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Latin American trade is closely tied to climate change. A Green Deal could be the solution

Latin American trade is closely tied to climate change. A Green Deal could be the solution

Latin American trade is tied to climate change. A Green Deal could be the solution

Climate change will seriously impact trade and development in Latin America, and the status quo is unlikely to help regional economies leap forward, which calls for a major rethinking of policy strategies to seize the “Green Windows of Opportunities” that arise from the global energy transition. A Latin American Green Deal based on regional coordination could also be a way forward. Amir Lebdioui (SOAS/LSE Latin American and Caribbean Centre).

The impact of climate change will be more devastating in Latin America than in most parts of the world and will influence the region’s ability to trade. Precipitation patterns change, temperatures rise, and some areas experience changes in the frequency or severity of extreme weather such as floods or droughts. It is expected that by 2050, there will be a total of 4.8 billion people living in these areas. Climate change damage could lead to USD 100 billion in annual losses.

The increasing frequency and severity of extreme weather events is already having devastating effects on tourism, production, and trade infrastructure. Expected precipitation fluctuations can also pose a threat to the long-term productivity and exports of many agricultural outputs. This is a problem that many countries in the region, including Argentina, Brazil, Chile and Ecuador, face for their food security. A few examples include climate change poses a serious risk to salmon farming in Chile, Coffee production in Colombia, and cacao production in Ecuador.

The global push toward decarbonisation also has important implications for the region’s trade prospects, bringing about both challenges and opportunities. There is uncertainty for many oil producers (e.g. Venezuela, Colombia, and Bolivia) as the demand for fossil fuels will decrease in the medium to longer term. The global transition towards a decarbonised world economy will have profound impacts. Cause the loss of more than 360,000 jobs in fossil-fuel extraction and fossil-fuel-based electricity generationIn the region.

However, several Latin American countries have the potential to benefit from the large amount of minerals necessary for low carbon technology production. Latin America is home to large amounts of nickel, copper, silver and bauxite.

However, even for countries dependent on these so-called ‘minerals of the future’, the long-term outlook is still dominated by high levels of uncertainty and risks of technological disruption. There are copious amounts of resources invested in research and development (R&D), especially in China, Japan, and the USA, to generate alternative electric battery technologies (such as solid-state batteries or hydrogen-based batteries) that rely on substitute minerals and raw materials.

The implications of decarbonisation on fossil fuels, mining and other industries

The global push toward decarbonisation also has important implications for the region’s trade prospects, bringing about both challenges and opportunities.One, many oil producers, such as Venezuela, Colombia, and Bolivia, face uncertainty because the demand for fossil fuels will drop in the medium-to-long term. The global transition towards a decarbonised world economy will have profound impacts. Cause the loss of more than 360,000 jobs in fossil-fuel extraction and fossil-fuel-based electricity generationIn the region.

However, many Latin American countries stand to reap the benefits of their vast mineral resources that are vital to the production low-carbon technologies. Latin America has large reserves of lithium and copper, silver, bauxite as well zinc, manganese, nickel, and zinc.

However, even for countries dependent on these so-called ‘minerals of the future’, the long-term outlook is still dominated by high levels of uncertainty and risks of technological disruption. There are copious amounts of resources invested in research and development (R&D), especially in China, Japan, and the USA, to generate alternative electric battery technologies (such as solid-state batteries or hydrogen-based batteries) that rely on substitute minerals and raw materials.

Latin America’s share of critical minerals reserves (Author’s elaboration)

In addition to the region’s direct productive vulnerability to climate change, Latin American firms will have to adapt as consumer demand shifts towards more sustainable products in key markets. In the United States and the European Union, Green New Deal proposals are gaining popularity. This will undoubtedly lead to regulatory changes that will change consumption patterns. In general, Latin American and developing countries need to anticipate these “green” trade regulations and standards, shifting their productive capabilities towards the export of lower carbon goods and services.

Many Latin American countries, such as Chile, Costa Rica, and Uruguay, are showing increasing high ambitions in climate change and remarkable successes in clean energy deployment. But there’s still a lot more to reap the full potential that clean transitions can provide in Latin America and compensate for the expected income and job losses in the fossil fuel sector.

Renewable energy 

Latin America has seen great success with renewable energy deployment. Renewables are the lowest-cost source for new power generation, and the per capita renewable energy capacity is twice that of the global average.

