What is Mexico's pathway to limit global warming to 1.5°C?

In the Highest Possible Ambition (HPA) scenario, industrial decarbonisation takes a staged approach. Electrification is critical, particularly for near-term emissions reductions. By 2035, electricity would meet 60% of industry energy demand. Beyond environmental concerns, electrification is critical to protect industry from price volatility in international fossil fuel markets. Surging gas prices as a result of the 2026 US/Israel war in Iran were passed onto consumers, including industry, highlighting the sector’s vulnerability to sudden price shocks due to its dependence on fossil fuels.¹1

Heat pumps can support industrial electrification, particularly for lower temperature processes (<140°C), with technological innovation increasingly showing applicability to temperatures to 250°C.²2 For higher temperature processes, such as in steelmaking, Mexico already has one of the world’s highest adoption rates of electric arc furnaces (EAFs), with around 94% of national steel production produced with EAFs. As a result, Mexican steel is almost 50% less energy-intensive than the global average.³3 Much of the remaining steel emissions (which amount to 1.0 tCO₂ per tonne of steel produced) underscore the importance of developing economy-wide policies which support renewable electrification. Aside from optimising processes, which the steel industry can lead on, the emissions reduction potential of electric technologies like EAFs remain underutilised as long as the electricity grid is not decarbonised. Much of this electricity continues to be fossil fuel-based and, as a result, emissions-intensive.

The HPA scenario accounts for a surge in fuels which can directly displace fossil fuels as feedstocks (e.g. in plastic production) and reduce hard-to-abate emissions (such as those produced in clinker production) from the 2030s on. Hydrogen reaches a 14% share in the mix by 2040, further increasing to a peak of 17% by 2050. Synthetic fuels begin to scale up in the 2040s, when it is more plausible for them to reach cost-competitiveness with other technologies. By 2050, they reach 4% of the mix, growing to 14% post-2050. The energy-intensive nature of green hydrogen and synthetic fuel production contribute to growth in industry’s absolute energy demand under the HPA scenario. However, because these fuels are produced by renewable electricity, they are critical to decarbonising Mexico’s industry sector; particularly as these fuels address otherwise hard-to-abate emissions.

As a major cement producer, Mexico’s cement sector is the leading source of industrial emissions.⁴4 As the majority of cement emissions are related to clinker production, phasing out fossil fuels alone is not enough to decarbonise cement. Clinker-related emissions continue regardless which fuel powers the process. As a result, reducing the share of clinker is necessary to bring the cement industry in line with 1.5°C. Reducing the ratio of clinker in cement and increasing the use of available alternatives represent cost-effective measures which do not require fundamental restructuring of factories and avoid extremely expensive investments in carbon capture and storage. The Mexican government can stimulate demand for low carbon cement through green public procurement policies.⁵5^,66

Mexico’s domestic fossil fuel industry is not included in the data represented in the graphs. However, it contributes 13% of economy-wide emissions and Pemex is among the most emissions-intensive producers in the world due to routine flaring.⁷7^{, 8}8