Current Policy Projections
Between 1990 and 2016, Chile’s emissions increased by 115% from 52 MtCO2e to 112 MtCO2e, excluding LULUCF. Looking at Chile’s current policies and in response to COVID-19, we estimate that emissions will decrease in 2020 to between 96-103 MtCO2e per year, excluding LULUCF, which represents a 85-98% increase above 1990 levels, and 5-12% increase above 2010 levels. Thereafter, we project that emissions will ramp up again as the economy recovers, climbing to 108-122 MtCO2e in 2030 (108-135% above 1990 levels and 18-33% above 2010 levels) excluding LULUCF.
Our current policy emissions pathway includes the Unconventional Renewable Energy Law (Law 20.257/2008), the carbon tax (Law 20.780/2014), the results of electricity supply tenders as of December 2017, emissions reductions from the retirement of the first eight coal-fired power plants announced in 2019 and the Electromobility Strategy, which sets out an action plan to achieve electrification of a 40% share of the private vehicle fleet—and 100% of public urban transport—by 2050.
Under currently implemented policies, Chile will overachieve its 2020 pledge. Our analysis also suggests that Chile will need to implement additional policies to meet its unconditional and conditional NDC targets in 2030. If Chile goes ahead with the implementation of planned policies such the 2050 Energy Strategy, the coal phase-out and the electromobility strategy, it could reach (and perhaps overachieve) its new NDC target for 2030.
Chile’s overarching Climate Action Plan 2017–2022 is the instrument articulating climate change policy for all sectors (Ministerio del Medio Ambiente de Chile, 2017). It guides climate mitigation actions and intends to advance mitigation measures by maintaining the national GHG inventory, developing policy, implementing MRV systems, and fulfilling Chile’s international commitments (Government of Chile, 2016a).
Chile is currently formulating a Climate Change Framework Law. The objective of this new law is to strengthen legal and institutional bases for implementing climate change mitigation and adaptation targets. Public debates (“Diálogos Ciudadanos”) have been held in several cities between December and mid-January 2019. The preliminary draft bill, released for public consultation between June and July 2019, includes reference to the goal of GHG emissions neutrality by 2050 and financing measures and economic instruments including the creation of a National Finance Strategy Against Climate Change (Gobierno de Chile, 2019a). If approved, this bill will enshrine Chile’s 2050 GHG emissions neutrality target into legislation.
Chile’s 2050 Energy Strategy from 2017 sets long-term targets for renewable energy generation. These targets include 60% electricity production from renewable energy by 2035 and 70% by 2050 (Ministerio de Energía, 2015). To achieve the Paris Agreement’s long-term temperature goal, the global power sector needs to rapidly transition to being carbon-free by around 2050 (Climate Action Tracker, 2016).
The Energy Route 2018–2022 (Ministerio de Energía, 2018b), supports the 2050 Energy Strategy’s targets and establishes commitments for further emissions reductions. These commitments include quadrupling small distributed renewable energy capacity by 2022, establishing a legal framework for energy efficiency in the industry, mining, transport, and buildings sector, implementing a ten-fold increase of current EVs share, regulating solid biofuels (i.e. wood), starting the process of decarbonising the energy matrix and establishing a concrete phase-out plan for coal-fired power plants.
Chile has already started implementing some of these commitments, but it is giving mixed signals. After more than a year of planning, in June 2019, Chile announced its plans to completely phase-out coal by 2040 and aim towards carbon-neutrality by 2050 (Ministerio de Energía, 2019). Around the same time, a new 375 MW coal-fired power plant in Mejillones (equivalent to about 1.8 TWh per year) started operations and two of its eight oldest ones (equivalent to 170 MW or 0.6 TWh per year) were closed (Electricidad, 2016; Engie, 2019; Tomás Gonzalez, 2019). These developments are already considered in our current and planned policy projections.
The phase-out plan is divided into two stages. First, by 2024, Chile will close eight of the oldest coal-fired power plants—equivalent to a fifth of its current coal electricity capacity and to nearly 5 MtCO2e/yr of yearly emissions by 2024 if the demand is replaced by renewable energy sources. If electricity demand is replaced by gas-fired generation, emissions reductions by 2024 will only be 2 MtCO2e/yr. Second, Chile will phase out the remaining 20 plants, but has not yet specified a detailed schedule. Phasing out all coal-fired power plants at the latest by 2032 is an action compatible with the global sectoral benchmark for electricity sector under a scenario in line with the Paris Agreement for the Latin America region (Yanguas Parra et al., 2019), this is eight years ahead of Chile’s coal phase-out plan.
We have estimated that closing all 29 coal-fired power plants in Chile by 2040 – assuming lineal retirement between 2024 and 2040 – could lead to a cumulative emissions reduction potential between 30 MtCO2e/yr to 36 MtCO2e/yr by 2030 depending on which technologies substitute electricity generation (for more details see Assumption section). In comparison, a study from the Chilean consultancy Valgesta Energia, estimated a cumulative emissions reduction potential of up to 20 MtCO2e by 2030, equivalent to about 1.8 MtCO2e/yr between 2019 and 2030 (Valgesta Energía, 2018).
