22 Argentina has a large amount of natural uranium and continues to invest in this sector (Argentine Republic, 2009). With both financial and technical support from China, it has commissioned two new plants, CAREM 25 and Atucha III, which are expected to come online in 2023 and 2028, respectively. These projects certainly will bring clean energy to Argentina but at a high price. China will provide a loan for $10B to finance 85% of the construction of Atucha III (Gerasimchuk et al., 2019). The ability to get full financing for these projects also is key as Argentina is going to struggle to find financing as it restructures existing debts. Partnering with China, as Argentina has done, can prove a viable way to achieve these expensive projects. For Argentina to create robust, sustainable energy production, nuclear undoubtably will be a key component. Weaning Off Fossil Fuels With Argentina’s current emissions rate and plans for new renewable energy insufficient to meet its Paris Agreement commitments, the UN conducted research on the best ways for it to close the gap. In 2019, the United Nations Environment Programme Emissions Gap Report outlined four key initiatives that Argentina must implement to improve its performance in reducing carbon emissions to close the gap between its commitments and current projections: 1. Refraining fromextractingnew, alternative fossil fuel resources (primarily fracking) 2. Reallocating fossil fuel subsidies to support distributed renewable electricity generation 3. Shifting toward widespread use of public transport in large metropolitan areas 4. Redirecting subsidies granted to companies for the extraction of alternative fossil fuels to building-sector measures Three out of four of these initiatives clearly identify a move away from fossil fuels and government subsidies within them and a move toward renewable alternatives. The first point is clearly directed at Vaca Muerta, an oil and natural gas reserve in western Argentina that has the top five, unproved, technically recoverable reserves in the world for both oil and natural gas (US EIA, 2015). Although Vaca Muerta has a large amount of potential, possibly creating up to 500,000 jobs in the next decade (PwC, remarks to Martindale Center, June 10, 2020), between fuel subsidies and decreasing costs of renewable energy sources, this is not a good investment. In 2017, Argentina paid $134M in fuel subsidies to oil companies (Gerasimchuk, 2019). While this does represent a decrease from $914M the year before, the fact that the government is paying oil companies to frack is counterproductive, especially when considering the cost projections of other fuel sources. Renewables The recent growth in renewable source electric generation has largely been due to Argentina’s Renewable Energy Auction (RenovAr) program, created in 2016 to auction off contracts for renewable energy projects. There are a variety of tax benefits under this program, including accelerated depreciation of assets and tax credit certificates (PwC, 2017). So far, there have been three rounds of investment in renewables through RenovAr (CAMMESA, 2020). Although Argentina’s credit rating is not investment grade, it is able to get favorable conditions on these projects. RenovAr’s success stems from its creative payment guarantee structure and because it is not the only guarantor of the debt. The Fund for the Development of Renewable Energy (FODER) subsidizes new renewable energy production projects at a rate based on the energy produced. This makes the funding of RenovAr projects easier; funding is provided through a series of government funded escrow accounts that must be replenished so they have 12 months’ worth of funds at any time. Unfortunately, in 2017, the government failed to live up to its funding commitment. To remedy this, the World Bank got involved and made a $480M guarantee (World Bank, 2020). The winning bidder also has a “put” option they can exercise under a variety of unfavorable circumstances (e.g., a failure of the Argentine currency). Under this put option, they can sell the project back to the Argentine government at a previously agreedupon price in USD as opposed to inflation-prone Argentine pesos. If the government cannot pay, there is a further guarantee that the World
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