Chapter 1. Environmental performance: Trends and recent developments1

Strong economic growth has helped Chile improve the well-being of its citizens. Economic growth, extraction of natural resources and rising resource and energy use have exerted increasing environmental pressures, however. This chapter examines Chile’s progress in decoupling economic activity from environmental pressures, focusing on the period since 2000. It presents the key socio-economic developments and reviews Chile’s progress in moving towards an energy-efficient and low-carbon economy; resource efficiency in material consumption and waste management; and sustainable management of the natural asset base, including biodiversity and water resources.

1. Introduction

Chile has experienced a long period of strong economic growth, which has helped reduce poverty and improve the well-being of its citizens, even though inequality remains large. Natural resources have been a key driver of growth, with copper mining and agriculture, forestry and aquaculture constituting a major share of national income and exports. The strong reliance on natural resources, along with rising living standards and increased consumption, has increased environmental pressures, including air pollution, loss of native forests, soil erosion, and soil and water contamination.

This chapter provides an overview of Chile’s main environmental achievements, as well as remaining challenges on the path towards green growth. Drawing on indicators from national and international sources, it reviews progress against national policy goals, as well as international commitments and targets, focusing on the period since 2000. To the extent possible, it compares the state of the environment and key environmental trends with those of other OECD member countries. The chapter sketches out major policy developments in relevant environmental sectors, including air, climate, waste, water and biodiversity.

2. Key economic and social developments

2.1. Economic performance

Chile is an open and export-oriented economy. Its real gross domestic product (GDP) increased at an average rate of 4.2% per year in 2000-14, well above the average of OECD and Latin American countries (Figure 1.1). As the world’s largest copper producer and exporter, Chile benefited from the commodities boom in the 2000s and weathered the 2009 global economic crisis. Declining raw material prices and lower external demand, however, resulted in a drop in GDP growth in 2014. A strong fiscal stimulus helped the growth rate exceed 2% in 2015; growth is expected to gradually accelerate in 2016-17, but will remain below the pre-2014 boom years (EIU, 2015; OECD, 2015a; see Chapter 3). The unemployment rate declined to a record low of 5.9% in 2013, but has been on the rise since.

Chile’s macroeconomic performance has traditionally been strong, characterised by tight monetary policies and a generally balanced fiscal position (see Basic Statistics; Chapter 3). Its tax-to-GDP ratio (20% in 2014) is significantly below the OECD average (34%). In 2014, Chile approved a major tax reform, seeking to reduce the fiscal gap and to finance additional expenditures in education, health and infrastructure. The reform aims to raise an additional 3% of GDP in tax revenue and make the tax system more progressive. It also includes an expansion in the use of environmentally related taxes, notably the introduction of a tax on the emissions of carbon dioxide (CO₂) and local air pollutants from stationary sources, and a vehicle tax that considers the fuel economy and the emissions of local air pollutants (Chapter 3). Revenue from environmentally related taxes amounted to 1.2% of GDP in 2014, one of the lowest shares in the OECD (Chapter 3).

With a large network of free trade agreements, Chile is well integrated into the global economy (Chapter 3). Both exports and imports have tripled in value since 2000, and together represented almost 70% of GDP in 2013, above the OECD average (see Basic Statistics). Main import products are fossil fuels and manufactured goods.

Export of natural resources has historically been at the core of Chile’s economic activity. The country has abundant mineral resources, including the largest copper reserves in the world and about half of global lithium reserves.2 Mining activity, mostly of copper, contributed to more than half of merchandise exports in 2014. Between 2006/07 and 2014, the contribution of mining to GDP dropped from 21% to 11% (Figure 1.2), which reflects falling ore quality and higher energy and labour costs. Mining concentrates in the northern desert region, where it contributes to up to half of regional GDP. Chile is also a major exporter of fish, fruits and wine. Total agricultural production increased by 30% over 2002-13, although the contribution of agriculture to GDP has slightly declined (Figure 1.2; Chapter 3). Forestry contributed 5.2% to national exports in 2013, the third highest value in the OECD after Finland and Sweden (OECD, 2015c). Services, including public administration, accounted for about 60% of value added in 2014, well below the OECD average (see Basic Statistics).

The OECD Economic Survey of Chile recommends that Chile further reduce its dependence on natural resources, increasing its knowledge-based contribution to global value chains and boosting productivity, which has been close to zero for much of the past decade (OECD, 2015a).3 Productivity of Chilean businesses is constrained by a complex regulatory framework and administrative burden, weaknesses in the competition law and low investment in innovation (Chapter 3).

2.2. Inclusiveness of growth

Thanks to strong economic growth, per capita income increased by nearly 50% over 2000-14 to become the highest in the region. However, it is still about 40% lower than the OECD average (Figure 1.1). Rising incomes helped substantially reduce poverty: the ratio of the population considered poor (living on less than USD 3.10 a day) declined from 9% to 2.1% over 2000-13; during the same period, the ratio of those considered extremely poor (less than USD 1.90 a day) decreased from 3.1% to 0.9% (World Bank, 2015). Poverty rates are now among the lowest in the region.

Despite progress, Chile remains a highly unequal society. Income inequality, as measured by the Gini coefficient, declined slightly, but is still the highest in the OECD (Figure 1.3). Chile’s tax-transfer system is characterised by low progressivity and is significantly less effective in reducing poverty and income inequality than in other OECD member countries (Figure 1.3). The concentration of income among the richest 1% of the population is by far the highest in the OECD, which is linked to the prevalence of family-based business conglomerates (OECD, 2015b).4

The labour market performance has been generally good, with a lower unemployment rate than in the OECD as a whole (see Basic Statistics). Youth unemployment stood at 16% in 2013, which is equivalent to the OECD average. Although women’s participation in the labour market is rising, it remains among the lowest in the OECD. Considerable differences remain in the type and quality of jobs held by women; between 2006 and 2011, the gender wage gap widened from 4% to 16% (OECD, 2015a, 2014a). The government is striving to address inequality and improve social mobility, including through reforms of the tax system, the education system and the labour market.

While population density is relatively low (see Basic Statistics), 85% of Chile’s population concentrates in urban areas (INE, 2015). Nearly 40% of people live in the Santiago Metropolitan Region; Valparaíso and Concepción, Chile’s second biggest cities, each host 5% of the population. Chile’s peculiar geography, with desert land in the north, mountainous terrain throughout the country and ice in the south (Section 5), results in a demographic concentration that is almost twice the OECD average, surpassed only by Iceland. Economic concentration (geographic concentration of GDP and per capita income) is the highest among OECD member countries (OECD, 2015b, 2014b).

