Is it business as usual for Chile, or is it time for green business?

By Marcelo Mena, MS, PhD and Alex Godoy-Faúndez, Dr. Centro de Investigación para la Sustentabilidad, Facultad de Ecología y Recursos Naturales, Universidad Andrés Bello

“Chile is in the midst of an energy crisis.” This is a phrase that is used to start an entrenched discussion on what our energy policy should be. This is a phrase that is used around the world to justify nearsighted energy and environmental policies, which lead us to pawn off our natural treasures in search for the last source of cheap energy. It applies in to the United States, with their oil production in the Artic National Wildlife Refuge. It applies in to Chile’s controversial Hidroaysen Project which would deliver over 2000 MW of hydroelectric power but at large ecological and landscape costs. The underlying justification of these projects is a largely ideological assumption that those environmental considerations hinder economic development. Chile, under it’s largely deregulated and market oriented economy, has established that environmental regulations must be efficient and that efficiency must be proven by a cost-benefit analysis of implementing the regulation. Thus, regulations that do not have economic and social benefits are not approved.

The Chilean scientific community has been a good partner for environmental regulators in developing methodologies for policy decisions. Every State Implementation Plan (SIP) undergoes analysis the costs to reduce emissions, which turn estimates the number of people who will not be exposed to pollution due to these reductions. This is how Santiago, which has a soaring PM2.5 (fine particles atmospheric  also called soot, which are tiny subdivisions of solid or liquid matter suspended in air) yearly average of 69ug/m3, now has reached an all time low of 26ug/m3 (still high, but among the largest reductions in PM around the world). This was achieved by staple air quality measures: reducing vehicular emissions by creating incentives for catalytic converter cars, reducing public transit emissions by overhauling old pollution spewing buses, supporting Subway transportation, banning open chimneys and dirty fuels in industries. These measures have reduced PM2.5 pollution to roughly 70% while doubling the Chilean economy and the public and private transport. New regulations, such as our ambitious PM2.5 reduction plans, have been supported by these tools. In this last case, reducing PM2.5 pollution from current levels to World Health Organization recommendations by 2032 will prevent roughly 5000 yearly premature deaths (more than all traffic related deaths), and a whopping 12.000.000 days of work lost due to pollution. Benefits outweigh costs by a factor of 3.  A country that wants to grow at 6% per year cannot afford to lose productivity of such magnitude.

Chile is a South American regional economic leader mainly considered as a mining country due to continuous investments in the mining industry. Currently, Chile is the main producer of copper in the world representing a 40% of our commercial balance and 9% of our Gross National Product thanks to CODELCO (Copper Corporation, a governmental industry) and the continuous private investments inside the mining industry (i.e. BHP-Billiton; Minera Escondida, 2007). Since the early 1900’s, continuous excavations have led to diverse environmental impacts, such as dust production, noise emission by heavy machinery, production of acid mine drainage, accumulation of hazardous wastes etc. These activities and this type of exploitation between open pit mine and underground mine, have disturbed land and ecosystems through habitat modifications. Throughout Chilean history, the relationship between the mining industry, society and the environment has been complex due to these continuous environmental impacts arising from abandoned mine sites and also due to confrontations ranging from the physical to cultural disturbances. Nevertheless, the general perception is that the Chilean population has ultimately accepted the mining industry as a very important development engine. On the other hand, the mining industries are the main industrial sector of energy consumption.

Now, the Chilean government is looking at regulating power plants. Indeed, production is projected to increase by 300% due to growing demand from the mining sector. Chile’s fascinating power dispatch strategy (which has a private center that instructs power plants to inject energy based on variable costs) represents the free market in its purest form: that is, no pollution abatement incorporated for coal power plants, a strategy preferred over cleaner options in the dispatch pecking order. This model has no awareness of the underlying relationships between emissions of coal-fired plants and competitiveness and of the fact that our products consume energy with a high carbon footprint including copper.

Considering the complexity and the relevance of this sector, the Chilean Environmental Commission (CONAMA– now The Ministry of Environment) assembled an interdisciplinary team that estimated pollution abatement costs for every single current and projected power plant, as well as emission reduction benefits by evaluating reduced exposure through a dispersion model. Later, the team estimated the impact of the regulation in variable costs, and ultimately in end consumer energy costs using the same economic model energy regulators that apply for energy tariff analysis. The results were encouraging for the environment. Meeting strict emissions standards would be at a cost less than half the health and social benefits, and energy costs would increase by a maximum of 0.1%.  Of course, the regulated sector is opposed to the emissions standard, and the Ministry of Energy is proposing grandfathering old power plants (the USEPA’s lack of leadership in regulating old power plants during the Bush years has yet another unintended consequence), which would leave roughly 70% of the emissions unregulated.

The Chilean populace has not been indifferent as there has been an explosive growth in interest concerning the environment. In a recent poll by UNAB, it was shown that in 1990 around 50% of Chileans were willing to sacrifice economic growth and jobs if it meant environmental progress. Today, these numbers hover around 70%.  Also, 70% of Chileans are willing to pay more for clean energy (which the government may consider not to be important since 70% of the energy is used by the industrial and mining sector). Recently, the Chilean government approved a large power plant (emitting roughly the same emissions as the whole city of Santiago) that met all Chilean air quality standards. The problem was that it is upwind of one of Chile’s two marine nature reserves, and the home of 80% of the worlds Humboldt penguins. Public outcry was catalyzed by a smart viral campaign by www.chaopescao.cl, as well as the participation of local celebrities and a spread of protests organized by twitter, caused President Piñera (who in a campaign had directly spoken against this powerplant, possibly inspired by a 2007 visit from Al Gore) to intervene in a complex and yet unknown outcome. He called Suez Energy asking them to withdraw the project and look for a new spot for the power plant (http://www.breakbulk.com/project-cargo-heavy-lift/approved-barrancones-plant-must-find-new-site). In the end, Chilean’s free market and economic based strategies are justifying more regulations and voters are increasingly concerned by global and local environmental challenges. Indeed, this is a perfect opportunity for Chile to take steps towards environmental sustainability, skipping missteps from by developed countries. And the current administration can capitalize on these right steps, embracing an environmental movement that transcends politics.  Stay tuned, as things will get interesting.

Marcelo Mena, MS, PhD and Alex Godoy-Faúndez, Dr. Centro de Investigación para la Sustentabilidad Facultad de Ecología y Recursos Naturales Universidad Andrés Bello

Leave a Reply