Green Or Gone

Biofuel Or Fossil Fuel? For Argentina, It's A False Choice

As the world moves to reduce the role of hydrocarbons, Argentina must exploit the biofuels potential of its vast farming sector, not entertain dreams of becoming a regional oil power like Venezuela.

Fossil fuel subsidies must be removed. It is not a question of if, but when.
Eduardo Trigo

BUENOS AIRES — Debate over biofuels has been heating up in Argentina, one of the world's biggest agriculture producers, amid the closure of the U.S. market and volatile price levels.

This is happening after the United Nations announced that last year was the worst ever in terms CO2 emissions — and if we continue with the same energy policy, the UN has warned, world temperatures could rise by as much as 8 °C by the end of the century. Biofuels alone will not solve the problem, but without a doubt, whichever strategy is chosen, it will include them as an important component. If Argentina changes the rules of the game now, it will send the world a signal at odds with our commitments and our stated intention to fully reinsert ourselves in the global community and reduce global warming.

The road ahead requires us to rethink our strategy.

In 2016, the Rockefeller Family Fund concluded there were no longer economic nor ethical reasons for investing to extract oil, while even Saudi Arabia has begun contemplating a future where oil will not have the same dominant role it plays today in its economy.

Other studies on oil's potential in Argentina indicate it has far less of the value to our economy than is being attributed to it, with overblown promises of the Vaca Muerta deposits turning us into a Saudi Arabia of the Southern Cone. At the very least one would have to properly analyze what has been done so far, because even if Vaca Muerta has potential, we have arrived late. The big players of the hydrocarbon market are already changing their strategic visions and thinking of a future without oil. There will be problems of demand as societies seek more sustainable living and consumption patterns, unrelated to how much reserves are left.

A view on the Vaca Muerta deposits — Photo: YPF

That does not mean we should not exploit Vaca Muerta. We must, and quickly, but only to generate resources to transform our economy and not to enhance oil's role in our energy ecosystem. Here, curbing incentives for biofuels is a delay like U.S. tariffs are a harsh blow.

Again, the road ahead requires us to rethink our strategy, which has shut in a vicious circle of poverty.

It is not a question of if, but when.

Biofuels are furthermore a key element in developing a sustainable economy where development does not necessarily entail environmental degradation, but lays the basis for strategies to balance people's economic expectations with management of shared goods like air, soil and water. Biofuels policies should become a market standard meant to promote the eventual substitution of fossil fuels in all areas, including such innovative and dynamic markets like jet fuel. Fossil fuel subsidies must be removed. It is not a question of if, but when, so we should anticipate the scenario and build an energy grid to fit that reality.

That would also be a first step toward exploiting our proven competitive advantage as a producer of biomass or agricultural products. This is crucial to any moves to restore dynamism to regional economic development, and the ability of these economies to generate revenues and quality jobs.

Recent events — like slow progress made at the WTO, the lack of a pact between the EU and Mercosur, and U.S. tariffs — must become incentives for change, not reasons to keep the status quo. It is a serious error to see biofuels as an isolated sector instead of a component of wider economic and territorial development. In a world that is challenged and concerned with the decline of resources and climate change, these are opportunities that cannot be spurned. Our response and strategy now must be: more bioenergy, food and biomaterials, and using our energy crisis and foreign market restrictions to become more competitive. That is our leverage for the future.

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European Debt? The First Question For Merkel's Successor

Across southern Europe, all eyes are on the German elections, as they hope a change of government might bring about reforms to the EU Stability Pact.

Angela Merkel at a campaign event of CDU party, Stralsund, Sep 2021

Tobias Kaiser, Virginia Kirst, Martina Meister


BERLIN — Finance Minister Olaf Scholz (SPD) is the front-runner, according to recent polls, to become Germany's next chancellor. Little wonder then that he's attracting attention not just within the country, but from neighbors across Europe who are watching and listening to his every word.

That was certainly the case this past weekend in Brdo, Slovenia, where the minister met with his European counterparts. And of particular interest for those in attendance is where Scholz stands on the issue of debt-rule reform for the eurozone, a subject that is expected to be hotly debated among EU members in the coming months.

