How SAm will face the Energy Dilemma an analysis of what the countries are bringing to COP-21

Transcription

1 Exclusive Outlook How SAm will face the Energy Dilemma an analysis of what the countries are bringing to COP-21 A vision of energy policies and Intended Nationally Determined Contributions (INDC). An analysis to support countries reduction of emissions through energy efficiency and energy mix. 1

2 Created by: Schneider Electric is a global specialist in energy management and automation. With revenues of 25 billion euros in 2014, our 170,000 employees serve customers in more than 100 countries, helping them in the management and energy processes, so that it is safe, reliable, efficient and sustainable. From switches to complex operational systems, Schneider Electric has the technology, software and services that enhance the way our customers manage and automate their operations. Our technologies will reshape industries, transform cities and enrich lives. At Schneider Electric, we call this Life is On. Energy, Ore and Latin American Extraction dialogue (Diálogo de Energia, Minério e Extrativismo latino-americano) is an International Civil Society Organization with activities in 8 countries of Latin America, dedicated to the promotion of sustainable development and universal access to energy. It addresses issues such as: promoting transparency in extractive industries; new forms of relationship with communities through the promotion of entrepreneurship and implementation of local economic development projects; climate protection and combating climate change; Biodiversity; Water Resources Management; Sustainable Transport; Smart Cities and support the Minamata Convention in matters related to Environment and Energy projects, Mining and Extraction of all kinds in the Latin American region. Brazilian Business Council for Sustainable Development (BCSD-Brazil / CEBDS) is a civil non-profit association that promotes sustainable development for companies that operate in Brazil, interacting with governments and civil society, as well as disseminating the most modern concepts and practices related to the theme. CEBDS was founded in 1997 by a group of business leaders aware of the changes and opportunities that sustainability presents, especially after the Rio 92 event. It is currently composed by 70 of the largest business groups in the country, with revenues corresponding to 40% of GDP and over one million direct jobs. CEBDS is the representative in Brazil of the World Business Council for Sustainable Development (WBCSD), which consists of nearly 60 national and regional councils in 36 countries and 22 industries, in addition to more than 200 active business groups on all continents. 2

3 What is good for the climate is good for the economy. Our global CEO, Jean Pascal Tricoire, always says that we are not optimistic or pessimistic about the weather; we are activists. This attitude perfectly defines the business strategy we have adopted, mainly in South America. We have a history with this continent: we landed here almost 70 years ago, we have over 6,000 employees and are present in several sectors, from residential to large infrastructure projects, such as the Olympic Village in Rio de Janeiro. More than five years ago, we started talking about sustainable development and not just because sustainability is linked to our business. As we grow roots in the countries where we operate, we cannot remain silent to the impacts associated with population growth and industrialization. And it is from this desire to contribute to the creation of nations and more sustainable cities with better quality of life for its citizens, that this Panorama was born. We have put together our experts in five countries and make alliances with renowned entities to pursue opportunities to accelerate the transition to a low carbon economy, from an analysis of energy policies and INDCs (Intended Nationally Determined Contributions) of Argentina, Brazil, Chile, Colombia and Peru. The study of these data shows that in only five countries in South America, there is a potential energy consumption reduction of 20% by 2032, which could generate savings of 2.8 trillion dollars and a reduction of 2 billion tons CO2eq in the atmosphere. All this through Energy Efficiency actions, a strategy still little used in the region, which still has a short-term mindset, focusing more on increasing production than in operational and sustainable efficiency. As it should be, we also look at the issue of access to energy. Today there are 30 million South Americans living in darkness and vulnerable livelihoods. With innovative and cost-effective technologies, I know it is possible to not only move the economy at more isolated regions but also transform lives and give them guarantee, which is a basic human right for us. With this panorama, we reinforce our journey to sensitize stakeholders from young talent at universities to government authorities, together with our customers, employees and partners. We are convinced that what is good for Earth is good for Economy. There is no doubt that Sustainability is a critical success factor. Ours and yours. Tania Cosentino President of Schneider Electric to South America region.

