Colombia’s President Iván Duque Márquez During CERAWeek

(Energy Analytics Institute, 7.Mar.2022) — Colombia’s President Iván Duque Márquez spoke in an interview with Daniel Yergin on 9 Mar. 2022 during CERAWeek by S&P Global. Excerpts from that discussion follow.

Related to energy security and the energy transition:

Iván Duque: In terms of energy security and energy transition, I think the first challenge is that we had to embrace it and leave the ideological debate aside. When we’re talking about energy security, we cannot allow those decisions to be captured by populism and that’s happening in many places of the world. People were saying that we have to shut down certain sources and they’re trying to exacerbate sentiment. What we did in Colombia in terms of energy security was three found.

First, we had to strengthen Ecopetrol and also give the right messages to all the private players in Colombia. What has happened? Ecopetrol [recorded] its best results in its history. It also expanded its reserves to 8 years, and we went again for another round in the hydrocarbon sector for the first time in five years, we reached record highs.

The second thing is we created the incentives for non-conventional renewable energies to expand in Colombia. So, basically when I assumed office, we had only 28 MW of installed capacity in non-conventional renewables, and we introduced three regulatory reforms. The first one, an uplift of 50% for non-conventional renewables. We had for the first time in the world a two-sided auction for buyers and sellers of energy and we also made a clear statement that all the public utility companies had to rely on 10% on non-conventional renewables. Today, we went from 28 MW to 2,800 MW that will be installed this year and we have 4,500 MW that are coming additionally in alternate generation projects, and that’s why Colombia has become a leader in the energy transition.

And last but not least on that element, which is also very important, we have seen that in order to kill the populist debate about the hydrocarbon sector [we needed to show that] the hydrocarbon sector is not the enemy. The enemy is the emissions and we did something marvelous with Ecopetrol for the first time they sold 1,000,000 barrels, fully neutralized in their production line from the extraction to the transportation and then to the selling to the final consumer. All this is happening in Colombia and we have put this in a balance so we feel happy that we have ensured energy security, but we have also become a leader in the energy transition regionally. 

Regarding populism that against development:

Iván Duque: Today there are three enemies of democracy that I think have been very well described: 1) post-truth, 2) populism and 3) polarization. So, the hydrocarbon sector has been captured by that debate. So, there are people always blaming the sector for everything that goes wrong in the energy market. We see that there are populists that want to gain a lot of applause by saying that they’re going to shut down this sector, and they want to polarize society against the sector. So, the statement that I have made in Colombia is that Colombia has a positive story to tell. We have used the underground richness to face the poverty on ground and that’s why this sector represents not only the major source of royalties, it also represents one of the main sources of foreign direct investment (FDI). It’s one of the drivers of our local capital market, and it is 40% of our currency market. But, besides that, it’s the major source of tax collection, so we have been able to do a lot of social reforms based on this. But, we also wanted to give the message to regions that are producers, so that’s why we made our reform under the royalty system so that now you can pay royalties in advance, and the companies that are doing exploration and exploitation can also pay royalties for works based on the taxes that they will pay. 

Works per taxes has allowed many works to take place in the country and we created an environment where we even got to a point where the discussion on non-conventional oil fields was based on science. We had the scientists, we had the environmentalists altogether, and that’s why we decided to go for pilot projects. So, that’s I think a very important signal and it has been a way to kill that populism. But the other thing is when you demonstrate that oil companies can become the largest auto-generators with non-conventional renewable energies like the case of Ecopetrol and when you see, for example, a Canadian company that is working in the oil sector and it’s using the water out of the extraction of oil to do thermal energy generation it also demonstrates that you can do something bigger on the circular economy. Last but not least, which is also a very important element, Colombia has 35% of its territory in Amazon land and 50% of the territory is tropical forests. This year we are declaring 30% of the Colombian land as a protected area. So, that means that Colombia can be a very important player in the carbon credit market and many companies in Colombia and abroad can reach their carbon neutrality by purchasing those credit bonds that we’ll have in Colombia.