Access to key public services has improved since 2000. Lower secondary education is now virtually universal and enrolment rates for higher education have increased. The quality of education also improved. Scores from the Programme for International Student Assessment (PISA) are the highest in the region, yet still below most OECD levels. High quality of education is, however, often reserved for well-off families, which constrains social mobility (OECD, 2015b). The ongoing education reform aims to improve equal opportunities for accessing quality education and reduce skills gaps across socio-economic groups. Investment in public health care provision and the supply of health workers increased, but is low compared with other OECD member countries. Life expectancy stood at 78.8 years in 2013,5 a gain of two years since 2000 and only slightly below the OECD average (see Basic Statistics).

2.3. Well-being and environmental awareness

Subjective well-being has improved: the percentage of Chilean people declaring to be very satisfied with their lives increased from 42% to 55% between 2007 and 2012, which is above the OECD average (OECD, 2014c). Notwithstanding, Chile performs well in only a few measures of well-being relative to most other countries in the OECD Better Life Index; it also ranks last in environmental quality, which is driven by very low scores in some northern regions. Other major constraints to life quality are relatively low disposable income, education and housing (Figure 1.4).

Environmental awareness is high. Two out of three Chileans report being “very concerned” about environmental issues (UNAB-IPSOS, 2012). According to the first National Survey on the Environment, air pollution is conceived as the biggest environmental problem (see Section 3.3), followed by urban waste and noise pollution (Figure 1.5). More than 80% of the population would support measures to reduce air pollution in their cities such as restricting vehicle circulation or firewood heaters (MMA, 2015a). Traffic is the main source of noise pollution in urban areas; more than half of the population is exposed to noise levels above maximum limits recommended by the OECD and European Union, with potentially high health impact (MMA, 2012).6 The environmental impact of mining dominates environmental concerns in northern Chile (MMA, 2015a).

3. Transition to an energy-efficient and low-carbon economy

3.1. Energy structure, intensity and use

Energy mix

Chile’s energy mix relies predominantly on fossil fuels (oil, natural gas and coal), which accounted for 68% of total primary energy supply (TPES) in 2014 (Figure 1.6). Energy generation from renewable sources has increased since 2000, but has not kept pace with growth in total energy demand. With limited domestic resources, Chile imports most oil, natural gas and coal, which makes it vulnerable to price volatility and supply interruptions.7 Energy security remains, therefore, high on the policy agenda (Chapters 3and 4).

Oil is the most important energy source (Figure 1.6). As in many OECD member countries, oil is predominantly used as a transport fuel, but is also used as a substitute for natural gas in power generation. Use of natural gas decreased notably in the mid-2000s due to import supply shortages (Figure 1.6).8 Since the second half of the 2000s, coal has met much of the growth in electricity demand; it accounted for 37% of electricity generation and 18% of the energy mix in 2014. Coal is extensively used in the north of the country for power generation, mainly for the mining industry (IEA, 2015). As a result, electricity generation in Chile is more carbon-intensive than in most other OECD member countries (Figure 4.6).

Energy production from renewable sources has doubled since 2000, reaching 32% of TPES in 2014. This is among the highest shares in the OECD and well above the OECD average (see Basic Statistics; Annex 1.A). Biomass is the dominant renewable source, mainly in the form of firewood for residential heating and notably in the isolated southernmost region; this, however, has significant impacts on air pollution and public health (Section 3.3). Hydropower is the main renewable source for electricity generation, especially in central Chile. It accounted for 32% of electricity generation in 2014, compared to the OECD average of 13% (IEA, 2015). Other renewables such as solar and wind still play a marginal role (Figure 1.6), though their deployment is increasing rapidly. As Chapters 3and 4 discuss, Chile has favourable conditions to deploy renewables and its supportive regulatory framework has encouraged massive investment in the sector.

Energy intensity

The energy intensity of Chile’s economy (TPES per unit of GDP) has decreased to slightly below the OECD average (see Basic Statistics; Annex 1.A). Total energy used by the economy (as measured by the TPES) grew by 54% between 2000 and 2014, but this was slower than GDP (Figure 1.6). TPES per capita is significantly below the OECD average, reflecting the remaining income gap. It increased by 34% over 2000-14, while the OECD average decreased by 10% (IEA, 2015).

Mining and other industry together account for the largest share of energy use (38%), followed by transport and the residential sector (Figure 1.7). Energy demand in the industrial sector increased by 50% over 2000-13, driven by the energy-intensive mining industry and paper and pulp production. Projections indicate that the mining industry’s electricity consumption alone may double until 2025.9 Energy demand in the transport sector also increased strongly (44%) (Figure 1.7), and is projected to rise by roughly 50% until 2035. Energy consumption in the commercial and public services sector has more than doubled since 2000, reflecting expanded use of heating and air conditioning (Figure 1.7).

3.2. Greenhouse gas emissions

Chile’s greenhouse gas (GHG) emissions, excluding land use, land-use change and forestry (LULUCF), increased by 23% between 2000 and 2010 (Figure 1.8). While this increase is less than half the GDP growth in the same period (+50%), it remains one of the largest among OECD member countries (Annex 1.B).10 Compared to 1990, Chilean GHG emissions had almost doubled (+84%) by 2010. CO₂ is the largest component of GHG emissions in Chile, accounting for 77% of total emissions in 2010. Methane (CH₄) and nitrous oxide (N₂O) account for the remaining 23%, which is larger than the OECD average and reflects the importance of agriculture and the prevalence of landfilling of waste.

Energy production and consumption remain the largest and fastest growing sources of emissions, accounting for three quarters of total GHG emissions in 2010. About 30% of energy-related emissions, or 23% of total GHG emissions, come from the transport sector alone, reflecting a rapid rise in road transport demand and vehicle fleet. CO₂ from energy use increased even faster than TPES, largely due to the shift from natural gas to more carbon-intensive fuels (coal and diesel) for electricity generation in the second half of the 2000s (Figure 1.8). Yet the carbon intensity of the economy (measured as the ratio of CO₂ emissions from fuel combustion over GDP) declined in 2000-13 and remains slightly below the OECD average (see Basic Statistics). CO₂ emissions per capita were among the lowest in the OECD (Annex 1.B).

