Crisis Hits Oil Industry and Energy Transition Alike

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Energy

Mexico's state-run oil giant Pemex faces a difficult outlook due to the fall in international oil prices and the crisis resulting from the coronavirus pandemic, which threatens its production and finances, in a situation analysed during the 29th La Jolla Energy Conference, organised online by the Institute of the Americas. CREDIT: Emilio Godoy/IPS

Mexico’s state-run oil giant Pemex faces a difficult outlook due to the fall in international oil prices and the crisis resulting from the coronavirus pandemic, which threatens its production and finances, in a situation analysed during the 29th La Jolla Energy Conference, organised online by the Institute of the Americas. CREDIT: Emilio Godoy/IPS

MEXICO CITY, May 22 2020 (IPS) – While it attempts to cushion the effects of the coronavirus pandemic, the Latin American and Caribbean region also faces concerns about the future of the energy transition and state-owned oil companies.


These questions were discussed at the 29th La Jolla Energy Conference, organised by the Institute of the Americas. It was held online May 18-22, rather than bringing together more than 50 speakers at the institute’s headquarters in the coastal district of San Diego, in the U.S. state of California, in the midst of the COVID-19 pandemic.

Alfonso Blanco of Uruguay, executive secretary of the Latin American Energy Organisation (OLADE), said during a session on global trends and the regional energy industry that the changes seen during the pandemic will spread after the crisis and will be long-lasting.

“There will be structural transformations and we are convinced that most consumer behaviors will change after the pandemic. Demand will vary due to changes in the main areas of transportation and other energy areas. The effects on fossil fuel consumption will be strong and there will be a greater impact on renewable energies,” he said.

OLADE, a 27-member regional intergovernmental organisation for energy coordination, estimates that electricity demand has fallen by 29 percent in Bolivia compared to 2019, as a result of the severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2), which causes COVID-19, and by 26 percent in Argentina, 22 percent in Brazil and 11 percent in Chile.

“There will be structural transformations and we are convinced that most consumer behaviors will change after the pandemic. Demand will vary due to changes in the main areas of transportation and other energy areas. The effects on fossil fuel consumption will be strong and there will be a greater impact on renewable energies.” — Alfonso Blanco

Likewise, final energy demand plummeted 14 percent in Brazil compared to 2019, 11 percent in both the Andean and Southern Cone regions, nine percent in Mexico, seven percent in Central America and five percent in the Caribbean.

As countries went into lockdown to curb the spread of COVID-19, electricity consumption by businesses and factories declined, due to the suspension of activities.

Leonardo Sempertegui, legal advisor to the Organisation of Petroleum Exporting Countries (OPEC), said the pandemic may be a wake-up call for countries lagging behind in the energy transition.

“This may be the new normal. The structure and governance of the energy architecture to cope with the next phase are changing dramatically. Energy poverty and the energy transition cannot be solved regardless of who controls a resource; these challenges cannot wait,” he said in the same session.

In Latin America, nations like Argentina, Bolivia, the Dominican Republic, Ecuador, Honduras and Uruguay have made progress in the energy transition since 2015, while Brazil has slid backwards and countries like Mexico are stuck in the same place, according to the World Economic Forum’s Energy Transition Index, released May 13.

As the region heads into the fourth month of the pandemic, countries are assessing their electricity markets, which have been shaken by the crisis.

Nations like Argentina, Chile, Colombia and Peru have resorted to long-term electricity auctions, which have generated low prices for renewables, while Mexico suspended such schemes in 2019.

In Argentina, as Andrés Chambouleyron, a non-resident fellow at the Institute of the Americas, explained, industrial consumption fell by 50 percent and electricity distributors have not been able to obtain sufficient revenues to cover fixed costs or electricity purchases.

The government has thus provided financing to Cammesa – the electricity wholesale market administration company – to pay the generators, since it is bound by contracts to buy the energy.

“There will be a permanent change in electricity consumption in Argentina. We have cheaper gas than before; the models say that you have to use more gas because it is cheaper than other sources. We won’t see much change in Argentina’s energy mix, and that could extend to all of Latin America,” said Chambouleyron, who warned of breach of and renegotiation of contracts for energy purchases.

Low oil prices threaten to slow down the energy transition in Latin America, although renewable energies already compete with the costs of fossil fuels, agreed experts at the 29th La Jolla Energy Conference, organised online by the Institute of the Americas. The photo shows solar panels on a house in Ajijic, in the western Mexican state of Jalisco. CREDIT: Emilio Godoy/IPS

Low oil prices threaten to slow down the energy transition in Latin America, although renewable energies already compete with the costs of fossil fuels, agreed experts at the 29th La Jolla Energy Conference, organised online by the Institute of the Americas. The photo shows solar panels on a house in Ajijic, in the western Mexican state of Jalisco. CREDIT: Emilio Godoy/IPS

While renewables are already competing in price with conventional sources, low oil and gas prices undermine their expansion, a predicament that alternative energy sources have been facing in recent years.

