Activist Sandra Guzmán holds a sign that reads “Climate Action Now” while diving.
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“Latin American countries don’t know how much it will cost them to address climate change,” is one of the first things Sandra Guzmán (39, State of Mexico), founder of the Climate Finance Group for Latin America and the Caribbean, says ( GFLAC) clarifies: “There are very few who have done this exercise,” he says. As head of this organization and a PhD in political science from the University of York (UK), Guzmán has worked to understand an issue that scares many: how much countries in the region are investing in climate change and how much they are doing in industry carbon dependent. He also explored the answer to some questions that are still unsolved today: How much money does Latin America and the Caribbean need to prepare for climate change? If they want to deliver on what they promised under the Paris Climate Agreement, how much should they take out of their own pockets and how much can they ask other countries or donors?
Two years ago, with GFLAC, he created the Sustainable Finance Index, a tool that helps map how high or low public investment in climate change is in each country in the region. With this and other exercises, she has also come close to numbers such as how it will cost the 21 main emitter countries in Latin America around $25,000 million to deliver on what they promised under the Paris Agreement, based on her calculations five of these 21 countries.
Sandra Guzmán, during the United Nations Climate Change Conference in 2021. Courtesy
Questions. Why are you launching the Sustainable Finance Index and what does it consist of?
Answer. Because not all countries are clear about their climate accounts. This is why we at GFLAC created a Sustainable Finance Index a few years ago, in which we not only see how much each country is owed due to climate change problems, but also due to carbon-intensive finance. That is, how much money they receive for activities that cause climate change. We just can’t see the beautiful part: how much I’m increasing my flow in trillions of dollars to fight climate change when there’s still funding flowing into high-carbon activities. For example, Mexico is one of the countries with the lowest sustainable finances, and you get that because it also relies heavily on fossil fuels for income. Economies are complex and it needs to be understood that what matters is not only whether countries spend money to mitigate or adapt to climate change, but also how involved their structure is in carbon-intensive economies, because if so, decoupling the economy from emissions is not so easy.
Q Just the last index they released – in 2022 but with data from 2021 – revealed that Mexico, Uruguay and Trinidad and Tobago are the countries in the region with the worst fiscal sustainability. What’s going on there?
R These are very different cases. In Mexico, it’s because it’s a country whose income, as we said, is heavily dependent on carbon-intensive activities. That is, income derived from the sale of oil and its export. That brings you a lot of capital and therefore there is a lot of public investment in this matter. In fact, government budgets in carbon-intensive economies in Mexico have risen sharply over this six-year tenure. So if you compare what the country spends on fighting climate change, it’s only 0.05% of the total budget. In the case of Trinidad and Tobago, it is similar in that although it is a small Caribbean economy, it is also heavily dependent on fossil fuels. They have failed to decouple their finances from carbon. And finally, the case of Uruguay is interesting because although they have invested a lot in renewable energy, it is not public investment, but mostly private. Analysis of the public thus shows that it remains closely associated with carbon-intensive activities and that there is little reported public investment in renewable energy. Well, there is also something interesting about this country, and that is that, unlike most countries, it also does not have disaggregated information. For example, it has almost no budget marked as such when it comes to climate protection issues. In terms of transparency, which we also analyze with the index, Uruguay has a lot to improve.
Q On the other side are the countries with a better index, namely the Central Americans. What are they doing right?
R Well, in general, they seem high because Central American countries have recently allocated more to climate change and sustainability compared to their total budgets. Obviously, their overall budgets are not very large, so one could say that what they have increased is relatively small in terms of the size of the budget. But they have increased greatly in terms of climate investment labels. For example, Nicaragua, El Salvador and Honduras have increasingly made budget allocations labeled as climate change. Now, I also have to say that I have received comments from colleagues in Nicaragua who think this government is using climate change as a flag but are not necessarily interested. So that’s also a bit of a topic that’s being discussed, what’s going on there? Because maybe there’s a label that isn’t entirely appropriate, but that’s the public information that’s out there. What we have observed, and it is important to say, is that Central American countries are much more vulnerable to climate change and this has forced them to have much more robust financing in the face of this phenomenon. They also have a better balance because they are also non-oil countries, and that gives them an advantage in decoupling their economies from emissions.
Sandra Guzmán, Founder of the Climate Finance Group for Latin America and the Caribbean Courtesy
Q And why is it so important that the region, and each country in particular, know exactly how much it will cost to prepare for climate change?
R Because now worldwide [y en el marco de las discusiones que se realizan en las Conferencias de Cambio Climático – COP] A new target for climate finance will be agreed, which must go beyond the $100 billion a year that developed countries pledged to developing countries in 2009. And if we don’t know how much we need, how much will we charge? But again, very few in Latin America have done this exercise. Mexico, Colombia and Chile have something, but it needs clarity to demand from other countries and from donors.
Q At the global level, too, there is a gap between money spent on mitigating climate change and adaptation, which is less. How does this play out in Latin America, a region that is not primarily a greenhouse gas emitter?
R I think that’s one of the key issues. What about customization? If you look at it in the context of funding, there are several challenges. On the one hand, adaptation is very difficult to estimate in terms of costs, since it is not simply a matter of technological change. The second thing is that donors usually want to declare battles won and for that they tend to measure everything in numbers. And because adaptation is long-term, sometimes you don’t see significant changes, it’s not as tangible or easy to measure. The last point is that the adaptation often does not bring financial returns and the funders, especially the private sector, are not interested in it.