4 Executive Summary and Conclusions: Discussions about climate change is not a topic on the agenda of many countries in South America, although in Brazil the topic is more present, countries did not discussed yet the impact of national energy policy on climate effects, both in generating energy or under the perspective of emissions caused by energy consumption. According to INDCs - Intended Nationally Determined Contributions - presented to United Nations by Argentina, Brazil, Chile, Colombia and Peru, energy use or the impacts of its production it s not taking any part on climate agenda. Data provided by OLADE affirms that energy-saving potential in Latin America continues to be high. In general, about 15-20% of energy consumption could be avoided using measures with short payback periods. But why this topic was not assumed as part of country commitments to reduce emissions? We believe that deeper changes that begin in energy policies of each country could play an essential role in reducing emissions the short term or in adapting these countries to the effects of climate change, besides to drive these emerging economies to an economic competitive advantage. However, energy policies were established in other political, environmental and economic contexts and they didn t consider the climate component. Most of energy framework of South America countries analyzed are guided by power generation to meet the economic needs. Countries like Chile, Colombia and Peru, in other hand, have the opportunity to change the game and overpass the other countries in the zone, by integrating their recent energy policies into a context where climate change is already showing impacts on these economies. At Schneider Electric, we are constantly challenging ourselves and our market: Produce more energy will even be the only answer? When we consider the limits of the planet, we concluded that we should seek alternative ways to continue growing and producing, but within the limits already recognized by science. And that s why we are committed to bring this message to the South American societies. We believe it is time to rethink the energy issue, considering our planet in common, since all of us feel the effects of rising temperatures even though we are not primarily responsible for it. Many of countries analyzed already count the losses of the impact of climate change. In Peru, we do estimate a reduction of 2,5% up to 14% in key segments of our operations as a consequence of El niño already in Unfortunately, despite the urgency that the subject demands, the process of change is too slow. Partly due to the lack of active participation of civil society organizations, partly due to the lack of information and the quality of technical bodies in the agencies or other institutions responsible for public policy development. One lesson that emerges from our experiences in this Region is that the mere existence of an Energy Efficiency Law does not ensure the achievement of a positive impact which can be verified through a rational decrease in energy demand if there is a persistent policy deficit in the systematic development and implementation of activities, projects and programs on the efficient use of energy, adapted to the circumstances of each country. In general, what is invested in Energy Efficiency (EE) actions is less than 1/10 of what is invested in generation. If we consider the payback of each initiative, we see that EE is faster and cheaper alternative to face the increasing demand, and meet the necessary 4

5 emission reduction targets in a horizon of coming 10 years. In some countries covered by this outlook, simple energy efficiency initiatives such as motors optimization could enhance country emissions target close to the conditional goals of its INDC. The investment required could come from various existing sources such as subsidies for fossil fuels have, for example. Or even by creating compensation instruments for private investments. The carbon pricing can contribute in this sense, if is meant to encourage decisions of the major South American issuers. If the private sector has never been so engaged in those discussions a decade ago, it has changed completely since Rio+20 and now, leading companies worldwide have realized the importance of the subject and how it must be considered to maintain and grow business in a new global scenario. For many of our customers this context makes participation in COP 21 much strategic. Although not directly involved in the negotiations, companies have crucial role in this context, because they have resources to invest in new technologies and innovations, as well as the ability to create scale for the production of clean and renewable energy, or to change the stage in energy efficiency, for example. Therefore, the private sector needs to understand, influence and be present in the negotiations that will take place during the Paris conference. That s why, we believe that open this dialog in several countries of the region and start taking information at different levels where our business goes, is an important step for us. If we were one company in COP20, now we are leading a coalition with relevant bodies such as the World Business Council and the Diálogo Energético Minero y Extractivo Latino Americano, both institutions operating in Latin America and putting together electricityintensive or economically important sectors. About this document We aim to analyze the national determined contributions of Argentina, Brasil, Chile, Colombia and Peru under the perspective of energy, which is our expertise. Those countries represent 95% of Schneider Electric activities in South America, and their energy demand growth is highly significant in the coming 15 year, being a bottleneck to the region economic growth, so our contribution in terms of market participation would be more relevant there. We seek for opportunities to enhance reduction goals of emissions in these countries by analyzing in deep what are the national energy policies already in place or in the path to be implemented. We share the key points of this study regarding regulatory framework to establish an energy matrix, energy efficiency evolution and how countries are addressing the last mile of population need in terms of access to energy, after all, we summarized the content of each country INDC searching for concrete opportunities by changing energy background. Based on available data, we found a potential of energy efficiency of 20% summed opportunities in Argentina, Brazil, Chile, Colombia and Peru to be reached up to This would be equivalent to a direct saving of 2,8 trillion dollars, money enough to supply twice the gap of energy access in the world, it means, the double on money required by the World Bank to deliver access to energy to 1,1 billion people in the world, only in five South American countries. In terms of energy demand, the saved power in those countries would be enough to supply Colombia for 4 years, without any investment in infrastructure to transport or distribute energy. Still according to the suggestions we made to countries targeted on this outlook, it is possible to reduce 2 billion tons of CO2eq, only as result of no-energy-consumption brought by energy efficiency potential. This is almost the same of 2,9 billion tons that these 5 countries has presented in their INDCs. So, it would be possible to double the commitment of 5