So I think it all comes together and we would demonstrate that there has to be a balance and that the balance is taking place is the best way to knock down the popular sentiment that the hydrocarbon sector is an enemy in order to fight climate change. So I think Colombia has major goals, we’re moving in the road to zero policy to get to become a carbon neutral country by 2050, but we’re working in that transition where every sector including the hydrocarbon sector is paying its part, this contributing its part, and it has shown the Colombian people that this is possible. We tried to assemble this from the very beginning, so let’s get rid of the politics, let’s get rid of the ideological debate and this work on energy security and something that is also important is that we launch the hydrogen road map.

We have the bet on green hydrogen, blue hydrogen but we also have the bet on renewables and just to give you an idea, Colombia has a potential of more than 30 GW of non-conventional renewable and we are a country that is also reducing the consumption of oil in order to expand the exports and be able to have more collections to be used in favor of social investments in the country, so hand in hand with the expansion of non-conventional renewables we have also met the target of having more than 6,000 electric vehicles of individual consumption in the country, but we have also consolidated ourselves with the biggest cargo fleet in Latin America run by electric vehicles and the same in public transportation. So, it also goes hand in hand and last but not least I think with defining a matrix where we are 70% hybrid getting to 20% of non-conventional renewables working on geothermal working on biomass is going to allow us to consolidate at one of the cleanest matrix in the world and be able to sell more energy to our people at better prices, but also position Columbia as a net exporter, for example of green hydrogen in the upcoming 10 years.

Regarding carbon credits developed in Colombia and the planting of more trees:

Iván Duque: We decided to go big. So, we said, OK, there’s a leader’s pledge for nature that says that by 2030 we will have to have 30% of the land protected. Well, we said we’re not waiting until 2030. We’re doing it in 2022, so we’re expanding the maritime protected area and we’re doing the online protected area, but once you have the land declared, the next process is how do you get peasants and local communities involved in protecting nature and be able to pay them for environmental services and have nature-based solutions so. That’s the next step and we’re planting 180mn trees under the 1tn trees initiative, and we will meet that target in Aug. 2022 and we just launched that two years ago. So we’re also meeting that target and that has allowed us to be able to construct a new voluntary carbon market that should be ready before the end of our administration in Aug. and that market has to be transparent, has to be scrutinizable, and it has to be based on a taxonomy of all the sectors that contribute to that road to zero, so we will be the third country in the world having that taxonomy.

We’ve already launched 2 green bonds with a very substantial premium, and we were four times oversubscribed so Colombia has the finances ready and with the voluntary market we will be able to consolidate all their re-forestry, all the recovery and all the new planted trees in the country so that companies, countries and ourselves will be able to measure the capture and be able to sell the carbon credits worldwide, in a very transparent way. And this is something important that people don’t regularly know . For example, one of the enemies that we have is the coca crop, when one hectare of coca is planted, 3 hectares of tropical jungle are destroyed. So, if we recover, if we declare, if we protect and if we build nature based solutions and the payment for environmental services, this can become so powerful that it will be a deterrent for the expansion of illegal crops around the country.

Regarding lessons about providing incentives for investors to help them see the importance of long-term goals amid the volatility:

Iván Duque: This morning I gave a talk and I remember a phrase from a movie that was “If you build it, they will come.” And you need to create the incentives, but also a regulatory system that is transparent enough so that you provide certainty to the market. So, the most important things that we have achieved in the last four years are the following: we have a 100% discount on the VAT when it comes to capital investments. All capital goods investments have a 100% discount on the VAT. We have a 50% discount on the local taxes when it comes to the income tax. We have a 50% uplift if you’re going to non-conventional renewables, but we also included green and blue hydrogen and besides that, we were able also to reduce the tariffs, immediate tariffs and immediate VAT release on the imports of materials for non-conventional renewable energies. So what has been the result? We expanded by 100 times the projects that we had when we assumed office. And this is only going to grow exponentially, so I think that has been a major achievement. 

And the other thing is that the oil sector, the gas sector has been treated as part of the transition and also kept as a very important player in terms of energy security, and I think at the times we’re living in the world with the circumstances of Ukraine and Russia this is the time where we need to realize that is not A or B, both can come together, and both have to be part of the solution and we need them both because if we let oil prices keep on growing and we get the market to be in a shock it would also harm the expansion of non-conventional renewables. 

