Mitigation Analysis

Background Information

Venezuela, located in the northern part of South America, has a total land area of 916,445 Km2, divided into 22 states and 1 Federal District. The capital, Caracas, is located in the central northern coastal region, which pioneered the sprout of industries during the 1950âs as a consequence of the incentives given during those years to industrial development; therefore, most of the population and major industrial areas are located in this region.

The Venezuelan population grew very fast during the 1950-60 period, at an annual rate of 4.1%. In the early sixties, the average annual growth rate began to decrese, reaching 3.5% in 1981, and 2.7% in 1990. The concentration pattern in the country also changed significantly in the last fifty years as a result of an intense migration from rural areas to urban centers, especially towards big cities. Currently, the country«s population is about 21.8 million inhabitants, mostly located in areas with more than 5,000 inhabitants, about 81% as compared to 42% in 1950.

The north western and north eastern regions concentrate the biggest hydrocarbon production, which represents the main source of revenues of the country. The most important heavy industries (aluminum and steel) and hydroelectric developments are located in the southern region while agriculture and animal husbandry are found mainly in the Llanos, and forestry in the south eastern region.

The Venezuelan economy is mainly based on oil, mining, steel, and aluminum export revenues; thus, it is very sensitive to the fluctuations of the international market. The Gross Domestic Product (GDP) has registered a yearly average growth rate of 4.3% during the last 45 years. This growth has not been uniform but has shown important fluctuations clearly defined during the period: a smooth growth until 1972, a sharp increase between 1973 and 1981, and important fluctuations afterwards, including negative growth rates. The evolution of total GDP and GDP per capita for the 1950-95 period are shown in Figures II-1 and II-2, respectively.

The jump in oil revenues in the seventies, distortioned Venezuelan economy and caused an increase in the foreign component of the industrial GDP from 26% in 1968 to 41% in 1978. In spite of the high incomes, the country incurred in a foreign debt of about 30 billion US dollars.

Since 1982 to present time, the economy has been characterized by adjustments, uncertainties in exchange rate, budget deficits, and increasing inflation problems. However, as a result of the adoption of a new development program (Agenda Venezuela), the national economy currently shows clear signs of recovery, with substantial flows of foreign investment mainly in the oil industry and a downward trend in inflation.

Regarding GDP sectoral structure, an appreciable change can be noted between 1950 and 1995: the oil industry share has declined from 64.8% to 27.5%, while other industries and services sector shares have increased from 5% to 15%, and from 25% to 43%, respectively (Figure II-3).

The current national development plan (IX Plan de la Naci—n) include, among others, industrial development programs, improvement of public services, expansion of the petroleum industry (including "oil opening" to foreign investment), and expansion of mining, agriculture and forest activities. All these programs might contribute to increasing greenhouse gas emissions and other environmental problems, unless specific effort to address these issues, such as energy efficiency and conservation, are implemented in the near future. Such efforts becomes even more relevant when considering that industrial activities, transport patterns, and land use change, have already generated important environmental problems of different nature, in the country.

On the other hand, Venezuela still preserves a considerable area of natural forests (more than 50% of the territory) and ranks among the first mega diversity countries in the world. To manage and protect its natural resources, Venezuela has put more than 54% of its territory under different forms of protection. However, implementation of new development programs could also affect extensive forest areas as the establishment of a wide range of economic activities has been traditionally linked to forest clearing. In this context, the development of the forest sector, if based on sustainable practices, could actually contribute to both forest conservation and GHG emission reduction, through carbon sequestration and storage.

According to the national GHG emissions inventory (CVCC, 1995), the major sources of CO2 in Venezuela are the energy combustion (56%) and deforestation (42%). Regarding CH4 emissions, the major sources are the energy sector (59%) (mainly from the fugitive emissions of the oil and gas production systems), and the agricultural sector (29%).

The selection of the sectors included in the mitigation options assessment was based on a detailed analysis that took into consideration the contribution of the main sources to national GHG emissions, the relevant natural and socio-economic characteristics of the country, the reduction potential, technologies for emission reduction, and local experience in related fields. The mitigation analysis concentrates on options to reduce CO2 emissions generated from the energy sector and land use change. In the energy sector, the analysis was centered on the energy industry, the transportation sector and the manufacturing industry, since these three sectors jointly generate 94.4% of the CO2 emissions resulting from energy combustion. For land use change, the mitigation options deals with the forestry sector.

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