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EU and LAC Climate Collaboration: Renewable Energy

While Europe has long promoted both energy efficiency and renewable energy, recent European Union (EU) policies reflect an increased ambition regarding its energy transition. Key instruments include the European Climate Law in 2021 ( European Union 2021 ) and subsequent implementing measures—the comprehensive “Fit for 55” package ( European Council 2023 ) and its reinforcement with the RePowerEU plan ( European Union 2022a ) in response to the war in Ukraine and related disruptions to energy supplies. [1] These policies include a clear integration of renewable energy in the context of the European taxonomy on sustainable activities ( European Commission 2023a ). The Latin America and Caribbean (LAC) region has a chance to be a crucial partner for the EU in this transition, thanks to several LAC countries ranking high in terms of solar photovoltaic (PV) ( World Bank 2020 ) and wind electricity potential ( World Bank 2019 ). Solar and wind deployments in the region are consolidating LAC’s position as a world leader in the share of renewables in electricity generation mix: 61 percent in 2021 ( OECD et al. 2022 ). This article is the latest in the authors’ series assessing the potential for climate collaboration between the EU and LAC regions, and follows their analyses of opportunities in e-mobility and the Carbon Border Adjustment Mechanism (CBAM) cooperation. Renewable Energy as a Driver of Growth in the EU Several European policies specifically target an increase in reliance on renewable energy and energy efficiency. They aim to address: The limited availability of fossil energy resources in Europe, stressing the relevance of energy diversification. The need to ensure affordable energy availability. The response to environment-related imperatives, starting with decarbonization, and paired with the reduction of emissions of local air pollutants. [2] At the same time, increased reliance on energy efficiency and renewable energy (in particular, renewable electricity) is seen as a crucial pillar for future growth opportunities in the EU. Reasons include the technological progress that is driving cost reductions for wind electricity, PV, and batteries, as well as risks and costs related to fossil fuel supply. Cuts by OPEC+, in particular during Covid-19 ( IEA 2020 , McNally 2020 ), and the war in Ukraine have added to these concerns. Renewable energy and energy efficiency will create greater capacity in the EU to structurally decouple economic growth from fossil energy demand, as well as greenhouse gas (GHG) and other pollutant emissions. Supportive policies include landmark instruments like: The third major update of the Renewable Energy Directive , first introduced in 2009, which provides the legal framework for the development of renewable energy across all sectors of the EU economy ( European Commission 2023b ) and places a greater focus on electricity, hydrogen, and its derivatives—called “renewable fuels of non-biological origin” (RFNBOs). Alongside this focus is continued interest in advanced biofuels, as long as the primary materials can be sustainably sourced. The Energy Efficiency Directive , first introduced in 2012, which sets rules and obligations for achieving the EU energy efficiency targets, is now enhanced with more stringent revisions ( European Commission 2023c ). [3] The Emissions Trading System ( European Commission 2023d ), first set up in 2005 and recently profoundly revised, aimed at increasing the demand for and market uptake of energy-saving and low-emission technologies, while also leveraging opportunities to raise revenues from carbon- and emission-intensive fossil energy resources. The ongoing revision of the rules that define the functioning of the European electricity market ( European Commission 2023e ), conceived to increase adequate returns of investments on renewable electricity generation, while keeping prices affordable and fostering technologies and business models that minimize the variability of renewable electricity supply. Infrastructure policies, in particular the TEN-E Regulation , first established in 2013 ( European Commission 2023f ), that include EU rules for cross-border energy infrastructure, also important to manage risks from supply variability. [4] LAC’s Leadership in Renewable Energy In the LAC region, emblematic examples of significant wind and solar deployment include projects in Brazil, Chile, and Uruguay ( Ember 2023a ). Hydropower is a significant source of the region’s electricity—accounting for more than 70 percent in Paraguay, Ecuador, Colombia, and Costa Rica, and more than 50 percent in Peru and Brazil ( Ember 2023b ). The high renewable energy endowment of LAC countries offers possibilities for cooperation with the EU, given European interest in mitigating risks associated with strategic energy-related dependencies. According to the recently released “New Agenda for Relations between the EU and Latin America and […]

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Daisie Hobson

Daisie Hobson is a Director at the Reshoring Institute and an engineer with many years of experience in manufacturing and project management.

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