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CLIMATE CHANGE: Juggling Carbon Consumption and Social Gains

Emilio Godoy* - IPS/TerraViva

CANCÚN, Mexico, Dec 7 2010 (IPS) - The economies of Latin America are caught on the horns of a dilemma: how to reduce their carbon consumption without sacrificing economic and social development. Subsidies for the development of renewable energies and for learning new technologies need to be increased urgently, experts say.

“The basic idea is to generate economic growth with social inclusion and a low-carbon path, with regulations and subsidies for alternative energies,” Mexican economist Luis Galindo, the coordinator of a study for the Economic Commission for Latin America and the Caribbean (ECLAC) on low-carbon development in Mexico, told TerraViva.

Mexico annually pours into the atmosphere 715.2 million tonnes of carbon dioxide (CO2), the main greenhouse gas responsible for global warming, according to the national inventory compiled in 2006. Of the total amount of CO2 emitted, 61 percent is from energy generation, 22 percent from industry and 14 percent from deforestation.

Electricity generation, which is based mainly on fossil fuels, is responsible for some 114 million tonnes of CO2 a year.

Chile, a smaller country, pumps 95 million tonnes of CO2 into the atmosphere every year, 85 percent of which is produced by the energy industry, according to the study titled “The Economics of Climate Change in Chile”, coordinated by ECLAC.

“What happens in Latin America has a significant impact on the rest of the world,” British economist Nicholas Stern told IPS. “What matters is not only reducing emissions, but also making progress on adaptation. Taxes on carbon, as well as carbon credit markets, can be created in different combinations for different economic sectors.”

Stern is the author of the world’s first major global report on the economic effects of global warming, published in 2006, which has been replicated at the national level in countries like Australia, Chile and Mexico.

Galindo and Stern are in Cancún attending the 16th Conference of the Parties to the United Nations Framework Convention on Climate Change (COP16), which opened Monday Nov. 29 in this southeastern Mexican city and will wind up Friday Dec. 10.

One of the central issues being discussed at COP16 is how to reduce an economy’s carbon footprint, a challenge that basically revolves around energy production and consumption.

“The Economics of Climate Change in Mexico”, of which Galindo is the lead author, predicts energy use will grow at a rate of 2.4 percent per year from 2008 to 2100. It admits that price adjustment and a slight fall in consumption will not be enough to check rising demand.

Countries like Mexico spend millions of dollars of public funds on subsidies for wasteful consumption of water, electricity and gasoline, according to a number of studies.

For example, over two billion dollars are spent each year on fuel subsidies, while Mexican President Felipe Calderón announced that the budget of the country’s Special Climate Change Programme 2009-2012 (PECC) will be approximately 1.3 billion dollars this year.

Global CO2 emissions amount to some 48 billion tonnes a year, and at an economic growth rate of zero, they would have to decline to 44 billion tonnes in 10 years, and be sharply reduced to 20 billion tonnes by 2050, in order to avoid the worst consequences of climate change, according to Stern’s estimates. The world average should be no more than two tonnes per capita, he said.

“We have a very backward and politicised economy based on primary products, which makes it difficult to adopt appropriate policies,” Boris Graizbord, who coordinates the Advanced Studies Programme on Sustainable Development and Environment at the public El Colegio de México, told TerraViva at Cancún.

The consequences of climate change could absorb six percent of Mexican GDP per year until 2100, if measures are not taken to mitigate and adapt to its effects, according to the ECLAC study, which was commissioned by the Finance Ministry and the Environment and Natural Resources Ministry (SEMARNAT).

In the case of Chile, the figure is likely to be 1.1 percent of annual GDP until 2100, according to ECLAC’s projections.

“There is a significant relationship between per capita energy consumption and carbon emissions per person, and between energy consumption per person and per capita income. Economic growth implies higher energy consumption and more greenhouse gas emissions,” said Galindo, an academic at the state National Autonomous University of Mexico.

Per capita greenhouse gas emissions in Mexico are set to increase sharply from 2040, while Chile’s emissions are expected to soar to 233 million tonnes by 2030, an average of 11.9 tonnes a year per person.

Mexico has committed itself to cutting its emissions by 50 million tonnes a year up to 2012, but has only achieved 42 percent of this goal, according to SEMARNAT.

“All countries must stop subsidising fossil fuels. It makes much more sense to use those funds to encourage renewable energies and the acquisition of new technologies. Besides this, the errors of the market must be corrected,” Stern recommended.

The Mexican government has instituted programmes to exchange refrigerators and water heaters for gas-fired appliances, and substitute ordinary light bulbs for low-energy, long- life bulbs, to promote energy efficiency and savings.

The ECLAC report on Mexico recommends reviewing government subsidies for gasoline, water and electricity; making the transition towards less polluting economic growth; and creating a national carbon credit market.

“The state oil company, Petróleos Mexicanos (PEMEX), and the Federal Electricity Commission must be compelled to develop sustainable strategies,” Graizbord said. Both these monopolies have a direct influence on CO2 emissions.

ECLAC is cooperating with Chile to produce a study on the low-carbon economy, and with Argentina to measure the impact of climate change on the economy.

* This story appears in the IPS TerraViva online published for the U.N. Conference on Climate Change in Cancún.

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