Environmental Technologies Industries

Environmental Technologies Industries

Market Plans

Mexico Environmental Export Market Plan

8. Air Pollution Monitoring and Control

The far-reaching policies implemented in Mexico to combat air pollution continue to be dwarfed by the magnitude of the widespread air-quality problem. This is especially true in the major urban areas and most notably in the valley of Mexico’s metropolitan area, home to more than 17 million people and 3.5 million vehicles. Mexico City’s air pollution problems are exacerbated by its circumstance of having a highly concentrated population living in an enclosed valley 7,500 feet above sea level.

The ambitious plans implemented in Mexico City have yielded some results, but whether those results have been major or marginal is open to debate. Although the overall level of pollutants released into the air has been reduced, a severe threat to public health remains.

Because air pollution problems have a direct impact on over one-third of Mexico’s total population, this sector will continue to be an important market for environmental technologies and services. It is also the area where the government thinks it has achieved the greatest progress.

Mexico City remains the principal air-quality challenge, but other regions have also suffered degradation in air quality. Lessons learned from tackling the problem in Mexico City have served as the basis for developing plans to address similar conditions in other cities. Pollution levels in Mexico are measured through an index called the Metropolitan Index for Air Quality (Indice Metropolitano de la Calidad del Aire, or IMECA), which tracks the level of sulfur dioxide (SO2), carbon monoxide (CO), nitrogen dioxide (NO2), ozone (O3), total suspended particles (TSP), particles under 10 microns (PM10), and lead (Pb). For each of these contaminants, there are specific regulations, which stipulate that the IMECA should not go over 100 points (see Table 8.1).

Table 8.1 Air-Quality Ratings under the IMECA

Air Quality	IMECA
Satisfactory (complies with NOMs)	0–100
Unsatisfactory	101–150
Bad (contingency phase 1)	151–200
Very bad (contingency phase 2)	200 and over

Source: INE.

On a national level, the most important plans to abate air pollution have been to create regional air-quality programs called PROAIRE. Those programs work toward establishing local infrastructures to monitor air quality, creating an inventory of pollution sources, and creating specific solutions to mitigate emission levels from fixed and mobile sources.

At present, seven PROAIRE have been implemented in the following cities: Mexico City, Guadalajara, Monterrey, Toluca, Juarez, Tijuana, and Mexicali, which have shown consistently high pollution levels.

Because air pollution results mostly from burning fuels, improving fuel quality has been the cornerstone of Mexico’s air-quality improvement programs. A focus of reducing industrial emissions has been increasing the availability of natural gas. Mexico is making major investments in its capacity to transport and distribute natural gas nationally.

On the mobile sources side, the national oil company, PEMEX, has also made better fuels available, but improved fuels have been only a partial solution because of the average age and inefficiency of the country’s vehicle fleet. A proposed alternative has been retrofitting vehicles for the use of compressed natural gas (CNG). This area is expected to experience significant growth in the near future.

Overall investment in improving air quality comes from both the private and public sectors. The public sector’s investment comes in the form of establishing and enforcing a regulatory framework, along with developing cleaner fuels. Private-sector investment results from regulatory enforcement and particularly the threat of shutdown from declared air-quality emergencies. The new administration is expected to continue promoting the development of additional PROAIRE in various Mexican cities. PROAIRE will continue to be a market driver for environmental technologies, services, and equipment. Particularly important will be technologies that help quantify and define the air-quality problem, as well as specific technologies to mitigate the problem.

Mexico City is developing an extension of its PROAIRE, which will result in a series of steps to be implemented over time. This new program is expected to be presented in July 2001. The program will differ from the previous PROAIRE of 1995–2000 in that it will cover a 10-year horizon and will be dynamic, allowing for modifications as air conditions change.

