From Fossil Fuels to Low Carbon Energy Transition

Latin America is primed for rapid renewable energy growth. This is not just an expectation of hope given the need for the region and indeed the world to urgently address the red line of climate change and shift towards a net zero energy system in the next few decades. However, Latin America is well-endowed in renewable energy resources, with around a quarter of total primary energy supply from renewables, and rich but heavily dependent on fossil fuels and extractives for energy security and economic development. With the necessity to address climate change, the region needs to diversify its energy mix to promote low carbon options. This chapter introduces Latin America in all its rich diversity before exploring the complex contextual drivers that have led the region’s initiatives to develop and deploy renewable energy to reach a crossroads: how to decarbonise in a way that addresses the drivers of energy security, economic competitiveness and environmental sustainability?

This chapter intends to fill a gap in the literature about what energy law involves and reflects on its different stages in Latin America. Since 2010, energy law in Latin America has been transformed to become a sustainable, unified and global right.

The introduction of specific regulation to incentivize the development of new power generation technologies is a sensible regulatory decision. In particular, policymakers should not only seek to define a well-structured set of rules, but also need to define clear objectives in order to assess the success of the policy. Additionally, policymakers should also revise what would the impact of the rules in the current situation of the power industry be and verify if these impacts would be offset by the benefits. In the case of the renewable energy regulation introduced in Peru in 2010, none of these has been made. In particular, the costs associated to the regulation cannot be properly compared to the benefits sought and, more harmfully, the interaction of these rules with the regulation in place has created unintended consequences which have been mostly endured by the smallest of the power consumers. Moreover, and unfortunately, the policymakers have not learnt from the past experiences and are trying to maintain a set of rules that clearly do not deliver sound policy.

Within the context of an open economy with a liberalised electricity market, Chile is searching for a regulatory framework and long-term energy policies capable to bring security of energy supply. Therefore, it has implemented a series of reforms and regulations in the field of energy policy capable of bringing long-term stability to reach foreign investment and strategic cooperation that would allow, in the long term, to provide through the implementation of technologies related to Non-Conventional Renewable Energy (NCRE), a native and low-cost source of fuel to achieve energy independence and Security of Energy Supply. So far the efforts have been fruitful and the country has already managed to meet its self-imposed goal of generating 20% of its electricity with NCRE by 2025, while keeping in mind that these advances are only the first part of the road ahead.

The Venezuelan hydrocarbons industry has been affected, during the last two decades, by multiple political, social, economic, technical, legal and even dogmatic factors which have compromised its performance and productiveness, including the decline of its level of crude-oil production from 3.1 MMBD to just above 480 MBD. One of the Venezuelan petroleum industry’s main legal problems is the excessive control and regulation by the State, which has not only been used—in a dogmatic manner—as an instrument of political and social manipulation, but also as a tool to influence investments which are considered contrary to the interests of the ‘ideological’ plans of the government of the day. In the present paper, the author identifies and reflects on how the excessive State’s control and regulation and the lack of professional and opportune decision-making in the Venezuelan hydrocarbons industry have affected the maintenance, the stabilisation and the development of said sector and, therefore, the legal certainty and stability requested by the investors. The author concludes that the petroleum history should use the learned lessons from the past and apply them to avoid repeating the political, social, economic, technical, legal and dogmatic consequences.

Mexico is one of the largest oil producers in Latin American. The importance and relevance for national development are crucial to understanding the Mexican ideology and ideocracy linked with the oil and gas sector. Even though oil and gas have been associated with progress, climate change and the current circumstance should create a new paradigm in which the centre of public policies is focused on the environment, sustainability and a better future for subsequent generations. If the Mexican Government consider them as the centre of public politics, according to international trends, the energy transitions shall play a key role. PEMEX as the National Oil Company and the major player in the Mexican oil and gas industry must consider the energy transition as a part of its modernization process. Unfortunately, PEMEX is not considering it as part of its strategic plans, despite other major oil companies doing so and governments and wider society claiming the need to do so with more impetus every day. The aim of this chapter is to analyse, from a historical to a practical perspective, the role of the Mexican NOC in the energy transition and the challenges that the government may face if the energy transition plays a key role in the following years.

Argentina has a role to play in the energy transition. Its gas, solar, wind, hydrogen and lithium resources can be exported to contribute with the net zero economy. This chapter studies the past, present and future of the Argentine energy mix and energy policy, with a focus on the opportunities and challenges that Argentina will face during the following decades.

