Mexico should increase green-economy investments as it strives to promote economic growth while reducing pollution, the Organization for Economic Cooperation and Development said in a report published Tuesday.

"Mexico's triple challenges are to boost its economy, improve its environment, and provide decent living standards to all its citizens," OECD Secretary-General Angel Gurria said.

The Paris-based organization issued 29 recommendations for the Latin American country pertaining to energy consumption, energy subsidies, the promotion of low-carbon mass transit systems and biodiversity protection.

According to the OECD, which cited Mexican estimates, environmental degradation and dwindling natural resources cost Mexico 7 percent of its gross domestic product in 2010.

"But the right mix of policies can promote inclusive green growth," Gurria said.

Mexico's new General Law on Climate Change, which calls for a 50 percent reduction in greenhouse gas emissions in 2050 relative to 2000 levels, has not succeeded in checking an increase in this type of pollution, the OECD said, adding that "additional policy measures are needed, particularly in the transport sector."

Mexico spent 1.7 percent of GDP on energy subsidies between 2005 and 2009, according to the OECD, which recommended "extending the use of environmentally related taxes and reforming environmentally harmful subsidies in order to tackle climate change and reduce inequality."

The OECD found that the poorest 20 percent of Mexico's population receives just a tenth of electricity subsidies and recommended that Mexico replace indirect subsidies - artificially low prices for energy and water - with cash transfers.

It said that would "encourage efficient use of energy and water, and help to promote more socially-inclusive green growth."

The OECD added that "low taxes on vehicles and tax credits on road tolls have also contributed to drive energy use by the transport sector up by more than 40 percent from 2000-10."

In that regard, increasing "transport-related tax could serve environmental and social goals by funding low-carbon mass transit systems." EFE