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The economics of climate change in Latin America and the Caribbean

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Title: The economics of climate change in Latin America and the Caribbean


1
The economics of climate change in Latin America
and the Caribbean
Alicia Bárcena Executive Secretary Economic
Commission for Latin America and the Caribbean
27 October 2009
2
Potential GDP growth will be weaker in the near
future in developed countries
OECD AND THE UNITED STATES OF AMERICA POTENTIAL
GDP GROWTH, 2007-2014 (Percentages)
Average growth rates ()
Source European Commission, 2009 Organization
for Economic Co-operation and Development (OECD),
2009 International Monetary Fund (IMF), 2009.
3
International trade has suffered strongly with
the crisis and a subdued recovery is estimated
for 2010
ANNUAL GROWTH RATE OF THE VOLUME OF INTERNATIONAL
TRADE, 2004-2010 (Percentages)
Source Economic Commission for Latin America and
the Caribbean (ECLAC), on the basis of OECD
Economic Outlook, June 2009.
4
JOBLESS RECOVERY Regional unemployment rate
could exceed 9 in 2009
LATIN AMERICA AND THE CARIBBEAN POVERTY, EXTREME
POVERTY AND UNEMPLOYMENT RATES a (Percentages)
Source Economic Commission for Latin America and
the Caribbean (ECLAC), on the basis of special
tabulations of household surveys conducted in the
respective countries. a Figures for poverty and
extreme poverty rates are based on estimates for
19 countries of the region, including Haiti. The
figures appearing above the bars are percentages
of the population. Figures for 2008 and 2009 are
forecasts.
5
The post-crisis world in a nutshell
  • Growth and trade with a plateau at lower levels
  • Jobless recovery
  • Global aggregate demand will be sustained more by
    the emerging economies.
  • The availability of external savings will be
    curtailed as a result of the massive destruction
    of financial wealth, tighter regulation and
    increased financial protectionism.
  • Growth in world trade will be more sluggish,
    trade protectionism will increase, and the
    competition for markets will be more fierce.
  • Climate change will demand the adoption of new,
    low-carbon production and trade patterns, which
    will require substantial investment.

6
THE PARADIGMS WE INHERITED
  • Intensive use of fossil fuels would increase
    living standards with minor externalities.
  • Neither energy efficiency programmes nor
    renewable energies are competitive and hence
    remain marginal.
  • Relative prices, due to expenditure, investment
    and taxation, favor the consumption of fossil
    fuels.
  • Gradual concerns about the degradation of the
    environment with partial responses.
  • Changes in land use are promoted for urbanization
    (urban areas and for traditional agriculture)
  • There is no coordination between fiscal policies,
    energy and climate security, innovation in
    infrastructure and transportation.

7
SCIENTIFIC EVIDENCE CALLS FOR URGENT GLOBAL
ACTION
8
Preliminary analysis of the accumulated costs of
climate change in selected countries and sectors
9
ECONOMIC COST OF NATURAL DISASTERS
Fuente CEPAL Registro 1970-2008, proyección
2009-2100
10
Chile Changes in agricultural output in the
twenty-first century
11
Montevideo, Uruguay impact on urban zones of the
flooding of coastal areas up to 2100
ESTIMATES OF TOTAL IMPACT ON COASTAL RESOURCES
ACCORDING TO PROPOSED SCENARIOS
1 meter rise in sea level 12 of 2008 GDP
12
THE MODEL FOR THE FUTURE
  • Carbon-emissions limits will be set to reduce the
    carbon footprint
  • Carbon footprint will be key to competitiveness
  • Carbon reduction targets, incentives, penalties
    or taxes will be established in the international
    economy.
  • The transition will be either negotiated and
    multilateral through the principle of common but
    differentiated responsibilities
  • Or unilateral through protectionism
  • Adaptation and mitigation policies require
    long-term planning in infrastructure, transport,
    land use, trade and investment, and energy
    production.