In addition, the rise in the cost of international credit and the fluctuations of the dollar against local currencies may make generation more expensive.

In another session on the outlook for state-owned oil companies, Marta Jara, former president of Uruguay’s public oil company ANCAP, said the current crisis could accelerate the transition, but called it a “major challenge”.

“The temptation is to be opportunistic and forget the roadmap of the energy transition. We must invest in sustainable energy systems, decarbonise transport. It is important to secure funding and create jobs. I hope the crisis opens the door to be more innovative,” she said.

Viable or not?

The plunge in fossil fuel prices is damaging the finances of the region’s oil producing countries, such as Argentina, Bolivia, Brazil, Colombia, Ecuador, Mexico, Peru and Venezuela, and state companies in the sector are facing problems with regard to planning and operations.

But it benefits net importers, like the countries of Central America or Chile, whose oil bills have shrunk, while for consumers in both oil producing and importing countries the cost of electricity could go down.

“The most competitive will be the countries with lower oil extraction costs. Some projects will not be economically viable. We will see greater economic problems than in 2019,” predicted Lisa Viscidi, director of the Energy, Climate Change and Extractive Industries Programme at the non-governmental Inter-American Dialogue, during a panel on the situation in several Caribbean nations.

The pandemic and a rise in Saudi production announced on Mar. 10 led to a collapse in oil prices and the consequent risk of bankruptcies in the industry. State-owned oil companies have fared better than others so far in the crisis.

In another session on the outlook for state-owned oil companies, John Padilla, managing director of the private consulting firm IPD Latin America, stated that “it will take time to get out of this situation, with effects for the region, and the need for great efficiency.

“Most nations have been exporters, efficiency will be the key. What has not been done is to cultivate domestic and regional markets, state enterprises are not going to play the same role as they always have,” he said.

Public companies such as Brazil’s Petrobras and Colombia’s Ecopetrol entered the crisis in a better position than Mexico’s Pemex, Venezuela’s PDVSA and Argentina’s YPF, according to experts.

“These are difficult times, even for the best prepared. We can hope that if the country and its company are in trouble, if governments need money, they can get more out of the companies,” said Francisco Monaldi, interim director of the Baker Institute for Public Policy’s Latin America Initiative at the private Rice University in the U.S. state of Texas.

In his view, “Mexico is in better fiscal conditions, it should not be a problem. But Pemex can drag Mexico down. If the government doesn’t change direction, it could become a serious problem,” he said as an example.

Although Pemex will increase its investment in 2020, the oil company reported losses of 20 billion dollars in the first quarter of this year. Due to the crisis, Petrobras limited its investment to 3.5 billion dollars and its daily production to 200,000 barrels, and postponed the sale of eight refineries.

For Lucas Aristizábal, a senior director in Fitch Ratings’ Latin American corporates group, some state-owned oil companies are viable and others are not.

“In 2021, the financial contribution of oil will be lower for governments. If they want the companies to play a key role, they will put more pressure on their financial structure. The current situation illustrates the economics of these corporations,” he said during the forum.

Pemex and YPF were already losing money per barrel in 2019, while Petrobras has more balanced production costs.

On the oil horizon, and in the midst of the COVID-19 crisis, Guyana has become the rising star, although there is still political uncertainty, as the result of the Mar. 2 presidential elections is still unclear.

“It’s hard to predict what will happen. There is a risk of U.S. sanctions that would not affect investment in the sector, but would pose a political risk to the country,” said Thomas Singh, in the Department of Economics at the public University of Guyana.

The country expects to extract 600,000 barrels per day by 2024 and take in revenues of five billion dollars, with reserves exceeding five billion barrels.

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Mexico’s Development Banks Fuel the Fossil Energy Trade

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Energy

Demonstrators demand clarification of the murder of land rights activist Samir Flores and the shutdown of a thermoelectric plant in the state of Morelos, in central Mexico, in a February 2019 protest on Mexico City's emblematic Paseo Reforma. CREDIT: Emilio Godoy/IPS

Demonstrators demand clarification of the murder of land rights activist Samir Flores and the shutdown of a thermoelectric plant in the state of Morelos, in central Mexico, in a February 2019 protest on Mexico City’s emblematic Paseo Reforma. CREDIT: Emilio Godoy/IPS

MEXICO CITY, May 20 2020 (IPS) – Since 2012, Teresa Castellanos has fought the construction of a gas-fired power plant in Huexca, in the central Mexican state of Morelos, adjacent to the country’s capital.


