Energy sector, public finances and energy transition

Written in
OPINION
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Energy is present in most daily activities and is essential for meeting basic and community needs. Due to this, the provision of reliable and affordable energy resources is decisive for the social and economic development of a country.

Currently, the energy sector contributes approximately 5.0% to the national Gross Domestic Product (GDP). However, this contribution has been reduced in recent years. From 2000 to 2021, the extraction of oil and gas went from 8.0% of GDP to 3.4%; while the generation of electricity went from 0.7% of GDP to 1.2% in the same period.

The energy sector is also closely linked to public finances. For example, from 2001 to 2021, public sector oil revenues averaged 6.1% of GDP, that is, approximately 28% of total public revenues. On the other hand, 25% of programmable spending is directed to the sector.

Another area where the energy sector exerts influence is the environment. Three out of every four greenhouse gas emissions, which cause climate change, originate from the sector. Pointing out this relationship becomes very relevant in the face of the climate emergency that the world is currently experiencing.

Given the above, a comprehensive analysis of the energy sector involves reviewing its relationship with public finances and the environment. However, the information related to these three areas is usually scattered. Given this, the CIEP has launched a microsite with information on the country’s energy sector and the relationship it has with public finances and the environment over the last 20 years.

Analyzing the comprehensive performance of the energy sector is useful for making a more accurate diagnosis and proposing better public policies. For example, it can be seen that the performance of the energy sector in the last ten years has made little progress, since as of 2015 the country has become a net importer of energy. At the same time, energy revenues have halved their share in the last five years. Not coincidentally, these two effects are linked to each other. Similarly, it is possible to see that the energy sector is behind in meeting its clean energy goals and that public spending directed to the sector is related to emissions.

As citizens and taxpayers we must be aware of what happens to the resources allocated to the energy sector, its performance and its relationship with the environment. The microsite aims to be a tool that contributes to the above and is available to everyone. We invite you to consult it at the following address: energiaenmexico.ciep.mx.

*Joel Tonatiuh Vazquez Perez

Coordinator of energy transition and public finances

Graduated from the Faculty of Economics of the UNAM. He completed a master’s degree in Environmental Economics at the Center for Economic Research and Teaching, where he was recognized for the best thesis of his generation, focused on the economic valuation of renewable energy. He has been an adjunct professor at CIDE and at the Faculty of Economics at UNAM. He currently serves as coordinator of Energy Transition and Public Finance at CIEP. He is interested in promoting the energy transition and mitigating the effects of climate change.

**Jose Luis Clavellina Miller

Director of research

He has a doctorate in Economics from the National Autonomous University of Mexico (UNAM), as well as a master’s degree and a degree in Economics from the same university. He did a doctoral research stay at the University of Kent at Canterbury. He has worked as a researcher at the Center for Public Finance Studies of the Chamber of Deputies and at the Belisario Domínguez Institute of the Senate of the Republic. He is currently Director of Research at CIEP. Among his interests are the sustainability of public finances, intergenerational fiscal equity and financing for development.