6 reducing emissions only by incrementing energy efficiency onto the INDCs. According to IADB, if Latin America keeps the track of current emissions, the cost to control it in 2050 would be of 110 billion dollars per year, less than the savings of a more energy efficient society can yield, but far more impacts on those booming economies. We do believe in a holistic system where energy can contribute to develop these countries economies in a more competitive way, but in an integrated economy it could be used to reinvest in technologies that allow more people participate in energy matrix by producing their own energy. With modern electrical grid covering some outback, it could also contribute to increase education levels or even generate revenue for low income families, currently spending their money in fossil fuels. Conclusions: There is a great expectation that the world reaches an agreement in Paris able to prevent the average temperature of the planet exceed the limit established by the scientific community. This agreement would become effective in 2020 to replace the Kyoto Protocol. Nationally Determined Contributions (INDCs) of the Parties to the UNFCCC, presented in advance to Paris meeting will constitute a crucial step for successful negotiations, since they demonstrate a strong commitment to our common goal. Indeed those contributions are just an intention so far and they could be changed before the Conference or even after to be adjusted to the goal that 196 state member of United Nations are pursuing. The report issued by the secretariat of the UN Framework Convention on Climate Change (UNFCCC) on October 30th assesses the collective impact of over 140 national climate action plans, throughout the Intended Nationally Determined Contributions or INDCs, and says that together, they can dramatically slow global emissions into the atmosphere, but this effort will not be enough to limit the temperature rise to 2 degree celsius up to 2100, which itself is a very large temperature rise in just a time domain of fifteen years. The Climate Action Tracker (CAT) developed a methodology evaluation of Effort Sharing, measuring the adequacy of INDCs level and reduction schedule emissions necessary to keep warming below 2 C. This analysis shows that most countries have reached a medium level, while ten countries were considered inadequate. It means that the current INDCs are below the required to keep the global warming within 2 C limit, open space to the societies start to play role in national discussions. Although recognized itself as one of the most vulnerable regions to climate change, South American countries have not taken the leading role through their INDCs. While the goals presented by Colombia were not evaluated and of Argentina were considered not measurable, the rest also excelled in terms of ambition. According to the analysis of the Climate Action Tracker, the goals presented by Peru and Brazil were considered intermediate ambition, while Chile were assessed as inadequate to stem the increase in global temperature to 2 C by In the case of Chile, it is also critical that the INDC is conditioned to the growth of the economy, instead of projecting the consequences that the increase in temperature of 2 C warming could cost the country. In the case of Peru, the country puts more emphasis on the issues of land use policies than properly in the long term policies. Many countries have followed this rule which puts the world in a rising temperature of 2,6 up to 2100 and 3,5 after 2200 according to an study performed by International Energy Agency. The Brazil s goal of reducing emissions could be achieved under current policies and is not considered an ambitious commitment. 6

7 Regarding energy standpoint, South American INDCs emphasize the generation, while the goals relating to energy efficiency are either vague or not accompanied by concrete measures to achieve them neither mentions incentives or investments that could leverage this short term contribution, which we see as a missing opportunity to promote a sustainable growth, since this region is supposed to grow in the coming decades, and this may increase their emissions level. According to According to the IDB, Latin America is expected to reach 2050 by issuing 7 billion tons of CO2 per year, about 50% more than the 4.7 billion If the trend continues, control costs of emissions in 2050 will reach $ 110 billion a year. But looking at INDCs there is no clue what would be the investment required to adapt the economies to become low carbon. Overall, improvements are not mentioned in the country s energy infrastructure to enable adaptation to climate change. Renewable energy participation in national energy matrices is increasing, with some asymmetries among countries. Argentina is behind compared to other countries in the region, but this is a real example of how regulations could change the game, for instance if the government implemented the legal framework sanctioned in September 2015 to balance the energy matrix. Generally speaking, access to energy has made significant progress in South America in the last 20 years. Although at different rates, different countries have implemented programs of electrification reaching an average of 90% of energy access. In all cases, the greatest challenge is attending dispersing people without access to energy, who are mostly in remote rural areas. Rural electrification programs aim to overcome these difficulties. In the case of Colombia do not specify the energy source used, while in Peru, Chile and Argentina are focused on the use of renewable energy, contributing to emission reduction targets and Brazil still solves the lack of 1,5 million people by subsidizing fossil fuels. Energy efficiency is the only actionable initiative to contribute to the reduction of demand, and therefore the energy deficit. However, nowadays there is no strong incentive to encourage the public and private sectors to save energy. In this regard, the participation of the business sector is essential to ensure that all objectives have not only implemented, but also to be monitored and turned into reality. Our vision: Considering INDCs analysis of the countries studied, we see the need of Latin American societies to improve their living conditions, production of local wealth through economic development projects. South America region is moving to clean energy sources, this has been demonstrated by the growing number of projects related to renewable conventional and unconventional, which definitely is setting a trend in the region, what we think there will be more sustainable and economically more democratic and less impact of major global interests. The enabler of these change would be smart grids that should also play a prominent role in this perspective, plant that are designed from the perspective of demand, not just supply, which has been the trend so far. However, the region lacks an opportunity in energy efficiency, where we have a huge room for growth, which is also the key driver in energy and climate long term, and an endless source of improving standards. Good practices, plans and programs are developed in all countries, but here we visualize a space of collaborative work can be highly efficient by exchanging policies and experiences in the public but also in the private sector, still not well aligned in a regional level to participate of COP 21 process of decision. 7

