Growing a Global Clean Energy Economy: Clean Energy Initiatives in the Caribbean and Latin America
September 28, 2016
By Abbie Zislis, C’18
Recently, the Senate passed the Frank R. Lautenberg Chemical Safety for the 21st Century Act (H.R. 2576), which puts more stringent chemical regulation measures into place and gives more oversight and authority to the Environmental Protection Agency by amending the outdated, four-decade-old Toxic Substances Control Act. While it has been exciting to be on the forefront to see these major reforms being made in US environmental policy, as a Political Science major concentrating in International Relations, I believe that it is important to not only establish pragmatic and responsible environmental practices at home but to also look outwards towards pursuing a global plan for environmental preservation and a clean energy economy. Specifically, it is advantageous to both US national interests and the Western hemisphere to cooperate on sustainable clean energy initiatives in the Caribbean and Latin America in order to support the growth of a global clean energy economy.
It is in the US’s best interest to cooperate with the Caribbean and Latin America on sustainable clean energy initiatives because the US’s Caribbean and Latin American neighbors are heavily dependent on Venezuelan crude oil imports. The Caribbean and Latin America’s dependency on Venezuelan crude oil imports poses a direct threat to the international energy economy. PetroCaribe, a Venezuelan oil alliance program that was formed by Venezuela’s former president, Hugo Chávez, in 2005, is the primary source of energy for 17 countries in the Caribbean and Central America, including Cuba, Nicaragua, the Dominican Republic, and Jamaica. PetroCaribe provides credit financing for states to buy crude oil and petroleum from Venezuela, and, today, Venezuela exports 45,000 barrels of crude oil per day to PetroCaribe countries.
However, PetroCaribe’s generous loans can be dangerous because borrowing states can incur significant debt. It is estimated that many of PetroCaribe’s members have incurred a debt to Venezuela that is 10% to 20% of their GDP. For example, debt in the Dominican Republic, one of PetroCaribe’s largest recipients, reached $3.8 billion in March 2014. Also, as a result of Caribbean and Latin American states’ dependence on credit-supported crude oil supplies, natural gas, renewables, and other forms of clean energy have been unable to compete.
It is critical that the Caribbean and Latin America reduce their dependency on Venezuelan crude oil and petroleum products because the country is in the middle of an economic crisis. Venezuela’s economic instability has been caused by years of economic mismanagement and irresponsible borrowing, an over-dependence on oil, and strict government price controls that have damaged businesses. Venezuela’s economic mismanagement has hindered the country’s ability to repay its foreign debt—they owe about $120 billion to foreign creditors and, this year, must make a repayment of $7 billion, or it will risk defaulting on its loans. Furthermore, since oil is Venezuela’s main export, it is predicted that plummeting oil prices will cause revenues to fall by 40% this year, contributing to a major part of the burgeoning economic disaster. It is best for the Caribbean and Latin America to stay away from Venezuela’s volatile market because it is predicted that Venezuela’s inflation rate could reach 500% this year and 1,600% by 2017.
Because the US government has notable technical expertise in clean energy development in areas such as electricity integration, off-shore oil spill preparedness, and clean energy distribution, it should provide support to its Caribbean and Latin American neighbors in promoting energy efficiency, resiliency, and access. One way for the US to provide assistance is to use multilateral financial institutions, such as the Inter-American Development Bank (IDB), and US government agencies, such as the State Department and the United States Agency for International Development (USAID), to establish national and regional clean energy partnerships. For example, USAID, the State Department, the US Trade and Development Agency (USTDA), and the Overseas Private Investment Corporation (OPIC) collaborate to support the Clean Energy Finance Facility for the Caribbean and Central America (CEFF-CCA), a financing program that is aimed at private-sector clean energy development and that has provided over $20 million in grants to early-stage energy project development in the Caribbean and Central America. Partnerships that work on innovative clean energy approaches in addition to competitive Caribbean and Latin American private sector and pro-business reforms to boost investment in clean energy infrastructure can contribute to healthy economic growth for the entire region.
With help from multilateral financial institutions and US government agencies, Latin America and the Caribbean can take steps towards diversifying their energy supplies, can migrate away from the use of inefficient, costly, and polluting fuels, and can reduce dependency on corrupt and volatile Venezuelan markets. By helping to support the growth of a clean energy economy in Latin America, the US will contribute to sustainable economic, environmental, and energy security benefits.
Additional Blog Posts
Student Blog Disclaimer
The views expressed on the Student Blog are the author’s opinions and don’t necessarily represent the Penn Wharton Public Policy Initiative’s strategies, recommendations, or opinions.