Chile, Brazil Lead Latin America’s Race to Zero Emissions

Argentina and Mexico are also among the top 25 on KPMG’s Net Zero Readiness Index

Smoke billows from cooling towers at the coal-fired Uniper SE power station in Ratcliffe-on-Soar, UK, on Thursday December 2, 2021.
January 09, 2022 | 09:06 PM
Reading time: 6 min.

Bogotá — Chile is the highest-ranking Latin American nation, placed 16th, in KMPG’s Net Zero Readiness Index 2021, which ranks countries’ performance in their efforts to achieve zero greenhouse gas emissions.

Brazil sits in 18th place, Argentina in 22nd and Mexico is in 23rd.

European countries dominate the list, while Latin American countries still face the challenge of leaving behind their dependence on fossil fuels and advancing in their energy transition, the index states.

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The top 15 countries in terms of efforts to achieve net zero emissions are Norway, the U.K., Sweden, Denmark, Germany, France, Japan, Canada, New Zealand, Italy, South Korea, Spain, Hungary, the U.S. and Singapore.

However, despite the advances made, “all of the countries analyzed are behind in the adoption both their aims associated with achieving net zero greenhouse gas emissions and norms that incentivize their compliance”, according to the KPMG index.

The 32 countries and territories that participated in the ranking contribute around three-quarters of global emissions, and of those, only Canada, Denmark, France, Germany, Hungary, Japan, New Zealand, Sweden and the UK have adopted commitments seen as “legally binding” with regards to achieving net zero emissions..

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In several of the countries analyzed, national preparations to achieve net zero emissions are related to the level of willingness of sectors such as electric power and energy, industry, transport, construction and agriculture, ground use and forestry activities.

And according to the index, “an economy’s ability to achieve net zero emissions is linked to its prosperity”.

KPMG Net Zero Readiness Index 2021

  1. Norway
  2. United Kingdom
  3. Sweden
  4. Denmark
  5. Germany
  6. France
  7. Japan
  8. Canada
  9. New Zealand
  10. Italy
  11. South Korea
  12. Spain
  13. Hungary
  14. United States of America
  15. Singapore
  16. Chile
  17. Australia
  18. Brazil
  19. Poland
  20. China
  21. Malaysia
  22. Argentina
  23. Mexico
  24. Turkey
  25. United Arab Emirates

Source: KMPG

Chile

Chile announced in 2020 its plans to decarbonize its electricity generation by 2040, which include the closure of 10 coal-fired plants, and in April 2021 connected the Cerro Dominador solar energy plant to its grid, which will generate uninterrupted solar power,” according to the index.

“The Atacama desert in northern Chile is among the best places in the world for solar power, with its dryness leading to very high levels of irradiation,” the index states.

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According to Chile’s environment ministry, meeting the net zero goal would create investment opportunities of between $27-$49 billion by 2050, while research has suggested a move to renewable energy could save the country more than $5 billion annually, as well as reducing deaths from air pollution and creating 11,000 new jobs.

However, Chile faces some challenges in meeting its decarbonization targets, including the need to increase co-operation between government, international organizations, academia, civil societies and businesses, according to Karin Eggers, KPMG Chile’s sustainability, climate change and human rights director.

The country also needs to invest more in science and innovation, with it currently spending less than other OECD member countries, and needs to develop better monitoring processes, among other changes. “This requires transformative action in society and the economy,” Eggers says.

Brazil

In 18th place, Brazil “has made extensive use of hydroelectric power for electricity. This gives it a head start on the road to Net Zero, which its government plans to meet by 2060 with an interim reduction of 43% on 2005 levels by 2030″, the index states.

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In addition, “the country is working to diversify its green energy sources, given the massive land requirements of hydroelectric reservoirs and their unreliability in dry seasons”, Manuel Fernandes, energy and natural resources co-lead for the Americas at KPMG in Brazil, is quoted by the index as saying.

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Norwegian energy group Equinor, which has been involved in oil and gas exploration and production in Brazil for two decades, made Brazil the site of its first solar energy farm, which opened in 2018, and has applied to build an offshore wind farm near Rio de Janeiro, while hydrogen energy company Enegix announced in March 2021 it would build the world’s largest green hydrogen plant in Ceará, which will use solar and onshore wind to create hydrogen.

“But the country is also likely to continue to exploit its oil reserves along with natural gas as a cleaner interim option,” according to the KPMG index, while deforestation and wildfires in recent years across the Amazon rainforest are hugely detrimental to the country’s ability to reach net zero”, it added.

Smoke rises above farmland from a fire near Sao José do Rio Pardo, in Sao Paulo state in Brazil, on Tuesday August 24, 2021.dfd

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There are also significant challenges for businesses in Brazil given its reliance on energy-intensive sectors, the index states.

Many companies are making commitments to reduce emissions, but while some including Brazilian mining group Vale have detailed plans — in its case to become carbon neutral by 2050, partly through the use of an internal carbon price115 — others are less clear. “These commitments from big companies are important, but we still need to see much more detail on how they are doing this,” according to Fernandes.

Argentina

In 22nd place, Argentina has committed to achieving zero net emissions by 2050 and set an intermediate goal of reducing CO2 emissions to 359 million tons of carbon dioxide a year by 2030, 25% lower than its previous target set in 2016.

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The country’s government has also established a national climate change council, an information system to track greenhouse gas emissions, and committed to zero net deforestation by 2030.

“But despite these announcements, the government faces major, unexpected economic and social challenges. It is focused on restructuring the country’s sovereign debt with external creditors, getting out of default and supporting its vulnerable population,” the index points out.

Furthermore, Argentine companies tend to publish only good news about their environmental work, the index says.

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“There has to be a requirement locally for companies to start talking about how they impact our environment,” according to Romina Bracco, governance, risk and compliance services and ESG partner at KPMG in Argentina. “It’s very difficult to reinforce or put pressure on private entities, such as for more information on their emissions, or considering penalties for not being compliant.”

Without such data, she adds, it is questionable whether the 2030 targets will be met.

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The country’s energy matrix largely depends on fossil fuels, while renewable energies so far only offer a marginal contribution, while on transport, the government is looking to improve electric rail networks in cities and move to electric buses, but Bracco says it could do more to discourage car usage — for which fossil fuels are currently subsidized — and encourage the use of public transport and help to make freight transportation more efficient. Adoption of electric vehicles and provision of charging infrastructure remains very low.

Mexico

Ranked 23rd, but 24th in national preparedness, Mexico “has yet to set a net zero target, but it has a solid regulatory framework, including reporting requirements for heavy producers of greenhouse gases. Good progress is being made, although more cooperation between public and private sectors is still needed”, according to the index.

“Some of Mexico’s companies are undertaking ambitious plans to cut emissions, both domestically and around the world. In transport, private sector organizations are undertaking decarbonization projects such as the promotion of electric, hybrid and biomass-driven vehicles, as well as more efficient conventional ones,” the index states.

“However, these initiatives are largely voluntary efforts because there is no ban on combustion engines in place, uptake of electric vehicles is low and there is a lack of availability of electric vehicle charging infrastructure. Similarly, in the building sector the government promotes efficiency improvements but further attention and investment from both the private and public sectors should be encouraged.”

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