J.1 Statement of Objectives (SOO).pdf

Attachment J.1 Section C – Statement of Objectives Request for Proposal 72052322R00003

USAID/Mexico Partnership for Net Zero Cities

ATTACHMENT J.1 SECTION C – STATEMENT OF OBJECTIVES

C.1 PURPOSE OF THE STATEMENT OF OBJECTIVES (SOO)

This Statement of Objectives (SOO) describes the objectives of USAID/Mexico’s five-year Partnership for Net Zero Cities with the goal of helping to put Mexico on a pathway to netzero emissions after 2030. This SOO is provided in lieu of a U.S. Government Statement of Work and does not state how the work is to be accomplished, but instead provides potential offerors the flexibility and responsibility to propose cost-effective, innovative approaches to reduce greenhouse gas emissions by improving energy efficiency measures subnationally, specifically decarbonizing the building and transportation sectors, and reducing Short-Lived Climate Pollutants while meeting the stated objectives.

C.2 BACKGROUND

Mexico’s greenhouse gas (GHG) emissions have increased by 63 percent over the last three decades and are projected to continue to increase until at least 20301. Mexico will need to scale up climate action to meet its Nationally Determined Contributions (NDC); its current plan is deemed unambitious and insufficient for maintaining global average temperature increases below

1.5 C. Fossil fuels still make up 87 percent of Mexico’s energy mix, which is above the G20 average and despite declining output, the country is still the second largest oil producer in Latin America. Given the Mexican administration's focus on strengthening the state-owned oil and electricity companies, progress for emission reductions in these sectors does not seem likely.

Accelerating the pace of emissions reductions in other sectors, (e.g. transport and buildings) is needed in order to help Mexico remain on a path towards net zero emissions by 2050. Not only do transportation and buildings account for the majority of Mexico’s GHG emissions2, but energy efficiency in buildings, transportation, and industry could bring about at least 40 percent of the GHG emission reductions needed by 20503. By accelerating the transition to energy efficient buildings and transportation, there will be a reduction in the need for the deployment of renewable energy resources. Also, improvement of energy efficiency in general could have broader collateral benefits in terms of competitiveness. For example, a close alignment on energy efficiency between the US and Mexico (in the framework of USMCA) could reduce energy costs and strengthen North American competitiveness4. Additionally, there are a number of non-climate benefits that could result in economic and public health improvements for cities, for example by creating new jobs, preventing premature deaths, saving billions of hours of commuters time, increased safety and better governance models, to name just a few.

Transport and buildings together present a great opportunity for emissions reductions. Mexico’s transport sector has grown over the years without prioritizing low emission technologies and

1 Mexico Climate Transparency Report 2020 2 Coalition for Urban Transitions https://urbantransitions.global/en/publication/seizing-the-urban-opportunity/seizing-mexicos-urban-opportunity/ 3 IEA Net Zero by 2050 4 U.S.-Mexico Climate Change Working group briefing paper - energy efficiency, June 4, 2021.

https://www.iea.org/news/pathway-to-critical-and-formidable-goal-of-net-zero-emissions-by-2050-is-narrow-but-brings-huge-benefits today, it represents one of the biggests emitters of GHGs in the country - second only to power generation. Mexico’s transport sector is dominated by fossil fuels, and the light passenger and heavy-duty vehicles are not only key contributors of GHG emissions, but are also the primary source of outdoor air pollution in Mexican cities. Working on fuel efficiency standards and expanding access to low-carbon modes, like electromobility, is thus a promising route to achieving mitigation targets and to reducing health impacts. On the other hand, buildings account for about 23 percent of GHG emissions in Mexico5, including direct emissions from fuel burnt onsite and indirectly from electricity consumption. The buildings share is expected to grow to 27 percent by 20506, driven by (1) increased electricity use in homes, particularly as air conditioning becomes more affordable and (2) the growth of the commercial sector with office buildings, shopping centers and hotels. Fortunately, the building sector offers great opportunities to mitigate GHG emissions and contribute to overall climate goals. In fact, the building sector has the potential to reach no net emissions status using current technologies.