“We don’t want the power plant to operate, because it will cause irreparable damage, polluting the water and air. This project was imposed on us; we have to defend the water and the land. This is not an industrial zone,” the activist, coordinator of the Huexca Resistance Committee, told IPS.

During the tests, the constant noise of the turbines also altered the life of this small community of just over 1,000 people, mostly farmers, near the Cuautla River, within the rural municipality of Yecapixtla.

“Development banks must have safeguards and principles for sustainable investment. National regulations are needed, which define climate finance and green finance, what principles govern them, what are the climate risks. The trend should be to increasingly finance green projects and less and less hydrocarbons.” — Liliana Estrada

The Central Combined Cycle Plant, located in Huexca and with a capacity of 620 megawatts based on gas and steam, is part of the Morelos Integral Project (PIM), developed by the state Federal Electricity Commission (CFE). It also consists of an aqueduct and a gas pipeline that crosses the states of Morelos, Puebla and Tlaxcala.

The People’s Front in Defence of Land and Water of Morelos, Puebla and Tlaxcala and its ally, the Permanent Assembly of the People of Morelos, have managed to get several court orders that have blocked the operation of the plant, the 12-km aqueduct and the 171-km gas pipeline since 2015.

Castellanos, who has won an international and a national award for her activism, has been involved in the battle against the plant from the very start, which has earned her persecution and threats.

The opposition to the power plant by local communities that depend on planting corn, beans, squash and tomatoes and raising cattle and pigs, focuses on the lack of consultation, the threat to their agricultural activity, due to the extraction of water from the rivers, and the discharge of liquid waste.

In February 2019, a public consultation that did not meet international standards supported the completion of the project.

A few days earlier, activist Samir Flores had been murdered, a crime that remains unsolved – just one more instance of violence against environmentalists in Mexico. Despite Flores’ murder, the government of leftist President Andrés Manuel López Obrador went ahead with the referendum and upheld the result.

Public funds have fuelled the conflict, as the state-owned National Bank of Public Works and Services (Banobras) lent some 55 million dollars for the pipeline.

As in the case of other projects, development banks have become a financial pillar for the oil industry in Latin America’s second-largest nation, population 130 million.

The National Bank of Foreign Trade (Bancomext), Banobras and Nacional Financiera (Nafin) have funneled millions of dollars into building pipelines and oil and gas facilities in recent years, even though the climate change crisis makes it necessary to abandon such investments.

They have also financed renewable energy projects, but in much smaller amounts than fossil fuels.

The construction and operation of the Central Combined Cycle Plant, of the state Federal Electricity Commission, financed with public funds, unleashed a conflict with residents of Huexca, a small community in the central Mexican state of Morelos, which has brought the operation of the thermoelectric plant to a halt. CREDIT: Emilio Godoy/IPS

The construction and operation of the Central Combined Cycle Plant, of the state Federal Electricity Commission, financed with public funds, unleashed a conflict with residents of Huexca, a small community in the central Mexican state of Morelos, which has brought the operation of the thermoelectric plant to a halt. CREDIT: Emilio Godoy/IPS

Energy reform pillar

The energy reform that then conservative president Enrique Peña Nieto (2012-2018) enacted in 2013 opened the sector to private capital, broke the monopoly of the state-owned Petroleos Mexicanos (Pemex) oil giant and CFE, and made Mexico an attractive market for international investment in the sector.

To support this transformation, the state development banks also opened their coffers.´

Since 2012, Banobras, which finances infrastructure and public works and services, has lent at least 721 million dollars for the construction of gas pipelines, 10.2 billion dollars for oil and gas projects, 251 million dollars for electrical cogeneration, from steam generated in hydrocarbon plants, and eight million dollars for the construction of a thermoelectric plant that will burn fuel oil in the northwestern state of Baja California Sur.

Bancomext, which provides financing to exporters, importers and nine strategic sectors, has delivered some 500,000 dollars to oil companies in the eastern state of Tamaulipas and another 446 million dollars in Mexico City. It has also provided 65.4 million dollars to gas initiatives in the northern state of Nuevo Leon and 626.7 million dollars in Mexico City.

In addition, it has contributed 1.5 billion dollars for the supply of gas through pipelines to the final consumer; 324 million dollars for the extraction of oil and gas; 216 million dollars for the construction of public works for oil and gas; 126 million dollars for the manufacture of products derived from oil and coal; nearly seven million dollars for oil refining; 0.65 million dollars for the commercialisation of fuels; 0.25 million dollars for the drilling and maintenance of hydrocarbon wells; as well as 0.25 million dollars for oil platform maintenance and services.

In February, Bancomext granted a loan of 7.1 million dollars to Grupo Diarqco, in what it presented as the first credit to a private Mexican company in the industry, to exploit an oil field in the southeastern state of Tabasco.

