Comparing Latin American Energy Policies on Climate Change:

Toward an Ambitious and Equitable International Climate Agreement

November 2014

Alison Kirsch Brown University

INTRODUCTION Since the passage of the Kyoto Pro-tocol 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 world’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 in-creased by 77%. National policymak-ing in the energy sector can lock in infrastructure, garner trust in low-carbon development, and substanti-ate international climate policy rheto-ric. Thus, a critical and comparative examination of energy policies is es-sential as parties to the United Na-tions Framework Convention on Cli-mate Change (UNFCCC) prepare to pledge contributions to the global ef-fort to mitigate runaway climate change. They will do so in their In-tended Nationally Determined Con-tributions (INDCs), an outline of spe-cific mitigation goals, projects and policies, due in early 2015.3 This re-port analyzes climate change polices in the energy sectors of Brazil, the Dominican Republic, Mexico, Nica-ragua, and Peru, in order to identify successes, obstacles, and opportuni-ties for advancement.

251.9

69.1

Brazil

0.797

7.22

Dominican Republic

23.35

8.13

Peru

218.9

56.1

Mexico

1.863 1.488

Nicaragua

2012

Ene

rgy

Bala

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Pro

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1

BRAZIL The natural gas boom and discovery of new oil reserves un-derneath 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% be-low 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 hydroe-lectric 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 green-house 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 Do-minican 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 depend-ence on imported energy, new hydrocarbon projects are un-derway, 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 condi-tional emission reduction targets of 30% below baseline levels by 2020, and 50% below 2000 levels by 2050.12 This green-house gas reduction goal would account for 72% of Mexico’s fair share of emission reductions by 2020. Aligned with the de-sire for energy security, the Mexican economy is highly de-pendent on oil exports, which is incongruous with its many cli-mate change and energy policies. Even though Mexico does have a carbon tax, it puts a very low price on carbon and ex-empts natural gas.13 Moreover, Mexico’s 2014 energy reform package sets the country up for a major, high-carbon expan-sion of oil and gas exploration.14 NICARAGUA Nicaragua’s location makes geothermal energy and other re-newables 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 Renewa-ble energy incentives have benefitted a few large hydroelectric and wind projects, while fossil fuel projects are developed sim-ultaneously. Efficiency measures have not received much at-tention 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 interna-tional 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 un-derstandably been the focus of the recent Latin American and Caribbean approach to greenhouse gas mitigation, especially considering the region’s bountiful hydropower resources that have allowed national governments to boast clean energy ma-trices.

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 petrole-um-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 emis-sions. Mexico’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 transport-ing the oil will be significant. Within na-tional politics, the agendas of the ad-ministrations 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 imple-menting policies to achieve green-house gas emission reductions is not only separate from energy issues, but also of lower priority.  

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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 — primarily Venezuelan oil. Thus, in-creased 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 Nicaragua’s renewable energy devel-opment consists mainly of large geothermal and hydroelectric projects. Though these projects reduce emissions, they rely on existing inefficient transmis-sion structures and engender questionable ecological con-sequences. These two smaller countries have high renewable energy capacities and the op-portunity in growth to leapfrog much of the typical carbon-intensive development. Oth-erwise, these two countries move toward merely a cleaner version of the status quo, in-stead of achieving the more fundamental changes needed for an adequate global re-sponse to climate change.

Peru emerges from this analysis as an interesting ex-ample of a country in between the Brazil/Mexico and Nicara-gua/Dominican Republic groupings. It is in the middle in terms of size, GDP, and GHG emissions, and produces three-quarters 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 in-vested 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 hy-drocarbon exploitation that is profitable in the short-term. Per-haps 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 con-sidered more realistic than that of Nicaragua.

All of the countries in this report demonstrate some lev-el of discordance between energy development projects and climate change policies within the sector, and similar discrep-ancies between international rhetoric and domestic implemen-tation. 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 for-estry 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 in-stance, 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 cap-italize 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

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its renewable electricity targets; putting forth an INDC provides an opportunity to specify goals into the post-2020 period. The-se 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 ad-vanced 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 ap-proach to the INDC planning process. Unfortunately, at the moment it is likely not politically feasible to commit to a phas-ing 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 car-bon 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 de-bate 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 incentiv-ize 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 struc-ture. 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

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gas reduction pledge, by specifying how it could increase this ambition with forthcoming finances. Its INDC must include well-developed 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 lev-els it has promised by 2020, its INDC for post-2020 can con-tend 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 ener-gy target.

Overall, the energy sectors of these Latin Ameri-can countries pre-sent promising op-portunities at the in-ternational level for following through on national rhetoric, ad-vancing ambition, and preparing for comprehensive mitigation in the INDCs. Before decisions are made at COP20, it is un-certain 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 en-ergy demands and promising legislative structures as they out-line their plans for post-2020 climate change mitigation.  

