Argentina lawmaker says long-term energy plan vital, warns of energy transition risks

Bnamericas Published: Thursday, August 26, 2021

In terms of energy policy, Argentina is heading in the opposite direction to the rest of the world and risks suffering associated economic fallout further down the road, a federal lawmaker said.

Argentina’s government is preparing a bill designed to provide incentives, via the likes of fiscal benefits, for greater hydrocarbons production, with a key focus expected to be ramping up exports of shale oil from the country’s massive Vaca Muerta play.

“We’re talking about how to subsidize production of the same energy matrix, we’re considering maintaining subsidies with the same criteria we’ve been using for more than 40 years,” said Jimena Latorre during a seminar hosted by local think tank the General Mosconi energy institute.

Against this backdrop, investment in renewable energy plants has flagged amid economic turbulence and policy uncertainty. Despite its abundant wind and solar resources, Argentina is also seen lagging its neighbors in the green hydrogen promotion stakes.

Latorre, an opposition lawmaker who represents oil and farming province Mendoza, said Argentina must balance the areas of sustainability, climate change and energy. She added that congress must spearhead the creation of a long-term national energy plan that transcends political cycles. This, is turn, should be used in the construction of an economic plan, the seminar was told.

Latorre said that, globally, available financing will be targeted at projects that change energy matrices and that export competitiveness will be linked to associated carbon emissions in the production process.

“We’re going against the flow, and that worries me because we’re not going to be able to have economic progress if we’re not inserted in this world,” said Latorre, who is also an energy-focused lawyer and former chair of Mendoza province electricity regulator Epre.

“It will therefore be very difficult to trade with countries that do make an effort to direct resources to convert their matrices. They’re going to erect tariff barriers and introduce import restrictions ... countries that don’t comply with the same standards … are going to be left out of this system.” 

Last month the European Commission proposed phasing in the world’s first carbon border levy from 2026, targeting imports of carbon-intensive steel, aluminum, cement, fertilizers and electricity.

In a preliminary phase, from 2023 to 2025 importers would be required to monitor and report their emissions.

Argentina’s government this week said that the economy and environment ministries would form a permanent working group whose key objective is to devise strategic energy policy. Economy minister Martín Guzmán indicated that the likelihood of carbon taxes on production in future years needed addressing to ensure export competitiveness.

Total installed generation capacity in Argentina stands at around 42.5GW. Gas-fired plants account for about half. Hydroelectric, followed by nuclear, non-conventional renewable energy and diesel plants, account for the rest. 

Thermoelectric, renewables and nuclear generation have been trending up amid a deterioration in hydrological conditions that has cut output from hydroelectric power stations. Neighbor Brazil, suffering heavily on account of its hydropower-dominated grid, has had to boost output from the likes of fuel oil-fired plants.

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