The purpose of this chapter is to address the important role of the mining industry within the on-going energy transition, especially considering that said transition toward a low-carbon economy is expected to be much more mineral intensive than previous transitions. There is a myriad of aspects that could be explored on this premise; however, this chapter will mainly focus on the phenomenon of the lithium sector in Argentina (one of the Lithium Triangle’s states). Certain minerals have acquired momentum under the energy transition and certainly lithium is one of them. This chapter aims to provide an overview of the current Argentine legal and regulatory framework, aiming to discuss the opportunities and challenges ahead to develop lithium projects in Argentina.

Nowadays, the world recognises the energy and mining sectors as essential activities for the economy and providers of some not inconsequential benefits such as potential economic growth, employment, local income and development, and private investment. In that regard, Peru is a country of ancient mining traditions, which has been preserved and cultivated by leading international companies that have been expanding the country’s mining activities. At the global and Latin American level, Peru is among the main producers of various metals (gold, silver, copper, lead, zinc, iron, tin, molybdenum, and tellurium, among others). This scenario reflects not only the abundance of resources and production capacity of the Peruvian mining industry, but also the stability of Peru’s economic policies, turning Peru into one of the key destinations for foreign investors on mining projects. However, the energy sector is simultaneously going through a transition stage to more renewable energies, and such energy transition is only achievable via strategic, coherent legislation that facilitates responsible investment and exploitation of resources. Consequently, this chapter’s focus is to discuss energy policy with emphasis on new regulatory developments in Peru, to give the reader a broad panorama of how the mining sector and the energy transition are regulated in country.

The purpose of this chapter is to carry out an analysis of social licensing to operate and social justice in energy transition according to Brazilian legislation and practices. The main objective of this chapter is to describe how the concept of social justice, consultation, and benefits for the community address the needs of the people to allow the energy transition and the concerns that have generated interest in social and environmental public policies inserted into the national oil and gas sector. Using the deductive method and exploratory research, this chapter seeks to introduce the reader to the topic via the Brazilian energy sector as the contextual background. The focus of the first part of the work, that of the social licensing to operate, shows the social environmental context and the challenges involved. Therefore, this chapter takes care to present the importance of social justice in the Brazilian energy sector, including socio-environmental protection, mitigation measures, and the public consultations in accordance with Brazilian law. In the development of the case, possible scenarios are brought to light and the lessons to be learned by Brazil.

In its first part, this chapter provides us certain reflections related to the theory of the Social License to Operate (SLO), its characteristics and definitions; the aforementioned will serve as a frame of reference for the study of the Colombian case and the use of this theory by different stakeholders. Subsequently, the document will create a relation between the SLO and some circumstances that involve public policy issues, with respect to the mining and energy sector. Reference will be made within the chapter to three issues that are closely related to the SLO and its use by companies in the country, which are: (i) the participation of the territorial local authorities in the decisions of the energy sector, (ii) land restitution public policy and (iii) the application of the prior consultation. Finally, the chapter leads us to reflect on the use that has been given to this theory in the Colombian framework and identifies some challenges that will have to be overcome in the coming years.

The energy transition presents a series of legal and business risks that will probably be addressed through arbitration. It is essential to understand the development of arbitration clauses, arbitrable risks and precedents, and the identification of potential cases that can come up in the development of the energy transition in the region. This chapter looks at these issues using renewable energy resource regulation in Peru through an analysis of the regime based on arbitration awards in order to seek ways to optimize the deployment of renewables and thus the energy transition not just for the companies involved and the State, but also for citizens who ultimately will pay for it.

By virtue of the environmental commitments in terms of reducing greenhouse gas emissions throughout the world, there is a race against time to achieve the desired energy transition to produce and utilise cleaner energies. This race must be organised, with a clear schedule both for each state and for each investor who intends to invest in the energy transition, so that, throughout the lifecycle and performance of long-term energy projects, no surprises will arise that make investors feel disappointed in their economic expectations. Further, states must not make decisions to meet the commitments to reduce emissions for which they may be subsequently sued.

Can the energy transformation change Latin America? This is the underlying issue that one keeps wondering about while reading the contributions in ‘From Fossil Fuels to Low Carbon Energy Transition: New Regulatory Trends in Latin America’. In this Epilogue, I discuss the contributions to this book around three themes: resource abundance, renewable energy investment and energy justice.