8 There are asymmetries among countries that have to do with the momentum of the economy, all of them dependent on the fluctuations of commodities price, which complicates the adoption of aggressive and wide policies to reduce GHG emissions in long-term. In all countries we see inefficiencies, but the look is upbeat as the growth gap among them is considerable. Our efforts go into the direction to allow the start of a platform of collaborative work, innovative, permanent and regional multi stakeholder, in which businesses, governments and civil society could share insights, learning and practices, mainly for energy, transport and extractive industries in which majority of regional economies are based on. This is exactly the common purpose of coalition of Diálogo Energético, Minero y Extractivo Latinoamericano and Schneider Electric and all data contributors, which has finally been very attractive challenge, as a source of learning and commitment of all parties. We share a common belief that we can make progress in the long term, as the battle against climate change is just beginning. We believe it is possible to avoid a 2C increase in world temperature: technologies are available. However, as magnitude and pace of required change is significant, multiple hurdles (financial, regulatory, cultural and behavioral) need to be removed, and speed of action will be critical. We aspire for: CO2 pricing mechanism to be implemented: robust, predictable that COP21 decision implementation starting in 1 year. Adoption of a reporting and control framework on Greenhouse Gas Emissions: CO2-footprint calculations made simpler and standardized worldwide (in 3 years) Adoption of ambitious, clear and long term policy frameworks favoring low carbon solutions and incentivizing innovation, in particular energy efficiency and energy optimization measures: CO2 as a mandatory currency for all significant transactions worldwide (in 5 years) Robust CO2 reporting and control framework enforced worldwide in 5 years: Implementation of targeted incentives towards fast adoption of Energy Efficient technologies, as negawatts are the cheapest way to low-co2 growth path in most contexts. Finally, we wonder what will be the new challenges to be faced by companies that supply goods and services to the energy sector after COP 21. In our view, there are four points on which we must be very focused on: 1. What is good for the climate is good for the economy The investment required to develop low-carbon infrastructure (including transport, energy, water and cities) is estimated at about 6 billion dollars per year over the next 15 years and the private sector will be one of its main beneficiaries. Then, companies must also commit to these principles and teach by example. Political framework in the long term will be required to assure stability that allows a low carbon economy takes place. 2. Energy and digital transition provides new efficient solutions Digital and energy transition affords to put environment, machines at the service of the user and to minimize their consumption and emissions while piloting their behavior. Sharing of digital information connects ecosystems together for better efficiency and enables development of new Smart models (Buildings, industries, cities ) 8

9 To increase energy and digital transition political leadership to mobilize investments in lower carbon emissions will be mandatory to allow the adoption of a legal framework favorable to energy efficiency, especially in buildings, which account for 40% of global energy consumption. The acceptance of a set of policies for the development of renewable energies will be key as well. 3. Fight against climate change won t be effective without taking into account development issues Without losing focus on the overall reduction of emissions, we must not lose sight of and effectively address the situation of developing countries where 1,1 billion people lack access to energy, 30 million in Latin America. Universal access to safe and clean energy has to be seen understood as a cause of social issues and it can lead to intractable international conflicts. A paradigm shift is necessary: We need to ensure equal access to energy while assuring that the planet remains habitable. 4. Develop a solid carbon pricing mechanism with easy to use and harmonized reporting methods The introduction of pricing mechanisms of solid, clear and predictable regulatory framework for carbon will allow the private sector to create the conditions of a lowcarbon economy to foster innovation. In a regional context, South America industries should take part of this discussion starting to seek for opportunities that could be leverage under this new world scenario and create a collaborative space in their sectors to promote the next step of innovation. *It means 2% of Peru and Bolivia Business for 2016 mainly due to the impacts of decrease in Agriculture (-2,5%) and Fishing (-14%) **CAT consortium consists of Climate Analytics, Ecofys, New Climate Institute and Potsdam Institute for Climate Impact Research. 9

10 Argentina schneider-electric.com.br Patagonia Argentina

11 schneider-electric.com.br Argentina Energy Policy Argentinian energy matrix depends substantially on its hydrocarbon. In 2014, out of a total of 85.6 million tons of oil equivalent used in the year, natural gas accounted for 52.4% and 32.3% oil. Only 1% of the energy used is renewable. Production of energy by resource Electricity supply 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Solar Energy Wind Energy Vegetable Alcohols Vegetable Oils Bagasse Wood Coal Hydroelectricity Nuclear Energy Oil Natural Gas Wind Energy 1% Hydroelectricity 23% Nuclear Energy 4% Thermal Energy 72% The structural reforms initiated in the early 90s were marked by the transfer of almost all public services to the private sector, including those corresponding to the energy sector. Oil production has suffered successive falls year after year. The attested oil reserves are equal in magnitude to those the country had in 1970; the natural gas reserves represent now half of those the country had in As a result, the country has lost its energy self-supply becoming a major importer of energy. The energy vulnerability of Argentina, measured both through the energy imports (in millions of dollars) of gross domestic product (GDP) or by electricity import (GWh) on the generation of local electricity, and other similar indicators, increased considerably in recent years. As an example, we present below a table that reflects, on official figures, the evolution of attested reserves of oil and gas between the years 2002 and 2013: 11

