Photo: AFP via El País
Targeting green growth opportunities in Latin America and the Caribbean could be one way for the Biden administration to expand its domestic climate action agenda to include broader foreign policy goals. With only days remaining until the U.N. Climate Summit (COP 26) in Glasgow, the debate in Washington over infrastructure and budget reconciliation will have global implications, especially as it concerns the climate crisis.
Current negotiations within the Democratic Party over the size of proposed spending will likely require the White House to table some climate-related policy proposals, including efforts to decarbonize the electricity sector. Yet the geopolitics of energy must still undergo a radical departure from the current status quo. A recent report by the United Nations Environment Programme indicated that governments plan to produce around 110 percent more fossil fuels by 2030 than would be consistent with limiting warming to 1.5°C. Uncomfortable with these findings, government officials from Australia, Japan, Saudi Arabia, and other countries lobbied the United Nations to downplay its messaging on cuts to fossil fuels.
Global leaders across the political spectrum have voiced support for ambitious climate goals. But G20 countries have directed approximately $300 billion toward fossil fuel activities since the beginning of the pandemic—more than the level of funding that has gone towards the clean energy sector. This is not “building back better.” If this trend continues, it puts the United States and its hemispheric neighbors on a precarious trajectory, potentially threatening regional stability in the future. Furthermore, it puts important multilateral efforts in jeopardy, weakening the energy transition agenda, including the Sustainable Development Goals for energy, and threatening the overall COP architecture that countries have developed since 1995. How can the status quo change then? A large part of the solution rests in tackling the political and economic influence of fossil fuel interests worldwide—which, in the United States for example, outspend renewable energy advocacy by a ratio of 13 to 1.
Other critical questions remain. First, can U.S. domestic and foreign policy more effectively promote renewable energy development in the United States and in the region—helping to revitalize U.S. manufacturing exports and generate good-paying jobs? Second, could such an emphasis on U.S. exports help bridge the partisan divide and shift the political calculus toward a consensus on the energy transition in Washington? Lastly, if the United States wishes to seriously outcompete China in the Western Hemisphere as a form of economic rivalry, can technological and scientific partnerships in renewable energy with key allies in Latin America help broaden the economic relationship, thereby advancing a more rapid and cost-effective global energy transition? These are important questions to consider since the countries of the Western Hemisphere are some of the most crucial economic partners for the United States and vice versa.
Similarly, countries in the region are also facing continued challenges, if not crises—from public health and the rule of law to eroding trust in democratic institutions. But the climate crisis in many ways has been able to unite diverse groups and political coalitions across the region. Take for example the recent Latin American climate summit hosted by Argentina, alongside Chile, Costa Rica, and Colombia, and attended by U.S. Presidential Special Envoy for Climate John Kerry.
While it may not appear evident now, Latin American leaders seeking a more robust economic and commercial relationship with the United States could soon find that the energy transition has become a priority for the Biden administration. U.S. officials have met with leaders in Colombia, Ecuador, and Panama—in an apparent bid to counter China’s Belt and Road Initiative with U.S.-funded projects. Countries throughout the Americas can benefit from renewed U.S. commitments to increase clean energy technology exports to the region, and they can develop important partnerships for manufacturing as well. The scale of investment needed is large and the ambition for new energy projects and infrastructure is impressive.
The Horizonte project in northern Chile is one example. Developed by Chilean energy firm Colbún, this 778-megawatt wind farm is projected to be operational in 2024. With 140 wind turbines and $850 million dollars in private investment, it represents Latin America’s largest onshore wind energy project. Meanwhile, in neighboring Argentina, the Cauchari solar project, the largest in Latin America, received 85 percent of its financing from the Import-Export Bank of China, on the condition that 80 percent of materials would be sourced from Chinese suppliers. If it had been offered on similar terms, Argentines would not have turned down financing from U.S. or European sources. Put simply, Chinese funders saw an economic opportunity that others did not and took it.
