Peru

Peru’s progress in advancing climate policy has been slow. According to our calculations, national emissions dropped 6% in 2020 compared to 2019 levels, as a consequence of the pandemic.

However, emissions growth is rapidly picking up and Peru’s emissions level (excl. LULUCF) is projected to reach pre-pandemic levels again in 2030. Since July 2021, President Pedro Castillo’s has changed his government’s ministerial cabinet five times, adding to the feeling of political instability in the country and slowing down policy development overall.

Our analysis shows that Peru could reach its unconditional NDC target under current policies, without the need for additional, more ambitious policies. Peru’s current policies are “Almost sufficient” when compared to their fair-share contribution.

The “Almost sufficient” rating indicates that Peru’s climate policies and action in 2030 are not yet consistent with the 1.5°C temperature limit but could be, with moderate improvements. If all countries were to follow Peru’s approach, warming could be held at—but not well below—2°C. Peru is expected to implement additional policies with its own resources but will also need international support to implement policies that are fully in line with decarbonisation.

Further information on how the CAT rates countries (against modelled domestic pathways and fair share) can be found here.

Peru’s emissions, excluding LULUCF, have increased by 90% from about 54 MtCO₂e in 1990 to 102 MtCO₂e in 2021 (Gütschow et al., 2021). According to our calculations, national emissions experienced a 6% drop in 2020 compared to 2019 levels as a consequence of the pandemic.

However, emissions quickly bounced back in 2021, leading to similar emissions levels as those we had estimated before the pandemic, despite the initial drop. We estimate emissions under current policies will reach 116 MtCO₂e, excl. LULUCF, by 2030 (116% above 1990 levels). Under current policy projections, Peru will overachieve its unconditional 2030 target, but will need to implement further, more ambitious policies in order to reach its conditional target.

In July 2021, Pedro Castillo, a public-school teacher and union leader from rural Peru, assumed the presidency of the country, against all odds. One year on, Castillo faces corruption allegations, a 70% disapproval rating and strong and organised opposition in congress. So far, Castillo has survived two impeachment attempts, changed his cabinet of ministers for a fifth time, and is now dealing with national strikes in response to the increasing costs of fuel, fertiliser and food linked to Russia’s war in Ukraine. Unsurprisingly, the feeling of political instability and low trust in the current government led to very slow progress in advancing climate policy (Giardino, 2022).

In the energy sector, the second largest source of emissions in the country, after LULUCF, the share of renewable energy in electricity generation and total primary energy supply continues to increase, despite continued investments in fossil fuels. Early this year, the government agreed the country’s first green hydrogen project, in the south of the country, with a pilot phase producing up to 55 tonnes of hydrogen per day and requiring 160 MW of renewable capacity (H2 Peru, 2022; Peru Energia, 2022b).

At the same time, in July 2022, the government approved the license contract for the oil extraction in Block 192 (Lote 192), Peru's most important oil asset (Peru Energia, 2022a). According a study from the IEA, new investments in oil and gas are incompatible with reaching net-zero emissions by 2050 (IEA, 2021). These new investments not only risk stranded assets for the country in the future but its at odds with the Climate Change National Strategy currently under development, which is expected to include a net zero target for 2050. Furthermore, this comes after what was labelled as the worst environmental disaster on the country’s coastline in January this year when an underwater oil pipeline owned by Repsol, a Spanish energy company, caused a spill of over 10,000 barrels into the Pacific Ocean. The spill took place north of the capital, Lima, but wind and currents spread it until it covered over 100 km2, polluting three protected marine reserves, several beaches and killing fish, seabirds and marine mammals (Collyns, 2022). The company now faces a $4.5 billion civil lawsuit for environmental damage and harm to locals and consumers (Reuters, 2022).

In the forestry sector, the National Forest Programme reported that 2020 was the year with the highest deforestation rate in the last two decades (Sierra, 2021). The largest share of deforestation is due to illegal activity, but migration back to rural areas as a result of the pandemic also played a role.

Other relevant developments include the approval of the regulation of the framework law on climate change at the end of 2019, which makes Peru’s NDC pledge legally binding (SINIA, 2020). In July 2020, the government established a high-level climate change committee, including members of 13 ministries, which will inform the setting of climate related targets and report to the UNFCCC on progress (Ministry of Environment of Peru, 2020d).

In October 2021, Peru and Switzerland signed a carbon credit agreement where Switzerland will finance emission reduction projects designed to contribute to sustainable development in Peru, while the emissions reductions would count towards the Swiss NDC (Climate Home News, 2020). To ensure environmental integrity, both Peru and Switzerland would have to put in place robust accounting systems so that the reductions are only counted once. Although the main rules and oversight provisions for such transfers under Article 6 of the Paris Agreement were initially agreed at COP26, the details for their implementation still need to be worked out. While no progress has been reported on this deal so far, the agreement has been criticised for posing a risk for Peru’s mitigation in the long-term, as achieving further mitigation reductions in the future will become more difficult (NewClimate Institute, 2021).