12 Table 1: Variation in reserves of hydrocarbons in Argentina Variation Variation [%] [%] Attested Reserves of natural gas [MMm 3 ] % 4,04% Attested Reserves of oil [Mm 3 ] % -1,05% Total [MMTEP] % 1,28% To restrain the rates and to reduce the social impact, energy subsidies were created that have reached a figure close to 18 million dollars in 2014, representing an exponential growth in the last 10 years. Such subsidies inhibit investment of consumers - of all ranges - in measures to reduce consumption and decrease emissions. Similarly, there is a restriction of investments in the distribution network that would make it more reliable and efficient. Tax subsidies for energy In millions of current dollars Electricity Natural Gas Diesel Naphtha LPG Energy Imports (INDEC) Energy generation is produced by private and public companies in a competitive electricity market and especially marked by the presence of the free market, with 75% of its capacity in the hands of the private sector. The portion of the government corresponds to the nuclear generation and two hydroelectric bi-national plants. The energy generation sector is very fragmented as it is divided between more than ten large companies. The electricity generators are sold in the wholesale market 12

13 operated by CAMMESA. The transmission and distribution sectors are highly regulated and less competitive than the generation sector. As a result of the policies and strategies followed by the market, and according to the current rules, the policy in the upstream was based on extracting the maximum amount of liquid and gaseous hydrocarbons and giving them value favorably in the context of prices in dollars, thus minimizing the risk of investments. In short, these conditions led the country to a progressive decrease in fossil fuel reserves in the face of the economic recovery and the resulting increase in energy demand. The example of Argentina clearly shows that the depletion of fossil fuel resources may be much closer than it is thought. When the country s energy policy is based on non-renewable resources in an environment of growing demand, it is necessary to consider a long-term energy planning in terms of economy. The combination of state intervention in prices and a predominantly exhaustible production led Argentina to this scenario. In September 2015, a legal framework was sanctioned in order to balance the country s energy matrix, estimating that by 2017 Argentina must have 8% of its electricity generation coming from wind, solar or small hydroelectric plants, among other renewable resources. In addition, the norm estimates that in 2020 this percentage will reach 20%. Access to Energy Regarding the access to energy, over 98% of Argentine households have access to electricity through the established networks. Even though there is no concrete norm that formulates goals related to access to energy, there is an interest not yet legally formalized to make 100% of the population to have access to electricity. This goal is indeed becoming close, and the fact that approximately half a million citizens do not have access to the electric network - because they live in remote and isolated areas throughout the country - prevents the setting of a deadline to achieve it. The Programa de Energías Renovables en Mercados Rurales - PERMER (Program of renewable Energy in Rural Markets) completed in 2012 was one of the measures taken by the Argentine government in order to provide electricity to isolated residential users of the interconnected network, based on renewable resources through the implementation of photovoltaic solar panels or small wind mills, benefiting more than 27,000 houses and nearly 2,000 rural schools. This Project was funded through a World Bank loan (USD 30 million), increased by a grant from the Global Environment Facility (USD 10 million) and Electronic Funds and other provincial resources; besides the subsidies of the power distribution companies from the provinces and other beneficiaries. The total estimated investment by PERMER was approximately USD 58.2 million. 13

14 To provide universal access to energy in Argentina, the country is currently pursuing renewable energy, which is an improvement of the climate point of view since fossil fuels will not be used to provide electricity to homes that still lack them. The results achieved by PERMER point to thousands of homes, schools and public service establishments provided with solar or wind energy. In addition, some micro network projects were designed to meet the electrical service and regarding the thermal component of the project, there have been installed hundreds of thermal solar systems in schools and public services for the preparation of food and hot water for sanitary purposes. Energy Efficiency By Decree 140 of 2007, Argentina established a legal framework by declaring as interest and national priority the rational and efficient use of energy through the approval of the guidelines of the National Program for the Rational and Efficient Use of Energy (PRONUREE). The key strategic guidelines of the policy of promoting energy efficiency in Argentina cover the development of the following factors: Development of regulatory frameworks that promote energy efficiency measures in Public Buildings of the National Public Administration. Proper planning of the institutional organization that enables the development of energy efficiency market together with stakeholders. Implementation of PRONUREE at the Ministerial Offices Direction in partnership with the Secretary of Energy of the Nation. Awareness, dissemination and education of consumers, professionals and the general public about Economy and Energy Efficiency. Market stimulation through economic incentives. Availability of appropriate financial mechanisms. Promoting Research and Development in the field of Energy Efficiency in Public Buildings. Planning and execution of an information system on available methodologies, costs and benefits by optimizing energy efficiency. In the short term, and as other countries in the region, it was implemented a massive replacement of incandescent bulbs with energy-saving lamps in all the country residences as well as the implementation of a standardized system with labels on minimum energy efficiency applied to the production, import and marketing of devices that consume energy. In addition, Argentina innovated in the education of school children in order to explain about the nature of energy, its impact on everyday life as well as the need to adopt conscious consumption patterns. 14