Regulations, Standards, and Enforcement

SEMARNAT and the Secretariat of Health are responsible for creating air-quality regulations. Those regulations relate both to emissions and to exposure levels and define the permissible pollution levels for each contaminant (see Table 8.2). Most Mexican air regulations are developed following the criteria set forth by the World Health Organization or are developed following EPA standards. A complete description of regulations is available in Spanish at the INE Web site,

www.ine.gob.mx

. Regulations for industry are mostly targeted to specific industrial sectors. Some of the most important criteria include the volume of an industry’s emissions as well as the potential of its processes to produce pollution and the quantity of fuels it consumes. Those regulations are targeted to control particles, sulfur oxide, nitrogen, and hydrocarbon emissions. Regulations for specific sectors are not complete, and several industries are still not regulated. The new SEMARNAT will analyze whether to continue regulating specific industrial activities or to issue general regulations that set emission standards for all industries.

Regulations for mobile sources are based largely on U.S. standards, but Mexico lags behind the United States in applying its regulations. For example, in 1994, the regulation for new vehicle emission was modified to adopt values similar to those that have been used in the United States since 1981. The Mexican regulation issued in 1999 sets TIER I standards, which have applied in the United States since 1994. Under current regulations, TIER II vehicles will be introduced in Mexico in 2006, whereas in the United States such vehicles will be introduced in 2004.

Table 8.2 Federal Regulations for Air Quality

Source or Pollutant Regulated	Number of Regulations Enacted
Fixed sources	13
Mobile sources	10
Monitoring systems	5
Fuels	1
Sulfur composites	6
Nitrogen oxides	6
Suspended particles	8
Volatile organic compounds	10
Carbon monoxide	6

Source: INE.

All air emission and exposure regulations are under constant review with the objective of making them more stringent. One recent change was for the regulation on ozone that reduced the accepted level to 0.08 particles per million (PPM) every eight hours. Regulations for vehicles circulating in Mexico City were also made stricter.

Similarly, regulations require an improvement in fuel quality. Regulations will require a lower sulfur content, reaching less than 30 PPM for 2006 and allowing the introduction of TIER II vehicles.

The cities with PROAIRE have stricter regulations than cities that are experiencing less severe pollution. Table 8.3 shows some of the measures and projects implemented in cities with PROAIRE.

Table 8.3 Air Pollution Reduction Measures in Cities with PROAIRE

Sector	Measure
Industry and Services	Stricter emission limits (NOM-085) New regulations (NOM-122 and NOM-123) Programs for self-regulation Contingency programs Air emission control equipment for priority sources Regulations for better fuels (NOM-086) Economic incentives for equipment Inspection and enforcement within primary pollution source
Transportation	Program for restriction of us se of polluting cars Stricter emission limits (NOM-042) Modernization of vehicle verification centers (NOM-041 and NOM-047) Regulations for better fuels (NOM-086) Vehicle fleet renovation program Promotion of safe and efficient public transportation systems
Environmental Recovery	Recovery of green areas Paving programs Urban and rural reforestation program

Source: Hanhausen & Dom�nech Consultares, S.C.

Under the past administration, a National Information System on Air Quality (SINAICA) was developed to evaluate the air quality in various regions and to assist in developing air-quality improvement programs in the cities where pollution indexes were high. At present, 15 cities have permanent monitoring systems (see Table 8.4). Cities where monitoring systems were installed tend to follow that measure by developing a PROAIRE.

Table 8.4 Cities with Air-Monitoring Systems

City/State	Equipment
M�xico, Distrito Federal	25A, 100Mx
Guadalajara, Jalisco	8A
Monterrey, Nuevo Le�n	5A
Toluca, M�xico	7A
Ciudad, Ju�rez, Chihuahua	3Mx
Tijuana, Baja California	4Mx
Mexicali, Baja California	4Mx
Manzanillo, Colima	3A
Aguascalientes, Aguascalientes	2Mx
Salamanca, Guanajuato	1Mx
San Luis Potos�, San Luis Potos�	2A, 10Mx
Villahermosa, Tabasco	1Mx
Zacatecas, Zacatecas	1Mx
Cananea, Sonora	5A
Nacorazi, Sonora	3A

Source: Hanhausen & Dom�nech Consultares, S.C.

According to Mexican law, local air improvement plans are the responsibility of local authorities, as is law enforcement. Many local governments have not yet developed programs and are in violation of the law. In any case, the federal authorities will continue moving forward developing regional PROAIRE. The federal government provides grants to several Mexican states for installing monitoring systems in their metropolitan areas (see Table 8.5).