Agriculture generated 15% of total GHG emissions in 2010. It was the second largest source of emissions, reflecting the country’s strong agricultural sector. LULUCF absorbs roughly 50 million tonnes of CO₂ per year. After a 30% decline in emissions removed by LULUCF over 2000-07, the absorbed volume turned back towards 2000 levels. This has been attributed to an increase in forest areas through tree plantations, as well as less forest harvesting (MMA, 2014a; see also Chapter 5). Wildfires are responsible for large yearly variations in some years (e.g. 2002).

In its Intended Nationally Determined Contribution (INDC) to the United Nations Framework Convention on Climate Change (UNFCCC), Chile pledged to reduce GHG emissions per unit of GDP by 30% by 2030 relative to 2007, if economic growth is maintained at current levels (excluding LULUCF, which has separate targets). The share will be increased to 35-45% if there is sufficient international financial support. Chile has launched a series of programmes and measures to reduce GHG emissions and adapt to climate change, which are discussed in Chapter 4.

3.3. Air emissions and air quality

Air emissions

Since 2005, emissions of most major air pollutants have increased. At the national level, the emission of particulate matter (PM_2.5 and PM₁₀) and carbon monoxide (CO) increased by roughly 10% over 2005-11, showing a relative decoupling from economic performance. Emissions of nitrogen oxides (NO_x) nearly doubled over that period, by far outpacing GDP growth (Figure 1.9). A notable exception, sulphur oxide (SO_x) emissions decreased by 20% between the peak in 2007 and 2011 (Figure 1.9).

The decrease in SO_x emissions was driven by a large reduction (-56%) in emissions from Chile’s seven copper foundries, which historically accounted for the bulk of SO_x emissions.11 This has been attributed to pollution control plans (see below), which helped foundries improve their efficiency. SO_x emissions from energy generation increased in the mid-2000s, along with the shift from natural gas to coal combustion (Section 3.1).12 They declined, however, in the second half of the 2000s, thanks to stricter emission controls set in the environmental permits for new power plants (MMA, 2012; environmental permitting is discussed in Chapter 2).

Fine particulate matter (PM_2.5) emissions stem from the extensive use of firewood for residential heating (Figure 1.9), notably in southern Chile. PM_2.5 emissions from burning of firewood increased by 17% over 2005-13. High emissions from firewood heating primarily result from bad wood quality (high humidity) and low efficiency and bad operation of heaters. Firewood and other wood-derived products are not directly regulated. The Ministry of Environment (MMA) is developing measures to reduce the use of firewood consumption, including more efficient heaters, energy-efficient housing and district heating (Chapter 3).

NO_x emissions increased across all major polluting sectors over 2005-11, namely transport (+27%), thermoelectric power generation (+77%) and industrial processes (+248%); a sharp reduction of emissions from industrial diesel combustion reversed the trend in 2012-13 (Figure 1.9).

Transport accounted for one-third of national NO_x emissions in 2013 (Figure 1.9). It is the single largest source of NO_x emissions in the Santiago Metropolitan Region, which alone accounts for 22% of national NO_x emissions. The government adopted several measures to control emissions from transport, including stricter vehicle standards,13 incentives to renew the national bus and truck fleet, and development of integrated public transport systems (Chapters 3and 4). However, NO_x emissions kept rising with the growth of transport demand, mileage driven and the vehicle fleet, which has more than doubled since 2000 (Figure 1.10). Within the total vehicle stock, the share of diesel vehicles, which emit more pollutants than vehicles running on petrol, has nearly doubled; this can be explained by the much lower tax rate on diesel than on petrol (Chapter 3).

Compared to other OECD member countries, Chile still has relatively few motorised vehicles per inhabitant (Annex 1.A). A further expansion of the fleet is to be expected, calling for the development of a comprehensive strategy to manage transport and limit associated air and GHG emissions (Chapter 4). In 2015, the government began introducing a passenger vehicle purchase tax based on a vehicle’s fuel efficiency and NO_x emissions. This is a step in the right direction and can contribute to modifying the composition of the fleet towards clean vehicles (Chapter 3).

National emission standards for thermoelectric power plants were established in 2011 (covering SO_x, NO_x, PM and mercury); and for copper smelters in 2013 (covering SO_x and arsenic emissions). No national standard exists for emissions from industrial processes, including mining processes other than copper smelting. As from 2018, Chile will tax emissions of CO₂, PM, NO_x and SO₂ from large energy and industrial facilities, mainly fossil fuel-based electricity plants, but not on copper smelters (Chapter 3).

Air quality

Poor air quality remains a major public concern across the country, particularly in large metropolitan areas, in the surroundings of large industrial and mining sites and in cities where wood burning prevails. Air quality standards exist for all major air pollutants, including for PM_2.5 since 2012, but these continue to be exceeded regularly. According to data from national monitoring stations, 44% of cities or regions surpassed the annual PM₁₀ standard, 15% the daily PM₁₀ standard, 67% the annual PM_2.5 standard and 77% the daily PM_2.5 standard (MMA, 2014c). It is estimated that more than half the Chilean population is exposed to annual average PM_2.5 concentration levels above the national standard of 20 micrograms/cubic metre (μg/m³); more than 4 000 people die prematurely each year due to cardiopulmonary diseases associated with chronic PM_2.5 exposure (MMA, 2012). On average each year, an estimated 15% of the Chilean population is exposed to more than 35 μg/m³, the second highest share in the OECD (Figure 1.11). PM₁₀ and PM_2.5 constitute the primary air quality concern in most cities, where firewood burning (in southern cities) and transport (notably in the Santiago Metropolitan Region; see Box 1.1) concentrate.14 SO_x and NO_x concentrations are elevated in areas with mining industry and thermoelectric power generation.