15 So far, no records of progress made by PRONUREE were found, although there is a consensus on the fact that energy efficiency remains an imminent issue to the country. Energy diagnostics for PyME: Within the framework of the Main Stage of the Energy Efficiency Project, the Secretary of Energy performs, since 2012, the development and execution of energy diagnoses in PyME industries with the goal of reaching 325 industries nationwide. The energy diagnosis is a systematic process by which it is obtained a sufficiently accurate knowledge of the energy consumption of a particular industry, building, process or system in order to detect the factors affecting such consumption identifying the different saving ways due to its profitability. The energy diagnosis is made in PyME industries belonging to several sectors of economic activity as well as from different regions of the country, such a diagnosis is carried out by 19 Companies Providers of Energy Services qualified and contracted for this purpose by the Secretary of Energy. Schneider Electric Argentina is one of the companies qualified by the Secretary of Energy, and has conducted a considerable amount of energy audits with satisfactory results. Energy efficiency worldwide is about 40% of the potential of reduction of greenhouse gas emissions and energy consumption, while contributing to energy security and creating new jobs. However, given the current economic situation facing the country, energy efficiency today in Argentina is not yet a priority. Energy efficiency is the only implantable initiative to contribute to the reduction of demand, and consequently the energy deficit. However, there is not now an incentive that encourages public and private sectors in energy savings and, in most cases, there are isolated initiatives. In the private sector, few multinational companies decide to promote energy efficiency measures in order to comply with corporate sustainability initiatives. Only 7 companies in Argentine territory have the ISO50001 certification, among them is the Schneider Electric Argentina. Schneider Electric believes that growth is closely associated with energy efficiency, since energy is an obstacle to various types of industries. The company often encourages its customers to a change of priority through a long-term prospect. Fossil fuels can be cheaper in the short term, but it is expected that this will change with a new agreement on climate change to be signed in Paris in Many countries are already creating taxes on emissions. In a global economy, this may affect the Argentine industry in the future. INDC Studies by Argentine researchers showed that during the period there was an increase in average temperature in most of the Argentine territory of about 0.5 C, exceeding 1 C in some areas of Patagonia, and it was registered in addition an increase in days with hot waves and a reduction in the number of days with frost. With regard to rainfall, the largest increases in these rates in the country were detected, 15

16 causing floods with great socioeconomic impact. In semi-arid regions, there was a decrease in rainfall in the area of mountain ranges, as well as a decrease in river flows in the geographical region of Cuyanos. The vulnerability to climate change is of great importance since the agricultural activities occupy a prominent role in the economy of the country. Such consideration acquires even greater importance when considering Argentina as a country protagonist in the production and supply of food globally, therefore playing a key role in food safety in the global context. For the energy sector two main axes were defined: the diversification of energy matrix and the promotion of rational and efficient use of energy. In this sense, the country has a regulatory framework and long-term strategic plans which promotes, among other things, greater participation of non-conventional renewable resources: hydroelectricity, nuclear energy and replacing fossil fuels with biofuels. However, programs and activities package were implemented aimed at reducing the intensity of energy consumption. Argentina proposes a goal of reducing their GHG emissions by 15% by the year 2030 compared to emissions estimated at BAU ( business as usual ) for the same year. The goal includes, among others, actions related to: promote the sustainable management of forests, energy efficiency, biofuels, nuclear energy, renewable energy and modal substitution of transport. The criteria for the choice of actions considered the potential of reduction and capture of GHG emissions and co-benefits associated as well as the ability to apply technologies developed at the national level. The conditional goal, Argentina could get an extension on the goal of reducing their GHG emissions by 30% by the year 2030 with respect to projected emissions in its BAU for the same year Emissions of BAU (M tons CO2 eq) Emissions of the scenario with Unconditioned Contributions Emissions of the scenario with Conditioned and Unconditioned Contributions (M tons CO2 eq) 16

17 Internationally, there are doubts and expectations about the fulfillment of these goals by the country, since, with the currently implemented policies, Argentina could reduce emissions at a rate lower than their reference projections. According to the analysis of the Climate Action Tracker**, the goals presented by Argentina are not measurable and therefore were not classified as relevant in the context of negotiations in Paris. Argentina Page last updated: 31st March 2015 History: Basic view + Fair Share + More info Emissons (Mt CO 2 eq.) Historical emissions, excl. forestry Historical emissions/removals, from forestry Current policy projections (CAT assessment) www climateactiontracker.org/ Climate Analytics/Ecofys/ NewClimate/PIK Finally, we believe that for Argentina to reach what is proposed in terms of reducing GHG emissions, it would be necessary to advance the energy and economic agenda so that such progress would be conquered jointly. The replacement of subsidies, migration to a generation that uses more renewable resources and the establishment of incentives for energy-efficiency initiatives could be constituted as a reasonable option in the medium term. Regulatory measures to allow private investment in cogeneration could be a reasonable measure, so the country could reduce its dependence on fossil fuels at the same time that it would lead to a true low-carbon economy. *(Source: Fundación Investigaciones Económicas Latinoamericanas FIEL) **The Climate Action Tracker (CAT) is an independent scientific analysis produced by four research organizations tracking climate action and global efforts towards the globally agreed aim of holding warming below 2 C, since