Table 8.5 States That Have Received Federal Grants for Air-Monitoring Equipment

State	Amount*
Aguascalientes	192,000
Baja Califonia	218,000
Baja California Sur	44,000
Chihuahua	154,000
Coahuila	225,500
Colima	69,000
Durango	164,000
Guanajuato	121,500
Guerrero	5,000
Hidalgo	128,500
Jalisco	49,000
M�xico	10,500
Morelos	18,500
Nayarit	73,500
Nuevo Le�n	40,000
Puebla	14,000
Quer�taro	18,500
San Luis Potos�	162,500
Sinaloa	10,000
Sonora	211,500
Tabasco	102,500
Tamaulipas	157,000
Tlaxcala	60,500
Veracruz	126,500
Yucat�n	12,000
Zacatecas	104,000
Total	2,492,000

* In U.S. dollars.
Source: INE.

PROAIRE

PROAIRE are programs to improve air quality in specific cities. Developing such programs requires the combined efforts of federal, state, and municipal authorities, as well as the participation of local interest groups such as industry and other sectors. PROAIRE work in a similar fashion to State Implementation Plans (SIPs) in the United States.

SEMARNAT’s role in PROAIRE has been to control air emissions that are under federal jurisdiction, which is the case for industries in the pulp and paper, cement, chemical, petrochemical, oil, and power sectors. SEMARNAT also defines emission standards for new vehicles and acts as coordinator among the three levels of government (federal, state, and local). SEMARNAT also contributes to PROAIRE by developing regulations, creating and updating the inventory of emissions, formulating programs to reduce air pollution, and approving local control programs.

Each PROAIRE is custom made. It addresses specific conditions within the city and lays forth a specific action plan, which includes an estimation of the environmental improvement that will result from each suggested measure. The program must include a cost-benefit analysis of the proposed measures and must define the responsible authorities for each portion of the program. Each proposal is also evaluated for its possible social and political impact, and it must be viable under this criterion as well.

PROAIRE’s purpose is to define specific measures for areas such as public transport, local transit infrastructure, improvements in fuel quality, urban development programs, strategies for substituting newer vehicles for older ones, vehicle emission inspections, development of air emergency plans, education, and reforestation. Under PROAIRE, letters of intent are signed that bind industries to limits on their operations imposed during air-quality emergencies.

PROAIRE are developed based on information obtained through a monitoring program and an inventory of air pollution sources. The information used to compile the inventory is managed under guidelines supplied by the U.S. EPA and the Western Governors Association.

Once monitoring systems have been established, an inventory of sources has been developed, and the magnitude of the pollution problem has been quantified, the program defines specific emissions goals for each type of pollutant. Those goals must be achieved by a certain date. The program outlines specific action items and measures that should be implemented by the city to achieve each goal. Some measures that are commonly found in PROAIRE include:

Establishing a permanent air-monitoring system
Developing a pollution sources inventory
Producing a target list to present the principal fixed sources of air pollution and to define specific measures at each site such as use of a cleaner fuel; installation of air emissions control equipment; and incorporation of gas cleaning systems, electrostatic precipitators, and other control technologies
Installing vapor recovery systems in the area’s gasoline stations
Evaluating federally controlled sources like PEMEX and CFE facilities, including developing suggested measures
Producing a target list that presents the principal groups of mobile sources of air pollution and defines specific measures to mitigate emissions such as using cleaner fuels like CNG, establishing a local independent vehicle emission testing program for both automobiles and heavy vehicles using diesel, and improving the city’s public transport system and general transport infrastructure
Reducing suspended particles from land erosion by reforestation and road pavement programs
Strengthening an industrial emissions inspection program
Implementing incentive programs for cleaner technologies in mobile and fixed sources
Implementing traffic engineering and management programs

The first PROAIRE in Mexico was issued in late 1995 for Mexico City and covered five years (1995–2000). Under this program, over $13 billion was invested in air pollution monitoring and control equipment. Table 8.6 illustrates the breakdown of such investments.

Table 8.6 Mexico City PROAIRE 1995–2000 Investment (millions of U.S. dollars)

Public
Private
Total

Industry 865 249 1,114

Vehicles 2,871 1,824 4,695

Transportation 6,547 802 7,349

Reforestation 292 --- 292

Total 10,575 2,875 13,450

Source: CONIECO.