Chile’s most recent energy planning documents, the Mitigation Plan for the Energy Sector (referred to as Mitigation Plan) and the Energy Sector’s Long Term Strategy, already assume a decreasing share of coal electricity generation towards 2050 (Ministerio de Energía, 2017b, 2017c). Chile’s Mitigation Plan includes three different scenarios for the energy sector: current policies, 2050 Energy Strategy and additional effort.
We have assessed the first two in our analysis as current and planned policies respectively, deducting estimations from policies coming after its publication. The main difference between these two scenarios lies in the assumptions of the long-term share of renewable energy and the coal phase-out.
In the current policy scenario, the renewable electricity share increases towards 2020 to reach around 59% and then stalls and we consider only the first stage of the coal phase-out plan: closing of the first eight plants by 2024. The planned policy scenario considers a growing renewable energy generation share towards 2050, where it reaches 70% and the assumption of linear retirement of coal power plants by 2040. This difference is translated to higher GHG emissions in the current policy scenario, as electricity generation from gas is ramped up to satisfy growing demand. In a Paris Agreement-compatible pathway, however, (unabated) gas should play only a minor role in electricity generation and phase out completely by 2050 (Climate Action Tracker, 2017).
Both the current policy and 2050 Energy Strategy scenarios from the Mitigation Plan include substantial generation from hydro — which accounted for 25% of generation in 2016 (IEA, 2017), and is assumed to increase to 32% and 39% respectively in 2030. According to the 2050 Energy Strategy scenario from the Mitigation Plan, renewable energy generation goals in 2035 and 2050 are only to be met with a substantial contribution of hydro power generation. It is not clear how much of this share is large hydro. The construction of large hydro projects in Chile is highly controversial, largely because of significant adverse environmental and social impacts. In 2014, Chile’s government overturned environmental permits for HidroAysén, a massive hydroelectric project in Patagonia, after a seven year campaign against it - the largest environmental campaign in Chile’s history (NRDC, 2016).
Making progress towards the non-conventional renewables goal, in 2018, 17.4 % of electricity generation was from non-conventional renewable sources, and 57% of the generation capacity under construction was non-conventional renewable energy1 (NCRE) (Comisión Nacional de Energía and Ministerio de Energía Chile, 2019).
As a measure to foster decentralised renewable energy deployment, in early 2018, Chile reformed its Distributed Generation Law (also referred to as the “Net Billing” Law) (Law 20.571). The reform included a tripling of installed capacity threshold from 100 kW to 300 kW, which aims to support and promote larger projects of self-consumption of electricity (Ministerio de Energía, 2018a).
As in the original law, electricity surplus can be fed into the grid to obtain discounts in the owner’s electricity bill. The reform establishes, that if an owner has more than one establishment, these discounts are also applicable for those electricity bills, otherwise, discounts from surplus can be accumulated. This policy is neither quantified in the current policy scenario nor the plan policy scenario due to lack of available data.
Additionally, Chile has implemented a carbon tax of 5 USD/tCO2 for stationary sources (turbines or boilers above 50 MWth), which came into effect in 2017. Payments for 2017 began in April 2018 and accounted for more than 190 million USD (El Mercurio, 2018).
According to IRENA (2019), renewable energy costs in Chile have continuously declined over recent years. Cost reductions have recently led to a higher implementation of renewable energy. The cost of renewable energy technologies in Chile is expected to keep declining (Ministerio de Energía, 2017c).
Energy efficiency is also part of the government’s Energy Agenda. A new Energy Efficiency bill was approved by the Senate in April 2019. It aims to foster energy efficiency and thereby reduce final energy consumption by 7% by 2035. This bill provides for the development of National Energy Efficiency Plans by the Ministry of Energy every five years and encompasses several sectors such as buildings, transportation and industry. The bill has not yet been published as law in the Official Journal. If this new law were to be implemented as proposed in the current draft bill, it could lead to an estimated CO2 emissions reduction of 4.6 MtCO2 by 2030 and of 6.8 MtCO2 by 2035 (Ministerio de Energía de Chile, 2019a).
From 2010 to 2013, the government implemented several policies on appliance labelling, energy efficiency, fuel efficiency standards and electricity infrastructure. Policies that stands out are the Energy Efficiency Seal (2013) and Energy Efficiency Action Plan 2012–2020 (Ministerio de Energía, 2013). The first one provides recognition form the Chilean Ministry of Energy to companies demonstrating a high commitment in terms of energy efficiency. In 2017, 22 companies received this recognition for more than 590 GWh per year saved through energy efficiency projects (Revista Electricidad, 2018). The second one aims to set a suitable legal framework for energy efficiency implementation across different sectors towards a 15% energy efficiency improvement by 2025.
1 | Chile defines non-conventional renewable energy sources as wind, solar, geothermal, biomass, tidal, and hydro up to 20MW.
Chile is the world’s leading copper exporter, and the mining and industry sector is Chile’s largest consumer of both total final energy (39% in 2017) and electricity (Comisión Nacional de Energía and Ministerio de Energía Chile, 2019).