18 Brazil schneider-electric.com.br Amazon River

19 schneider-electric.com.br BRAZIL Energy Policy The Brazilian energy policy goes through a crisis which effects can be felt both in the internal and external environment, especially in the South hemisphere. Internally, the crisis shows ever closer limits of the federal government in the financing of major works on energy infrastructure and heavy industry. In 2012, the Brazilian government launched the MP (provisional measure) 579/2012, aiming at reducing the tariffs by 20% by anticipating the closure of generation contracts in exchange for the renewal of concessions. However, only the federal state companies accepted the proposal. The moment proved inadequate due to evidence of shortages in supply. Prices on the open energy market have increased significantly and the energy distribution companies also fell into debt in an effort to honor their commitments in the captive market. At first, this move undermined the intensive consumers of electricity and subsequently all other consumers since it was necessary to restore the real tariffs through adjustments in the order of 50% in several concessions and regions. Such instability has made the electric energy of Brazil one of the world s most expensive ones, limiting the development and competitiveness of the domestic industry. In 2014, the domestic energy supply (total energy required for the country) reached 4070 TWh (Terawatt hours), registering a growth rate of 3.1% with the evolution of the GDP of 0.1% according to the latest data released by IBGE. Natural gas, oil and its derivatives accounted for 80% of this increase. It happened primarily due to the reduction of the domestic supply of hydroelectricity with a consequent increase in thermal generation, based on natural gas, coal or oil. For the third consecutive year, due to unfavorable water conditions observed over the period, there was a reduction in hydropower supply. In 2014 the reduction was 5.6%. The lower supply based on this resource explains the lower share of renewables in the energy matrix, from 84.5% in 2012, 79.3% in 2013 and 65.2% in 2014, despite an increase of 3,177 MW in the installed capacity of the hydroelectric complex. The wind power reached 4,903 MW, which provided an increase of 85.6% in electricity generation from this resource. In 2014, final consumption of electricity in the country registered an increase of 2.9%, provided through the expansion of thermal generation, especially of industrial plants powered by coal (+24.7%), natural gas (+17.5%), biomass (+14.1%), whose participation in the energy matrix, in a comparison between the years 2013 and 2014, moved from 2.6 to 3.2, from 11.3% to 13.0% and 6.6 to 7.4%, respectively. The sectors that contributed most to the increase in electricity demand were the residential (+5.7%) and commercial (+7.4%). 19

20 In 2014, total anthropogenic emissions associated with the Brazilian energy matrix has reached million tons of carbon dioxide equivalent (Mt CO2-eq), most of which (221.9 Mt CO2-eq) generated in the sector of transport. The carbon intensity of the economy was 0.21 kg CO2 / US$. Brazilian economy continues to be on average 32% less intense on carbon than the European economy, 53% less than the US economy and 73% less than the Chinese economy. The deterioration in the production of energy and water crisis forces the country to think of other ways of generation from renewable resources. Our proposal is to go beyond the inclusion of new resources, taking into account energy efficiency as the matrix component. Access to Energy Access to energy remains a major challenge for the country, where 1.5 million people lack access to electricity. For the past 12 years, the government has tried to universalize the access to electricity through the program Luz para Todos ( Light for All ). However, a portion of the population remains without electricity, according to the Ministry of Mines and Energy. Progress has been significant since 2012, when the ministry estimated that 10 million people had no access to energy. This challenge is related to some states in the Northeast, Midwest and across the North. The new deadline for universal access to energy has been set for Although the universal access policy considers renewable energy, almost all isolated populations of the conventional network gets electricity through the burning of fossil fuels. Yet the country has no regulations so that the families not included in the program are provided with the solar network on a small scale, for example, which does not follow the technological advances of recent decades and that could increase universal access, since these regions are far from the power grid, which in turn cannot serve this population due to high costs and environmental permits because the transmission would cut through areas of still intact forest. Energy Efficiency In Brazil, energy efficiency has been part of the government s agenda at least since the 80s, with the creation of the Brazilian Labeling Program and the National Conservation Program of Electricity PROCEL. In the 90s, there was the creation of the National Program for the Rational Use of Program Products and Natural Gas CONPET and by the turn of the century, two laws were approved: Law 9991 of 200, establishing the Energy Efficiency Program Aneel, and Law 10,295 of 2001 or the Energy Efficiency Law. Nevertheless, its energy intensity has grown in recent decades and energy consumption also grew at a fast pace in this period. This increase was closely related to significant economic growth, and to the increase of families well-being. Between 1990 and 2010, Brazil s GDP registered an increase of approximately 82%, while the power supply was expanded around 89%. Several factors contributed to the increase 20

