Over the last decade, Mexico has faced a critical balancing act between energy sovereignty and climate ambition. Once considered a Latin American leader in clean energy integration, Mexico’s trajectory has diverged in recent years due to shifting federal priorities, policy uncertainty, and a re-emphasis on fossil fuels. Although a new administration has created an opening for renewable energy investment and a potential opportunity for investors, Mexico must contend with the political uncertainty generated by mandates for state-owned electricity production, recent cancellations of renewable energy auctions, and constitutional reforms to unlock long-term success in meeting its climate and energy goals. The issue brief “Mexico: The energy transition journey” published by the Atlantic Council highlights that Mexico’s vast renewable energy potential, along with growing international collaborations and new financing opportunities, gives the country a chance to revitalize its climate finance strategy and keep up with its long-term sustainability agenda.
In November 2025, the Mexican government submitted its updated Nationally Determined Contribution (NDC) under the Paris Agreement. It sets an absolute emissions cap for 2035 that would reduce emissions by more than 50 percent compared to baseline. However, meeting these targets will not be easy. Mexico, a major oil producer, remains heavily dependent on fossil fuels. Mexico is the second-largest greenhouse gas emitter in Latin America and the Caribbean and while the country is taking steps to decarbonize its economy, recent regulatory shifts and political decisions to disrupt market-based competition and prioritize state-owned production in the electricity sector is generating investment uncertainty and threatens to deter private investment.
Access the brief here