[44]); FAO (2017[45]).
2.2.4. Funding and finance
Like any other investments to manage water-related climate risks, NbS have the potential to be supported by different funding and financing sources, both private and public. According to stakeholders during interviews (see Annex 2.A. for a list of the stakeholders interviewed), the federal government currently does not have an estimate of how much the public or private sector spends on NbS or similar approaches. However, it is estimated that most projects specifically labelled as NbS have been funded through a combination of international assistance and domestic public funds.
The Ministry of Finance and Public Credit (Secretaría de Hacienda y Crédito Público, SHCP) is responsible for managing and allocating Mexico’s federal budget. Given the wide range of interventions which can be considered as an NbS, multiple funds have the potential to be used for NbS-related activities (Table 2.2). However, several challenges around the criteria needed to access public funding exist. For example, disaster prevention funds cannot be used to fund NbS, as NbS are not currently considered as a form of structural prevention.
Table 2.2. Examples of public funding mechanisms and sources available for nature-based solutions in Mexico
Note: Following the publication of the “Decree ordering the extinction or termination of public trusts, public mandates and similar” (April 2020), which modifies 18 laws and repeals two more, 109 trust are to be extinguished, including the Disaster Assistance Fund (FONDEN); The National Climate Change Fund (FCC); "Sectorial Fund for Environmental Research SEMARNAT-CONACYT (FSIA)" and Mixed Funds CONACYT (FOMIX). The beneficiaries will continue to receive resources through the allocated federal budget.
Source: INECC (2020[48]).
One challenge that was frequently cited by interviewees was around the timing of budgets. For example, most conservation-based programmes are subject to annual budgets, whereas NbS generally need sustained medium- to long-term funding. Depending on the interventions employed, NbS usually require an influx of capital up front that can support initial NbS implementation such as planting trees, removing invasive species, etc. However, to sustain the benefits of an NbS, ongoing maintenance is needed. Additionally, management and monitoring are often not factored into budgets for NbS projects in Mexico, particularly for after a project’s completion. This, coupled with a lack of access to medium- and long-term funding and the short mandates of municipal governments frequently makes it difficult for these projects to be sustainable beyond their completion. One potential way to overcome this barrier would be to make NbS eligible for infrastructure funding, as this type of funding is generally multiannual.
Mexico has a well-established payment for ecosystem services programme for forest conservation, known as the Payment for Hydrological Services Programme (Programa de Pago por Servicios Ambientales Hidrológicos, PSAH) (PROFOR, 2019[49]). Administered by CONAFOR, the programme gives forest communities between USD 10 and USD 40 per hectare per year of land conserved and has helped in cutting 38% less forest than they otherwise would have in areas of high risk of deforestation (Alix-Garcia et al., 2014[50]; CBD, 2019[51]). One of the key benefits of this programme is the hydrological management service provided by intact forests – creating a solid model that could be replicated more broadly in Mexico.
Funding and technical support from development agencies and multilateral banks have been key enablers for NbS initiatives in Mexico. For example, between 2011 and 2016, the Global Environmental Facility supported projects to reduce the risk of climate-related disasters in the Gulf of Mexico through NbS, such as mangrove and riparian reforestation, coral reef restoration, and water flow rehabilitation (World Bank, 2018[52]). However, an ongoing challenge is ensuring the continuity of actions once initial project funding has run its course.
Associating NbS benefits with private values can be difficult, especially as many of the potential co-benefits of NbS are hard to monetise, such as increased resilience, avoided losses and non-monetary benefits. Mexico has experience with private actors funding NbS measures in the case where NbS benefits can be translated into direct returns, such as the tourism industry, which depends on wide pristine beaches. One successful example of the private sector financing an NbS project in Mexico is the insurance policy for the Mesoamerican reef in the state of Quintana Roo (Box 2.3). In addition, some communities and local authorities, such as in the Sierra de Zapalinamé in Coahuila, have agreed to encourage water savings through voluntary financial contributions in water bills, revenues of which are then used for the watershed conservation (Gómez, 2016[53]).
Box 2.3. The Mesoamerican Reef insurance policy to protect the reef
The Mesoamerican reef, in the Caribbean Sea, is known for being the second-largest coral reef in the world. It provides coastal flood protection benefits from tropical storms to the local tourism industry as well as other benefits, such as biodiversity protection. As part of a project delivered by The Nature Conservancy and the state government, beachfront property owners are required to pay a fee into a trust to cover the repair of coral reef crest and restore resilience after storm damage as well as beach nourishment. This insurance policy provides protection benefits for buildings valued at USD 42 million, with USD 20.8 million specifically related to hotel infrastructure, while also providing co-benefits related to biodiversity and eco-tourism. The Nature Conservancy is working to determine whether it can be used for other types of ecosystems, such as coastal wetlands, with projects being pursued in Asia, the United States and the Caribbean.
Sources: Reguero et al. (2019[54]); Beck, Quast and Pfliegner (2019[55]); The Nature Conservatory (2019[56]).
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Annex 2.A. List of stakeholders interviewed
The OECD undertook interviews with representatives from the following institutions in July 2020.
Table 2.A.1. Name of institutions
The representatives interviewed were: Juan Carlos Centeno Álvarez, Cintia Amezcua, Angel Arias, Alfredo Araujo Beltrán, Miguel Angel Gallegos Benítez, Francisco Escobar Bravo, Luisa Buenrostro, Rodolfo Silva Casarín, Américo de la Garza Castellanos, Alejandro Cruz Castellón, Dra. Margarita Caso Chávez, Laurent Courty, Gloria Cuevas, Pilar Jacobo Enciso, Jorge Luis Nieves Frausto, Ricardo Prieto González, Salvador Espinosa Hernández, Jorge Zavala Hidalgo, Griselda Medina Laguna, María Fernanda Montero Lara, Amalia Salgado López, Malinali Dominguez Mares, Martin Ibarra Ochoa, Jesús Heriberto Montes Ortiz, Abril Salgado Paz, Lucía Guadalupe Matías Ramírez, Fabián Vázquez Romaña, Irma Karina López Sánchez, Homey Bon Santoyo, Juan Carlos Ramos Soto, Isabel María Hernández Toro, Cecilia Izcapa Treviño and Aseneth Ureña.
Notes
← 1. For the purpose of this study, the term NbS encompasses a range of ecosystem-based management approaches such as ecosystem-based adaptation, ecosystem-based disaster risk reduction and green infrastructure. Water-related climate risks are scoped as flooding, which includes coastal, riverine and urban floods, as well as associated hazards caused by too much water, such as landslides; as well as drought.
← 2. Examples of these water-related hazards include tropical cyclones, floods, landslides, avalanches and drought.
← 3. Not yet adopted by February 2020, and based on information from interviews.