Effectively dealing with the climate crisis involves replacing the infrastructure that maintains the use of fossil fuels. Therefore, if we want to decarbonize the economy, we must decarbonize infrastructure. For example, power transmission lines must support the expansion of renewable energy sources, roads must facilitate the use of electric cars, and railroads must discourage the use of aircraft. In this article I will highlight the main aspects of developing net zero emission infrastructure plan It contrasts with the approach of major infrastructure projects in Latin America.
Replacing the infrastructure built in recent decades presents a challenge similar to that of wartime, in which private markets will not be sufficient to cover the necessary capital. Therefore, state intervention will be key as we see in China, the UK or the US. The public sector has to chart a course for decarbonization and cover the huge costs that private investors are unwilling to absorb in terms of infrastructure.
An example that helps to understand the key role of the state is the transition to electric vehicles. Developed countries are rapidly adopting this new technology, however, the private sector is not ready to deploy the infrastructure to recharge new units in the future. We will see in the coming years how the government will have to be responsible for meeting this need before demand generates the necessary incentives for private capital to decide to participate. This situation applies to all types of green infrastructure networks that need to replace those carbon intensive networks.
One of the first steps for Latin American countries to chart a credible and ambitious path to low-carbon economies is to design a net zero-emissions infrastructure plan. There are no shortcuts, and you can’t avoid this step. The first priority is fiber-optic networks, where it is necessary to manage a large amount of data for the operation of electrical systems, roads and railways. In particular, the fiber-optic network must withstand intermittency caused by renewable energy sources and interactions between local networks, storage, local generation, and batteries.
The second priority axis is the electrical infrastructure, which is linked to the first axis. Electrification of most activities that use fossil fuels today will be critical to decarbonization, as long as we succeed in producing the energy we demand in a sustainable manner.
The third major issue is transportation. The transition of this sector will include more electricity and smart communication systems, and on the other hand, less fossil fuels. Infrastructure plans must anticipate how road and rail networks will be compatible with a decarbonized world.
Infrastructure plans must not only be national, but also regional because that is how the effects of climate change will be. If we examine the ten most ambitious infrastructure projects in Latin America in 2019, we can see that the region, for the most part, is ignoring the importance and the need to transition to a zero-emissions economy.
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As can be seen in Figure 1, the most important project in terms of value is the supply of CNG in the Caribbean, which does not take into account climatic risks such as potential damage to the port network in the region or the downfall of natural gas. Production in the United States due to climate regulations. If successful, it could lead to dependence on natural gas in the region and delay a more ambitious deployment of renewable energy. In contrast, Reguemos Chile is an initiative that anticipates the challenges of water scarcity and will improve Chile’s resilience by moving water from the south to the north. In addition, the project also aims to reduce the dependence on copper in the production matrix of the Andean country.
Figure 1. Major infrastructure projects in Latin America in 2019, valued at billions of US dollars.
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In the case of the seven railway projects, there are no clear indications that electric trains are running or that they are using green hydrogen; However, its adaptation to these technologies in the future is possible. In general, promoting high-efficiency, high-speed trains will create fewer incentives for future use of aircraft. Finally, the projects that have received the most criticism at the regional level are the Dos Bocas Refinery and Santa Lucia Airport in Mexico. Both lack reliable climate risk analysis and environmental impact assessments. Therefore, uncertainty about its viability will be a recurring issue on Mexico’s public agenda.
In conclusion, there can be no net zero emissions future without proper infrastructure. This goal will never be achieved if we wait for private equity to dissolve. Private investors, no matter how responsible they may be, will prioritize profitability, which can partially satisfy the need for a resilient infrastructure. For this reason, governments need to bridge this gap to ensure comprehensive networks and systems that effectively mitigate and adapt to climate change.
Jose Luis Resendes, Researcher at Oxford University’s Sustainable Finance Program and founder of ESG Latam.*
The opinions expressed are the sole responsibility of their authors and are completely independent of the position and editorial line of Forbes Mexico.