Nafin, which grants credits and guarantees to public and private projects, created in 2014 the Energy Impulse Programme for these initiatives, endowed with more than a billion dollars.

It also manages, along with the economy ministry, the Public Trust to Promote the Development of Energy Industry National Suppliers and Contractors, designed for the industrial promotion of local production chains and direct investment in the energy industry, which this year has a fund of some 41 million dollars.

Missing: social and environmental safeguards

As in the case of the Morelos Integral Project, the gas pipelines have been a source of conflict with local communities, arising from the lack of socio-environmental safeguards and standards to guarantee that a project and its financing will respect the human rights of potentially affected communities.

Nafin and Banobras lack such safeguards, while Bacomext has had an “Environmental and Social Risk Management System Guide” since 2017, with no evidence of whether and how it has been applied to energy projects financed since then.

Since 2003, three platforms of international standards have emerged, to which Mexico’s development banks have not adhered, on human rights; social and environmental assessments and impacts; the application of safeguards; stakeholder participation; complaint resolution; and transparency.

The planet needs 80 percent of the global hydrocarbon reserves to stay underground in order for the temperature increase to remain at 1.5 degrees Celsius, as set out in the Paris Agreement on climate change.

The treaty, signed by 196 countries and territories in 2015, will enter into force at year-end and is considered indispensable to avoid irreversible climate disasters and human catastrophes.

Liliana Estrada, a researcher with the Climate Finance Group of Latin America and the Caribbean, told IPS that most investment in energy still goes to fossil fuels.

“After the reform, they have to enter into strategic projects and follow the guidelines of the government; they cannot go against these strategic lines. The gas and gas pipelines became strategic,” with the boost to the megaprojects of the López Obrador administration, said the representative of this coalition of non-governmental organisations and academics.

These credits are part of the fossil fuel subsidies that Mexico has pledged, to several international bodies, to eliminate.

The Mexican energy industry has also attracted international private banks, which have lent 55.95 billion dollars to 12 corporations, according to “Banking on Climate Change: Fossil Fuel Finance Report 2020”, released in March by six international environmental organisations.

The CFE received some 5.4 billion dollars from 12 banks between 2016 and 2019, and Pemex received 48.3 billion dollars from 20 foreign banks.

Based on Huexca’s experience, Castellanos demanded that these investments be stopped.

“If it’s our company, as the government says, then we can close it down. We have to defend the space in which we live, because we only have one planet and it belongs to all of us, it belongs to every living being, and it is our obligation to contribute something to this planet, because we are only here for a short while, we are guests of the earth”, she said.

Estrada called for sustainable financing regulations and questioned the lack of government leadership in this regard.

“Development banks must have safeguards and principles for sustainable investment,” she said. “National regulations are needed, which define climate finance and green finance, what principles govern them, what are the climate risks. The trend should be to increasingly finance green projects and less and less hydrocarbons.”

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Young People Bring Solar Energy to Schools in the Argentine Capital

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Energy

Sebastián Ieraci (L), a member of the group of students who in 2014 pushed for the switch to solar energy at the Antonio Devoto High School, stands next to the school's principal Marcelo Mazzeo on the rooftop of the educational institution located in the Buenos Aires neighbourhood of Villa Devoto. Credit: Daniel Gutman/IPS

Sebastián Ieraci (L), a member of the group of students who in 2014 pushed for the switch to solar energy at the Antonio Devoto High School, stands next to the school’s principal Marcelo Mazzeo on the rooftop of the educational institution located in the Buenos Aires neighbourhood of Villa Devoto. Credit: Daniel Gutman/IPS

BUENOS AIRES , Mar 19 2020 (IPS) – “The idea came to a group of schoolmates and me in 2014, but we never thought it could become a reality,” says Sebastián Ieraci, 23, as he points to a multitude of photovoltaic solar panels shining on the roof of the Antonio Devoto High School in the Argentine capital.


The secondary school is one of the first public centres in Buenos Aires that has managed, since last November, to cover 100 percent of its electricity needs from renewable energy generated in the building itself.

Although today only seven of the city’s public schools have solar panels, the authorities have identified another 140 school buildings with the conditions to generate solar energy, and the plan is to gradually equip all of them with solar panels.

But perhaps the most interesting aspect of this case is that it was the students’ own enthusiasm for clean energy and community involvement that allowed the school to be chosen for an experiment that is new to Buenos Aires.

“Now they come to see us from schools in different parts of the country, to see what we have done and to try to replicate it.” — Marcelo Mazzeo

Ieraci, who arrives in a hurry at his former school after his workday at a paint factory, was in his last year of high school in 2014, when law teachers suggested to him and his classmates that they come up with a project for the programme The Legislature and Schools.

