Latin America must take advantage of green financing to achieve growth that is less dependent on fossil fuels, the greatest responsible for carbon emissions
January 28th celebrated the World Day for the Reduction of CO2 Emissions, a date that intends to create awareness among countries so that they break their dependence on fossil fuels and start an orderly transition toward clean economies that are less carbon-dependent.
The urgency is evident: if actions are not taken now, the planet will face the worse effects of climate change, such as an increase in droughts and level of the oceans, or a greater fury of extreme natural phenomena.
Experts agree that measures to prevent these omens include increasing investments on actions that lead to economies that are less intensive in greenhouse gas emissions. In this scenario, Latin America must prepare itself to take better advantage of the opportunities presented by international green financing.
There are several companies that have stepped forward and incorporated environmental externalities within their financial planning to establish the cost of carbon that their operations issue.
On the side of governments, carbon taxes, an instrument already implemented in countries such as Chile, Mexico, Costa Rica, and Colombia, promote the reduction of energy intensity, the development of new technologies and clean energies, and facilitate systems to measure, report, and verify the emission of greenhouse gasses.
In addition, fiscal systems that seek to assign a price to carbon are presented as one of the most efficient strategies to respond to climate change and achieve development that is sustainable and low in emissions.
"It has been proven that green investments, which must contribute to a change of paradigm of productive systems, are profitable both at an economic and social level. What is most important is that companies in the electricity and industrial sectors may look at emissions reductions as investment opportunities in cost-effective projects and green businesses, and are not perceived as barriers", explains Ligia Castro, Corporate Director at CAF's Environment and Climate Change.
The good news is that during the Climate Change Summit (COP 22) in Marrakesh agreement was reached to implement new international policies that promote green financing at a global level. In addition, currently several countries are working for the development of a carbon market. At the same time, the Pacific Alliance, made up by Chile, Colombia, Mexico, and Peru, has announced its intention to create a common carbon market
To date, 32 countries of the region have presented their Nationally Determined Contributions (NDC) intentions, including goals for emission reductions and, in most cases, goals for adaptation to climate change. One of the main challenges for Latin America is to translate these goals into investment plans and structure ambitious projects and programs to access climate financing sources, such as the Green Fund for Climate.
Castro states "We are at the right time to take advantage of international green financing and manage to implement actions that help us become a competitive region, low in emissions, and leader in environmental management".
According to the expert, investment plans to stop climate change must consider the development and improvement of infrastructures, which are responsible for 60 percent of greenhouse gas emissions. This reason is more than enough for governments, multilateral organizations, and private investors to support sustainable infrastructures with the objective of promoting economic growth and adapt to the risks associated to climate change.
The speed at which the Paris Agreement has been ratified shows the important commitment that the international community is making to respond to the pressing challenge of climate change. Now is the time to take this task to the next level and collect the funds necessary to face one of the most vital challenges in history with guarantees.