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2011 EMISSIONS 1 = highest, 5 = lowest

Total GHG emissions Rank

Energy sector

share of total

emissions

Rank Energy

emissions per capita

Rank

Units MtCO2e Percent tCO2e

Brazil 1419.1 1 31% 3 2.22 2 Dominican Republic 29.96 5 64% 2 1.89 3

Mexico 723.19 2 68% 1 4.1 1

Nicaragua 46.51 4 12% 4 0.93 5 Peru 153.65 3 31% 3 1.6 4

RENEWABLE ENERGY (RE) POLICY 1 = most ambitious, 5 = least ambitious

2012 RE

share*

RE Targets

Economy-wide GHG reduction

target

Portion of 2020 fair

share that will be met by current

pledges

Total Rank

Brazil 36% 16% of

electricity by 2020

Voluntary 36.1-38.9%

below BAU by 2020

51 to 56% 2

Dominican Republic 10%

10% of elec-tricity by 2015, 25% by 2025

Unconditional 25% below

2010 by 2030 93% 1

Mexico 6%

35% of electricity by

2024, 40% by 2034, 50% by

2054

Conditional 30% below

BAU by 2020, 50% below

2000 by 2050

70% 1

Nicaragua 56% 90% of energy by 2020 None N/A 2

Peru 14%

5% of elec- tricity by 2013, 40% of energy consumption

by 2021

None** N/A 3

*Includes biofuels, waste, geothermal, solar, tidal, wind, and small- and large-scale hydropower projects. **Peru has targets in distinct sectors of the economy.

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Latin America & the CaribbeanTotal Emissions Energy Share LULUCF Share

 ACKNOWLEDGEMENTS The author gratefully acknowledges the support of Camila Bustos, Ximena Carranza Risco, Mariana Castillo, Guy Ed-wards, 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 Latino-américa. Contact the author for the full report: alison_kirsch@brown.edu REFERENCES [1] CEPALSTAT Databases and Statistical Publications, Economic Commission for Latin Ameri-ca and the Caribbean. Updated 13 October 2014. Accessed 3 November 2014. [2] All data on GHG emissions are from: WRI, CAIT 2.0. 2014. Climate Analysis Indicators Tool: WRI’s Climate Data Explorer. Washington, DC: World Resources Institute. Available at: http://cait2.wri.org. [3] Niklas Höhne, Christian Ellermann, and Lina Li, "Intented Nationally Determined Contributions under the UNFCCC - Discussion Paper," (Cologne: Ecofys, 11 June 2014). [4] “PDE 2023: Brasil Será Grande Produtor de Petróleo Mantendo Matriz Energética Limpa,” Empresa de Pesquisa Energética, 10 September 2014, accessed 12 October 2014. [5] “Institui a Política Nacional sobre Mudança do Clima - PNMC e dá outras providências,” Presidência da República Casa Civil, 29 December 2009, Law 12.187/2009, Brazil. [6] “Plano Decenal de Expansão de Energia 2020,” Ministério de Minas e Energia, Empresa de Pesquisa Energética. Brasília: MME/EPE, 2011 2 v.: il. [7] Compromise scenario based 50% on capacity and 50% on historical responsibil-ity since 1990. The pledge brings Brazil to 422-457 MtCO2e below baseline, while its fair share is to decrease 830 MtCO2e below baseline. Climate Equity Reference Calculator beta, Green-house Development Rights 2014, EcoEquity and the Stockholm Environment Institute, accessi-ble at http://www.gdrights.org/calculator/#. [8] “Ley 1-12: Estrategia Nacional de Deasrrollo 2030,” Ministerio de Economía, Planificación y Desarrollo. Santo Domingo, 25 January 2012. [9] Nachmany, M., Fankhauser, S., Townshend, T., Collins, M. Landesman, T., Matthews, A., Pave-se, C., Rietig, K., Schleifer, P. and Setzer, J., 2014. “The GLOBE Climate Legislation Study: A Review of Climate Change Legislation in 66 Countries. Fourth Edition.” London: GLOBE Interna-tional and the Grantham Research Institute, London School of Economics. [10] “Law 57-07 on Renewable Sources of Energy Incentives and its Special Regimes,” National Congress. Santo Domingo: 24 April 2007. [11] Xing Fu-Bertaux, “Where is The Cash? Financing Renewable En-ergies in the Dominican Republic — Part 3,” Revolt, Worldwatch Institute, 21 September 2011. [12] “General Law on Climate Change,” Diario Oficial de la Federación, Mexico City: 6 June 2012. [13] "Ley del Impuesto Especial Sobre Producción y Servicios." Cámara de Diputados del H. Congreso de la Unión. Mexico City: December 11, 2013. [14] “Energy Reform – What Is?” México: Gobierno de la República, Mexico City, 2014. [15] All energy balance data are from: "Energy Balance Flows." International Energy Agency, 2014. [16] “Statement by Commander in Chief of the Nicaraguan Army (Ret.) Moisés Omar Halleslevens Acevedo, Vice President of the Republic of Nicaragua,” Plenary of the United Nations Climate Summit, New York: 23 September 2014. [17] “Entrevista a César Gamboa de DAR: Proyecto del Ejecutivo Debilita al Ministerio del Ambiente,” Enlace Nacional, Peru: 29 June 2014. [18] “Legislative Decree #1002 to Promote Investment for Electricity Generation with the Use of Renewable Energy,” Ministerio de Energía y Minas, Lima: 13 September 2010. [19] “National Capacity Building Workshop for the Develop-ment of Nationally Appropriate Mitigation Actions,” Peru Ministry of Environment, Lima: 14-15 March 2013. [20] “Plan Referencial del Uso Eficiente de Energia 2009-2018,” Ministerio de En-ergía y Minas, Lima: 4 September 2009. [21] “Climatescope 2014: Mapping the Global Fronteirs for Clean Energy Investment,” Bloomberg New Energy Finance. [22] “Support Project for the Preparation of the Peruvian Intended Nationally Determined Contribution (INDC),” International Partnership on Mitigation and MRV, 2014. Photographs: [a] Seanews.com.tw [b] Greenoptimis-tic.com [c] Aeonday