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No, it is not convenient for Latin America to invest in natural gas (despite the war in Ukraine)

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Despite the fact that natural gas is a fossil fuel that generates methane – one of the gases that most contributes to climate change – it has managed to emerge undefeated from several debates. The European Union recently classified it as a “green” investment and in Latin America the idea that natural gas is a necessary energy to achieve the energy transition has been growing. Its ability to attract attention, moreover, was enhanced by Russia’s invasion of Ukraine, as the market changed and the global price of natural gas skyrocketed. But, for the United Nations Environment Program (UNEP), the path that Latin America and the Caribbean must follow is clear: natural gas is not a good investment for the region.

This concludes a report presented by that organization on Tuesday that says that Latin America has only 5% of the world’s natural gas reserves, which represents 7% of its production. Despite this, the narrative of creating more projects to explore and exploit it in countries such as Argentina, Mexico, Brazil, El Salvador and Chile continues to grow, which goes against the necessary actions to mitigate climate change. “The International Energy Agency warned last year that if the world wants to have a 50% chance of limiting temperature rise to 1.5°C by the end of the century – as the Paris Agreement seeks and science has recommended – it will not more fossil fuels can be extracted. This does not mean stopping what is there, but rather not generating more capacity and new plans”, says Gustau Manez, regional deputy director of UNEP.

The report, specifically, only analyzed the role of gas in electricity, but warns: “In the region, most of the electricity generation comes from hydroelectric plants, which represent around half, between 45% and 50%. But the gas has begun to enter more into the matrix, going from 15% to 25% in recent years,” says Manez. “What happens is that climate change will surely alter the rivers and this could affect hydroelectric production in a significant way.”

What UNEP did, then, was to analyze what will happen in Latin America and the Caribbean depending on the energy it chooses to supply the growing electricity demand. He proposed three scenarios. One in which the current energy trend is continued, including coal and oil plants; another in which natural gas is prioritized and, the third, in which renewable energies prevail to guarantee electricity demand. Taking into account three criteria – the economic benefit, the generation of employment and the reduction of emissions – betting on renewables always won as the best option.

In the natural gas scenario, the document explains, almost the same investment is required as if we continue with the current trend. And while with natural gas Latin America and the Caribbean would achieve a net benefit of 454 million dollars by 2050 – the equivalent of 7% of its 2019 Gross Domestic Product (GDP) – compared to the current trend scenario, betting by renewable energies would increase this net benefit to 1,255 million dollars for the same year, almost 20% of the regional GDP of 2019.

On the subject of jobs, the findings are similar. By 2050 natural gas could create 35,000 new jobs. But with the scenario of prioritizing renewable energies, almost three million new jobs would be generated, which would also compensate for the 132,000 jobs that could be lost with the closure of oil and coal projects, and the almost 5,000 related to natural gas. . “If you add to this that, if only 30% of the components needed for renewable energies are manufactured in the region, jobs would increase to 3.7 million by 2050,” Manez also explains. “Latin America is 100% capable of achieving it and in countries like Colombia, Mexico, Brazil and Chile it is very feasible for it to happen.”

Finally, there is the most logical conclusion: that of emissions. In a scenario in which the current trend continues, electricity emissions in the region would be four times higher in 2050 compared to 2019. In the case of gas, there would only be a 20% reduction in emissions by 2050. But with renewable energies, the reduction in emissions would be 75% by 2050 if compared to the natural gas scenario and 80% less than if we continue with the current trend. In other words, this last scenario, in which renewable energies would prevail, would manage to reduce emissions by 30% when compared to the levels reported by the sector in 2019.

The benefits of ditching natural gas and going straight for renewables also include avoiding what is known in climate change as the carbon lock in or carbon lock. That is, to generate, at this time, high investments in infrastructure for natural gas that will lead us to continue using it and depending on this fossil fuel when it is neither scientifically nor economically convenient. “This type of investment is intended for the next 30 years,” recalls the expert. So starting a natural gas project now will mean staying tied to gas even after 2050.

But then, how to convince the countries of Latin America and the Caribbean not to be seduced by natural gas when the war in Russia and Ukraine has changed the narrative and in Europe there is a gas crisis? Manez gives a simple answer: “From the moment you explore, until you exploit, extract and can export, at least five years pass. In Europe they are going to need that gas this winter. And the next maybe. Perhaps in a third winter. But they already have very strong plans to switch off fossil fuels and it won’t be long before they stop needing gas.”



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