France, which holds its own elections early next year, has already made its position clear. "When it comes to the Stability and Growth Pact, we need new rules," said Bruno Le Maire, France's minister of the economy and finance, at the meeting in Slovenia. "We need simpler rules that take the economic reality into account. That is what France will be arguing for in the coming weeks."

The economic reality for eurozone countries is an average national debt of 100% of GDP. Only Luxemburg is currently meeting the two central requirements of the Maastricht Treaty: That national debt must be less than 60% of GDP and the deficit should be no more than 3%. For the moment, these rules have been set aside due to the coronavirus crisis, but next year national leaders must decide how to go forward and whether the rules should be reinstated in 2023.

Europe's north-south divide lives on

The debate looks set to be intense. Fiscally conservative countries, above all Austria and the Netherlands, are against relaxing the rules as they recently made very clear in a joint position paper on the subject. In contrast, southern European countries that are dealing with high levels of national debt believe that now is the moment to relax the rules.

Those governments are calling for countries to be given more freedom over their levels of national debt so that the economy, which is recovering remarkably quickly thanks to coronavirus spending and the European Central Bank's relaxation of its fiscal policy, can continue to grow.

Despite its clear stance on the issue, Paris hasn't yet gone on the offensive.

The rules must be "adapted to fit the new reality," said Spanish Finance Minister Nadia Calviño in Brdo. She says the eurozone needs "new rules that work." Her Belgian counterpart agreed. The national debts in both countries currently stand at over 100% of GDP. The same is true of France, Italy, Portugal, Greece and Cyprus.

Officials there will be keeping a close eye on the German elections — and the subsequent coalition negotiations. Along with France, Germany still sets the tone in the EU, and Berlin's stance on the brewing conflict will depend largely on what the coalition government looks like.

A key question is which party Germany's next finance minister comes from. In their election campaign, the Greens have called for the debt rules to be revised so that in the future they support rather than hinder public investment. The FDP, however, wants to reinstate the Maastricht Treaty rules exactly as they were and ensure they are more strictly enforced than before.

This demand is unlikely to gain traction at the EU level because too many countries would still be breaking the rules for years to come. There is already a consensus that they should be reformed; what is still at stake is how far these reforms should go.

Mario Draghi on stage in Bologna

Prime Minister Mario Draghi at an event in Bologna, Italy — Photo: Brancolini/ROPI/ZUMA

Time for Draghi to step up?

Despite its clear stance on the issue, Paris hasn't yet gone on the offensive. That having been said, starting in January, France will take over the presidency of the EU Council for a period that will coincide with its presidential election campaign. And it's likely that Macron's main rival, right-wing populist Marine Le Pen, will put the reforms front and center, especially since she has long argued against Germany and in favor of more freedom.

Rome is putting its faith in the negotiating skills of Prime Minister Mario Draghi, a former head of the European Central Bank. Draghi is a respected EU finance expert at the debating table and can be of great service to Italy precisely at a moment when Merkel's departure may see Germany represented by a politician with less experience at these kinds of drawn-out summits, where discussions go on long into the night.

The Stability and Growth pact may survive unscathed.

Regardless of how heated the debates turn out to be, the Stability and Growth Pact may well survive the conflict unscathed, as its symbolic value may make revising the agreement itself practically impossible. Instead, the aim will be to rewrite the rules that govern how the Pact should be interpreted: regulations, in other words, about how the deficit and national debt should be calculated.

One possible change would be to allow future borrowing for environmental investments to be discounted. France is not alone in calling for that. European Commissioner for Economy Paolo Gentiloni has also added his voice.

The European Commission is assuming that the debate may drag on for some time. The rules — set aside during the pandemic — are supposed to come into force again at the start of 2023.

The Commission is already preparing for the possibility that they could be reactivated without any reforms. They are investigating how the flexibility that has already been built into the debt laws could be used to ensure that a large swathe of eurozone countries don't automatically find themselves contravening them, representatives explained.

The Commission will present its recommendations for reforms, which will serve as a basis for the countries' negotiations, in December. By that point, the results of the German elections will be known, as well as possibly the coalition negotiations. And we might have a clearer idea of how intense the fight over Europe's debt rules could become — and whether the hopes of the southern countries could become reality.

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