While renewable energy investment globally fell by 11 percent in 2012, renewable energy financing increased by 127 percent in Latin American countries, excluding Brazil. According to Bloomberg New Energy Finance, this included gains of 595 percent in Mexico, 313 percent in Chile, 285 percent in Uruguay, and 176 percent in Peru. In total, renewable energy investments in Latin America reached $9.7 billion in 2012.
When adding the important renewable energy portfolio of Brazil ($5.2 billion in 2012), the renewable energy sector in Latin America is growing and will continue to attract significant capital in the coming years. A combination of favorable government policies, receptiveness to foreign investment, and attractive regulatory regimes has drawn investors to renewable energy projects in the region. These issues were debated in Washington on July 30 during a roundtable discussion on financing renewable energy in Latin America at the Council of the Americas, held under the auspices of the Council’s Energy Action Group.
The conditions for renewable energy in Latin America are favorable. From the photovoltaic potential of the Atacama Desert in Chile to the many rivers that feed into hydroelectric dams in Brazil to the fields of African palm oil in Colombia, developers have been drawn to the region due to a unique geography that offers great potential for renewable feedstocks.
Countries are also beginning to adopt renewable energy standards. Chile is leading the way with its 20/20 renewable plan—20 percent of the country’s electrical grid powered by renewable energy by 2020. While the target may be a long shot, the initiative demonstrates that countries in the region are serious about developing their renewable energy potential.
Passage of climate change legislation in the U.S. House of Representatives last Friday was the United States’ first step in a more robust, forward-looking policy to cut greenhouse-gas emissions. But look to the other side of the Rio Grande and you’ll find a country that is showing new leadership in going green.
Yes, the outlook for Mexico may be somewhat grey these days if you're looking at the economic situation or the loss in tourism revenue. But Mexico is fast becoming one of Latin America’s best examples of how a government can address climate change and open the door for greater use of alternative energy.
Mexico’s role is quite welcome in a region that lags behind the world in terms of its investments in alternative renewable energy and in fighting climate change. In 2007, Latin America produced just 1.7 percent of global renewable energy, including wind, solar, geothermal, and small hydro energy. This correlated with the region’s ability to attract a meager 3 percent of the $87 billion globally invested in renewable projects. And while Latin America may not be a big contributor of carbon dioxide (CO2) emissions, climate change is intensifying tropical rains, tornados, hurricanes, and dry seasons across the world. Mexico and the rest of the region stand to lose out by not taking action now.
June 1: This AQ-Efecto Naím segment looks at sustainable cities in the hemisphere.