Additionally, SLCPs, including black carbon, methane and hydrofluorocarbons, are powerful climate forcers which can also impact air quality. Reducing these pollutants can bring climate benefits and improve health and livelihoods, by preventing premature deaths. Mexico’s climate change commitments include a target of reducing black carbon emissions by 51% in 2030 compared to business as usual scenarios. Mexico has an integrated strategy to reduce SLCPs, and key sectors in which opportunities exist are the waste, industry, and oil and gas sectors.

The prospects are good for international collaboration with Mexico on energy efficiency and transportation. In many cases, the most effective approach remains to work directly with the federal government developing regulations, but engaging with subnational governments on implementation. For example, while the federal government issues mandatory energy efficiency construction codes, these are implemented at the municipal level. Specifically, in the buildings and transportation sector, subnational actors have the necessary legal mandates over development of these sectors. Subnational actors are often eager to fill the current gap in clean energy development left by the federal level and are more likely to be willing to work with

USAID.

In this context, accelerating climate action at the subnational level has become very relevant in Mexico. States, cities, and municipalities can play a role as climate champions, helping to raise climate ambition, accelerate climate action and secure effective implementation in Mexico to stay on track with the Paris Agreement. There are currently neworks of states/city governments, such as the Mexican Climate Community (CCM), nested at the National Association of State Environmental Authorities of Mexico (ANAAE) which gathers the Secretaries for Environment of all the 32 states, that can rapidly scale the work with a more significant number of states.

Therefore, a thorough selection exercise for selecting subnational entities that the partnership will focus on is crucial.

C.3 SCOPE

5 (SENER-Sistema de Información Energética 2019) 6 LBNL, preliminary estimate.

https://paperpile.com/c/ULZUnk/EtZxv

The purpose of this contract is to assist the Government of Mexico (GOM) to reduce greenhouse gas emissions subnationally by improving energy efficiency measures in the building and transportation sectors, and reducing Short-Lived Climate Pollutants (SLCPs), thereby helping to put Mexico on a pathway to net-zero emissions after 2030. The Partnership will rely on local partners' capacities, strengths, and knowledge of relevant actors to successfully implement intended activities.

C.3 PROBLEM STATEMENT

With current policies and measures, making progress towards achieving 2030 NDC targets and future climate ambition in Mexico is challenging. The “Partnership for Net Zero Cities” will assist the GOM (both at the federal and subnational levels) to reduce greenhouse gas emissions by improving energy efficiency measures, specifically decarbonizing the building and transportation sectors, and reducing Short-Lived Climate Pollutants, thereby helping to put Mexico on a pathway to netzero emissions after 2030.

C.4 THEORY OF CHANGE

The Partnership for Net Zero Cities proposes the following theory of change:

IF Mexico pursues subnational climate mitigation actions by supporting net zero pathways for buildings, transportation, and waste sectors, and if finance barriers are addressed and subnational capacity and planning processes are strengthened THEN the GOM will make significant progress towards 2030 NDC targets and future climate ambitions, while reducing consumer energy costs and improving energy security.

C.5 ACTIVITY OBJECTIVES

To achieve these goals, in the target cities, this activity should make ambitious strides toward improving building cooling efficiency by up to 50 percent (Objective 1), increasing public transport to up to 30 percent zero emissions vehicles (Objective 2), and reducing methane emissions by up to 30 percent from the industry/waste sectors (Objective 3). Achieving these goals will require improved access to private/climate finance (Objective 4). USAID has provided illustrative targets below; the Contractor must suggest realistic targets based on the proposed geographic focus and activities.

Objective 1 (O1): Adopt Energy Efficiency pathways to net zero buildings by 2050

Building energy efficiency measures could provide 50 Mt CO2e of carbon mitigation potential by 2030, while creating ~500k jobs (Coalition for Urban Transitions). Cooling in the residential and commercial sectors already accounts for a quarter of all electricity use in the summer months and improving cooling efficiency will also reduce peak demand and transmission constraints (Lawrence Berkeley National Lab, LBNL). Therefore, it makes sense to prioritize cooling efficiency as a first step in the pathway to net zero buildings. Second, implementation of net zero building codes in Mexico City (see LBNL/C40 Building Decarbonization Roadmap) would result in electricity bill savings through 2050 of $13 billion and a reduction of $5 billion for https://c40cities.medium.com/energy-buildings-5ac98f762e00 electricity subsidies. Third, research is needed to decrease the manufacturing, developer, and consumer costs of improved cooling and building envelope efficiency which could include development of complementary technologies and programs to decrease cooling use such as alternative cooling technologies, cool surfaces, and smart buildings.