Unrestricted cross-border trading of electricity in Latin America could have significant benefits, such as very high savings costs. However, these trade operations remain limited. Except for a few exceptions like the biofuels or wind energy sectors in Brazil and other countries, most countries are included in low-value segments of renewable energy value chain, such as production of primary commodities, supply, installation, maintenance, and distribution activities.

The volatility of energy politics and demand have made it difficult to expand manufacturing capacities in Ecuador, Mexico Brazil, Colombia, Colombia, and Argentina. This is why it is essential to promote a more stable market for renewable energy, with a clearer plan in the medium- and long-term, and a stronger regulation plan, in order to increase investor trust in local manufacturing capabilities related to renewable energy.

Latin American countries could also use cheap and clean energy resources to decarbonise electricity generation as well as as feedstock to develop low-carbon, competitively value-added services and industries like green hydrogen production, low-carbon data centres, and cloud services.

BiodiversityConservation ForValue-added traDe

Latin America’s biodiversity and unique natural ecosystems can act as a transformative force in the region’s sustainable development. The whole world benefits from a range of ecosystem services (such as carbon storage, watershed protection, and conservation of fauna and flora) that can only be found in this part of the planet. Traditional conservation strategies have often missed opportunities for compensation and benefits to those living in the area. To maximize the trade value of biodiversity, it is necessary to coordinate policy efforts.

Carbon pricing and carbon markets are gaining more attention as a way to generate value from biodiversity conservation. A price on pollution could be a source of revenue for the government. This year, the world’s governments raised USD45 Billion.. Mexico, Chile, and Colombia have begun to use – or are considering using – carbon pricing and emission trading systems as part of a broader strategy to decarbonise their economies. Existing carbon emissions trading systems must be able to cross national and continental borders to be effective as trade tools.

Ecotourism is a popular strategy that combines conservation and the growth of tradable goods. Over-reliance on such activities can lead to significant risks, particularly given the vulnerability to climate change and high levels revenue volatility as well as exposure to external shocks. These are the consequences for the Galapagos Islands, Ecuador.

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While the sector of biodiversity-based innovations is still in its infancy across most countries, Costa Rica may see useful efforts towards bioinnovation (primarily through bioprospecting). This is a promising area for venture capital, start-ups and future investments..

Governments should intensify their efforts to implement policies that include green industrial policies and skills development plans. They must think about financing to attract private investments and venture capital to nurture start-up ecosystems around low carbon services. To reduce emissions and manage scarce resources, authorities can promote circular economies.

A Latin American Green Deal?  

When you consider the many policies and regional coordination required to promote a rapid approach to global warming in Latin America, the idea of a Latin American Green Deal is relevant. This program could have significant positive effects on many economic sectors, including agriculture, energy, carbon emissions trading and the bioeconomy, if it is well-designed.

Each country has its own comparative strengths. There are a variety (complementary), critical minerals that are scattered across the region (e.g. Chile, Peru and Suriname) to their manufacturing capacities (e.g. Brazil, Costa Rica) to renewable energy potential (e.g. Mexico, Paraguay) and renewable energy potential (e.g. If the right resources and policies are used and coordinated, all of these assets can be part and parcel of the plan for developing a regional industrial hub around low-carbon technologies.

It is crucial that you overcome many obstacles, particularly on the political and funding fronts, in order to design and implement such a program. This is possible, but it may even be necessary. It requires significant changes in policy, investment, vision, and policy.

While several countries are demonstrating increasing high ambitions and have signed several green economy agreements and launched several green economies plans. These agreements promise major implications for the shift towards more sustainable trade. However, regional governments and international trade and investment partners must take bolder steps to meet the enormous opportunities and challenges facing Latin American trade.

Notes:
• The views expressed here are of the author rather than the Centre or the LSE
• This post is based on the
Report Latin American Trade and Climate Change: Impact, Opportunities and Policy OptionsThe launch will take place at the LSE in London, May 25th.
• The Canning House Forum is a partnership between the LSE Latin American and Caribbean Centre and Canning House that aims to promote research and policy engagement around the overarching theme of “The Future of Latin America and the Caribbean”
• Please read our Comments PolicyBefore commenting
• Banner image: Antonio MaloMalverde (CC BY-NC 2.0)

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