Box 1.1. Air pollution in Metropolitan Santiago

The Santiago Metropolitan Region faces particularly high air pollution, which is partly related to the city’s geographic location.a Average annual exposure to PM_2.5 in Santiago is higher than in any other region in Chile (Figure 1.11). The Ministry of Environment estimates that about 27 000 people suffer from air pollution-related problems each year in Santiago, causing more than 1 600 deaths per year (mostly during winter). The region’s Pollution Prevention and Decontamination Plan (PPDA) has helped improve air quality, with the number of pre-emergency days (related to PM₁₀) dropping from 37 to 3 in 1997-2014 (MMA, 2015b).b However, emissions have not substantially declined since 2009 and the PPDA’s target of meeting PM₁₀ and ozone standards by 2010 was not met. The forthcoming PPDA’s most recent update, called Santiago Respira, aims to reduce PM_2.5 emissions from transport by 78%, from residential heating by 91% and from industry by 31%. This will ultimately cut the exceedances of air quality standards by 90% in 10 years. The plan includes a ban of wood burning heaters, restrictions on the use of the most polluting road vehicles and implementation of the Euro 6 standard for public buses.

← a. Santiago is in an enclosed valley with limited wind and little rain, which favours the transformation and accumulation of pollutants from traffic, industry and residential firewood use.

← b. Environmental emergencies are declared when the Chilean Air Quality Index (ICAP) exceeds level 500 (equalling a PM₁₀ concentration of 330 ug/m³ per 24 hours); environmental pre-emergencies are declared at ICAP levels between 300 and 499 (PM₁₀ concentration levels between 240 ug/m³ and 329 ug/m³ per 24 hours).

The 1994 Environmental Basic Law requires for Pollution Prevention and/or Decontamination Plans (PPDAs) in saturated zones (areas that exceed air quality standards for the protection of human health) and in latent zones (areas that come close to exceeding these standards) (Chapter 2).15 PPDAs have been developed for ten zones throughout the country, mostly to control for excess PM pollution. However, lack of co-ordination at the administrative level, and insufficient engagement of local institutions and stakeholders, hamper effective implementation of the PPDAs (OECD, 2013a). Although the plans must be reviewed every five years, many have not been updated in a long time. In addition, several areas that exceed (or nearly exceed) national air quality standards have not yet been declared as saturated/latent zones, particularly in southern Chile, and lack PPDAs. The 2014-18 Atmospheric Pollution Control Strategy foresees the declaration of six new saturated areas and completion of 14 PPDAs addressing 87% of the national risk associated with air pollution (MMA, 2014c). As of 2015, 11 of the 14 foreseen PPDAs were either published, under public review or in design.

Since 2012, responsibility for air quality monitoring has passed from the Ministry of Health to the MMA. With a view to standardise and improve the management of air quality information, the MMA developed a National Air Quality Information System (SINCA) that integrates information from public and private networks. Coverage of the national monitoring network has expanded in recent years, but important information gaps remain, notably on PM_2.5; less than 30% of monitoring stations report to SINCA (Toro et al., 2015). Data on air emissions improved following a 2005 Ministry of Health decree stipulating mandatory declaration of emissions from facilities in a wide range of economic sectors, as well as with the implementation of the Pollution Release and Transfer Register (PRTR), which contains an inventory of over 7 000 stationary sources of air pollution (Chapter 2).

4. Transition to a resource-efficient economy

4.1. Material consumption

Chile’s economy is among the OECD’s most resource intensive. Domestic material consumption (DMC)16 grew by 36% over 2000-10, compared to an average decrease of 7% in OECD member countries. Although Chile’s material productivity (GDP per DMC) improved by 10% in the 2000s, it remained the lowest in the OECD in 2010 (Annex 1.C). While metals accounted for 80% of DMC in 2010, fossil fuel consumption has registered the strongest increase since 2000, reflecting the increase in conventional energy generation (Figure 1.12). Chile’s dependence on fossil fuel imports increased over time, as did its dependence on primary goods exports (Figure 1.12).

4.2. Waste management

Waste generation, disposal and recycling

With increased economic activity and private consumption, total waste generation increased by 28% between 2000 and 2009. Industrial waste and municipal solid waste (MSW) grew roughly at the same pace of 3% per year (Figure 1.13). Per capita MSW remains low compared to OECD levels (Annex 1.C), but is higher than in regional peers such as Mexico and Brazil (MMA, 2012); this reflects differences in per-capita income levels and consumption. Roughly half of MSW is generated in the Santiago Metropolitan Region, where most people live (MMA, 2015b). Most hazardous waste stems from the exploitation of mines and quarries (42%) and manufacturing industries (35%) (MMA, 2012).

Landfills absorbed more than 96% of total collected waste in 2010/11, while 4% was recovered for reuse, recycling and composting. In 2015, about 25% of total landfilled waste was disposed of either in inadequate landfills (which comply with regulation dating from 1980) or in uncontrolled garbage dumps, compared to nearly 40% in 2009 (CONAMA, 2010). Only 30% of municipalities had access to a sanitary landfill in 2010, but the government aims to bring this percentage up to 75% by 2020.17 It foresees doubling the number of sanitary landfills in the country (Fernández, 2013; see Chapter 3).

Recycling is negligible in Chile. Collection rates of tires (15%) have improved following a voluntary agreement signed between the government and the four largest tire producers. Recycling rates are higher for selected products, such as batteries (52%) and paper/carton (52%), which is mainly linked to high market prices within the informal sector. It is estimated that 60 000 waste pickers, who earn their living by informally collecting recyclables and selling them to private recycling companies, contribute to 60% of recycling in Chile (El Dinamo, 2014). Informal recyclers work in parallel with the formal waste management system, although some privately operated recycling centres integrate waste pickers into the formal retail sector. Some municipalities pioneered formal recycling schemes through contracts for differentiated collection, but the scale is often too small for recycling to be a profitable business (Chapter 3). Waste management services remain inadequate in most municipalities; about 80% of municipalities do not have a waste management plan, which is largely due to resource constraints of smaller local authorities (Chapter 3).

A long overdue Waste Framework Law, which is expected to be adopted in 2016, aims to expand the policy focus from waste collection and disposal in sanitary landfills to waste reduction and reuse. The law will introduce a system of extended producer responsibility for a wide range of environmentally harmful products (Box 1.2). Full implementation of the law would significantly help reduce the volume of landfilled municipal solid waste and the related financial burden on local governments (Chapter 3). In addition, the MMA initiated the development of a policy for waste prevention and recovery in 2015 that would promote resource productivity, recovery of organic waste, data collection and citizen awareness.

