Countries around the world are thinking about how to address the widespread repercussions of the COVID-19 pandemic after the urgent and necessary short-term health response. Extraordinary resources are being made available by governments to relaunch economies and to support vulnerable segments of the society.
These mid- and long-term stimulus packages hold both the potential of a faster and fair transition to low-carbon societies, and the risk of generating additional barriers to such transitions. Indeed, while many experts, organizations and policymakers have called for making sure that recovery strategies and investments pave the way for a more resilient and low-carbon economy, governments around the world are spending vastly more in support of fossil fuels than on low-carbon energy in rescue packages triggered by the coronavirus crisis.
In Latin America and the Caribbean (LAC), governments face the COVID-19 crisis from a weak position. This is due to both social and political instability and the low economic growth that marked the end of the 2010s in the region. For oil-producing countries, this is combined with the dramatic drop in oil prices provoked by a combination of oversupply and a severe drop in demand due to the massive global shutdowns. Coal and gas producers are facing similar challenges. Sustainable recovery strategies need to look forward and bring about different economies that address the pervasive inequalities afflicting society, and reduce countries’ and regions’ dependence on the exports of fossil fuels (and other commodities).
However, various LAC countries are still counting on their traditional exporting sectors, especially fossil fuels, to drive economic recovery. The idea that fossil fuel production is necessary for development is deeply rooted, as explored in my recent paper in Climate Policy. Colombia has indicated it will help reactivate mining and hydrocarbon activities through flexible environmental licenses and regulations, and is also expanding its coal power generation. In Argentina, the government has set a $45 oil price in a push to save its domestic shale industry. In Mexico, the government has put the brakes on private energy investments – an action that overwhelmingly affects renewable projects — in order to prop up state-owned fossil-fuel-based power plants, and also to build the domestic market for Mexican fuel oil. Such strategies are likely to expand dependence on fossil fuels, thus increasing financial, economic, social and environmental risks for these countries.
In the context of recovery from the COVID-19 crisis, it is essential to reduce countries’ dependence on the fossil fuel industry, which threatens long-term economic stability and climate security. An Inter-American Development Bank report has shown that achieving net-zero emissions by 2050 in LAC is not only technically feasible, but would also bring about economic benefits. And international cooperation can support this process, for instance through the Paris Agreement’s nationally determined contributions, which are being updated this year.
So how can LAC countries avoid further carbon lock-in and its associated health and financial risks? And further, how can they instead use recovery measures to enable just transitions to more resilient, less polluting, and more equitable economies and societies? How can international cooperation support this process?
To start answering these questions, researchers and green development experts from the Stockholm Environment Institute, the Natural Resource Governance Institute, Climate Strategies, the Inter-American Development Bank, and Transforma/Mission 2020 will discuss carbon lock-in risks and potential ways forward for the region during a webinar (in Spanish) on July 22nd. Policymakers in LAC countries have an opportunity to build back better, through recovery plans that help pave the way for a fair transition away from fossil fuels.
Read the paper in Climate Policy ‘Extraction and development; fossil fuel narratives and counter narratives in Colombia’.
Claudia Strambo is a Research Fellow at the Stockholm Environment Institute, where she works mostly on energy and climate issues, such as carbon lock-in, just transitions and the political economy of fossil fuel extraction