Comparing Latin American Energy Policies on Climate Change: Toward an Ambitious and Equitable International Climate Agreement November 2014 Alison Kirsch Brown University
2012 Energy Balances, Mtoe
56.1 218.9 Nicaragua
8.13 23.35 1
Since the passage of the Kyoto Protocol in 1997, the regional GDP of Latin America and the Caribbean has grown by 62%.1 In 2011, emissions from the region made up 9% of the worldâ€™s total.2 The energy sector plays an increasingly important role in Latin American greenhouse gas emissions: since 1990, emissions from land use, land-use change and forestry (LULUCF) have decreased by 44%, while energy emissions increased by 77%. National policymaking in the energy sector can lock in infrastructure, garner trust in lowcarbon development, and substantiate international climate policy rhetoric. Thus, a critical and comparative examination of energy policies is essential as parties to the United Nations Framework Convention on Climate Change (UNFCCC) prepare to pledge contributions to the global effort to mitigate runaway climate change. They will do so in their Intended Nationally Determined Contributions (INDCs), an outline of specific mitigation goals, projects and policies, due in early 2015.3 This report analyzes climate change polices in the energy sectors of Brazil, the Dominican Republic, Mexico, Nicaragua, and Peru, in order to identify successes, obstacles, and opportunities for advancement.
BRAZIL The natural gas boom and discovery of new oil reserves underneath layers of salt (“pre-salt”) have transformed the energy sector of Brazil, the world’s sixth largest emitter of greenhouse gases. Brazil aims to keep its national energy matrix clean while exploring profitable oil reserves for export.4 Written into law is a voluntary emission reduction target of 36.1-38.9% below business-as-usual projections by 2020,5 as well as a goal of 16% renewable electricity (excluding large hydropower) by the same year.6 Additionally, Brazil has policies to encourage distributed power generation and construct new large hydroelectric projects. According to the Climate Equity Reference Calculator, by 2020 Brazil’s voluntary commitments will yield only half of the emission reductions that make up its fair share of an equitable international climate agreement.7
DOMINICAN REPUBLIC In 2012, the Dominican Republic became the first developing country to make an unconditional pledge to reduce its greenhouse gas emissions to 25% below 2010 levels by 2030,8 even while another plan aims to boost GDP growth by 140%.9 The country gets 90% of its energy from imported fossil fuels, but has a legislated goal of 25% clean energy by 2025.10 The Dominican Republic is slowly implementing a range of policies that incentivize clean and efficient energy infrastructures, such as net metering systems.11 In the quest to decrease dependence on imported energy, new hydrocarbon projects are underway, which swamp recent concessions given to renewable energy installations. 2
MEXICO Mexico’s progressive national climate legislation of 2012 sets a renewable electricity target of 25% by 2024, as well as conditional emission reduction targets of 30% below baseline levels by 2020, and 50% below 2000 levels by 2050.12 This greenhouse gas reduction goal would account for 72% of Mexico’s fair share of emission reductions by 2020. Aligned with the desire for energy security, the Mexican economy is highly dependent on oil exports, which is incongruous with its many climate change and energy policies. Even though Mexico does have a carbon tax, it puts a very low price on carbon and exempts natural gas.13 Moreover, Mexico’s 2014 energy reform package sets the country up for a major, high-carbon expansion of oil and gas exploration.14
NICARAGUA Nicaragua’s location makes geothermal energy and other renewables potentially successful, though imported fossil fuels make up 44% of the country’s energy matrix.15 The country has no emission reduction targets, but rather an extremely ambitious renewable energy goal of 90% by 2020.16 Renewable energy incentives have benefitted a few large hydroelectric and wind projects, while fossil fuel projects are developed simultaneously. Efficiency measures have not received much attention in Nicaraguan policy, where 74% of electricity is lost before reaching the consumer.
PERU Both Peru’s presidency of the UNFCCC Conference of the Parties in December 2014, as well as a recent bundle of laws that lessened environmental regulations, have called international attention to Peru’s climate change policies.17 Peru has no economy-wide emission reduction target, but rather targets in distinct sectors. Its low renewable electricity target of 5% by 201218 has not been updated, though its voluntary target under the UNFCCC calls for 40% renewable energy consumption by 2021.19 An energy efficiency plan through 201820 is in force but in need of support from new regulations. Yet where policy and 3
implementation are lagging, Peru has found the political will to convene multiple bodies and reports to plan for climate change within various short- and long-term scenarios.
