Alicia Bárcena
The economics of
climate change in
Latin America and the
Caribbean
Executive Secretary
Economic Commission for
Latin America and the Caribbean
27 October 2009
Potential GDP growth will be weaker in
the near future in developed countries
Average growth rates (%)
OECD AND THE UNITED STATES OF AMERICA: POTENTIAL GDP GROWTH, 2007-2014
(Percentages)
2.5
2
1.5
1
0.5
0
United States
OECD
2004-2008
2009-2010
2011-2014
Source: European Commission, 2009; Organization for Economic Co-operation and Development (OECD), 2009; International Monetary Fund
(IMF), 2009.
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)
Crisis
Pre crisis world
15.0
10.0
5.0
0.0
2004
2005
2006
2007
2008
2009
2010
-5.0
-10.0
-15.0
-20.0
Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of OECD Economic Outlook, June 2009.
JOBLESS RECOVERY
Regional unemployment rate could exceed 9% in 2009
LATIN AMERICA AND THE CARIBBEAN: POVERTY, EXTREME POVERTY AND UNEMPLOYMENT RATES
(Percentages)
60
12
48,3
50
43,8
40,5
10
44,0
43,5
40
8
36,3
30
22.5
20
a
18.6
19.0
18.5
34,1
33,2
6
19.4
4
13.3
12.6
12.9
10
2
0
0
1980
1990
Very poor
1997
1999
Poor
2002
2006
2007
2008
2009
Unemployment rate (right hand side)
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.
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.
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.
SCIENTIFIC EVIDENCE CALLS FOR
URGENT GLOBAL ACTION:
Preliminary analysis of the accumulated costs of
climate change in selected countries and sectors
Present value of the accumulated costs up to 2100
Sectors evaluated
(As a proportion of current GDP)
Country
Discount rate of 0.5% per year
B1/B2
A2
Average of
Discount rate of 4% per year
B2
A2
scenarios
Mexico
Average of
scenarios
34%
43%
39%
7%
8%
7%
Crop farming, water, soil use,
biodiversity, tourism, livestock
farming (indirectly), biodiversity
(indirectly)
Chile
- 63%
193%
65%
6%
35%
20%
Crop farming, fruit farming,
forestry, hydroelectricity, drinking
water, indirect costs
Chile
(annualized)
- 0.21
0.60
0.02
0.11
Uruguay
28%
206%
117%
-2%
40%
19%
Farming, energy, tourism, water,
coastal resources, biodiversity,
disasters, indirect costs
507%
805%
656%
44%
70%
57%
Disasters (all=overestimate) in
infrastructure and farming,
biodiversity, energy, health,
drinking water
37%
11%
12%
12%
Farming, forestry, water, health,
biodiversity (partial) , floods
(partial) coastal edge (partial)
Bolivia
(Plurinational
State of)
Argentina
37%
37%
With a 0.5% discount, the loss
under the A2 scenario is close or
equivalent to the country’s
environmental spending.
ECONOMIC COST OF NATURAL
DISASTERS
Fuente: CEPAL Registro 1970-2008, proyección 2009-2100
Chile: Changes in agricultural output in
the twenty-first century
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
Coastal Resources - Total economic impact
Scenarios Sea-level rise (metres)
US$ 2008
A2
2010
0.1
0
2030
0.2
37,569,236
2050
0.4
862,398,690
2070
0.6
1,310,906,102
2100
1.0
2,085,332,243
Total
4,296,206,272
B2
2010
0.1
0
2030
0.2
24,954,063
2050
0.3
449,978,513
2070
0.5
1,553,509,040
2100
0.7
2,200,987,227
Total
4,229,428,843
1 meter rise in sea level
=
12% of 2008 GDP
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.
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
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 1980=100)
Total OECD
2007
2006
2005
2004
2003
2002
2000
2001
1999
1998
1997
1996
1995
1993
1994
1992
60
1991
60
1990
70
1989
70
1988
80
1986
1987
80
1985
90
1984
90
1983
100
1982
100
1981
110
1980
110
Latin America and the Caribbean
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).
ENERGY EFFICIENCY COULD CONTRIBUTE TO 35%
REDUCTIONS IN THE 2030 SCENARIO
35%
Aumento de
eficiencia
en
Demanda eléctrica
y
Demanda de
combustibles fósiles
Fuente: IEA-OECD World Energy Outlook 2006 y 2007.
GROWTH WITH LOWER POLLUTION IS POSSIBLE
Source: CAIT/WRI
PRODUCTIVITY GAP ADDS TO THE ENERGY
CONSUMPTION GAP
Índices de brecha energética y productividad relativa, 1996-2006
250
200
150
100
50
0
1996
2001
2002
2003
2004
Brecha Enérgica AL/EEUU
Pr relativa
Linear (Brecha Enérgica AL/EEUU)
Linear (Pr relativa)
Fuente: División de Desarrollo Productivo y Empresarial, CEPAL
2005
2006
Millions of United States
dollars
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).
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
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
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.
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.