The programme, carried out for over 20 years, invites final-year high school students to submit proposals to the Buenos Aires city legislature, in the areas of environment, public spaces, traffic and transport and security.

Once they do so, the students sit on the city legislature for an afternoon to discuss their proposals with students from other schools.

“We came up with the idea of installing solar panels because we knew that the school’s rooftop was not being used for anything and that doing so could be doubly beneficial, both environmentally and economically, since the school could generate its own energy,” says Ieraci during IPS’s visit to his former school.

Aerial view of the rooftops of the primary and secondary schools located across from the main square in Villa Devoto, a residential neighborhood in the Argentine capital. The adjacent schools now have 200 solar panels with an installed capacity of 70 kilowatts, and the surplus is injected into the Buenos Aires electricity grid. Credit: Courtesy of Buenos Aires city government

Aerial view of the rooftops of the primary and secondary schools located across from the main square in Villa Devoto, a residential neighborhood in the Argentine capital. The adjacent schools now have 200 solar panels with an installed capacity of 70 kilowatts, and the surplus is injected into the Buenos Aires electricity grid. Credit: Courtesy of Buenos Aires city government

“Then we started looking for information, and after a month we presented the project. Back then it was a utopia and today seeing these panels makes me very proud, because this is a school that generates a sense of belonging,” he explains.

The school is located in a large two-storey building that preserves the style of the old manor house that Italian immigrant Antonio Devoto had built there at the beginning of the 20th century. Devoto is considered the founder of the middle-class residential neighbourhood that today bears his name.

The school is located across from the main square of Devoto, in an area with many old trees and few tall buildings, full of bars and restaurants, and bursting with vitality far from the centre of Buenos Aires.

The Devoto teenagers’ solar panel project was the winner among more than 70 initiatives that students presented in 2014 to the local legislature, and in 2016 the Buenos Aires city government launched it. The first step was to start feasibility studies in more than 600 school buildings.

But it was in 2017 that the school received the definitive push to move towards solar energy, when it once again presented the project in a competition, this time in BA Elige (Buenos Aires Chooses), a citizen participation programme in which the more than three million inhabitants of Buenos Aires proper vote on the projects they want to see carried out.

On that occasion, the residents of Devoto expressed their opinions online, supporting the installation of solar panels in the neighbourhood schools and thus enabling the authorities to allocate budget funds.

The installation of the solar panels began in August 2019 and took three months. Since November, 87 two-by-one meter solar panels have been in operation on the rooftop of the Antonio Devoto High School.

The primary school next door was soon incorporated into the programme, and since January 113 solar panels have been operating, bringing the total to 200 panels on the adjacent rooftops of the two schools that serve a combined total of 500 students.

Solar panels nearly cover the entire rooftop of the Antonio Devoto High School in Buenos Aires. Until last year the rooftop area was not put to any use. The idea of using that space to generate renewable energy came from students in their final year in 2014, who presented a project to the Buenos Aires city legislature. Credit: Daniel Gutman/IPS

Solar panels nearly cover the entire rooftop of the Antonio Devoto High School in Buenos Aires. Until last year the rooftop area was not put to any use. The idea of using that space to generate renewable energy came from students in their final year in 2014, who presented a project to the Buenos Aires city legislature. Credit: Daniel Gutman/IPS

“In secondary schools, the panels have 30 kilowatts (kW) of installed capacity, and in primary schools, 40. But the most interesting thing is that the primary school injects its surplus energy into the city’s electricity grid, generating credit with the power company,” engineer Andrés Valdivia, head of climate action in the city government’s Ministry of Education, told IPS.

The Ministry reports that the 140 school rooftops declared suitable for the installation of solar panels – because there are few high buildings surrounding them and they receive good solar radiation – have a combined surface area of 145,000 square meters and could have a total installed capacity of 13 megawatts (MW).

Renewable energies – basically, solar and wind – have experienced major growth in Argentina since a fund was created by law in September 2015 to finance the construction of facilities and to guarantee the purchase of the energy generated.

By late 2019, nearly eight percent of the electricity produced in the country came from renewable sources, up from just 2.2 percent in early 2016, according to official statistics.

However, that growth will not continue because the recession and the devaluation of the local currency in Argentina mean that almost no new projects will be launched, say industry analysts.

View of the front of the Antonio Devoto High School, which was built in an old manor house belonging to the Italian immigrant recognised as the founder of the Villa Devoto neighbourhood in Buenos Aires, the capital of Argentina. Credit: Courtesy of Marcelo Mazzeo

View of the front of the Antonio Devoto High School, which was built in an old manor house belonging to the Italian immigrant recognised as the founder of the Villa Devoto neighbourhood in Buenos Aires, the capital of Argentina. Credit: Courtesy of Marcelo Mazzeo

“Ours is not a technical school; we have an orientation in economics and administration. But the kids’ interest in the energy transition surprised us and led us to gather a lot of information together about the subject,” said Marcelo Mazzeo, the principal of the Antonio Devoto High School.