Results, Goals, and Targets

- Result 1: Adoption of high efficiency cooling technologies increased

● Possible Goal: Increased market penetration of high-efficiency cooling technologies (e.g. mini-split air conditioners)

- Result 2: Building Code Enforcement and Implementation increased

● Possible Goal: Increasing enforcement of building codes to increase building envelope efficiency

- Result 3: Research and Development enhanced

● Possible Goal: Support research and development to reduce costs of improved cooling and building envelope efficiency.

Target: 50% Improvement in Building Cooling Efficiency in target cities

O2: Accelerate the transition to a zero emission, equitable urban transportation system

The most economically attractive options for GHG mitigation at the subnational level are in transportation, which accounts for 28 percent of emissions reduction potential in cities (Coalition for Urban Transitions). According to a WRI estimate, modernizing the transport sector in Mexico could reduce the sector’s emissions by 86 percent below business as usual by 2050, and avoid 75,000 deaths related to air pollution exposure (NREL).

There appears to be political will within several cities and states to improve the transportation system. Transport is included in state climate action plans, as cities that are building bus rapid transit lines and are procuring e-buses municipal governments have set incentives in place to replace minibus and taxi fleets with electric vehicles; and many cities have goals to better connect urban residents with safe and accessible bicycle and pedestrian infrastructure. Many cities are looking at the multiple opportunities within the transportation sector to link goals to improve equity through affordable and high quality public transportation access with deep decarbonization and public health improvements through reduction of SLCPs (e.g. black carbon).

There are two primary levers USAID can pull to simultaneously reduce urban transport emissions and improve transportation service quality: (1) avoiding travel from high emitting modes, like private automobiles, by enabling the shift to more efficient modes, like buses, rail, trolleys, bicycles, and walking; and (2) improving vehicles and vehicle operations to reduce emissions through replacement with electric vehicles or other technologies, reducing congestion, and fuel economy standards.

Results, Goals, and Targets

- Result 1: Travel from high emitting modes of transport avoided; shift to more efficient modes enabled

● Possible Goal: Increase share of trips to transit, bicycle and walking by supporting improved coordination between transportation and land use, the planning, procurement, and implementation of critical infrastructure.

- Result 2: Vehicles and vehicle operations to reduce emissions improved

● Possible Goal: Improve or replace urban transportation fleet, including buses and minibuses, and accelerate electrification of taxis and private vehicles.

● Possible Goal: Support technical advancement of more stringent fuel efficiency and vehicle standards.

Target: 30% public transit (bus) sales are zero emission vehicles by 2030

O3: Reduce short-lived climate pollutants in industry/waste sectors (Increased Quantity Option)

Mexico is one of more than 100 countries that have agreed to the Global Methane Pledge with the expectation of meeting the 30 percent reduction in methane emissions from agricultural sectors. However, the low-to-no cost methane solutions in the energy, waste, and industry sectors could achieve the equivalent of 18% of Mexico’s NDC targets. There is ample opportunity to reduce both carbon and air pollution emissions through improved operations and maintenance in industry. USAID is working with Berkeley Lab to explore Industrial Energy Efficiency opportunities to bring manufacturing practices up to international standards. Given the potential for industrial electricity self-generation, this activity will leave the door open to engage with industry on energy efficiency, distributed generation, and battery storage; depending on whether there is additional funding and political will to reduce emissions from the industry sector. In the waste sector, mitigation options include reducing landfill methane emissions directly by capturing landfill gas. USAID is open to pursuing SLCP reduction strategies in multiple sectors including waste, transport, and industry. Regarding waste however, USAID is limited in its ability to work on waste/wastewater sectors due to the definition of “clean energy” under the renewable energy earmark and likely will only be able to use clean energy money for the capture of landfill gas or biogas.