Box 1.2. Extended producer responsibility

The draft Framework Law for Waste Management aims to introduce a system of extended producer responsibility for nine product lines: tyres, lubricating oils, batteries, electrical and electronic equipment (including lamps), pharmaceuticals, expired pesticides, paper, packaging and end-of-life vehicles. The Ministry of Environment expects to establish specific recovery and recycling targets through implementing decrees for each product group before 2020. The draft law will allow producers to meet their product recovery and recycling obligations through either individual arrangements or collective management schemes. The ministry should give implementation priority to the most environmentally harmful products so as to avoid the environmental and health risks associated with their landfilling. The law is designed to fill gaps in Chile’s waste management framework and would not repeal any existing waste-related laws or regulations.

A revised regulation on hazardous waste management and a new regulation on the transboundary movements of waste are also expected to be enacted in 2016. The latter will implement the Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and their Disposal, which Chile ratified in 1998.18 The swift adoption and implementation of these regulations, and of the waste management law and policy described above, are key steps towards compliance with seven OECD Council Acts on environmentally sound waste management practices and transboundary movements of waste. Chile has complied with the remaining two waste-related acts.

Mining waste and contaminated mining sites

Waste generated from ore extraction contains chemicals and heavy metals, which pose serious risks to human health and ecosystems when released to the environment. High risks are also associated with acid mine drainage (outflow of acidic water from mines) and damage to tailing ponds, where hazardous mining waste is stockpiled, due to earthquakes, heavy rainfalls and landslides. Large volumes of tailings have already contaminated soil, surface water and groundwater, and some have been discarded into the Chilean Pacific Ocean, with potential negative impacts on marine biodiversity (Chapter 5). The projected increase in mining production calls for systematic assessments of soil and water contamination from mining activities, which currently are limited.

The inventory of abandoned mining sites, last updated in 2015, reported 651 abandoned and/or inactive mining sites, dozens of which pose an environmental hazard. The 2012 Mining Closure Law strengthened regulation on the management of mining waste and environmental liabilities, as discussed in more detail in Chapter 2.

4.3. Chemicals management

Regulatory systems for several types of chemical products, including agricultural pesticides and biocides, have been in place for a number of years and Chile has developed the technical capacities to test, assess and manage these substances. The National Policy on Chemical Safety was reformulated in late 2012 and updated for the period 2015-19. Progress has been made in protecting the environment from harmful effects of specific chemicals like polychlorinated biphenyls (PCBs) and in applying the polluter-pays principle to accidental pollution.

However, further efforts are needed to establish a consistent framework for the sound management of chemicals. Important gaps remain as regards the legal and institutional system for industrial chemicals. As no chemical inventory is available yet, a lack of information exists on the potential risks from imported, produced and used chemicals (except for imports of hazardous substances). The implementation of the Chilean Chemical Substance Reporting System and of the Globally Harmonized System of Classification of Chemicals (GHS) should be stepped up as a matter of priority. Making progress towards full compliance with the OECD Council Acts will require taking a more systematic approach to chemicals management and strengthening capacity for testing and assessing risks from industrial chemicals.

4.4. Ozone-depleting substances

Chile, which ratified the Vienna Convention and the Montreal Protocol in 1990, has complied with related targets to diminish the consumption of ozone-depleting substances (ODS). Since 2000, total ODS consumption decreased by 73% (Figure 1.14); the gradual phase-out of chlorofluorocarbons (CFCs), completed by 2010, drove this considerable reduction. Methyl bromide, which is used as a pesticide and accounted for 70% of total ODS in 2014, has remained stable since 2005; it was phased out by 2015 as import restrictions became effective.19 Chile is particularly vulnerable to ozone layer depletion, given its near location to the Antarctic Ozone Hole, and is developing several ozone layer monitoring initiatives (MMA, 2012).

The use of hydro chloro-fluorocarbons (HCFCs), which have less potential to deplete the ozone than CFCs but are more likely to contribute to global warming, increased by about 30% over 2000-13, but slightly decreased in 2014 (Figure 1.14). In compliance with the Montreal Protocol, an HCFC phase-out plan was adopted in 2011 with the aim to freeze consumption in 2013 at 2009/10 levels, and to gradually phase out its use by 2040. Chile introduced an HCFC regulatory system that includes import quotas and a licensing system, sectoral support programmes, and monitoring and awareness-raising programmes. Chile also collaborates with the United Nations Environment Programme (UNEP) to reduce HCFCs in the retail sector.

5. Managing biodiversity and water

Chile’s continental territory hosts a variety of climates, ecosystems, vegetation and land-use patterns. The north of the country is extremely dry; a temperate Mediterranean climate prevails in central and southern Chile where vegetation is richer and river valleys and fertile soil encourage farming and, at higher altitudes, extensive forestry. The extreme south has a snow-prone Alpine climate, with glaciers and fjords providing good conditions for fishing and fish farming (Chapter 5).

5.1. Ecosystems and biodiversity

As Chapter 5 discusses, the expansion of planted forests, agricultural land and urban area are among the major pressures on Chile’s biodiversity. Other threats include illegal logging, the introduction of exotic species, high pesticide and fertiliser use, forest fires, water scarcity and pollution, and climate change. Aquatic ecosystems are vulnerable to eutrophication, water shortages resulting from river diversion for irrigation and other human activity, and water infrastructure development. More emphasis on mainstreaming biodiversity considerations into decision making is needed as economic activity expands and conflicts over use of water, land and other natural resources intensify (Chapter 5).

Chile hosts globally significant ecoregions, such as the Valdivian temperate rainforests, and 127 terrestrial ecosystems, about 13% of which are considered under threat. These threats are particularly apparent in central Chile where the rate of vegetation loss has been particularly high over the past 20 years (Chapter 5). Forest cover has expanded since 2000, to about 23% of the country’s total land area (FAO, 2015). Forest plantation of non-native tree species, however, has increased pressures on native vegetation and contributed to water scarcity (Chapter 5).

Information about the loss or alteration of inland water and marine ecosystems is limited (MMA, 2014d). It indicates, however, that quality and quantity of water in many rivers, lakes and wetlands have been deteriorating. Chile’s extensive coastline comprises one of the most productive marine ecosystems in the world. Indeed, according to the Ocean Health Index, Chile has been relatively successful in maintaining marine biodiversity compared to other Latin American countries (Ocean Health Index, 2015). A major fishing country, Chile introduced a tradable fishery quota system in 2001. This has helped address severe depletion of its fish stock by reducing fish catches by 64% between 2004 and 2013 (Figure 5.11). By contrast, aquaculture production, a major source of water pollution (MMA, 2012), almost tripled over 2000-12 (Chapter 5).

