Renowned Latin American Economists Debate Development Versus Green Growth

October 04, 2021

As the world faces the daunting challenge of limiting global warming, Latin America is in a unique position to leverage its human and natural resources to drive economic development. Should the region focus on decreasing its emissions or on driving green energy production? What climate policies can Latin America adopt to ensure sustained, equitable economic growth?

Such were the issues discussed during the webinar “Climate Policies for Economic Development,” featuring panelists Mauricio Cárdenas, Visiting Senior Research Scholar at the Center on Global Energy Policy (CGEP) at Columbia's School of Public & International Affairs (SIPA), and Ricardo Hausmann, Director of the Growth Lab and Professor of the Practice of International Political Economy at Harvard University Kennedy School of Government. The event, moderated by Laurie Fitzmaurice, CGEP Executive Director, was co-sponsored by the Santiago and Rio Centers, CGEP, Harvard’s David Rockefeller Center for Latin American Studies (DRCLAS), and Columbia’s Institute of Latin American Studies (ILAS).

During the webinar, Cárdenas spoke of his work done in conjunction with the World Resources Institute (WRI) in co-chairing a taskforce by the Carbon Pricing Leadership Initiative, which brings together private sector players, governments, and NGOs. “Carbon pricing is essential in net-zero goals [but] there is a scarcity of strategies and actual tools to make sure this happens. Carbon pricing is one element in the toolbox, and it’s not as widely used as you may think, by about 60 countries in the world, but the amount of greenhouse gas emissions covered by those prices is relatively low,” he said.

He added that carbon prices in Latin America are in the early stages, with low coverage and low taxes. “There’s still lots to do, not just for reduction in carbon emissions but for investment in innovation to find new technologies that will allow countries to reduce emissions and substitute fossil fuels,” Cárdenas said.

In turn, Hausmann noted that heeding climate issues may mean a constraint on growth and “it’s hard to grow when you’re doing less of something. That accentuates the tension between growth or prosperity and sustainability.” He said that renewable energy is less transportable than fossil fuels, but in today’s energetically flat world, energy poor countries such as South Korea can specialize in producing energy intensive products like steel.

However, if the world is to decarbonize, renewable energies need to be used, which are not transportable. “So the world won’t want to make steel in South Korea, it will be in places that are richer in renewable energy sources. That will mean reallocation of economic activity. The countries have to figure out a strategy in how to play a role in that reallocation of global economic activity if they are rich in renewable resources,” he said. “So it’s not thinking about how each country will reduce their own emissions, we need a strategy that will reduce global emissions… by moving economic activity to countries that are rich in green energies” which could play into Latin America’s favor.

Both panelists noted that due to the economic implications, economists and public officials that have traditionally been working more in the areas of planning and finance, have to now begin thinking about the issues of climate and development.