USAID will prioritize interventions that reduce SLCPs (including methane and black carbon) while delivering increased clean energy supplies and local health co-benefits. Although activities in Objectives 1 and 2 may reduce SLCPs, this objective will provide the opportunity for subnational jurisdictions, where concentrated areas of waste and industrial activity are located, to pursue state-of-the-art clean energy technologies in coordination with the private sector. USAID expects to exercise the increased quantity option should the following conditions be met: a) to meet the threshold in industry, there will need to be sufficient political will or clearly identified industry partner and b) to meet the threshold for waste, there will need to be sufficient funding of an earmark type to be able to work with entity(ies) with waste expertise.

The sectoral focus will depend on the existing, high-impact opportunities for SLCP mitigation in waste, industry, and other sectors in the cities that the Offeror and USAID agree to work with.

● Result 3.1 Reduced SLCPs from the Waste Sector

● Possible Goal: Increase municipal uptake of capture of landfill gas

● Result 3.2 Reduced SLCPs from the Industry Sector

● Possible Goal: Reduce carbon and air pollution emissions through improved operations and maintenance in industry.

Target: 30% reduction in methane in target cities in accordance with Global Methane Pledge

O4: Municipal Governance/Finance

The realization of ambitious NDCs relies in large part on the ability of subnational entities to implement climate actions, particularly in the buildings and transport sectors. Globally, more than half of the actions required to meet Paris targets must be taken by local governments. More states and cities across Mexico have shown a desire to increase the ambition of their climate targets but they are faced with the same challenges that burden subnational governments and decision makers around the world. The ability of cities to implement these actions rests on their ability to plan investments, structure projects, and mobilize both public and private finance.

Even advanced cities, like Mexico City, do not have coordinated, annually updated capital investment plans, which assess the financial health of the city, including existing and potentially new revenue sources, and prioritize projects for investment or potential for blended finance. In all cases, public finance will not be sufficient to meet city- or national-level climate and development goals; however, lack of creditworthiness is the primary barrier to cities’ ability to take on smart, strategic debt and attract private investment. Many cities, like Mexico City, are also debt averse, further constraining their ability to fully fund infrastructure-related needs. In sum, local governments face budget constraints and are unable to finance the climate-smart projects needed to realize a just transition. In Mexico, USAID can address these challenges by strengthening climate-smart investment planning and facilitating investment through strategic partnerships with regional investment opportunities (e.g., NADBank); adapting and transferring innovative municipal finance tools developed elsewhere; enhancing transparent green procurement; and providing advisory services for prioritized project development to improve access to finance. This objective is cross-cutting and these actions are necessary to support Objectives 1, 2, and 3.

Results, Goals, and Targets

- Result 1: Climate Smart Capital Investment Planning

● Possible Goal: Strengthen capital investment planning process to increase revenue and mobilize sources for climate smart investments

- Result 2: Transparent Green Procurement and Finance

● Possible Goal: Leverage technical expertise on green purchasing policies to create an enabling environment for green procurement efforts.

- Result 3: Access to green finance and project development support increased (advisory services)

● Possible Goal: Support subnational governments with technical assistance aimed at tapping into existing climate finance and provide advisory services for prioritized project development.

Target: Climate-positive investment mobilized at a subnational level, leveraging up to 500M USD across the targeted geographies

C.6 PERFORMANCE INDICATORS

Objectives/Goal Indicator

Overall Objective ● Custom (C) Amount of investment mobilized in USD for energy efficiency and SLCP reduction projects as supported by USG

● (C) Avoided generation capacity (MW) from clean/non-clean energy that reached financial closure

● Standard (S) Projected greenhouse gas emissions reduced or avoided from adopted laws, policies, regulations, or technologies related to clean energy as supported by USG assistance

● (C) Number of direct and indirect jobs (full time equivalents) created as a result of USG assistance

Objective 1 ● (S) Number of laws, policies, regulations or standards to enhance energy sector governance and/or address clean energy and energy efficiency formally proposed, adopted or implemented as supported by USG assistance

● (S) Number of beneficiaries with improved energy services due to USG assistance

● (C) Amount of energy (MWh) saved from energy efficiency as supported by USG

● (C) Number of people trained on energy standards to promote energy efficiency

Objective 2 ●(C) Number of policies, plans, or regulations developed, to advance energy resources and systems

● (S) Number of people trained in technical energy fields supported by USG assistance

Objective 3 ●(C) Number of policies, plans, or regulations developed, to advance energy resources and systems