COMPARATIVE POLICY ANALYSIS The countries in this report vary significantly in the geographic, social, and political contexts from which they approach climate change policy. Deforestation and land use change have understandably been the focus of the recent Latin American and Caribbean approach to greenhouse gas mitigation, especially considering the regionâ€™s bountiful hydropower resources that have allowed national governments to boast clean energy matrices. However, the fossil fuel exports of a country cannot be ignored, especially in the cases of Brazil and Mexico, whose individual greenhouse gas emission reduction targets will be more than overridden by increased oil exportation to petroleum-hungry countries. In these two countries, the largest of those analyzed in this report, climate change rhetoric within the energy sector has not overcome the lure of fossil fuels in the quest for foreign investment. In Brazil, the focus on LULUCF policy avoids dealing with the inconsistencies between profiting from pre-salt oil exploration while reducing in-country emissions. Mexicoâ€™s energy reforms pose the same contradiction in relation to its progressive General Law on Climate Change. Even though the oil will not be burned within the borders of these countries, emissions generated by fracking, extracting, and transporting the oil will be significant. Within national politics, the agendas of the administrations in power drive these fossil fuel-based energy reforms more so than they do other public policies, such as general climate change legislation. This suggests to the public that implementing policies to achieve greenhouse gas emission reductions is not only separate from energy issues, but also of lower priority. Â 4
The two smallest countries analyzed in this report, the Dominican Republic and Nicaragua, have some of the most ambitious renewable energy and greenhouse gas emission reduction targets of the group, yet are also the most dependent on imported energy â€” primarily Venezuelan oil. Thus, increased energy independence will also come at a financial benefit to these countries by lessening their debt to Venezuela. Incentives for renewable energy development are in force, though the overall energy mix will only become cleaner if the pace of renewable development exceeds increasing energy demand. The Dominican Republic has a more robust array of policies thus far, while Nicaraguaâ€™s renewable energy development consists mainly of large geothermal and hydroelectric projects. Though these projects reduce emissions, they rely on existing inefficient transmission structures and engender questionable ecological consequences. These two smaller countries have high renewable energy capacities and the opportunity in growth to leapfrog much of the typical carbonintensive development. Otherwise, these two countries move toward merely a cleaner version of the status quo, instead of achieving the more fundamental changes needed for an adequate global response to climate change. Peru emerges from this analysis as an interesting example of a country in between the Brazil/Mexico and Nicaragua/Dominican Republic groupings. It is in the middle in terms of size, GDP, and GHG emissions, and produces threequarters of its own energy. These conditions, and the public eye on its leadership at COP20 in Lima, could theoretically provide the country leeway for ambitious progress in climate change mitigation in the energy sector. Peru has produced a great amount of research and plans on hypothetical responses 5
to climate change. Yet it is the laggard of the group in terms of legislated economy-wide emission reductions, as well as with renewable energy goals. Even considering the $3.4 billion invested in clean energy in Peru from 2006 to 2013,21 and the resultant CDM projects, Peru cannot let clean energy policies fall to the wayside — or worse, be pushed aside in favor of hydrocarbon exploitation that is profitable in the short-term. Perhaps it is with these energy objectives in mind that Peru has been hesitant to set and update binding GHG reduction and/or clean energy targets; this approach, however, could be considered more realistic than that of Nicaragua. All of the countries in this report demonstrate some level of discordance between energy development projects and climate change policies within the sector, and similar discrepancies between international rhetoric and domestic implementation. This is most fundamentally exemplified by the fact that each of these countries has a Ministry of Energy and Mining that is separate from the Ministry of the Environment or Natural Resources. Emphasizing the connection between climate change and more traditional environmental topics (namely forestry and land use) helps Latin American governments shift climate concerns away from high-carbon energy projects, which are instead billed as economic development endeavors.
