Cop: LatAm diverges on mechanisms to cut fossil fuels

  • Market: Coal, Crude oil, Electricity, Natural gas
  • 12/06/23

Latin America and the Caribbeanhave mixed views on the phasing out of fossil fuels and which mechanisms are the most effectiveto reduce its consumption and increase clean energy.

Even though Latin America and the Caribbean have the cleanest electricity mix in the world — with a renewable share at 60pc — the overall energy matrix, as well as the economies of key countries, are still heavily dependent on fossil fuels such as oil, coal and natural gas.

Leaders such as Colombia's presidentGustavo Petro or Chile's president Gabriel Boric, both leftists,have called for a phase-out of fossil fuels. Colombia on 2 December joined the fossil fuel non-proliferation treaty during the UN's Cop 28 climate summit. On the other hand, Brazil is not pushing for an immediate phasing out of fossil fuel but is calling for more discussions at national and international levels, while Argentina is targeting increasing oil and natural gas production at its Vaca Muerta shale basin. Caribbean oil and gas producers Trinidad and Tobago and Guyana argue that their targets for decarbonisation can be met only by income from their fossil-fuel resources.

On top of that, the oil sector remains subsidized in the region, which slows a transition to cleaner energies, delegates heard at Cop in Dubai.

"This goes beyond stopping the subsidies that favor the development of fossil fuels," said Ramon Mendez-Galain, executive director at the Ivy Foundation. "In order to reduce the consumption of fossil fuels, we need to create fair conditions to attract investment in renewables," he added.

Mendez-Galain between 2008-15 led the transformation of the Uruguayan energy sector that includes a renewables share of 98pc in the electricity matrix and 67pc of renewable sources in the overall primary matrix of the country.

"What we did was to create the necessary conditions to reduce investors' risks and attract investment in renewable energy and so make renewables more competitive than fossil fuels," he said. Uruguay attracted around $6bn of investment in renewables, which he says accounted for 12pc of the country's GDP at the time.

But Uruguay's model to reduce fossil-fuel consumption may not be the best fit for other countries. Neighbouring Brazil is opting for increasing the costs of fossil-fuel consumption by implementing a carbon market through a bill that is currently under debate in congress.

Former president of Colombia Ivan Duque also agreed that carbon markets are important for Latin America as they will allow the mobilization of financial resources directed at impactful and sustainable projects.

But the region needs support from developed economies and multilateral institutions to be able to implement a successful carbon market that benefits not only decarbonization but local communities.

While developed economies like the US have earmarked part of their national spending for the expansion of clean energy technologies, Latin America and the Caribbean do not have the same fiscal space to offer subsidies.

"We are a developing and inequitable country and we can't put the costs [of the energy transition] on the Brazilian people," said Lucas Ferraz, secretary for international business at the state of Sao Paulo.

"It is impossible to achieve an energy transition [like in the US] in a region filled with [economic] inequality," Mendez-Galain added.


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