13
RIGHT TO THE FUTURE CHALLENGES AND OPPORTUNITIES
  • Paradigm shift towards a low-carbon economy is
    urgent.
  • Opportunity to overhaul existing infrastructure,
    improve production processes and move towards
    energy efficiency
  • Evidence shows that cost of adaptation wil be
    considerable in agriculture, coastal urban and
    touristic areas, water availability
  • If no multilateral meaningful agreement is
    reached, the unilateral option will come through
    protectionist measures in trade of commodities
    (carbon footprint).
  • Multilateral entails targets, funding and
    adaptation strategies
  • Adaptation and mitigation require long term
    planning and new market incentives
  • Considerable levels of innovation in key sectors
    infrastructure, transport, industry and new
    energy alternatives
  • The role of the State needs to be reinforced,
    expressing a new alliance between the public and
    private a new social covenant for a low carbon
    future

14
ENERGY INTENSITY ARE NOT IN THE RIGHT TRENDS
LATIN AMERICA AND THE CARIBBEAN ENERGY INTENSITY
(Barrels of Oil Equivalent (BOE)/US 1000 in
2000 prices, index 1980100)
Source Economic Commission for Latin America and
the Caribbean (ECLAC), on the basis of OLADE,
Energy-Economic Information System (SIEE) and
International Energy Agency (IEA).
15
ENERGY EFFICIENCY COULD CONTRIBUTE TO 35
REDUCTIONS IN THE 2030 SCENARIO
Aumento de eficiencia en Demanda
eléctrica y Demanda de combustibles fósiles
35
Fuente IEA-OECD World Energy Outlook 2006 y 2007.
16
GROWTH WITH LOWER POLLUTION IS POSSIBLE
Source CAIT/WRI
17
PRODUCTIVITY GAP ADDS TO THE ENERGY CONSUMPTION
GAP
Índices de brecha energética y productividad
relativa, 1996-2006
Fuente División de Desarrollo Productivo y
Empresarial, CEPAL
18
Participation by Latin America and the Caribbean
in a mitigation scenario opportunities are
concentrated in improving efficiency in
industry, transport and buildings
Source Economic Commission for Latin America and
the Caribbean (ECLAC), on the basis of
UNFCCC(2007).
19
OPPORTUNITIES FOR ENERGY MITIGATION (2010-2030)
  • Efficiency measures for potential emissions
    reductions of between 15 and 20 by 2030
  • In electricity generation
  • In managing demand for electricity
  • In the industrial sector
  • In transport
  • Increasing renewable sources participation from
    the current level of 25 to 40 by 2030. This
    will entail removing barriers in the following
    areas
  • Economic and institutional (subsidies,
    internalizing positive externalities from
    renewables and negative ones from fossil fuels)
  • Technical (knowledge of available resources)
  • Social (acceptance of some renewables and
    cultural changes)
  • Increase in nuclear energy
  • Introduction of technologies for carbon capture
    and sequestration in electricity generation

20
Role of ECLAC in the Reviews of the Economics of
Climate Change (RECCs) and structure of the
Reviews
Partner in Mexico (UK, IDB, World Bank), Promotor
in Central America (UK), Caribbean (UK) and
South America (UK, German, Spanish and Danish
Cooperation Agencies, European Union, IDB)
Argentina, Chile, Colombia, Bolivia, Ecuador,
Paraguay, Peru and Uruguay
Methodological Approach
countries
21
CENTRAL OBJECTIVES OF RECCS
  • Measure the baselines for adaptation and
    mitigation and thus be in a position to compare
    change scenarios between the two processes and
    among countries
  • Build consensus processes and capacity within the
    countries (technical teams per country-subregion)
  • Draw the attention of government economic
    agencies in the region to these issues and their
    relationship with development (government panels
    in countries)
  • Design low-carbon (double or triple dividend)
    development strategies
  • Foresee changes in the international environment
    in which the region will be immersed in order to
    adjust trade and investment policy as appropriate.

22
PRELIMINARY CONCLUSIONS
  • Compared with other regions, ours can position
    itself proactively at relatively low cost by
    improving energy efficiency and diversifying
    energy sources.
  • This will enable the region to capture additional
    financial and technological flows associated with
    its participation in the international agenda.
  • Flows can be channeled towards underfinanced
    areas of the regional energy agenda, which need
    attention, regardless of the international agenda
  • This strategy will enable the countries to move
    forward simultaneously with their domestic
    priorities and assume a proactive role vis-à-vis
    the international climate change regime,
    consistent with their own development priorities.

23
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