LOOKING TOWARD THE INDCs The conclusions drawn here point toward opportunities for convergence between the multifaceted goals of the Intended Nationally Determined Contributions process, and the energy sector’s mitigative potential within these countries. For instance, Peru has one climate change planning document that applies through 2021, and another that covers 2021-2050. This timing provides an entry point for Peru to propose an ambitious INDC for 2020 that takes both into account. Its pledge can capitalize on all of its existing predictions and proposals in order to identify an economy-wide greenhouse gas emission reduction target and subsequent implementation mechanisms. Also in the mitigation section of Peru’s INDC should be a breakdown of commitments by sector that confronts the country’s need to transition to renewable energy. Peru has lagged on updating 6
its renewable electricity targets; putting forth an INDC provides an opportunity to specify goals into the post-2020 period. These changes in the electricity sector can be seen as adaptive mitigation, given the detrimental effects that climate change will have on hydroelectric generation capacity. Peru is advanced in that it has in fact begun to formulate its INDC, and has requested financial support from Germany through July of 2015 to develop its plan.22 Brazil’s greenhouse gas inventory, BAU projections, and emission reduction targets set it up to take a strong approach to the INDC planning process. Unfortunately, at the moment it is likely not politically feasible to commit to a phasing out of pre-salt oil exploration, though this would be a major step in the energy sector to align Brazil’s external rhetoric with its national actions. Given that current pre-2020 pledges meet only half of Brazil’s fair share contribution to global greenhouse gas mitigation, a post-2020 regime with a focus on equitably divided responsibility could hit Brazil hard. In the interim, its INDC can consider thorough implementation of a national carbon market, as provided for by its National Policy on Climate Change, to shift market forces and smoothen the transition. Mexico’s long-term renewable energy and emissions goals can be the framework for its INDC, which presents an opportunity to further clarify and develop the policies that will bring these to fruition. Depending on the international decision regarding the commitment period for INDCs (currently in debate between five, ten, or more years), Mexico’s INDC can be a periodically updated plan to achieve the goals it has set through 2054. A significant step for the energy sector would be to make the carbon tax stricter and higher, in order to incentivize the necessary post-2020 mitigation aligned with economic growth. Within the UNFCCC, the Independent Association of Latin American and the Caribbean (AILAC, of which Peru is a member) has proposed that the INDCs take a two-tiered structure. In this approach, developing countries indicate what they can commit to both with and without international financial support. The Dominican Republic can use this structure within its INDC to build upon its existing unconditional greenhouse 7
gas reduction pledge, by specifying how it could increase this ambition with forthcoming finances. Its INDC must include welldeveloped renewable policies and projects that will continue to decrease its dependence on Venezuelan oil and make its emission reduction targets possible. It has as a foundation the Climate-Compatible Development Plan. Lastly, if Nicaragua achieves the renewable energy levels it has promised by 2020, its INDC for post-2020 can contend with efficiency measures within the renewable system, as well as furthering a greenhouse gas inventory process. Given that Nicaragua’s existing projects are very reliant on outside funding, the country would also do well to clarify in its INDC its capabilities without financial support, in order to commit itself to take climate change into account no matter the results of international climate finance promises. That said, Nicaragua’s focus on common but differentiated responsibilities within the Convention, and particularly on historical responsibility for greenhouse gas emissions, likely means that a Nicaraguan INDC must be comprised of actions with co-benefits — such as the energy independence advantage of its renewable energy target. Overall, the energy sectors of these Latin American countries present promising opportunities at the international level for following through on national rhetoric, advancing ambition, and preparing for comprehensive mitigation in the INDCs. Before decisions are made at COP20, it is uncertain exactly what will be required for submission within an INDC. It is clear, however, that the contributions will involve some sort of mitigation component. Thus, it would behoove the countries analyzed in this report to consider their growing energy demands and promising legislative structures as they outline their plans for post-2020 climate change mitigation.
1 = highest, 5 = lowest Energy sector Energy Total GHG Rank share of Rank emissions Rank emissions total per capita emissions MtCO2e Percent tCO2e
Brazil Dominican Republic Mexico
RENEWABLE ENERGY (RE) POLICY 1 = most ambitious, 5 = least ambitious Portion of Economy2020 fair 2012 RE wide GHG share that Total RE Targets reduction will be met Rank share* target by current pledges Voluntary 16% of 36.1-38.9% Brazil 36% electricity by 51 to 56% 2 below BAU by 2020 2020 10% of elec- Unconditional Dominican 10% tricity by 2015, 25% below 93% 1 Republic 25% by 2025 2010 by 2030
35% of electricity by 2024, 40% by 2034, 50% by 2054
90% of energy by 2020
Conditional 30% below BAU by 2020, 50% below 2000 by 2050
5% of electricity by 2013, Peru 14% 40% of energy None** N/A 3 consumption by 2021 *Includes biofuels, waste, geothermal, solar, tidal, wind, and small- and large-scale hydropower projects. 9 **Peru has targets in distinct sectors of the economy.
Total GHG Emissions (Thousands MtCO2e)
Latin America & the Caribbean
Total GHG Emissions (Thousands MtCO2e)
ACKNOWLEDGEMENTS The author gratefully acknowledges the support of Camila Bustos, Ximena Carranza Risco, Mariana Castillo, Guy Edwards, Tania Guillén Bolaños, Jeanne Loewenstein, Enrique Maurtua Konstantinidis, Evaydee Pérez, J. Timmons Roberts, Daniel Ryan, and Dov Sax. The views presented here are the author’s own and do not represent Brown University or Climate Action Network Latinoamérica. Contact the author for the full report: email@example.com
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November 2014 Alison Kirsch Brown University