Beyond the market opportunities for U.S. firms, both political parties must also recognize the shifting priorities for international security and the global threats that exist on the horizon. The latest Global Trends report by the U.S. intelligence community highlighted environmental change as likely to intensify along with demographic shifts, resulting in new vulnerabilities in developing countries and worsening “existing risks to economic prosperity, food, water, health, and energy security.” Most recently, the National Intelligence Council released a new report on security trends for the next two decades, indicating that the physical effects of climate change “will increase the potential for instability and possibly internal conflict” in developing nations, which are more likely than developed countries to feel the impacts of climate change. Therefore, sustainable, regional supply chains not only promote prosperity in Latin America and offer benefits to the U.S. renewable energy sector, but also benefit U.S. national security interests.
Regional markets in Latin America and the Caribbean can stimulate greater investment and scale up renewable energy development in the United States—but only if leaders rethink their existing trade relationships. Modern trade relationships should not simply rely on commodities, such as copper, lithium, cobalt, nickel, and rare earth minerals. In addition to developing these resources, an equal partnership based on scientific innovation and discovery can also flourish and build strong and sustainable long-term alliances. Developing better, more efficient batteries, examining industrial scale deployments of concentrated solar energy, and even advancing economies of scale within the green hydrogen industry could all be areas for exploration for several Latin American nations.
U.S. trade policy can establish new rules of the game for a warming planet by incorporating better labor and environmental standards in foreign markets. At the same time, it can benefit the U.S. by incorporating commercial, scientific, and technological diplomacy and projecting soft power into bilateral and regional trade relationships.
So far, the U.S. has left this opportunity on the table for European nations, such as Germany, Spain, and Italy, which have growing commercial interests in the clean energy sector, as well as Chinese-state owned enterprises, which often seek rents and control over natural resources. But in the U.S. this hasn’t always been the case. From 2010 to 2014, the Obama administration launched the National Export Initiative, which sought to double U.S. exports over a five-year period. A key aspect of the policy included a focus on exporting renewable energy and energy efficiency technologies into key markets. The U.S. government identified several Latin American countries as significant market opportunities and potential partners for U.S. companies.
Similarly, the Biden administration has proposed the creation of a Clean Energy Export and Climate Investment Initiative to “offer incentives for U.S. firms that supply low-carbon solutions to the international market in order to spur U.S. industry, jobs, and competitiveness, and make America the world leader in clean energy technologies.” This type of policy proposal would align with the regional target in the hemisphere to reach 70 percent of renewable energy use by 2030, which already has U.S. support and backing. But the United States cannot play a more active role in supporting this target simply by promoting its exports. It must accompany an export promotion program with greater investments in research and development in partnership with countries in the region. Most importantly, U.S. leaders must discourage the use of fossil fuels. Here, the Biden administration has executive powers to initiate the important work required to reform and change U.S. domestic and foreign policy, and with it, influence the status quo of energy markets abroad. However, Congress must also act and go beyond short-term electoral interests.
During COP 26 and beyond, the Biden administration should go further in areas where it has the ability to do so, without the constraints of intra-party political dynamics and where it can realize the greatest impact in the short term. By considering a more ambitious policy framework in its “all-of-government” approach to climate mitigation abroad, the Biden administration can support renewable energy targets and sustainable development in the Western Hemisphere by beginning to address fossil fuel subsidy reforms at home and within Latin America.
Limiting U.S.-backed investment for polluting projects in oil and gas is incredibly important to avoid stranded assets this decade. But it must also be accompanied by greater commitments to the region’s renewable energy transition. By addressing the role of U.S.-backed investments in the fossil fuel industry—in major extractive economies such as Argentina, Brazil, Colombia, Ecuador, and Mexico—primary institutions of U.S. development finance such as the International Development Finance Corporation, U.S. Export-Import Bank, and the Trade and Development Agency—can all be part of a new strategy that links U.S. national security interests, climate change, and economic opportunity for the shared benefit of the entire hemisphere.
If progress at home is difficult, a greater emphasis and connection to the economies of Latin America and the Caribbean can begin to create more resilient supply chains, promote cross-border investment and trade, and further sell the benefits of the energy transition not just to the American people, but also to those elected to serve their interests.
Ricardo Raineri is a former Chilean minister of energy, senior advisor to AUI, Inc., and a professor at the Pontificia Universidad Católica de Chile. Anders Beal is an associate in the Latin American Program for the Woodrow Wilson International Center for Scholars. The views and opinions expressed are those of the authors.