The main agreement between the government and the mining industry regarding energy efficiency is the “Cooperation Agreement”, under which mining companies should look for ways to use energy more efficiently, and the Ministry of Energy should support them (Government of Chile, 2016b).
The new energy efficiency bill approved by the Senate in April 2019 will foster emissions reductions in “energy intensive” industries (i.e. with energy consumption higher than 418 TJ per year) that could be legally binding (El Mostrador, 2019). Policies within this sector would be important for Chile to reduce its emissions (Ministerio de Energía, 2017b).
Under current policies, energy emissions from the mining and industry sector are projected to reach 21.4 MtCO2e per year in 2030, 24% increase compared to emissions from 2015, while under planned policies (2050 Energy Strategy), the projected emissions are 18.9 MtCO2e per year in 2030 (Ministerio de Energía, 2017b).
In 2017, the transport sector accounted for 36% of total final energy consumption in Chile, second to industry (Comisión Nacional de Energía and Ministerio de Energía Chile, 2019). In 2015, the government introduced the “Green Tax” on motorised vehicles, which applies to new vehicles, and is intended to incentivise more efficient vehicles. Payments of this tax for 2017 accounted for 107 million USD (El Mercurio, 2018). Chile also has a vehicle labelling programme and has set CO2 fleet performance standards – that are in line with those of the US, EU and Japan – for new imported vehicles (Government of Chile, 2016a; Ministerio de Energía, 2017b).
In December 2017, Chile published its electromobility strategy, which sets out a goal and action plan towards achieving a 40% share of electric passenger vehicles as well as a 100% electrified public transport by 2050 (Ministerio de Energía, 2017a). We estimate that the implementation of this strategy could lead to an emissions reduction between 2.1 to 4.6 MtCO2e/yr by 2030. This is included in our planned policies scenario. The action plan is divided into strategic axes, which include development of policy and regulation, prioritising pubic transport, and supporting the initial uptake of electric mobility.
Chile has already begun implementing actions towards achieving these targets. By the end of April 2018, the Chilean government had funded 60 electric taxis, which arrived in Santiago in October 2018 (Ministerio de Transportes y Telecomunicaciones, 2018). The Valparaíso Region will have a second fleet of 120 “electrotaxis” operating by the end of 2019 (Ministry of Energy Chile, 2019).
Two fleets of 100 electric buses each – equivalent to 3% of Santiago’s bus fleet – were also incorporated to the Transantiago public transport system between December 2018 and January 2019, making Chile the country with the largest electric bus fleet in the Latin America region and the second largest in the world (Nuñez, 2017; Labarca, 2019). These buses are incorporated in a 10 km long electric corridor in Chile’s capital city (La Tercera, 2018). In January 2019, the Chilean government also launched its first interurban electric bus, which operates between Santiago and Rancagua .
Chile’s electromobility target is a step in the right direction, but additional policies, especially targeting private car ownership, are needed to meet global decarbonisation benchmarks, which foresee having only zero emission cars on the road by 2050 to be compatible with limiting temperature to 1.5°C (Climate Action Tracker, 2016). For the development of an integral policy making framework for transport, it is of great importance to consider social and economic consequences of the different policy options. The total emissions reduction potential of transport electrification depends significantly upon the decarbonisation of the electricity supply used to charge vehicles.
The buildings sector was the third largest consumer of final energy in 2017, accounting for 22% of consumption (Comisión Nacional de Energía and Ministerio de Energía Chile, 2019). Chile pursues a National Strategy for Sustainable Buildings, which includes energy, water, waste and health goals. The government also incentivises energy efficiency in public buildings (Government of Chile, 2016a). Under the law no. 20.571/2016, Chile aims to incentivise the use of solar heating through tax cuts for developers who implement this technology (Ministerio de Energía, 2017b). A draft law currently debated in the Senate aims to promote an energy efficiency rating system for buildings – “Calificación Energética de Viviendas (CEV, in Spanish)”. This rating issued by the Ministry of Housing and Urbanism will be required for new residential buildings to be commercialised.
Energy emissions from the buildings sector are projected to reach 9.5 MtCO2e per year in 2030 under current policies, a 61% increase compared to emissions in 2015, which will be mainly driven by increased energy demand for residential heating (Ministerio de Energía, 2017b). Under planned policies scenario emissions are projected to be 8.4 MtCO2e.
The LULUCF sector has been a major sink in Chile, with GHG net emissions ranging from -35 to -72 MtCO2e from 1990 to 2016. Over the same period, carbon removals from forestry increased by 30.8 %. According to Chile’s Third Biennial Report, these removals decreased by 8.9 % between 2013 to 2016.
Chile’s 2020 NDC references the National Strategy for Climate Change and Vegetation Resources (ENCCRV), established since 2013 by the Ministry of Agriculture (MINAGRI), through the National Forest Corporation (CONAF), as one of the main tools in reaching the different targets on mitigation related to LULUCF, along with regulations and instruments granting incentives for forest owners to preserve or create new forests. Further, the NDC states that its afforestation target should be in line with Law Nº20.283 on Native Forest Recovery and Forest Promotion, under which afforestation is undertaken only in lands without vegetation and does not allow for substitution of native forests (Government of Chile, 2020).