Other PROAIRE have been developed for Guadalajara, Monterrey, Toluca, Ciudad Ju�rez, Mexicali, and Tijuana. These plans have been the main driver for the installation of “clean air” technologies and have also boosted the demand for air-monitoring and consulting services.

The new administration will continue to support the development of these plans in the most polluted cities. Although much investment has already occurred, suppliers of air-quality technologies and services will continue to find good opportunities in Mexico.

Mexico City PROAIRE, 2001–2010

Because Mexico City continues to provide a major air pollution challenge, its PROAIRE program will continue. Recently, a new metropolitan environmental committee was formed that will be responsible for dealing with air-quality issues.

In the past, one of the big obstacles to air-quality improvement has been inadequate coordination between the local and federal authorities. For example, SHCP was unwilling to expand the life of the environmental trust fund that financed environmental projects in Mexico City through a two-centavo surcharge on local gasoline prices. Further, vehicles with federal service license plates, mostly buses and trucks, are still not subject to emissions verifications because of lack of coordination between the federal Secretariat for Communications and Transportation and the local government. The new Mexico City government has pledged to build better coordination with the federal government.

Mexico City’s government has commissioned Dr. Mario Molina, a chemistry Nobel Prize laureate, and his research team from the Massachusetts Institute of Technology to produce a study that will serve as the basis for a new air-quality program for Mexico City for 2001–2010. Molina’s research group is developing a current assessment of air-quality conditions in the valley of Mexico’s metropolitan area. That research was to be presented in June 2001. Some preliminary findings and specific recommendations indicate that air-quality conditions are deteriorating and that new types of pollution, such as PM10 and PM2.5, are reaching critical levels and are affecting the mortality of vulnerable population groups.

Molina indicated that the most urgent first step is updating the last emission inventory produced in 1998. Updating the inventory and constant monitoring of sources are the only real ways to evaluate the progress being made by the various air-quality improvement measures. He has indicated that micro particles caused by diesel and land erosion require immediate action.

Another preliminary recommendation calls for developing new vehicle emission infrastructure to verify the compliance of heavy cargo and passenger vehicles with five emission criteria. That recommendation also calls for PEMEX to reduce the sulfur content in its gasoline and diesel fuels. For this purpose, Molina suggests forming a special committee to work with the federal government to develop an investment program for PEMEX refineries that will allow the production of low sulfur content fuels.

Development of the pollution-source inventory should also address a problem currently faced by the authorities, who lack precise information on the number and type of vehicles circulating in Mexico City. An updated inventory will help the authorities develop specific actions to target each type of emission source. The information obtained from monitoring the sources will be combined with meteorological information to generate short-term air-quality forecasts that will allow the authorities to implement immediate actions to control emissions on a day-by-day basis.

Among the sources identified as a continuing problem are thermoelectric facilities. The program calls for investments aimed at reducing those facilities’ nitrogen oxide emissions. The recommendations also call for SHCP to reestablish Mexico City’s environmental trust fund, funded by a two-centavo surcharge on local gasoline prices, and for the government to establish measures to limit the expansion of the urban area and to modernize the city’s public transportation system by developing non-polluting public transportation. Another important recommendation is to implement the measures under a strict time schedule.

Mobile Sources

Mobile sources are the biggest contributors to air pollution in Mexico’s metropolitan areas. In Mexico City, the problem is more evident because vehicles generate 85 percent of the pollution. To mitigate the problem, the city restricts the use of old cars one day per week and has developed several programs for fining polluters and for promoting the use of cleaner technologies. Mexico City also has a mandatory emissions testing program for cars; however, trucks and buses are not tested. The need to establish a new mandatory emissions testing program for buses and trucks that use federal license plates will be addressed shortly as a result of Molina’s recommendations. Such a program would open new opportunities for companies selling emissions testing equipment for diesel-fueled vehicles.

The measures implemented thus far by the environmental authorities in Mexico City have had a limited success rate. For example, prices of older, nonconforming vehicles dropped after the imposition of measures to restrict the circulation of older cars, so many people simply purchased a second used car to get around the restriction.