Chile’s distinct topography and geographic isolation result in a relatively low diversity of flora and fauna species compared to some other South American countries, but also in a high degree of endemism. Between 22% and 25% of the almost 31 000 described species in Chile are endemic (found nowhere else in the world) (MMA, 2014d). More than 60% of the 1 000 species classified in Chile are considered threatened, mostly marine fish, vascular plants and bird species (Figure 5.4). Considerable knowledge gaps on species conservation remain, however, as only 3.5% of all species known in Chile have been classified (Chapter 5).

Protected areas

Official protected areas cover about 19.5% of Chile’s land area (including inland waters). This surpasses the Aichi target of protecting at least 17% by 2020, established under the United Nations Convention on Biological Diversity (CBD).20 Since 2000, Chile has expanded the surface of protected land by nearly 7%. The majority of protected areas are classified within the highest protection level categories (nature reserves and national parks). Chile has the third highest share of total land area within national parks in the OECD (Figure 5.6; see Chapter 5).

As Chapter 5 discusses, protected areas are not equally represented across ecosystems and regions. Official protected areas do not cover several vulnerable ecosystems, notably terrestrial ecosystems in the centre and the north of the country and wetlands (MMA, 2014d). More than 80% of protected areas are located in the two southernmost regions (Aysén and Magallanes) and cover large extents of ice and rock.

The surface of marine protected areas expanded to reach 4.3% of total marine area in 2015, with the establishment of an extensive marine park around the Sala-y-Gómez Island. In October 2015, the environment ministry announced the establishment of an extensive marine park around the oceanic islands known as the Desventuradas. This will bring protected areas to 24% of total marine area, well beyond the Aichi target of 10%. Yet protected marine areas along the continental edge remain marginal and should be expanded (Chapter 5).

5.2. Management of water resources

Water resources

Numerous rivers cross Chile, providing plenty of water resources and considerable hydropower potential. Chile also has a significant volume of underground resources, as well as reservoirs in the form of lakes and notably glaciers, the primary water sources feeding Chilean rivers. Water resources are not homogenously distributed across the country, however, with annual average water availability ranging from 52 m³ per person in Antofagasta (northern Chile) to nearly 3 000 000 m³ in Aysén (the scarcely populated southern Chile) (World Bank, 2011); this leads to distinct water management challenges in different parts of the country. On average, Chile endows about 56 000 m³ of renewable freshwater resources per capita, the fifth highest value in the OECD (OECD, 2015c).

Water demand exceeds supply in various regions, notably in the arid north, where most of the water-intensive mining takes place. Increasingly, it also exceeds supply in the central parts of the country, where agricultural production is concentrated (Figure 1.15). Accentuated by seven consecutive years of drought, this structural water supply deficit has led to severe water shortages in numerous municipalities (Chapter 3).21 The situation is expected to worsen with economic growth, increased water use and the predicted reduction of rainfall and glacier reservoirs from climate change (MISP, 2015). Since 2005, the General Water Directorate (DGA) has monitored groundwater withdrawals. Limited human, technical and financial resources, however, result in significant gaps in the registry of wells and measurements of extraction and recharge balances (Hearne and Donoso, 2014).

The majority of water abstraction (about 89%) is for non-consumptive use, namely hydroelectric power generation (MISP, 2015).22 Agriculture, which accounted for half of groundwater use and most of surface water use (Figure 1.16), dominates consumptive use. Most irrigation areas (72%) still rely on relatively old irrigation techniques, resulting in low efficiency compared to other OECD member countries (OECD, 2013b; see Chapter 5).

Rising water tariffs helped reduce drinking water consumption per urban household by 18% between 2000 and 2013, while total consumption of drinking water grew by 17% (Chapter 3). During the same period, the amount of water abstracted for public water production increased by 23%, which points to inefficiencies in distribution: water losses increased by 35% between 2000 and 2013, when leakages exceeded one-third of production (Figure 1.16). Groundwater supplies two-thirds (67%) of drinking water (MISP, 2015); public water supply accounts for about one-third to total groundwater use (Figure 1.16).

Freshwater abstraction in the mining sector has grown moderately (by 4% over 2009-14) and less than total mining production. Water scarcity has encouraged investment in more efficient water use, closed loop water systems and alternative water sources, notably desalination (Cantallopts, 2015; see Chapter 3). Despite greater water efficiency, water needs for mining are expected to rise by 40% over 2014-25 due to growing production and declining ore grades.23 Seawater use is projected to expand massively to meet these needs, resulting in increasing energy demand and potentially negative impacts on ecosystems and biodiversity (Chapter 5).

According to the 1981 Water Code and its 2005 reform, the allocation and use of water resources are based on a system of tradable private water-use rights (Box 1.3). This approach aims to set a price that reflects the real opportunity cost of the water resource, thereby achieving an efficient reallocation of water from low value to higher value activities. Distortions in allocation rules and practices, however, have led to over-allocation and extreme concentration of water-use rights (DAAs).24 This has exacerbated over-exploitation of some aquifers in northern and central Chile (MMA, 2012), drinking water shortages in rural villages and conflicts among local communities (including indigenous communities), farmers and mining and hydropower companies (Box 1.3).

Box 1.3. Chile’s market of water-use rights

The 1981 Water Code, as reformed in 2005, defines water resources as “national property for public use”. The General Water Directorate (DGA) allocates water-use rights (DAAs) to users upon request, free of cost and for life (they are inheritable). In case there is more than one request over the same water source and not enough resources to satisfy them all, the water right is allocated via a tender process. Water-use rights, which are separate from land titles, can be freely traded.

Water rights are issued without specification of water use or good water management obligations. This, together with water rights being granted for free, has encouraged speculation and hoarding of DAAs. Consequently, water resources available for allocation have declined, although the water rights are not actually being used. Only water rights registered with the DGA can be traded, but many are not – only 20% of water rights and 50% of transactions had been recorded in the late 2000s (World Bank, 2011). In addition, in 110 aquifers, user rights have been granted beyond the aquifer recharge capacity (over-allocation), which has led to a dramatic decrease of the water table.

