Decarbonization Plan in Chile: An unambitious but dynamic process

Chile is facing important debates for its future. The South American country is immersed in a process to establish a new constitution to manage a multifactorial crisis situation to which the social-environmental crisis contributes heavily. In parallel, the country is committed to becoming carbon-neutral by 2050. Hence, the institutional framework, and the path to reach it, are key. Maximiliano Proaño reports

Chile’s energy sector is dominated by coal-fired energy and responsible for almost 80% of emissions. (BruceW., CC BY-NC-SA 2.0)

During the last years, Chile has been highlighted as a promising example for energy transition in Latin America. Indeed, the renewables’ share in its electricity mix has risen from less than 5% to 20% in the past six years. However, on the other side, fossil fuels still generate more than 50% of the electricity. Currently, the energy sector generates 78% of greenhouse emissions in Chile. The worst side of the Chilean energy model is represented by five areas of the country which concentrate 28 of the 38 thermoelectric power plants of the country. These five areas are known as “sacrifice zones”. Besides the environmental damage the “sacrifice” refers to the health of the local population who has been subjected to a massive air pollution and water contamination. A report from the Catholic University of Chile  shows that in Huasco, one of the five Chilean “sacrifice zones”, the risk of dying from cerebrovascular disease is 281% higher than the national average; the likelihood of developing chronic airway disease is 139% higher; and the presence of patients with asthma is almost four times higher than in the rest of the country.

In addition to this context, Chile launched its updated National Determined Contribution (NDC) to reach the Paris Agreement goals in April 2020. The NDC includes a target of 30% greenhouse gas (GHG) emissions reduction by 2030, based on 2016 levels (the previous NDC’s target was a 30% reduction in GHG intensity of its GDP by 2030 compared to 2007). In accordance with the Climate Action Tracker, the updated NDC is still insufficient with efforts to limit global warming to 2°C and even less to below 1.5°C.

Decarbonization plan

When the Chilean government announced its energy policy 2018 –2022, they included the goal to go forward with the decarbonization of the energy matrix. To optimize this process, a (national) Coal Commission was founded in 2018, representing the Ministries of Energy and Environment, energy companies, agencies representing electricity customers, environmental NGOs, academics, and civil society. Energy companies were willing to participate in a decarbonization plan, mainly because they have already been turning their investments from fossils to renewable sources. Moreover, renewables are increasingly cheaper than fossils, and Chile has an enormous potential for solar and wind energy.

The decarbonization plan was released in June 2019 stating a complete coal phase-out by 2040. The closure schedules part of the decarbonization plan were to establish the cessation of the first 1,047 MW corresponding to the eight oldest plants by 2024, which together represent 19% of the total installed capacity of coal-fired plants (in Chile). However, for the remaining 80%, the decarbonization plan does not consider a specific closure program for any generating unit in the period 2025-2040. The medium- and long-term stage of the plan considers new working groups formed every five years, which may allow for the establishment of specific retirement schedules (for coal-fired plants).

Civil society organizations qualified the plan as unambitious. Considering the fast increase of renewable energies in Chile, it would be perfectly possible to have a 100% coal phase-out by 2030. Even 2025 could be feasible. The 2040 deadline appears excessive for the people who live in sacrifice zones and insufficient to reach the Paris Agreement goals. Even coal fired companies have gone further, with six coal fired power plants having announced their departure from the system far earlier than scheduled.

Another critical aspect of the plan, according to civil society actors, is the exclusion of any closure schedule for the 2025 – 2040 period for (the) 80% of coal-fired power capacity. Not only civil society organizations have criticized the decarbonization plan deadline. The National Congress of Chile approved in a first instance a bill – currently still in the pipeline – proposing to shut down all coal-fired power plants for electricity production by 2025, putting additional pressure on the government.

A third controversial aspect of the decarbonisation plan is the status of strategic reserve for coal-fired plants for up to five years after their closure.  During this period, these coal-fired power plants will receive a remuneration of 60% of the amount received by the active power plants. The justification of this measure by the government is to safeguard the security and efficiency of the National Electric System.

Last but not least, the closure of 28 coal-fired plants will also have an impact on jobs in this industry. Jobs losses are estimated at around 4,400 direct jobs and around 9,500 people affected by indirect jobs. In June, the government launched the process to elaborate a Just Energy Transition Strategy. Within this process, they initiated the discussion to generate local action plans for communities affected by coal-fired power plants. These local action plans may make it possible to diagnose the existing social, productive, environmental and territorial needs, in order to generate actions resulting from participatory processes, with clear goals, indicators, deadlines and responsible parties. The process is just starting, therefore, no results are possible to assess yet.

Although the government’s initiative to open the decarbonization debate is valuable, it seems that the real Chilean decarbonization process is going faster than the government´s decarbonization plan. The increasing consensus of closing 100% of the coal fired power plants before 2040 is good news for Chile. Though, the question if this energy transition will be just, both socially and environmentally, is still a pending issue.


Max Proaño is a lawyer and social scientist, and currently works as a parliamentary adviser in energy and environmental issues. He has vast experience working in the public sector and civil society organizations.

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