21 in energy intensity, including the distribution of income and the consequent increase in residential property from the Real Plan, in addition to the growth of industries of high energy consumption. According to a study led by the Energy Research Institute of Brazilian government in partnership with Cepal, energy efficiency in various sectors would be as follows: The energy intensity of centers of transformation was reduced by approximately 0.15% per year during the period analyzed, moving from 849 MWh/M US$ [2000] in MWh/ M US$ [2000] in Sugar-alcohol sector was responsible for most of the demand for energy in the centers of transformation, followed by the oil industry (both in exploration and processing as in refining and distribution) and electricity generation. Since the beginning of this century, the hydroelectric generation was reduced, which affected the overall efficiency of electricity generation. As a whole, the energy intensity of the industrial sector was increased from 2,15MWh/ MR $ [in 2000] to 2,65MWh/ MR $ [2000] from 1990 to This increase was also observed in almost all industries: textiles, food and beverages (increase of 32% over the last decade and 14% in the whole period), non-metallic minerals (11%), paper and cellulose (6%) and primary metals (3%). The only exception occurred in the chemical sector, which recorded a drop of 32% in its energy intensity. However, despite an increased use of energy, considering the specific consumption (that is toe per ton produced), the main intensive sectors in energy (steel, sugar, cement, cellulose and paper) recorded falls in this indicator, which denotes a greater productive efficiency (the cellulose and paper segment was the only one that showed an increase in this indicator). By analyzing the residential sector, the most appropriate variable to determine the energy intensity is energy consumption per household or per capita. In 1990, a typical residence of Brazil consumed 5,93 MWh per year, a rate that reached 4,42 MWh per household in Part of this reduction is due to the replacement of wood by other energy resources used in the kitchen. On the other hand, as the number of people per household decreased in this time interval (4.2 to 3.2 people per household), it was assessed the residential consumption per capita and change was drastic: 1,40 MWh by 0,120 toe per capita in 1990 to 1,38MWh / toe per capita in Electricity consumption suffered a reverse process, which testified the increase per household of 114 kwh per month per household in 1990 to 156 kwh per month per household in 2012 as well as per inhabitant from 27 kwh per month per household in 1990 to 49 kwh per month per household in Were it not for the energy efficiency programs operating in the residential sector, such as EBS, PROCEL and CONPET, this increase would have been greater. It is evident that changes in greenhouse gases matrix were affected by rising energy use, because between 1990 and 2011 the consumption more than doubled. This reinforces the importance of the energy sector in the transition from Brazil to a low-carbon economy. According to the classification of the energy efficiency potential held by the International Energy Agency, Brazil is in 15th position among 16 countries, the country reaches only 30% of the utilization of their full potential. Germany, leader of the ratings, uses its potential by 63% and the US by 40%. 21

22 According to the classification of the energy efficiency potential held by the International Energy Agency, Brazil is in 15th position among 16 countries, the country reaches only 30% of the utilization of their full potential. Germany, leader of the ratings, uses its potential by 63% and the US by 40%. INDC Based in 2005, the country aims to achieve a reduction in emissions of greenhouse gases through its economy by 37% for 2025 and 43% in The country s commitment in adopting absolute goals is significant, taking into account the relevance of the country internationally. The challenge is to work implementing measures to enable the private sector to assume an important role in this performance. After highlighting the reduction of deforestation in the Amazon produced in recent years, the country s ambition is to reach zero level of illegal deforestation in the biome in In this perspective of 15 years, there is not any other explicit mention to other biomes, particularly the Cerrado, currently threatened by the intensity of legal and illegal deforestation. Ideally, the country would also announce the goal of reducing the elimination of vegetation, since most of Brazilian forests can be legally suppressed, leading to an increase in emissions and loss of biodiversity. Incentives to increase productivity should be considered. The goal of the restoration is 12 million hectares, whereas the recovery of pastures is 15 million hectares and integration of crops with livestock and forest is 5 million hectares. The commitment presented is important, but the numbers are still below the country s needs and even established by the Forest Code because the latest numbers estimates there are 21 million hectares passive. The estimate of a 23% share of non-hydro renewable energy (solar, wind and biomass) in the energy matrix is a very ambitious goal and worth mentioning, since wind energy currently represents only 2% of the total biomass and reaches 7.3%, while the solar is still of residual presence. The electricity for the supply of water substantially remained the current level of 66%. In addition, Brazil has pledged to increase the electrical efficiency by 10% by At this point it is unclear how the country will achieve this goal, because considering the technology available today, it is not an ambitious commitment. Our working group aims to present concrete proposals so that we can be more ambitious in reducing emissions from the resulting energy through energy efficiency and the creation of conditions so that the energy does not constitute an obstacle in the resumption of the country s growth. According to the International Energy Agency, the country has an energy efficiency potential estimated at 40%. What will allow it to double the goal proposed in INDC, that is, proposing a 20% reduction in energy consumption through energy efficiency measures. The first impact would be on reducing emissions which would achieve 58 million tons of CO2 per year. 22