Peru was hit particularly hit by the pandemic. The country’s per capita fatality rate was one of the highest in the world and it also led to one of Peru’s worst economic crises, with a reported 11% drop in its GDP in 2020 (IMF, 2022; KfW Development Bank, 2020).

The government estimates that national emissions in 2020 were ~1.6 MtCO₂e lower than in 2019 due to the reduced circulation of vehicles during the lockdown, the lower electricity consumption in the production and commerce sectors and the cancellation of internal flights (Ministry of Environment of Peru, 2020c). Based on our calculations (using IMF growth rate, see assumptions section), we estimate a difference of ~6 MtCO₂e between 2019 and 2020 for the entire energy sector.

In Glasgow, four sectoral initiatives were launched to accelerate climate action on methane, the coal exit, 100% EVs and forests. At most, these initiatives may close the 2030 emissions gap by around 9%—or 2.2 GtCO₂e, though assessing what is new and what is already covered by existing NDC targets is challenging.

For methane, signatories agreed to cut emissions in all sectors by 30% globally over the next decade. The coal exit initiative seeks to transition away from unabated coal power by the 2030s or 2040s and to cease building new coal plants. Signatories of the 100% EVs declaration agreed that 100% of new car and van sales in 2040 should be electric vehicles, 2035 for leading markets, and on forests, leaders agreed “to halt and reverse forest loss and land degradation by 2030”.

NDCs should be updated to include these sectoral initiatives, if they’re not already covered by existing NDC targets. As with all targets, implementation of the necessary policies and measures is critical to ensuring that these sectoral objectives are actually achieved.

• Methane pledge: Peru signed the methane pledge at COP26. According to the latest emissions inventory, methane emissions in Peru represent about 32 MtCO₂e or 15% of total emissions (incl. LULUCF), with 50% coming from agriculture. The energy sector contributes to 28% of the country’s methane emissions, and the waste sector with the remaining 22% (INGEI, 2021). Although the new NDC indicates it covers all gases and sectors, the methane pledge is not explicitly referenced, nor does it include any specific action on methane emissions. Reducing 30% of current methane emissions could roughly translate into an 8 MtCO₂e reduction by 2030 which could potentially lead to lower emissions level than that under the unconditional NDC.
• Forestry: Peru signed the Glasgow Leaders’ Declaration on Forests and Land Use at COP26. However, that same year, the National Forest Programme reported that 2020 saw the highest deforestation rates in the last two decades (see forestry section below for more details). In the past, Peru also endorsed other initiatives linked to reducing deforestation, such as the New York Declaration on Forests (signed in 2014).

In 2019, the energy sector emitted ~34 MtCO₂e (excluding emissions from the transport sector), it represented 34% of total emissions and is the second largest source of emissions in the country, after LULUCF emissions (Gütschow et al., 2021; INGEI, 2021). Policies that aim to mitigate these emissions include the policy for ‘promotion of investment for the generation of electricity from renewable energy’, which builds on the National Strategy on Climate Change and prioritises renewable energy generation as a matter of national interest and public necessity.

In 2019, renewables accounted for 24% of Peru’s total primary energy supply (TPES). Over 50% of this share came from biofuels and waste and just over 40% comes from hydro; wind and solar contribute only 4% to the overall share of renewables (IEA, 2019). Oil and gas made up 73% of the supply in the same year, and increase compared to a 64% share in 2010. In terms of electricity generation, in 2020, 58% of the country’s power came from hydro, a significant increase from a share of 49% in 2015. Solar and wind added up to a 5% contribution, compared to a 1% share in 2015. The other important source of electricity is natural gas with a share of 35% in 2020 (IEA, 2019).

The share of renewables in TPES and in electricity generation has been steadily increasing over the years in response to the four renewable energy auctions held since 2009 (El Comercio, 2017). In January 2022, the government announced it would offer two more auctions on solar and wind, totalling around 2000 MW capacity (Energia Estrategica, 2022).

The government continues to expand oil and gas exploration and extraction. In July 2022, the government approved the license contract for oil extraction in Block 192 (Lote 192), Peru's most important oil asset, located in the middle of the Amazon region, comprising about 500,000 ha. It holds 127 million barrels of proven reserves, producing approximately 10,500 barrels/day (Peru Energia, 2022a).

