Towards Decarbonization of the South American Economies - Virtual Summit held June 23, 24, and 25, 2021
June 30, 2021 – Amidst urgent public health measures to address the COVID-19 pandemic, nations across South America are poised to design economic recovery strategies that align with the Sustainable Development Goals (SDGs) and the trajectory towards a resilient recovery. Further, the IPCC 1.5 °C Global Warming Report clearly signaled the critical need to limit global warming below 1.5 °C by 2030 in order to limit the most catastrophic impacts of climate change. Given the unique balance between nature and communities across South America, as well as the fragile balance of its ecosystems, it is imperative for the region to reach carbon neutrality by 2050.
Finance Ministers are key figureheads in charge of state fiscal financing and they have an opportunity ahead to design a fair and sustainable economic transformation to ensure economic and environmental security across the region. Several countries are working on transformative strategies and innovative policy frameworks in preparation for the UN decade of action ahead. The Ministry of Finance of Chile and the Ministry of Finance of Paraguay, with technical cooperation from the CAF Development Bank of Latin America and the valuable support of the Inter-American Development Bank (IDB) and the UN Sustainable Development Solutions Network (SDSN), organized a regional virtual dialogue of Finance Ministers, economists, and energy experts entitled " Towards Decarbonization of the South American Economies ” with the objective of contextualizing and exchanging experiences and solutions for financing that allow a rapid decarbonization across the region.
South America has abundant clean energy resources available and a huge opportunity to decarbonize power grids, transport, and industry across the continent, as well as to bolster natural carbon sinks and biodiversity. As countries look to update their Nationally Determined Contributions (NDCs) ahead of COP26, leaders prepare to take stock of the progress made over the last 5 years and put forward new ambitious pathways. During the virtual dialogue, experts shared knowledge on advances in financing for the decarbonization of the energy matrix and promoted solutions for the regional integration of a common energy market. The three-day event covered the following themes: Day 1. Macroeconomics of decarbonization, Day 2. Solutions for decarbonization, and Day 3. Green recovery.
Key questions explored:
Day 1: Regional Energy Integration
As a region, South American countries are all using a national approach, with sectoral ministries, to meet national energy challenges, but at the same time there is a clear opportunity to strengthen ties. One of the most obvious synergies that we have at the regional level is the opportunity to integrate our energy systems and grids. On this day speakers discussed the composition of their energy matrices, how various reneables resources are being scaled, and how to potentially finance future demands based on historic experiences. Speakers explored how to: i) promote regional exchange of information regarding solutions and energy companies, ii) finance generation demand and iii) strengthen economies through a regional electricity market.
Session 1.1 : South America Regional Integration Initiatives (SINEA and SIESUR)
Session objective: Considering the vast energy resources coming from renewable sources in the region, this session focused on:
Key takeaways:
Session 1.2 : Financing Regional Integration
Session objective:
Key takeaways:
The recovery phase calls for a solid green signal in investments, including a quality employment opportunities in the labor markets and strong private sector participation. This session explored how to take advantage of the opportunities offered by decarbonization as a development mechanism and economic recovery and what shared regional opportunities are available. For example, investments associated with decarbonization may be available in a wide range of productive complementary assets, such as as physical infrastructure and human capital, knowledge and intangible capital, as well as natural and social capital.
Session 2.1:
What to Focus on in Recovery: Regional Experiences
Session objective:
Session 2.2: How to Finance if there is no Fiscal Space?
Session objective:
Key takeaways:
Most of the countries in the region are updating their Nationally Determined Contributions (NDCs) with regard to the Paris Agreement. Long-Term Strategies (LTS) will help us accelerate the transition to low-emission and resilient development pathways. The question that arises organically is how to finance them? During this day we evaluated the type of long-term technical strategies and their deadline, as well as innovative proposals for national contributions based in mitigation and adaptation to climate change. We also debated mechanisms and tools that can be implemented at the fiscal level to finance long-term strategies. Tools like green budgets, green bonds, macroeconomic modeling, and fiscal policies were discussed as well as how to promote the involvement of private sector.
Session 3.1:
What are the LTS and NDCs in the context of Finance Ministries?
Session objective:
--
About CAF
CAF Development Bank of Latin America - promotes sustainable development and regional integration through the financing of public and private sector projects, technical cooperation and other specialized services. CAF began operating in 1970 and is currently made up of 19 countries –17 from Latin America and the Caribbean and Spain and Portugal– in addition to 13 private banks, CAF is one of the main sources of multilateral financing and an important generator of knowledge for the region.
Contact: Nicolás Abrew, nabrew@caf.com
About the IDB
The Inter-American Development Bank is a leading source of long-term financing for economic, social and institutional projects in Latin America and the Caribbean. Besides loans, grants and guarantees, the IDB conducts cutting-edge research to offer innovative and sustainable solutions to our region’s most pressing challenges. Founded in 1959 to help accelerate progress in its developing member countries, the IDB continues to work every day to improve lives.
Contact: Anamaria Nunez, anan@iadb.org
About SDSN
The UN Sustainable Development Solutions Network (SDSN) mobilizes scientific and technical expertise from academia, civil society, and the private sector to support practical problem solving for sustainable development at local, national, and global scales. The SDSN has been operating since 2012 under the auspices of the UN Secretary-General. The SDSN is building national and regional networks of knowledge institutions, solution-focused thematic networks, and the SDG Academy, an online university for sustainable development.
Contact: Cheyenne Maddox, cheyenne.maddox@unsdsn.org.
Get our latest insights, opportunities to engage with our networks, and more.
SDSN mobilizes global scientific and technological expertise to promote practical solutions for sustainable development, including the implementation of the Sustainable Development Goals (SDGs) and the Paris Climate Agreement.
Paris
19 rue Bergère
75009 Paris
France
+33 (0) 1 84 86 06 60
New York
475 Riverside Drive
Suite 530
New York NY 10115 USA
+1 (212) 870-3920
Kuala Lumpur
Sunway University
Sunway City Kuala Lumpur
5 Jalan Universiti
Selangor 47500
Malaysia
+60 (3) 7491-8622