Regarding energy innovations:

Iván Duque: I am proud of… and I’m telling you this story six years ago when I was a senator, we were facing an energy crisis in Colombia because of the temporary of the niño effect so everybody was shocked we had to import energy from Ecuador and I remembered that a senator I said we have to accelerate the energy transition, we had to move to non-conventional renewables and we have to integrate this in a balanced way. Many people said that was impossible.  When I ran for office, I said we’re going to make this revolution and in just three years and a half we pass from 0.2% of our energy matrix in non-conventional renewables to get in the route of ending this year with almost 20% of the energy matrix and that simply is from building the right regulatory system and giving certainty to the private sector players. In my opinion, if you build it, they will come. We built it, they came and today Colombia is a leader in the energy transition in Latin America. 

Regarding takeaways from leading Colombia during the pandemic:

Iván Duque: I was also telling some of my colleagues the other day that we live in a world I called VUCA: Volatility, Uncertainty, Complexity and Ambiguity. Those elements are present every day to governments around the world and we had to deal with the massive migration crisis because of the circumstances in Venezuela. We also had to face a category 5 hurricane for the first time in Colombia and the pandemic. So, the decisions that we made first of all having a confinement, we made the decision, but we kept 41% of the economy running and then we gradually started recovering sector by sector, so we had to have biosecurity protocols and one of the elements that we said the energy sector cannot shut down. 

We decided we had to keep the energy sector running and we had to keep all the regulatory agencies running. We needed to keep all the grids working and we had to keep advancing projects.  So what’s important is that this revolution of the energy transition in Colombia took place in the midst of a pandemic. Also, when we talk about energy, conventional energy and hydrocarbons, we discussed with our team in Ecopetrol how we were going to get efficiencies in 2020? All the decisions we made allowed us to end the year 2020 with Ecopetrol being one of the few oil companies in the world that closed the year with black numbers. We didn’t go red, and in 2021 the best historical performance and I think that’s because we understood the balance and that every decision on how to manage the pandemic was based on allowing the sector to have the best bio protocols to improve its performance.

Regarding emissions and geopolitics and Colombia’s role in the world:

Iván Duque: Colombia has been a very strong player when it comes to climate action. Even though we only represent 0.6% of all the world’s C02 emissions and that we have one of the cleanest energy matrices around the world, we are among the top 20 of the countries most threatened by the effects of climate change. So we have been able to say, OK, we want to be a carbon neutral country by 2050, reduce our emissions by 51% by 2030 but start putting together all their regulatory systems to achieve that. So it’s like Ronald Reagan said “trust, but verify.” We have to trust in the police, but we have to verify and we were able to pass in Congress in the midst of all this world political polarization, a unanimous climate action bill last year. So, I think that it has been very important in terms of geopolitics.  But, the other thing is, Colombia has contributed regionally to have a sounder debate on how to manage energy matrices. I think Colombia today it’s one of the preachers of the build back better world initiative in the Americas, so I will end up this by saying that this is the moment where nearshoring makes more sense for the US to bring more investments so that you can’t rely so much on Far East and do more in the Americas. Geopolitically, Colombia has been a preacher, a player and a partner, to demonstrate that nearshoring can be successful. 

Final reflections on after three and a half years in office:

Iván Duque: There are many reflections but I think the most important one is we can’t take democracy for granted. We have to protect democracy every day and democracy is being challenged by post-truth, populism and polarization. And private initiative sometimes is affected by that and we see authoritarian regimes around the world that control their social media that control their media outlets but they are sometimes being the promoters of the disruption of democracies elsewhere. 

So we have to be able to show that the facts and the results are the best way to communicate, but we have to acknowledge that we can’t allow populism to say that which sector plays and which one does not. We have to defeat populism. We have to defeat post truth and we have to defeat populism and that involves the daily participation of the private sector. The private sector cannot be an observer of these processes, we need to act together and that’s why maybe Colombia historically has not allowed populism to govern our country. So, we have to do it again and we have to do it with the criteria that the private initiative is a cornerstone of democracy. 

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By Piero Stewart. © Energy Analytics Institute (EAI). All Rights Reserved.