A program introduced in 1989 to reduce by 30 percent the air emissions generated by vehicles in Mexico City has also met with limited success. This Natural Gas Vehicle Conversion Program was aimed at converting high-use vehicles, such as taxis, to CNG. The initial goals called for converting 80,000 taxis, 2,000 buses, and 16,000 official cars and trucks. To date, despite having the city government’s backing and funding for its early stages from the World Bank, only two CNG service stations are operating in Mexico City, and the number of vehicles converted has yet to reach 5,000. If the government is to achieve success in this and other initiatives, it will have to dedicate additional resources. It is estimated that by 2003 Mexico City will have expanded its natural gas distribution network, thus providing a boost to efforts to substitute natural gas for existing vehicle fuels.

In addition to the emission testing centers for buses and trucks and the Natural Gas Vehicle Conversion Program, other opportunities exist for clean technologies in Mexico City. In 1999, the city’s government issued a regulation that exempted from use restrictions vehicles whose catalytic converters were replaced after five years. That regulation has created a huge market for catalytic converters in the city. An expected 170,000 converters should be replaced each year.

Other local governments, including Guadalajara, Mexicali, Ciudad Ju�rez, and Tijuana, are considering issuing regulations for obligatory emissions testing as well as some measures that have proven to work in Mexico City. The problem of older cars with poor emission standards is particularly severe along the U.S.-Mexico border because of the importation into Mexico of older U.S. cars.

Fixed Sources

SEMARNAT is responsible for supervising federal fixed sources of air pollution, which include manufacturing companies in the chemical, petroleum and petrochemical, paint and dye, automotive, paper and cellulose, metallurgy, glass, power generation, asbestos, cement and gypsum, and hazardous waste treatment sectors. Those industries must comply with the emission standards set in federal NOMs.

Because of complex air pollution problems, air-quality contingency plans apply to industries located in Mexico City and Guadalajara. The Environmental Contingency Program of Mexico City covers 450 companies that have to reduce their operations between 30 percent and 40 percent for phase 1 contingencies and up to 50 percent for phase 2 contingencies. Table 8.1 defines these contingencies. Clean companies are exempt from air quality contingency plans. This exemption has created an incentive for investment in cleaner technologies, which has strengthened as permissible pollution levels continue to be lowered.

To be exempt from such plans, companies must comply with air emission regulations, especially for sulfur oxide. Facilities that use natural gas as fuel and can show compliance with regulations on low PM10 emissions can also be exempted. Development of a natural gas distribution network in Mexico City will make it possible for medium-sized industries to switch to natural gas. Technologies allowing companies to switch to natural gas will continue to have good potential in Mexico City and Guadalajara in spite of the recent steep increase in natural gas prices. The shock caused by the significant increase in natural gas prices might make some companies consider alternative pollution control investments so that they will be able to continue using other fuels.

PEMEX

Up until the early 1990s, PEMEX, the government controlled oil monopoly, was one of the major contributors to environmental degradation in Mexico. PEMEX’s operations and products were environmentally damaging in two ways. First, they were a major source of pollution, and, second, the company was supplying its customers with highly polluting fuels. Because of enormous social pressure, PEMEX started having a more responsible attitude regarding its direct impact on the environment. The company implemented a series of plans and projects to improve its environmental performance and to reduce the harmful effects of its products.

One program was launched in May 1998 under the name Integrated Management System for Industrial Safety and Environmental Protection with the objective of turning PEMEX into an environmentally friendly enterprise. A first step of the program was to inscribe each of PEMEX’s facilities into the voluntary environmental audit program. The audits of each facility have produced individualized assessments and generated a list of corrective actions to be implemented at each site. At present, almost half of all facilities have produced their action lists and are working on obtaining clean industry certificates. Some are trying to achieve ISO 14001 certification.

Air emissions were the most important environmental problem generated by PEMEX facilities, with almost 85 percent of pollution produced by PEMEX released into the air. Close to 70 percent of that problem was caused by sulfur oxide emissions, followed by volatile organic compounds (VOCs), which accounted for 20 percent. The most important sources of sulfur oxide were the flares at offshore platforms (33 percent), followed by boilers using fuel oils (25 percent), and gas-processing centers (23 percent).

