Shannon K. O'Neil

Latin America's Moment

O'Neil analyzes developments in Latin America and U.S. relations in the region.

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Guest Post: Latin America, Energy Matrices, and the Future of Climate Change

by Guest Blogger for Shannon K. O'Neil
December 5, 2014

Latin America, Energy Matrices, Climate Change A Petrobras Oil platform is seen at Guabanara bay in Rio de Janeiro September 24, 2010. Brazilian state oil company Petrobras raised $70 billion on Thursday in the world's biggest share offering, giving the company the financial muscle it needs to tap vast offshore oil reserves (Bruno Domingos/Courtesy Reuters).

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This is a guest post by Matthew Michaelides, an intern here at the Council on Foreign Relations who works with me in the Latin America program.

This week world leaders meet in Lima, Peru to discuss the framework for a new UN climate change agreement. The big issues for discussion include financing clean energy projects and implementing cap-and-trade policies, building on the release of a new report by the Intergovernmental Panel on Climate Change (IPCC) and a landmark climate change accord between the United States and China.

As the home to some six hundred million people and the source of 10 percent of the world’s GDP, Latin America’s path forward will influence the success or failure of the global climate change movement. The region has traditionally led the world in lower carbon emissions, in large part because of its diverse energy matrices. Yet, without a concerted push toward renewables, recent trends threaten this climate-friendly mix.

The first is economic development. As Latin American nations grow, they consume more fossil fuels. From 1995 to 2011, fossil fuels dependence grew by 10 plus percent in four countries in the region—Cuba, Honduras, Nicaragua, and Panama—increasing their carbon footprints. As a consequence, usage rates of nonrenewables across the region are converging on the wrong end of the spectrum.

figure 1

World Bank, “World Development Indicators,” 2014.

Fossil fuel production matters as well. Well known producers such as Trinidad and Tobago (natural gas) or Venezuela (oil) have always depended more heavily on hydrocarbons for their energy. But over the last fifteen years, Brazil, Mexico, and Argentina all made substantial new oil and gas discoveries, and Colombia and Bolivia boosted production on known oil and natural gas reserves. These increases threaten future carbon emissions declines. In Brazil, hydropower’s contribution to electricity generation fell from 82 percent in 2011, to 71 percent in 2013—replaced almost wholly by fossil fuel powered sources. These trends look to continue, as domestic political pressures have halted plans to build four to eight new nuclear reactors by 2030 and slowed several new hydroelectric dam projects. In Mexico, for all the publicity the country received for progressive 2012 climate change legislation, hydrocarbon consumption continues apace, and the recent energy reform may incentivize a further turn toward fossil fuels.

figure 2

World Bank, “World Development Indicators,” 2014.

Some nations have improved their carbon footprints or are taking positive steps to do so. Costa Rica decreased its fossil fuel consumption by over 10 percent from 1995 to 2011 and plans to be carbon-neutral as soon as 2021. And despite its recent uptick in hydrocarbon usage, Brazil remains the second largest producer of both ethanol and hydroelectric power in the world. Nicaragua meets 21 percent of its energy needs through wind sources and plans to increase its use of renewables to 90 percent of its energy needs. And El Salvador hopes to increase geothermal energy production to 40 percent from 24 percent through public-private partnerships.

As in other regions of the world, Latin American countries face a trade-off between money and development today, and environmental sustainability and diversity tomorrow. If oil prices continue to fall and shale gas technology continues to improve, the challenge to maintain environmentally sustainable energy matrices will only grow. This week’s discussions in Lima on making renewables usage financially feasible are a positive step, but they must be followed up with concrete action.

 

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