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Obama: Energy in the Americas?

Will President Barack Obama's idea for an Energy Partnership for the Americas be implemented? Four experts share their insights.

BY LATIN AMERICA ADVISOR
Inter-American Dialogue
 

During his campaign, U.S. President Barack Obama promised an "Energy Partnership for the Americas" to create sustainable growth and promote renewable energy in the hemisphere. The upcoming Summit of the Americas, which will be one of the new President's first opportunities to engage hemispheric leaders, also calls upon countries to develop an energy cooperation strategy before 2011. What would these partnerships look like, and what is the likelihood they will be implemented? Where will they overlap? Which areas of the energy sector are most ripe for collaboration, and what factors might derail plans for increased energy cooperation?

Paul Isbell, Visiting Senior Fellow at the Inter-American Dialogue and Director of the Energy Program at Elcano Royal Institute: Obama's proposed 'Energy Partnership for the Americas' would be a welcomed initiative, and would easily dovetail with the energy aspects of the Draft Declaration of the Fifth Summit of the Americas. A renewed push toward deeper hemispheric collaboration on energy issues would be a potential antidote to the recent wave of energy nationalism in the region, and it would certainly be a logical mechanism for smaller, import-dependent economies to use in the attempt to augment their energy security. It is true that many oil and gas producers—like Venezuela, Ecuador, Bolivia and Argentina—are unlikely to cooperate with such an endeavor, particularly if it were to be based on open, transparent, and rules-based, market principles. But if the Energy Charter Treaty of Europe and Eurasia is any guide, the opposition of a few countries does not necessarily doom regional collaboration to failure. The big question is what kind of specific content should or could be included in such an initiative. A couple of areas seem to offer at least some promise. The first would be in the realm of renewable energy promotion. Although the U.S.-Brazil Biofuels Partnership is still too young to present us with many tangible results, it does offer a useful template for further collaboration. The hemispheric effort might even considering merging its efforts with the Ibero-American space, inviting Spain—one of the world's leaders in wind and solar energy, and a European leader in biofuels—to participate in a broader renewable energy partnership. A logical area where such efforts might focus would be Central America and the Caribbean. This subregion is the poorest and most economically vulnerable to both external dependence and oil price volatility in the region, and would therefore particularly benefit from any attempts at regional energy integration or replacement of fossil fuels with renewables in their primary energy mixes.

Roger Stark, Partner at K&L Gates: Opportunities for regional energy cooperation are, in theory, almost limitless. In practice, they are constrained by the vagaries of intellectual property law, U.S .trade policies and current market conditions. The Obama Administration has foreshadowed an energy policy that will focus on three key objectives: energy efficiency, energy security and climate change mitigation. The United States has all the intellectual and economic capital necessary to become a world leader in energy technology. However, the willingness of U.S. companies to export energy technology to other countries in the region depends on whether their intellectual property (IP)—i.e., patents and know-how—will be adequately protected. Latin American governments must demonstrate a strong commitment to IP protection in order to attract leading edge technologies. Climate change and energy security issues are often two sides of the same coin. Reducing the use of hydrocarbon fuels reduces greenhouse gas emissions and also reduces our dependence on foreign oil from unstable or unreliable foreign sources. Biofuels provide a basis for regional trade that could support both goals. However, U.S. agribusiness interests have thus far opposed the repeal of tariffs that support U.S. corn-based ethanol at the expense of cheaper and more efficient biofuels available from non-US feedstocks. By contrast, some U.S. companies continue to develop and finance Latin American power projects using renewable energy resources (primarily wind and solar facilities), but face stiff competition from Spanish and other European or Asian competitors. Additional U.S. investment capital might flow to these projects if suitable protections were available pursuant to bilateral or multilateral investment treaties. However, rather than strengthening these treaties, some Latin American governments are seeking to weaken or even repudiate them. In sum, the Energy Partnership for the Americas holds great potential for sustainable, economic trade in energy technologies, feedstocks, power projects and capital, but realizing this potential will require hard work on a variety of difficult issues.

Johanna Mendelson Forman, Senior Associate in the Americas program at the Center for Strategic and International Studies: Obama's plan builds on the 2007 US Biofuels Memorandum of Understanding with Brazil, one of the more important policy achievements of the Bush Administration. But it goes beyond the bilateral focus to a more integrated program that will help Latin American nations become more energy independent, focusing on promotion of renewable resources to advance sustainable growth through green technology. As we approach the Summit of the Americas, the Obama Administration may find its vision of energy partnerships compromised by the continued insistence of the Obama team to retain the import tariff imported Brazilian ethanol. This form of protectionism will require some rethinking if the goal of this first meeting with Latin American counterparts is to build a true sense of partnership and collaboration. There is broad consensus on the need to improve energy integration in the hemisphere. The opportunities, however, are most evident in Central America, where the Proyecto Mesoamerica has laid an important foundation for regional electrification through massive investment in energy infrastructure. It is precisely in this region that the Obama vision of technical cooperation on green energy, shared technology, and development of renewable energy resources could be used to support the new infrastructure now in place. Working with Brazil will be essential because energy diplomacy can be used to leverage other types of cooperation we need with South America's second largest country. However, a recent decline in the price of oil may adversely impact the regional initiatives on renewable energy resources. As a policy decision the focus of the Obama Administration will also have to reinforce the long-term need to promote alternative energy since the demands of carbon reduction and mitigation of the adverse impacts of climate change demand that an energy partnership become a tool for diplomatic engagement, development assistance and a leveraging point for improved free trade.

Jorge Kamine, Counsel at Skadden, Arps, Slate, Meagher & Flom LLP: These partnerships would presumably build on four recent bilateral and regional efforts to promote energy integration and cooperation. The first is the U.S.-Brazil MOU on biofuels, which has led to partnerships and investments in Central America and the Caribbean. Second are transmission line and interconnection projects that facilitate electricity exports, including SIEPAC in Central America, the proposed undersea transmission line connecting Colombia, Puerto Rico and the Dominican Republic, and proposed interconnections between Brazil, Argentina, Peru and Uruguay. Third is the possible development of joint energy infrastructure projects like the proposed Peru-Brazil hydro dams. Finally, there are regional energy solutions like the exporting of Peruvian gas to Mexico for its power generation. The Summit could also serve as a forum for the development of a common hemispheric agenda on carbon emissions related to energy production in advance of upcoming negotiations of the post-Kyoto Protocol regime. The U.S.-Brazil MOU may represent the best example of a partnership that ties back to a Summit plan of action (Mar del Plata, paragraph 33) and could potentially be expanded to include investments in other renewable technologies like solar and wind. The US could also expand its financing for much-needed investments to develop deepwater oil and gas reserves and new power generation and transmission infrastructure. Unfortunately, the recent energy shocks suffered by Brazil, Chile and others as a result of gas supply interruptions has encouraged a policy shift towards greater energy independence from regional suppliers rather than interdependence (note the shift to LNG regas terminals versus regional gas pipelines). Restoring regional confidence in the viability of relying on energy imports (whether gas or electricity) will be key to defining the scope of any energy cooperation strategy.

Republished with permission from the Inter-American Dialogue's daily Latin America Advisor newsletter.

 

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