In March 2022, the vice-Ministry of Electricity signed an agreement to promote the development of green hydrogen in the country. Now the first green hydrogen project is planned for the southern coast of the country, with a pilot phase expected to produce up to 55 tonnes of hydrogen per day, requiring 160 MW of renewable capacity. According to the green hydrogen roadmap, the hydrogen industry has the potential to create up to 94,000 jobs in the country by 2050 (H2 Peru, 2022; Peru Energia, 2022b).

In 2019, the transport sector emitted ~20 MtCO₂e, which represent 19% of Peru’s total national emissions (excl. LULUCF) and 36% of the country’s energy-related emissions; it is the largest contributor to the sector’s emissions (Gütschow et al., 2021; INGEI, 2021). Peru was hit particularly hard by the pandemic, especially in its first year when the government implemented a strict lockdown period which included the complete immobilisation of the population for weeks. The government now estimates that emissions from the transport sector in 2020 were ~0.6 MtCO₂e lower due to the reduced circulation of vehicles during the lockdown (Ministry of Environment of Peru, 2020c).

To help mitigate the rapid increase in transport emissions, Peru has implemented a range of policies over the years, plus some additional developments in the context of the pandemic:

• In 2020, the government approved a decree that sets tax incentives to promote the acquisition of hybrid or electric vehicles by an accelerated depreciation of up to 50% per year (Decreto Legislativo Que Establece Un Régimen Especial de Depreciación y Modifica Plazos de Depreciación, 2020; PLATFORM for REDESIGN, 2020)
• In the same year, the government approved by law the National Programme for Sustainable Urban Transport, which supports the development of cycling infrastructure, referred to as low-emissions and low-risk mode of transport (Decreto Supremo Que Crea El Programa Nacional de Transporte Urbano Sostenible, 2019).
• Full implementation of the second phase of the Lima Metro Network (Line 2) is expected to be completed by 2024 (Andina, 2020)
• COFIGAS Programme, which supports the conversion of vehicles to run on natural gas, which estimates that about 274,000 vehicles were converted to gas since the start of the program until end of 2018 (COFIDE, 2019)
• An emissions standards Decree (updated in 2017) which establishes maximum permissible limits of atmospheric emissions for vehicles and mandates that as of 1 April 2018, vehicle emission standards will be Euro 4/IV, Tier 2 and EPA 2007 (Government of Peru, 2017; UNEP, 2017).

Cities across the country have been rapidly and disorderly growing over the last decade, paying little to no attention to climate-friendly construction guidelines. In the coastal region, which hosts almost 60% of the country’s population, winters have been getting colder and summers warmer over the past decade. The lack of sustainable infrastructure will only become more evident in the near future as the country continues to reach record temperatures every year (Gaillard, 2019).

In 2017, the government introduced energy efficiency labels for household appliances (Supreme Decree no. 009-2017-EM) and in 2015, a Sustainable Construction Code to improve technical criteria for the design and construction of public and private buildings was approved (Supreme Decree no. 015-2015-VIVIENDA).

The land use, land-use change and forestry sector has consistently been a significant source of emissions in Peru over the last 20 years.

Although the government had been reporting lower annual deforestation rates since 2016, this remains a critical problem in Peru. This decreasing deforestation trend reported between 2016 and 2019 was attributed to the work done under the National Forest Conservation Program, which was extended for ten more years and has set the target of protecting 10 million forest hectares by 2030. According to the government, this would reduce current deforestation rates by 30% (Ministry of Environment of Peru, 2020e).

However, in 2020, Peru reached its highest deforestation rate in 20 years. According to the National Forest Programme, the country lost 203,000 hectares of forest in 2020; over 50,000 hectares more than the previous year (Sierra, 2021). The largest share of deforestation is due to illegal activity, although migration back to rural areas as a result of the economic crisis linked to the pandemic also played a role.

At COP26, Peru signed the Glasgow Leaders’ Declaration on Forests and Land Use alongside over 145 other countries. The Declaration on Forests and Land Use aims to stop deforestation, as well as promote the conservation, protection and sustainable management of forests (UN Climate Change Conference 2021, 2021). While many celebrated the announcement, others seemed less optimistic of the potential impacts, while also highlighting the reluctance of some of the Declaration’s donors to take a harder line on the extractive and agricultural industries that have historically been the biggest threats to their societies (Mongabay, 2021).

Forests cover over two thirds of the national territory, Peru hosts about 740,000 square kilometres of forests, including the largest area of the Amazon rainforest after Brazil (World Bank, 2021). In Peru, land use and forestry is the main source of emissions, with a share of almost 53% reported for 2016 (INGEI, 2021). To be aligned with the Paris Agreement, the rate of deforestation worldwide needs to decline 70% by 2030 and 95% by 2050, compared to 2018 levels (State of climate action 2021).