Over 90 percent of the VOC problem was caused by evaporation of hydrocarbons at storage facilities. Corrective measures have included installing internal floating roofs and improving filling stations for tanker trucks, including installing vapor recovery equipment. Over $270 million has already been invested in this area from a budget of $420 million that was allocated to the 1999–2002 period.

PEMEX has also tried to improve its fuel products. It has begun constructing sulfur recovery facilities, which are expected to achieve a recovery rate of 98.5 percent by 2002. This performance will exceed the U.S. EPA’s standard of 97 percent and will represent an improvement of 80 percent over 1994’s level.

Those actions continue the process initiated by PEMEX in 1986 to improve fuel quality in Mexico. During 1998, leaded gasoline was completely phased out, and sulfur content on diesel fuels was reduced to 0.05 percent. Because hydrocarbon compounds are precursors to the formation of ozone, the company has, especially in Mexico City, supported the government’s efforts for fuel switching in the industrial sector. In 1998, natural gas accounted for 58.5 percent of the total fuel used for industrial purposes; that figure is expected to grow to 68.2 percent by 2007.

PEMEX presents large opportunities for U.S. manufacturers of air pollution control devices. Although the company has already made important investments over the past three years to improve its environmental record, it needs to continue investing if it is to obtain clean certificates in at least half of its facilities. The company has a budget of over $150 million for these investments for 2001 and 2002.

CFE

The National Electricity Commission (CFE) generates over 90 percent of all electric power in Mexico. In past years, the company has made important investments to improve its environmental performance. Most of those investments were aimed at switching from burning fuel oils to natural gas.

Some of the utility’s power plants are in areas with critical air-quality conditions. This circumstance will compel CFE to continue to invest in additional cleaning technologies, particularly at facilities that cannot be converted to natural gas.

Best Prospects

Although the Fox administration has declared that its environmental priority will be the water and forest sectors, air-quality improvement will continue to be a top priority because air pollution directly affects a large portion of the population. The air-quality program will also continue to be one of the Mexico City government’s two top environmental priorities as results from Dr. Molina’s studies are expected to indicate that the situation is deteriorating. Thus, the Mexican market for U.S. environmental technologies will continue to be strong.

The federal government is developing its plans for the next six years. Priorities are expected to include:

Developing adequate coordination between different levels of government and different federal authorities, including transport, energy, and urban development authorities
Consolidating the progress made so far in the installation of monitoring systems
Further improving the quality of fuels produced by PEMEX and creating a growing awareness among the population of the magnitude of the investments that will be required to modernize the public transport system in Mexico City
Continuing to update environmental regulations, while improving enforcement efforts
Initiating monitoring programs in every Mexican city with more than 500,000 inhabitants (including cities such as Le�n, Guanajuato; Culiac�n, Sinaloa; Acapulco, Guerrero; and Morelia, Michoac�n)
Increasing the number of cities with air-quality management programs, which should include very strong programs for vehicle emission testing
Publishing a regulation covering PM2.5

PROAIRE will continue to be the main drivers for investments in Mexico’s air pollution control sector. Because those programs set stricter standards, implement contingency plans for polluting industries, and issue fines to polluters, industries and vehicle owners in cities with PROAIRE have strong incentives to invest in cleaner technologies.

Products with good sales potential in Mexico include:
Software development for monitoring systems
Monitoring equipment
Laboratory equipment
Computerized systems for urban traffic flow management
Solar heaters for domestic use
Electric transport equipment
CNG transport and conversion systems
Services and equipment for the reduction of nitrogen oxide in thermoelectric power plants
Pressure regulators
Gas-air mixture controllers
Catalytic converters
CNG storage tanks, including tanks for CNG storage in vehicles
Pumps for CNG service stations
Security systems
Vapor control systems
Vehicle emission verification systems (especially for diesel-powered cargo and passenger transport)
Items related to the updating of a pollution-source inventory
Services to update air-quality monitoring software to include weather forecasting variables
Data bases for tracking the number of vehicles

	Public	Private	Total
Industry	865	249	1,114
Vehicles	2,871	1,824	4,695
Transportation	6,547	802	7,349
Reforestation	292	---	292
Total	10,575	2,875	13,450