● (S) Number of people trained in technical energy fields supported by USG assistance

Objective 4 ● (S) Amount of investment mobilized in USD for energy projects as supported by USG

● (S) Number of civil society organizations (CSOs) receiving USG assistance engaged in advocacy interventions

● (S) Number of persons trained with USG assistance to advance outcomes consistent with gender equality or female empowerment through their roles in public or private sector institutions or organizations

Cross-cutting ● (S) Percent of USG-assisted organizations with improved performance (CBLD-9)

● (C) Proportion of women’s involvement in policy, plan, or regulations development as a result of USG assistance

● (S) Percentage of female participants in USG-assisted programs designed to increase access to productive economic resources (assets, credit, income or employment)

● (C) Number of partnership with private American firms established or engaged to modernize energy systems

● (C) Number of transport projects offering alternatives to low-income areas.

C.6 GEOGRAPHIC FOCUS

Under this activity, the Contractor will identify and work with subnational champions -- states and cities -- to advance decarbonization in Mexico. Illustrative criteria for determining the geographical scope are below:

● Baseline emissions reduction potential at the intervention site;

● Potential to scale up to other cities and states across the country;

● Political opportunity/support among key state or municipal authorities (climate change champion);

● Potential for demonstration of climate/clean energy leadership; and

● Technical capacity of subnational entities.

If these goals can be achieved in 3-6 target cities/states by 2025, then this activity could be scaled to other cities/states so that GOM is on a pathway to achieving net zero emissions by 2030. The Contractor will propose cities/states based on the highest potential to achieve the activity’s goals. While proposed cities/states must be included in the PWS, final selection will be negotiated with USAID post-award.

C.7 KEY CONSIDERATIONS FOR IMPLEMENTATION

Building on past successes and lessons learned. There has been previous experience advancing energy conservation and efficiency projects in Mexico, with both USAID and other donors, including guidance for developing energy efficiency projects in municipalities, as well as assistance on how to enforce regulations and standards on energy efficiency in public buildings.

In spite of the changes in administration, both at the federal and subnational levels, this work should build on previous work and use past successes and lessons learned to advance programmatic efforts.

Coordination with other USAID and other USG Entities. The National Renewable Energy Laboratory (NREL) and the Lawrence Berkeley National Laboratory (LBNL) are currently providing strategic advisory support and technical assistance to USAID/Mexico and the GOM to provide specific expertise on energy efficiency. There may also be opportunities for activities under O4 to be complemented with current USAID/Mexico’s work focused on transparency and subnational capacity-building efforts, tapping into the knowledge and networks already established and that can further add to create an enabling environment to advance netzero policies at a municipal level.

Relationship with other USAID agency-wide Objectives. To rapidly accelerate our climate change action and make a real difference in addressing the crisis of our time, work to support cities must be at the heart of climate action, where 75% of our global greenhouse emissions come from and 60% of the global population will live in 2030. Partnership for Net Zero Cities will directly support USAID’s new Climate Strategy and fill this gap in USAID’s programming to tackle the climate crisis. Partnership for Net Zero Cities will contribute to all six USAID climate strategy targets and will help cities contribute to their national climate pledges and transition to net-zero, resilient, and inclusive energy systems.

Gender. USAID policy on increasing gender equality and female empowerment is at the core of the Agency’s programming. As a principle, the activities implemented under the Partnership for Net Zero Cities will address how public policies in general, and those specifically related to energy efficiency, consider practices and incentives from a gender and youth perspective, fostering opportunities where women and youth have equal and better access to information, have access to better training and capacity building efforts, and are more empowered in decision-making processes.

Private Sector Engagement. USAID’s private sector engagement (PSE) policy fortifies the strategic approach to planning and programming through which the Agency consults, strategizes, https://www.usaid.gov/climate/strategy aligns, collaborates, and implements with the private sector for greater scale, sustainability, and effectiveness of development outcomes across all sectors. In particular, the Partnership for Net Zero Cities should engage private sector actors, such as commercial real estate and building management companies, mass transit providers, and manufacturers to leverage shared objectives to reduce costs and access to capital.

Environmental Compliance and Climate Risk Management.