The 2005 reform of the Water Code enabled the DGA to restrict groundwater use to preserve the resilience of aquifers and set minimum ecological flow requirements for newly allocated water rights.a Of 238 hydrological sectors surveyed in 2010, 45% were declared restricted areas (i.e. temporarily restricting the exercise of water-use rights), while new groundwater abstraction was prohibited in six hydrological sectors. Such site-specific restrictions can be effective in addressing the risk of water shortage in aquifers. However, it is not clear how well these restrictions and the minimum ecological flow requirements are enforced; existing user rights do not allow for meeting the minimum flow in half of the river basins in northern Chile.

The 2005 reform also introduced a “tax for the non-use” of water rights, levied on DAAs that are not actually used (for which a water intake has not been constructed).b The tax aims to discourage speculation and hoarding of rights. Tax rates increase based on how long the rights stay unused and water scarcity (with higher rates in northern regions). Holders of small use rights are exempt. The tax has helped reactivate water markets, but not to the extent hoped. In 2007-10, 12% of DAAs for consumptive uses and only 0.1% of DAAs for non-consumptive use (hydropower) were sold on the market or started to be actually used. In general, tax rates have been too low compared to the DAA market prices to stimulate sale of rights. Hydropower companies have tended to keep their DAAs to prevent entry of new players in the electricity market (Valenzuela et al., 2013). Increasing tax rates, which would improve tax effectiveness, has been under discussion for years. The tax, however, creates perverse incentives to waste water and discourage registration of DAAs, as only registered DAAs are liable to pay the tax.

The water market has gradually expanded since the 2005 reform. Nearly two-thirds of the DAAs in circulation have been granted since the reform and 60% of transactions have occurred since then (Cruz, 2014). Most transactions have occurred among farmers, although many of them maintain surplus DAAs to mitigate the risk of drought. There has been limited inter-sectoral trading (Hearne and Donoso, 2014). Average prices are decreasing from north to south, indicating that prices are capturing the relative scarcity of water. However, there is a great dispersion of prices, which suggests a lack of transparency about trading and prices (Cristi, 2011).

Overall, speculation and the hoarding of water-use rights have been reduced, freeing up water to be accessed by a broader number of potential users and thereby improving the equity of allocation (OECD, 2015d). However, historical over-allocation and concentration of DAAs remain, as do market and information failures. Making transactions, mortgage and eligibility for irrigation subsidies conditional to registration has not created sufficient incentives to regularise and register the user rights. Overlapping claims on water rights remain, including unsettled claims by indigenous people. High transaction costs and insufficient transparency and information (about water availability, potential buyers and sellers, and prices) limit the efficiency of the water market and exacerbate tensions.

← a. Minimum ecological flows aim to preserve the hydrological and ecological functions of rivers, e.g. by preventing rivers from drying-up or significantly altering their physical regimes. The minimum ecological flow was set at 10% to 20% of the annual average flow rate in 2012, and replaced in 2014 by a more flexible 50% of monthly river flow rates, while the 20% cap has remained. These definitions are commonly used in environmental impact assessments of hydroelectric projects.

← b. However, the mere existence of a water intake infrastructure does not ensure that the water is actually abstracted and used.

A new set of amendments to the Water Code, proposed in 2011 and under parliamentary discussion at the time of writing, requires that new water rights be temporary (maximum 30 years) and do not undermine the resilience of freshwater systems; it identifies priority water uses, namely human consumption and sanitation, when granting new rights and, in exceptional cases only, for existing rights; it introduces provisions for termination and forfeiture of non-used rights; and it strengthens restrictions in the exercise of user rights in the public interest (e.g. in case of drought). These steps are in line with the recommendations of the OECD study on water resource allocations (OECD, 2015d).

In addition, Chile should improve market transparency. It should consider introducing effective and enforceable abstraction limits that reflect environmental requirements and sustainable use, making sure that water rights and trading arrangements are consistent with such limits (OECD, 2015d). Efforts should focus on developing the knowledge base on risks for water resource availability and quality and their potential economic, environmental and social consequences. This would help determine the effective availability of water for allocation, beyond that needed for ensuring the resilience of water systems, and better inform decisions about priority uses. Chile’s multi-stakeholder water roundtables can be a useful forum to help identify risks and policy priorities.

Water quality

In the far south, where most lakes and lagoons are located and where population densities are low and economic activities limited, water quality is generally very good. However, in central Chile, limited access to tertiary wastewater treatment and large agricultural runoff have caused eutrophication of coastal lakes, wetlands and estuaries (Chapter 5). Mining activity has led to elevated copper and salinity levels in some rivers. In the northern regions, mining effluent adds to naturally high concentrations of heavy metals and sulphates in surface water, which often exceed permissible or recommended limit values (MMA, 2012).

Since 2010, Chile has adopted secondary surface water quality standards (designed for ecosystem protection) for four river basins and two lake catchments.25 However, such standards have yet to be introduced for most river basins in northern Chile, which are the worst affected by mining activities (Chapter 5). There is no water quality standard for groundwater other than for aquifers intended for drinking water supply. Standards for sewerage discharges apply throughout the country, but are not linked to the water quality in the receiving water bodies; standards for industrial discharges are being updated. PPDAs must be developed for areas that fail to meet one or more quality standards, fully (saturated areas) or in part (latent areas). The DGA monitors water quality, but monitoring data are insufficient to adequately characterise the status of water bodies and coastal areas (World Bank, 2011) and enforce the water quality standards. This partly explains why no saturated or latent areas have been declared yet. A water quality and ecological information platform is currently being developed.

Access to water supply and sanitation

Nearly all the urban population has continuous access to potable water. Water and sanitation utilities have massively invested in the expansion of urban wastewater treatment facilities (Chapter 3), which served 96.6% of the urban population in 2014 (Figure 1.17). This is high compared to regional peers, although only two-thirds of urban dwellers were connected to advanced (secondary and tertiary) treatment in 2011; this is low by OECD standards. Most wastewater treatment plants do not remove nutrients in urban wastewater. Some municipalities discharge wastewater at sea using submarine outfalls after only primary treatment.

Official data on access to water supply and wastewater treatment in rural areas – where about 15% of the population lives – are lacking. Rural wastewater treatment systems depend on public subsidies and have deteriorated over time (Donoso, 2015; see Chapter 3). The Rural Potable Water programme aims to achieve universal access to potable water in “semi-concentrated” and “dispersed” rural localities by 2035, which register very low access levels (MOP, 2012).