“Now they come to see us from schools in different parts of the country, to see what we have done and to try to replicate it,” he told IPS.

Félix Aban, one of the law teachers who worked with the students on the project and is now the school’s vice-principal, said that “one of the most interesting things was that in 2014 the kids suggested that the surplus energy generated by their schools could be injected into the power grid, when that possibility was not even being discussed in Argentina.”

In fact, the law on distributed (or decentralised) energy was not approved by Congress until 2017, under the official name “Regime to foment distributed renewable energy generation integrated into the public electricity grid”.

“They investigated and found that in other countries individual generators fed power into the grid. So we can say that the kids at this school were really ahead of the game,” said Aban.

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Carbon Markets Can Provide a Crucial Part of the Solution to the Climate Crisis

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Opinion

Fenella Aouane, Principal Green Finance Specialist, Investment and Policy Solutions Division, Global Green Growth Institute (GGGI)

SEOUL, South Korea, Dec 18 2019 (IPS) – One of the main discussions at the COP25 climate change talks was Article 6, which is designed to provide financial support to emerging economies and developing countries to help them reduce emissions by using global carbon markets. Carbon pricing is an essential piece of the puzzle to curb emissions. Without a value on carbon, there is less incentive to make positive changes, especially in the private sector. The most efficient way to carry this forward is to allow trading of carbon both nationally and internationally, which will ensure the lowest cost of mitigation for participants globally.


Fenella Aouane

The COP25 negotiations in Madrid have largely been dominated by Article 6 negotiations on potential carbon markets as they are perceived by many, including businesses, as a way to generate financial flows to emerging economies and developing countries, and to reduce emissions at the lowest possible cost. Thus, it’s crucial to adopt decisions on Article 6 as rules need to be set to show how such markets will operate – this is the guidance the Article 6 rulebook will create. The sooner the better, overall mitigation in global emissions (OMGE) will be possible under the Paris Agreement through international carbon trading with aspects such as corresponding adjustments, which were lacking under the Kyoto Protocol. Carbon markets are a way to not only manage mitigation emissions cuts, but help to find the lowest cost and therefore a strong motivator for implementing international efforts.

The Global Green Growth Institute (GGGI), a Seoul-based treaty-based international, inter-governmental organization that supports emerging economies and developing country governments transition to a model of economic growth that is environmentally sustainable and socially inclusive, is already involved in several programs, funded by developed country governments such as Norway and Sweden. GGGI is working with the Norwegian Ministry of Climate and Environment on wider policy approaches, which have been made possible under Article 6 of the Paris Agreement through cooperative approaches. This program looks at helping its member and partner governments to identify areas above their Nationally Determined Contribution (NDC) targets, where emissions reductions directly resulting from policy interventions are quantified and transacted. This creates a flow of carbon finance, in exchange for the transfer of the resultant internationally transferred mitigation outcomes (ITMOs). These programs will not only create ITMO transactions but also set up the lasting infrastructure needed for countries to be able to govern and properly account for future transfers, ensuring environmental integrity and transparency.

GGGI has a key role to play. A further good example is GGGI’s recent collaboration with the Swedish Energy Agency (SEA). The two organizations will work together to catalyze international trading of mitigation outcomes in support of the increased climate ambitions needed under the Paris Agreement. Through a joint cooperation, SEA and GGGI will identify and structure mitigation activities and support the establishment of governance frameworks within host countries as required under the developing rulebook of Article 6 of the Paris Agreement, with the goal of completing ITMO transactions.

Although specific rules related to cooperative approaches under Article 6 have yet to be codified, Article 6 aims at supporting the authorization of international emissions trades while avoiding double counting and ensuring environmental integrity, permitting the movement of the related emission reductions between registries, and better linking national emission trading schemes, project-level transactions, and cooperative approaches.

What next? Carbon markets can and should be seen as an opportunity to lower the cost of cutting greenhouse gas emissions and enabling countries to commit to more ambitious targets. At next year’s Glasgow climate change conference, countries need to come forward with more ambitious Nationally Determined Contributions. GGGI’s work on pioneering designs for international carbon transactions over 2020 will help shape how the carbon markets can contribute to this increased ambition. It has also made the 2020 NDCs a priority in support of its Members and will ensure that there is strong support to deliver this next year. We need to come to Glasgow with concrete plans and steps. However, tackling climate change cannot be solved by one government alone. There needs to be high-level political commitment and collective action – these are a must.

 

Under Pressure. Can COP25 Deliver?

