The economics of climate change in Latin America and the Caribbean

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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
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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.
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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.
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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.
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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.

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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.

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SCIENTIFIC EVIDENCE CALLS FOR URGENT GLOBAL
ACTION
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Preliminary analysis of the accumulated costs of
climate change in selected countries and sectors
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ECONOMIC COST OF NATURAL DISASTERS
Fuente CEPAL Registro 1970-2008, proyección
2009-2100
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Chile Changes in agricultural output in the
twenty-first century
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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
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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.

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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

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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).
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ENERGY EFFICIENCY COULD CONTRIBUTE TO 35
REDUCTIONS IN THE 2030 SCENARIO
Aumento de eficiencia en Demanda
eléctrica y Demanda de combustibles fósiles
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Fuente IEA-OECD World Energy Outlook 2006 y 2007.
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GROWTH WITH LOWER POLLUTION IS POSSIBLE
Source CAIT/WRI
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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
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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).
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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

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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
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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.

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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.

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