Development should be environmentally sound, and interventions must be compliant with environmental regulations. As such, the Partnership for Net Zero Cities should adhere to the provisions in Title 22 of the Code of Federal Regulations, Part 216. In addition, it should also adhere and be cognizant about Mexican environmental laws and procedures, including the Ley de Transición Energética, Ley General del Equilibrio Ecológico y Protección al Ambiente, Ley Federal de Responsabilidad Ambiental, Ley General de Cambio Climático, among others. The function of the approved Initial Environmental Examination (IEE) will be the factual basis for a Threshold Decision, whether a proposed Agency action is a major action significantly affecting the environment and/or the beneficiaries. For activities that are subject to one or more conditions set out in the “Recommended Threshold Decision” section of the approved IEE, an Environmental Mitigation and Monitoring Plan (EMMP) documenting how the activity will implement and verify all IEE conditions. This activity must be robust in the face of potential climate change impacts.

Climate risk management (CRM) is now required for new USAID strategies, projects and activities. The ADS 201mal (https://www.usaid.gov/ads/policy/200/201mal) puts in place the new CRM guidance for new USAID activities. Therefore, the Contractor must identify expected climate change impacts over the life of the activity’s expected benefits and demonstrate how those risks will be reduced in order to ensure effectiveness and sustainability of the activity’s objectives in the face of climate variability and change. How to address and adaptively manage climate risks that apply to the activity will either be included in the EMMP or a separate CRM plan as deemed fit. Monitoring of both the EMMP and CRM plans are expected during the implementation of the activity.

Monitoring, Evaluation, and Learning. Monitoring, Evaluation, and Learning must be designed to track progress towards reaching the project goal over the life of the project through a rigorous, consistent and timely collection and analysis of data based on a selection of targeted custom and standard indicators, and must fully comply with clean energy funding requirements.

Monitoring will be systematically conducted through the collection of output and outcome information for two purposes: (1) to track progress and inform implementation internally so that the team can adjust as necessary, and (2) to communicate progress externally to stakeholders.

The collected information will be used to monitor the quantity, quality, and timeliness of activity outputs and outcomes throughout the life of the activity. The activity will have a mix of USAID’s standard indicators and custom indicators to support monitoring and planning of the Activity progress and performance.

Sustainability. USAID recognizes that sustainability of interventions is indispensable to meet long-term development objectives. The Contractor will include a Sustainability Plan as part of the work plan, which will identify issues and considerations that may hamper overall sustainability of the Activity as well as opportunities that will optimize activity outcomes. It will also recommend approaches or interventions necessary to mitigate, overcome and/or adapt to these issues, linking it with how benefits and results will continue and be scaled up beyond USAID funding. The Sustainability Plan will ensure that outcomes are sustainable after the end of activity through adaptive management, donor coordination, and local partner capacity building.

Grants Under Contract. The Contractor may use a Grants Under Contract (GUC) component of up to $4 million in its Technical Approach. The proposed grants program will provide monetary and in-kind grants to local organizations that result in capacity building of sector actors, and leverage investment from the public and private sector to support Partnership for Net Zero Cities objectives. Fundamentally, this activity supports climate change mitigation through energy efficiency. Innovative technologies, planning and procurement practices, and regulatory frameworks will be required to achieve this goal. Effective implementation at the subnational level will require leveraging considerable capacity in the government (federal, state, local) and civil society.

It is expected that the Contractor will engage mostly local partners in program activities to complement Contractor’s activities, while also strengthening the institutional capacity of local organizations, and will serve to leverage resources from program participants for an opportunity to maximize results. This will support the agency’s New Partnerships Initiative (NPI) which seeks to increase USAID’s development impact by elevating local leadership, fostering creativity and innovation, and mobilizing resources. Grants may be allocated through a competitive or non-competitive process or through a public-private partnership. Potential areas for the GUC component to target include strengthening public outreach within the sector, as well as strengthening community engagement and supporting reduction in local air pollution, and leveraging the capabilities of cities with high technical capacity and/or successful implementation strategies by building knowledge sharing networks and communities of practice.

All grant activities to support innovations in buildings, transport, and SLCPs should:

● Involve key government and non-governmental stakeholders in the design, implementation, and learning; and

● Have a clear strategy for demonstration, tracking, monitoring, disseminating, and replication of outcomes preferably at a wider-scale.

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