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Opinion

Farhana Haque Rahman is Senior Vice President of IPS Inter Press Service; a journalist and communications expert, she is a former senior official of the United Nations Food and Agriculture Organization and the International Fund for Agricultural Development.

Climate change effects, such as extreme weather events, drive up environmental remediation costs. Credit: Jorge Luis Baños/IPS

ROME, Dec 2 2019 (IPS) – Mass public pressure backed by the weight of scientific reports is starting to bring governments to their senses as the annual UN climate summit kicks off in Madrid today.


But despite warnings that the planet is reaching critical tipping points, the two weeks of talks with nearly 30,000 participants and dozens of heads of government attending may still end in that familiar sense of disappointment and an opportunity missed.

The annual Conference of the Parties, this year being COP25, was to have been a highly arcane if crucial process of finding agreement on carbon markets, known in the jargon as Article 6 of the ‘rulebook’ to implement the 2015 Paris Agreement on stopping the planet from overheating.

Highly contentious, and in part pitting developing countries like Brazil, China and India against others, the Article 6 debate could not be resolved at last year’s summit – COP24 in Katowice, Poland – nor at meetings in Bonn in June and hence was left for COP25 to try and fix. The other big elephant in the room – setting more ambitious national targets to reduce carbon emissions – was conveniently going to be left to be settled at next year’s COP26 in Glasgow, Scotland.

But action is needed now, and senior officials representing nearly 200 countries have been put on notice that the climate emergency in all its forms is dominating the public sphere across the world. Just last week we saw student-led demonstrations and strikes in many places that appropriately fell on Black Friday, delivering a broadside against rampant consumerism as well as government inaction.

Farhana Haque Rahman

“Striking is not a choice we relish; we do it because we see no other options,” youth leaders Greta Thunberg of Sweden, Luisa Neubauer of Germany and Angela Valenzuela of Chile declared in a joint statement.

“We have watched a string of United Nations climate conferences unfold. Countless negotiations have produced much-hyped but ultimately empty commitments from the world’s governments—the same governments that allow fossil fuel companies to drill for ever-more oil and gas, and burn away our futures for their profit.”

UN Secretary General António Guterres has told COP25 that “the point of no return is no longer over the horizon”.

“In the crucial 12 months ahead, it is essential that we secure more ambitious national commitments – particularly from the main emitters – to immediately start reducing greenhouse gas emissions at a pace consistent to reaching carbon neutrality by 2050. We simply have to stop digging and drilling and take advantage of the vast possibilities offered by renewable energy and nature-based solutions,” Guterres said.

Just last month the UN Environment Programme’s annual Emissions Gap Report warned that the Paris Agreement ambition of keeping average temperatures within 1.5 degrees Celsius above pre-industrial times was “on the brink of becoming impossible”.

Global greenhouse gas emissions in 2030 would have to be under 25 billion tonnes of carbon dioxide equivalent to reach that target but, at current rates of growth, emissions are projected to reach more than double that level. Clearly drastic action is needed.

Reinforcing the sense of emergency, the World Meteorological Organization reported that atmospheric concentrations of carbon dioxide and other greenhouse gases reached new record highs in 2018. China is the world’s largest emitter.

Spain stepped in to offer Madrid as a venue for COP25 after Chile withdrew as host because of mass anti-government unrest. However Chile is still leading the conference and together with Spain will be pushing countries to act quickly to raise the ambition of their carbon emission reduction targets. Spanish Prime Minister Pedro Sanchez says the goal is for “the largest number of countries” to commit to net zero emissions by 2050.

From 2020 to 2030, emissions must be cut 7.6% a year to meet the 1.5 degrees Celsius goal, the UNEP says.

However the main negotiation process in Madrid is expected to focus on the unfinished business of the market-based mechanisms to create and manage new carbon markets under the Paris Agreement. This would allow countries and industries to earn credits for above-target emission reductions that can then be traded. Big developing countries have already accumulated huge amounts of carbon credits under the previous but now largely discredited carbon credit scheme. It is a highly complex tangle of interests.

Carbon Brief, a UK-based climate website, says the Article 6 debate has the potential to “make or break” implementation of the Paris Agreement which comes into force next year.

“To its proponents, Article 6 offers a path to significantly raising climate ambition or lowering costs, while engaging the private sector and spreading finance, technology and expertise into new areas. To its critics, it risks fatally undermining the ambition of the Paris Agreement at a time when there is clear evidence of the need to go further and faster to avoid the worst effects of climate change,” Carbon Brief explains.

While Article 6 is a highly technical area, the underlying issues are political, with some countries forming unofficial alliances to defend their own interests rather than the common good of the planet. But politicians have been put on notice that this time the world’s public is watching closely. Horse-trading cannot be allowed to put our futures at risk.

