Why climate change could trigger a surge in industrialization

With the clean energy matrix and its raw materials, Latin American economies will particularly benefit from the green turn in the global economy. But for this to happen, governments would have to follow suit. This is especially true for Mexico and Brazil.

by Alexander Busch, Latin America correspondent for Handelsblatt and Neue Zürcher Zeitung

 

Countries and companies around the world are increasingly responding to climate change. Emission-neutral economies are the goal. Action on climate change is becoming a central issue in global competition. For Latin America, this offers a unique opportunity.

This is because the region has more sustainable energy production in many countries than the average of the industrialized nations. On the one hand, this is due to the traditionally dominant hydropower for electricity generation in the center of South America. Biofuels have also been produced and used for many years, especially in Brazil. Their importance will increase in the coming years in all agricultural regions of Latin America. This is due to new technologies that are increasingly being used to convert biomass, as well as urban waste, into fuels and electricity.

In addition, fast-growing investments in wind and solar farms are making energy production in Latin America more sustainable. In addition to high solar radiation, the region has the windiest areas in the world – and the potential of off-shore wind farms has not even been tapped yet. Industrial use of the abundant geothermal energy is also only just beginning.

Chile is currently demonstrating how solar energy can be converted into “green” hydrogen, which is not produced from conventional energy sources but from solar and wind energy. The other countries will follow. Because with the falling prices for the sustainable energy infrastructure to produce hydrogen, Latin America is likely to become a major producer in the next decade.

For Latin America, the green transition will bring high investment and create jobs. Even the much-needed productivity and industrialization boost could trigger the changes in the global economy.

This is because green hydrogen can be incorporated into the value chains of local industries and not just exported as a fuel or energy carrier. Already, companies in Europe, the U.S. and China are demanding “green” steel and copper. In addition, companies could sustainably build the entire value chain and logistics from the ore mine in the Amazon or the Andes to the ports in Europe or China with biofuels or hydrogen, i.e. CO2-neutral.

But there is a problem. While ecological change is accelerating around the world, the governments of Latin America’s two largest economies have just taken the opposite approach. In Brazil and Mexico, the presidents are not taking the issue seriously: Mexico’s government has banned sustainable energy from its list of priorities. It is relying on the traditional oil industry and refineries. In Brazil, too, the government is ignoring the opportunities presented by the shift in the global economy.

But governments are changing. In the case of solar and wind energy, too, many Latin American countries were late to jump on the bandwagon. Today, they are among the most important investment locations for the industries worldwide.

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