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18 October 2021

Economic recovery is trumping climate action in Latin America

Post-pandemic, Mexico and Brazil are consuming more fossil fuels in defiance of climate commitments.

By Patrick Mulholland

The decision of Brazil and Mexico to stall, and even renege, on their commitments under the Paris climate Agreement, could have potentially negative region-wide effects, says a study published last week. Blindsided by the global pandemic, both countries have set themselves on a perilous path of upward emissions in order to kickstart their economies, the first and second largest in the region, respectively. 

Of the 16 countries surveyed across Central and South America, the report by the Institute of the Americas on nationally determined contributions – plans each country must submit under the Paris Agreement to show how they will cut greenhouse gas emissions – finds that Brazil and Mexico are most at risk of reversing climate adaptation and mitigation measures. 

The Mexican president Andrés Manuel López Obrador has staked his reputation on reviving the country’s battered oil and gas industry, and last month proposed a bill that would scrap its independent energy regulator and effectively end private investment in green technologies. Another so-called pet project, the Dos Bocas oil refinery in the president’s home state of Tabasco, is also nearing completion despite ongoing local protests. 

Meanwhile, in Brazil, under the administration of President Jair Bolsonaro, emissions are expected to climb by 35 per cent on previous baseline estimates by 2030, while illegal deforestation in the Amazon reached a 12-year high between August 2019 and July 2020. 

“Instead of thinking of the pandemic as an opportunity to reframe the narrative around climate change, most countries have intensified their reliance and consumption of fossil fuels,” says Sandra Guzmán, a manager at the Climate Policy Initiative. 

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Leonardo Beltrán, former deputy secretary for planning and energy transition in Mexico, recognises that the country’s oscillating stance seems outwardly paradoxical, but says this is the “result of democratic processes”. The key, in his mind, is striking the right balance of stakeholder interests between short-term carbon-intensive recovery efforts and long-term climate commitments, such as electrifying public transportation infrastructure. 

“As of today, there’s a moving target – certainly we are moving toward net zero – but there are layers to how we change course,” explains Beltrán. “Perhaps some people would characterise that as going backwards. Others would say we’re taking a different direction.”

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Within Latin America, these problems are particularly acute. With a GDP decline of 7.2 per cent in 2020, the region took the largest economic hit worldwide from the pandemic. Across the board, government finances remain strained. And in a vicious circle, some countries face downgraded sovereign ratings, which further increases the cost of borrowing.

On average, countries in Latin America have earmarked 2.4 per cent of long-term recovery spending for environmentally sustainable projects, compared with 19.2 per cent globally, shows the UN’s Covid-19 recovery tracker.

Part of the challenge in delivering on net-zero emission targets is the mammoth task of analysing the total cost of the green transition, an undertaking that few countries have even begun. But there is another more nitty-gritty component: the contingency of climate policies in developing countries on international funding. At present, less than a third of Latin American countries have made their commitments on the environment fully unconditional.

[See also: Emissions tracker: How countries compare ahead of COP26] 

“The high level of conditionality means these climate pledges will largely rely on the developed world, which is something to keep in mind by the international community at COP26,” says Tania Miranda, director of policy at the Institute of the Americas, and author of its report. 

Yet data from the OECD shows that developed countries provided less than $80bn in climate finance to the developing world in 2018, over two years after the Paris Agreement was signed. Furthermore, between 2016 and 2018, Latin America benefited the least from these funds, collecting just 17 per cent of total inflows, compared with 43 per cent for Asia and 25 per cent for Africa. 

Miranda says the best way for Latin American countries to lobby for more foreign aid and funding is to invest in institutional capacity building and technology, as well as better budgeting practices and putting more of their own resources into tackling unconditional pledges. Otherwise it appears as if the region is “not serious in their efforts”, she opines.

Thomas Singh, director of the Green Institute at the University of Guyana, agrees that voluntary contributions towards climate targets have, so far, failed to produce meaningful results, and proposes more forceful policies. “Carbon pricing deals frontally with the weakness of the pledge-and-review framework, which has a lot to do with our inability to enforce commitments,” he says. “While the Paris Agreement is a legal instrument, the enforcement mechanisms just aren’t there.”

One solution the Paris Agreement has provided is a market mechanism that allows developed countries to offset carbon emissions by investing in cheaper green transition projects in developing countries. Although controversial, Switzerland and Peru became the first nations to conclude such a bilateral agreement in November last year. Other countries, including the UK, have said they will not employ overseas carbon offsetting strategies to reach their goals. 

Nevertheless, this speaks to the region’s potential. Latin America is uniquely endowed with rich natural assets, something that its governments could make a better case for at COP26 when discussing the “multiple opportunities” available for cost-effective climate mitigation measures, says Miranda. 

For example, hydropower is the largest source of renewable energy in the region, accounting for almost 70 per cent of electricity production in Brazil and Colombia, and 100 per cent in Paraguay. But this capacity is interlinked with the health of the environment, such as the rainforests in the Amazon Basin, which are responsible for rainfall across a large swathe of the continent. Due to mismanagement, the hydroelectric potential of South America’s five basins has decreased by a quarter from the baseline period (1961-90) through 2014-19. 

The current regime on carbon sinks “rewards additionality as opposed to the existing stock of biodiversity,” says Singh, who believes more could be done to incentivise conservation. This misalignment is best illustrated by the fact that Brazil and Mexico, the two laggards of the region, are the largest recipients of international climate finance, explains Guzmán.

“The UK already has important agreements with Mexico, Peru and Argentina,” she adds. “It’s not only a matter of more money flowing to the developing world, but how to improve the allocation of funds [when it gets there].”

[See also: Is Australian Prime Minister Scott Morrison finally acting in the face of the climate crisis?]