 

Africa’s Civil Society Calls for Action as COP25 Kicks off in Madrid

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Climate Change

In Africa, climate change has caused drought, change in distribution of rainfall, the drying-up of rivers. Intense flooding causes landslides and in Kenya, residents of West Pokot County are currently grappling with with the deaths of 50 people who were last week buried alive by landslides following heavy rainfall that continues to pound the East African region. Credit: Isaiah Esipisu/IPS

MADRID, Dec 2 2019 (IPS) – During the 25th round of climate change negotiations starting today in Madrid, Spain, African civil society organisations will call on governments from both developing and developed nations to play their promised roles in combating climate change.


“We’re fatigued by COP [Conference of Parties] jamborees which have become a ritual every year,” said Dr Mithika Mwenda of the Pan Africa Climate Justice Alliance (PACJA) – an umbrella organisation that brings together over 1,000 African climate and environment civil society organisations.

“We know the science is clear about the level [in which] we need to act, yet we procrastinate and prevaricate while maintaining our profligate lifestyles,” he told IPS in an interview.

The 25th United Nations Framework Convention on Climate Change (UNFCCC) Conference of Parties (COP 25) comes a week after the U.N. Environment Programme (UNEP) released a report warning that unless global greenhouse gas emissions fall by 7.6 percent each year between 2020 and 2030, the world will miss the opportunity to get on track towards the 1.5°C temperature goal of the Paris Agreement.

The Paris Agreement is an agreement reached at the 21st Conference of the Parties (COP 21) in Paris, France, where the world’s nations undertook a determined course to reduce climate change. Among the commitments was to reduce the increase in global temperatures.

The annual Emissions Gap Report, which was released on Nov. 26 warns that even if all current unconditional commitments under the Paris Agreement are implemented, temperatures are expected to rise by 3.2°C, bringing even wider-ranging and more destructive climate impacts.

“Any slight change in global temperatures can have a devastating effect on millions of livelihoods, and could expose people to life-threatening heat waves, water shortages and coastal flooding,” said Dr Mohammed Said, a climate change research scientist based in Kenya.

According to his research in Kenya’s Arid and Semi Arid regions, people in counties that experienced increased temperatures in the past 50 years have suffered significant loss of livelihoods with some having to change their lifestyles altogether.

“In Turkana County for example, the temperatures increased by 1.8°C, and as a result, the cattle population declined by 60 percent, and now residents have been forced to turn to more resilient camels, goats and sheep,” he told IPS.

It is the same situation all over the world. A study published in Nature Climate Change points out that if global warming causes a rise of 1.5°C or 2°C, then there will be extremely hot summers across Australia, more frequent drought conditions and more frequent heat leading to bleaching of the Great Barrier Reef.

Another study by the United Kingdom’s Met Office reveals that the changing climate will make heat waves a common phenomena worldwide and even intense in the U.K..

In Africa, climate change has caused flooding, drought, change in the distribution of rainfall, and the drying up of rivers. It has affected agriculture, food security and human health. And it has also led to conflicts over resources, impacting national security in various countries.

In Kenya, residents of West Pokot County are currently grappling with the deaths of 50 people who were last week buried alive by landslides following heavy rainfall that continues to pound the East African region.

According to the Kenya Meteorological Department, the above-normal rainfall has been caused by sea surface temperature anomalies in the Indian, Atlantic and Pacific Oceans caused by global warming. Floods in the region, which have already displaced hundreds of households and have swept away bridges, roads and property, are expected to continue for the next three weeks, according to the meteorological focus.

However, Mwenda believes that all is not lost. He notes that though the Nationally Determined Commitments (NDCs) are inadequate to lead to emission levels required by science and justice, there is still hope that momentum building on their implementation won’t be compromised.

“We will not be tired of telling our leaders that the future generations will judge them harshly as they have failed to rise to the occasion even when science is very clear that we have exceeded planetary boundaries,” he said.

In order to address climate change adequately, civil society is also calling for a dedicated financial mechanism to be established in Madrid to support Loss and Damage with a clear agreement on new sources of finance.

During the 19th round of negotiations in Poland, the COP established the Warsaw International Mechanism (WIM) for Loss and Damage associated with Climate Change Impacts (Loss and Damage Mechanism), to address loss and damage associated with impacts of climate change, including extreme events and slow onset events, in developing countries that are particularly vulnerable to the adverse effects of climate change.

“As we head to Madrid, we expect that all countries will endeavour to deliver on ambitious commitments in climate finance, especially in regard to loss and damage, strong national targets, and clear rules on trading emissions between countries,” said Robert Bakiika, the Executive Director of EMLI Bwaise Facility, a Ugandan NGO and one of the admitted observer organisations at the UNFCCC.