Recommendations on air, waste and water management

Air quality management

Develop Pollution Prevention and Decontamination Plans (PPDAs) for all areas that do not comply with air quality standards, and evaluate and update those that already exist; closely engage local authorities in the design, implementation and evaluation of specific policy measures within each PPDA.
Continue to improve the air quality monitoring network and ensure that air pollution information is made available to the public.

Waste management and circular economy

Adopt the draft waste framework law at the earliest opportunity and implement extended producer responsibility schemes for key types of environmentally harmful products.
Update and implement regulation on hazardous waste management and transboundary movement of waste to comply with international best practice.
Encourage waste prevention, recycling and recovery of products not covered under the planned extended producer responsibility schemes (e.g. organic waste), including by: i) making greater use of charges and taxes on generated waste; ii) considering fiscal incentives for recycled products; iii) reviewing the incentives and funding mechanisms for waste management in small municipalities; and iv) raising awareness among citizens.

Water management

Introduce a risk-based approach to water resource management by developing the knowledge base on water risks to inform decision making; consider enhancing the role of water roundtables to resolve water conflicts.
Design and implement further reforms of the water allocation regime to ensure an effective and enforceable cap on abstractions that reflects environmental and ecological requirements and sustainable use; establish “essential” water uses (such as public water supply, sanitation and ecosystem services) as a high priority use; speed up the regularisation and registration of water-use rights to make the public register on water rights fully operational and transparent; consider auctioning the allocation of new rights (for systems that are not already over-allocated); strengthen enforcement and sanctions for illegal abstractions.
Develop a strategy to address over-allocation in basins and aquifers where water-use rights exceed the sustainable capacity of the water body.
Continue expanding coverage of water quality standards and accelerate implementation of the planned water quality and ecological information platform, with a view to systematically collecting and publishing water quality data; improve monitoring of soil contamination, as well as of water abstraction to protect ecosystems, notably wetlands.

References

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Annex 1.A. Energy and transport data

Annex 1.B. Climate change and air pollution data

Annex 1.C. Waste and resource management data

Annex 1.D. Biodiversity and water data

Notes

← 1. The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law.

← 2. Other abundant minerals and metals include molybdenum and manganese (by-products from copper mining), lead, zinc, iron, gold and silver.

← 3. Although outside of the mining sector, total factor productivity growth has been positive.

← 4. The top 1% of the population holds 21% of total income; while the bottom 40% holds less than 1.7% of total income (OECD, 2015a).

← 5. Female life expectancy stood at 81.4 years in 2013 (compared to an OECD average of 83.1); male life expectancy stood at 76.3 years (compared to an OECD average of 77.8).

← 6. Chile was the first country in Latin America to develop “noise maps” for selected major cities, including Antofagasta and Providencia (2009) and then Santiago (2010), to determine population exposure to noise levels (MMA, 2012). High exposure to traffic noise has severe health impacts, including on cardiovascular health and cognitive functions (EEA, 2010).

← 7. The limited domestic oil and natural gas resources are located in the Chilean Magallanes and Antarctic region, while coal reserves are located in central and southern Chile.

← 8. The steep fall in natural gas in TPES between 2006 and 2008 was caused by a progressive curtailment of natural gas supplies from Argentina, which was the only supplier that time.

← 9. Energy consumption of copper mines increased by 60% over 2005-14, driven by both production growth and structural changes in the industry (notably, declining ore grades,increasing rock hardness and extraction at increasingly greater depth and distance, which drive up energy intensity in the production process). Even though the industry saw energy efficiency gains, the processes with the highest energy demand (open pit mining and concentration) have increased their energy use per tonne extracted. The Chilean Copper Commission projects that electricity consumption by the copper industry, the largest mining segment, will increase by 96% to 118% over 2013-25 (Cochilco, 2014).

← 10. The increase for Chile refers to 2000-10, while increases for other OECD member countries in Annex 1.B refer to 2000-12.

← 11. Ore smelting is the highest-impact mining activity in terms of air quality. Copper foundries accounted for nearly 60% of total SO_x emissions over 2005-11.

← 12. Pollutant emissions from coal-fired power plants are significantly higher than in combined-cycle power plants using natural gas.

← 13. The Euro 5 standards for new light duty diesel vehicles and petrol cars were introduced in 2012 and 2014, respectively.

← 14. NO_x emissions are precursors of PM, i.e. they react in the atmosphere to form PM.

← 15. Latent zones are declared where pollutant concentrations are above 80% of the air quality standards.

← 16. DMC is the sum of domestic raw materials extraction used by an economy and their physical trade balance (imports minus exports of domesticraw materials and manufactured products).

← 17. The target is set in the National Health Strategy to Achieve the 2011-2020 Health Objectives. The strategy served to provide conditions for the implementation of the 2007 Ministry of Health regulations on the sanitary design of landfills.

← 18. It provides for export requirements (including financial guarantees), control procedures and sanctions in the case of non-compliance, in addition to a platform for information exchange between concerned authorities.

← 19. Chile does not produce ODS and hence imports all consumed ODS. The import of CFCs, halons and carbon tetrachloride have been prohibited since 2010; the import of methyl bromide has been prohibited since January 2015.

← 20. Official protected areas refer to those areas administered by public institutions, including the National Forestry Corporation, the National Fishing and Aquaculture Service and the Ministry of Environment. They include: national parks, national reserves, nature sanctuaries, natural monuments, marine reserves, marine parks and multiple use marine coastal protected areas. The government estimated the total area under some form of protection at almost 40% of the territory.

← 21. In 2014, for example, a water shortage was declared in 41 municipalities and an agricultural emergency in 54 municipalities in central Chile (MISP, 2015). Emergency measures, such as using cistern trucks for securing water supply, implied high costs for local authorities’ budgets.

← 22. Hydroelectric power generation is a non-consumptive water use, as most of the water abstracted for this purposegoes back into the water source as a return flow.

← 23. Lower ore grades make the extraction and processing of copper more difficult and typically lead to increased use of chemicals, water and energy per produced tonne.

← 24. For example, only three companies possess 90% of water rights for power generation nationwide (Larrain and Schaeffer, 2010).

← 25. Secondary water quality standards regulate biological contamination, nutrient levels (nitrogen, phosphorus), heavy metals, and toxic contaminants (phenols, polycyclic aromatic hydrocarbons, organic halogen compounds and some pesticides).