By Marina Grossi
In the new logic of the global market, natural resources, such as forests, are valuable assets that must be managed responsibly, as they can be relevant instruments for the economy to regain momentum.
As the end of the year approaches, it is already possible to say that 2016 will be remembered as a decisive moment in the global transition to a low-carbon economy. The peak of this movement was undoubtedly April 22 of this year, when 175 countries signed the Paris Agreement, a historic record for the number of countries signing an international agreement on the same day. The second half of the year was marked by the ratification of the Agreement much earlier than expected and its entry into force on November 4. This signals that the community of nations is committed to the measures necessary to contain climate change to a maximum increase of 2°C compared to the global average temperature before the Industrial Revolution, with efforts to not exceed 1.5°C. This combination of efforts brought together even countries that are traditionally reluctant to address the issue, such as China and the United States, which, despite the election of Donald Trump, launched a bold action plan in favor of decarbonization at COP 22, with measures up to 2050. Brazil, which was a leading actor in this construction, assumed a State commitment that can no longer be neglected due to the current pressure.
The goals have been set and there is nothing stopping the country from taking advantage of this momentum to embark on a new development model. It is necessary to turn the page on improvisation (which has inspired so many policies without financial support for their implementation) and adopt a strategic planning approach, with a view to an economically sustainable, socially committed agenda capable of boosting investment and business competitiveness. The electric power sector offers a promising path in this regard. as pointed out in the studies “Financing for Renewable Energy: obstacles, challenges and opportunities” and “Efficient Consumption of Electric Energy: an agenda for Brazil”, published this year by the CEBDS (Brazilian Business Council for Sustainable Development) Leaders Council.
From now on, the issue goes beyond the diplomatic dimension and must become concrete. Available public resources need to be allocated to choices that make sense in the short, medium and long term. In this context, the announcement made by BNDES in early October is good news: increasing the bank's participation in renewable energy financing, simultaneously with the reduction of contributions to thermoelectric plants.
There are significant obstacles to the transition to a low-carbon economy in Brazil, whether in regulatory terms or even due to the lack of planning and strategic vision, which results in perverse incentives – as happened with the emphasis on thermoelectric plants at the height of the water crisis in 2014 or as, similarly, is now happening with the stimulus program for coal-fired thermoelectric plants, recently approved by the National Congress in the form of an article inserted in Provisional Measure No. 735/2016, which regulates privatizations in the electricity sector.
According to the Intergovernmental Panel on Climate Change (IPCC), fuel combustion is the main source of GHG (greenhouse gas) emissions, accounting for 70% of global emissions. In Brazil, although activities associated with land use are the largest emitters, as shown by the third national inventory of GHG emissions, the review of which was sent to the United Nations last April, energy consumption, including electricity, is not far behind and is already the second main source of emissions, accounting for approximately 30% of the total. In order to achieve the goal we assumed in the Paris Agreement – gains of 10% in efficiency in the use of electricity and increasing the share of alternative renewable sources to 23% of the total matrix – we need to shift the incentives currently granted to fossil fuels to the financing of alternative renewable technologies, which have such extraordinary potential in our country.
In the new logic of the global market, natural resources, such as forests, are valuable assets that must be managed responsibly, as they can be a relevant instrument for the economy to regain momentum. The necessary reforms – labor, tax and social security – will be able to unlock Brazilian economic growth. But we must view the economic recovery as an opportunity to rethink our development model. Highly polluting countries, such as China, are rediscovering themselves as sustainable powers. It is strategic blindness to ignore our extraordinary comparative advantages. We are destined to be the great green power of the planet.
The studies cited focus on some of the main perspectives and opportunities generated by the climate agenda for the Brazilian economy. With regard to energy efficiency, meeting the targets would bring gains of R$57 billion to R$90 billion for the electrical system by 2030. We know that these gains increase as efficiency increases. As a result, it is estimated that there could be reductions of up to R$271 billion in electricity tariffs if an efficiency improvement of around R$201 billion were achieved during the period. The effects on industry, domestic consumers and inflation in the country would be very significant.
All of this depends on political will, a vision for the future and a commitment to sustainable development. Energy efficiency is nothing more than achieving the same result with lower electricity consumption. It is an effort that ranges from very simple actions, such as replacing conventional light bulbs with LEDs in homes and commercial buildings and removing standby equipment, to incentives aimed at major consumers, such as industry, which can benefit greatly from replacing obsolete or oversized electric motors with new options. What is missing? Incentives, impetus and policies aimed at changing attitudes.
There is a saying that the cheapest electricity is that which does not need to be generated. In other words, avoiding unnecessary consumption also means reducing investments in increasing generation and expanding the distribution network. This slowdown in the expansion of supply gives the system breathing space at the critical moment we are going through, allowing for expansion with better planning and increasing interaction with alternative renewable sources.
Financing for alternative renewable energy generation – solar, wind, biomass and small hydroelectric plants (SHPs) – is currently based mainly on public resources. In the current scenario of economic and fiscal contraction, it is necessary to rethink these financing mechanisms, expanding the possibilities for investment and securitization, offering guarantees that stimulate credit operations in this market, reserving for the State only those responsibilities that the private sector is unable to assume.
Jumping from the current 9.5% of alternative sources in the electricity grid to 23% by 2030 requires investment, but brings easily noticeable gains, such as the development of a production chain with greater technology and added value. As the study itself shows, the generation of 1 MW of photovoltaic solar energy creates between 25 and 30 jobs, while a large hydroelectric plant like Belo Monte, the third largest in the world in terms of installed capacity, generated less than two jobs per MW.
The Brazilian commitments made in Paris are definitely not a burden. Strongly influenced by civil society and private initiative, they outline a development path in which everyone wins. All that is needed is planning, political will and an understanding that we have entered a new era, in which the word sustainability needs to be taken seriously, as the axis of a new way of being in the world.
Marina Grossi is an economist and president of CEBDS (Brazilian Business Council for Sustainable Development) since 2010.
Originally published on November 12th, in Nexo Jornal. Check it out here.
