What differences are there between climate action in emerging economies and in developed industrial countries?
I think that there are key differences in three main areas: finance, social issues, and public opinion. Let’s start with the finance. In newly industrialized countries, less money is generally available for investments and subsidies. In addition, the higher interest rates and risk premiums on the capital costs, for example for investments in renewable energies or increased energy efficiency, have a greater impact. Naturally, all of this makes moving to climate-friendly technologies more difficult. For this reason, in emerging economies financing models such as leasing or energy service companies are the most sensible option. Energy service companies rent roof space on commercial properties or private houses, for example, and install photovoltaic systems on them. They find it easier to obtain the necessary capital and they can sell the electricity to the owners of the buildings. However, in the case of private households the business model needs a lot of explanation and, therefore, involves a large amount of work.
What differences are there in terms of social issues?
In newly industrialized countries, there are, of course, more people on low incomes. They spend a large proportion of their earnings on energy, which means that they are hard hit by price rises in this area. In addition, the state must ensure the right conditions for subsidies for renewable energies. Households with a high income are more likely to be able to afford to invest in photovoltaic panels, for example, than poorer people. This leads to the risk that these investments are co-financed by people with lower incomes. To prevent this from happening, the subsidies should only be made available up to a certain income threshold.
What differences are there in public opinion with regard to climate action?
On the basis of my experience in Chile, I think that all sectors of the population are aware of the issue of climate change, but it is the wealthier people who are prepared to take concrete action. The upper middle classes are particularly concerned about it. People on lower incomes are not prepared to give up their modest levels of prosperity. For example, many of them have only just been able to afford their own car. The arguments presented by newly industrialized countries at climate conferences run along similar lines. They want to catch up with the industrial states in economic terms and are not prepared to be held back by measures to combat climate change. However, in recent years their approach has softened slightly. There is one other positive development. When I first arrived in Chile in 2013, the majority of the people knew very little about climate-friendly technologies such as photovoltaics. Only a few years later, many Chileans were talking enthusiastically about renewable energies. I sometimes feel that this kind of enthusiasm is lacking in Germany.
You spent four years in Chile. What type of climate strategy has the country adopted?
In many respects, Chile is a role model for other South American countries, for example in terms of economic development. The Chileans are also pioneers when it comes to helping to prevent climate change. They have ambitious targets that include reaching peak carbon by 2025, phasing out coal-fired power generation completely by 2040 and becoming climate-neutral by 2050. The country has a formal Climate Protection Act and a clear road map for reducing CO2. It is investing heavily in renewable energies: wind power primarily on the coast and in the south of the country and photovoltaics in the north. Chile is also improving its power grids so that it can transport the large quantities of solar energy generated in the Atacama desert to the industrial heartlands around the capital Santiago. The challenges in this respect are very similar to those in Germany, which is why the grid operators in the two countries are working closely together. In addition, Chile is aiming to enter into an energy partnership with Germany for the production of green hydrogen.
What can we in Germany learn from Chile’s climate policy?
I have been particularly impressed by the considerable pragmatism and the efficiency of the political decision-making process. Only a few people work in the energy ministry, but they are all very well educated. They give the technical and economic aspects of their work priority over legal and administrative issues, in contrast to the complicated regulations in Germany, for example for battery storage in combination with generation under the Renewable Energy Act. And if a particular measure proves to be inefficient, people are quick to change things. In other words, the Chileans are much more agile than we are in Germany.
What role could countries like Chile play in general terms in preventing global climate change?
In my view, we should make much more use of the worldwide CO2 emission trading system. In industrial countries like Germany, it is relatively expensive to save a metric ton of carbon dioxide, because the infrastructure is already very efficient. In other countries, much greater savings could be made for every euro spent by investing similar amounts. But instead of addressing the global problem of climate change on a global basis, we are focusing almost exclusively on national considerations. We will not gain anything on a worldwide scale if we shut down highly efficient power plants here while other countries continue making use of energy sources that are extremely harmful to the climate.
Matthias Grandel was appointed Professor of Energy Studies at Biberach University of Applied Sciences in 2017. Between 2013 and 2017, he worked as a consultant to the Chilean energy ministry on behalf of the Gesellschaft für Internationale Zusammenarbeit (GIZ), the German development agency. Before that he held a variety of positions at E.ON and Deutsche Telekom.