In the transition to a world economy with zero carbon emissions, governments and the private sector can and should share the risks, experts said during the 2022 edition of S&P Global Commodity Insights’ Mexico Energy Forum.
However, the private sector will make the bulk of the investments, and the best way governments can contribute is by designing public policies and regulatory frameworks that create incentives for those investments, the experts said Oct. 19.
“In the quest for net-zero emissions, technology will be paramount,” said Jose Francisco Castro Guardiola, senior manager of energy planning at Luxembourg-based steel manufacturer Ternium.
Of all the technologies being considered to decarbonize the economy, it is hard to tell which ones will prevail, but companies must make investments to determine which technology is best for them, Castro Guardiola said during a panel about energy transition.
In 2018, Ternium committed to investing almost $500 million in a decade exploring different technologies, including renewables. After this period and with that amount of investment, the company will be in a position to outline a concrete path to zero emissions, he said. In Mexico, the carbon footprint of the company is smaller than in other parts of the world as steel in Mexico is mainly produced from scrap, he said.
A combination of technologies
Companies should consider a combination of technologies as different solutions are required in every place, Fernando Reiter, corporate finance director at Cemex, said during the panel discussion.
“The public sector can and should get some skin in the game, invest in research and innovation, take some risk, but the bulk of the investments will be made by the private sector,” Reiter said.
Cemex is exploring using numerous technologies in its operations around the world, like storing heat, burning garbage at high temperatures and recycling concrete from demolished buildings.
What governments must do is design appropriate regulations, Reiter said.
“When good regulation is in place, transition occurs even when there are no incentives,” he said.
Consistency in government policy
Carlos Pascual, senior vice president for Global Energy and International Affairs at S&P Global Commodity Insights, agreed on the importance of incentives. He added that government policy must also be consistent through time, noting that in Mexico there is infrastructure designed in the previous administration but that has not been built.
Governments must be able to deal with basic issues, like permits, which may not be very sexy but that are essential to reach the big objectives, Pascual said during the panel discussion.
“The planet as a whole is already late; we have depended 100% on hydrocarbons for decades,” he said. “We are now at 80%, but bringing that to zero will be a huge challenge. We will have to escalate solutions to a level never seen before.”
— Sheky Espejo