THAT WAS EASY:

The Chilean government went into full crisis-management mode. The first, obvious step was to end Chile's dependence on Argentinian gas. We accelerated construction of a liquefied natural gas terminal and began building a second facility. LNG storage capacity could not be built overnight (the first Chilean facility would not be completed until 2009), but once vaporizers were installed, regasification could proceed while ships provided temporary storage.

We also accelerated the expansion of solar and wind power. When the Argentine gas shock came, what had been viewed as an opportunity to be seized in the future suddenly became an urgent imperative. The government passed the first law in Latin America regulating renewable energy and started providing risk-mitigation guarantees to new private suppliers, so that smaller hydro, solar, and wind projects could come online.

But, because not all new energy supplies could be green, the government also reluctantly pushed for some industrial plants and electricity generators to be converted back to burning diesel. This was dirty and expensive, but it was deemed acceptable as a short-run measure to bridge the supply gap while new hydro, solar, and wind facilities were built.

Even then, the new supply sources were not enough to keep total energy consumption at pre-crisis levels, so the government launched a national energy-efficiency campaign. It distributed low-consumption light bulbs, provided funds to improve insulation in homes, extended summer daylight savings hours, and worked with electricity companies to provide transitory subsidies to firms that lowered consumption. Total electricity use fell by 10% over the course of 2008.

Crucially, the Chilean government was able to resist political pressures to cap the domestic price of electricity and oil. Trying to reduce consumption while artificially holding down prices would have made no sense. To offset the impact of higher energy prices on family budgets, we provided poor households with cash transfers and subsidies roughly equal in value to their additional energy expenses. Because the Chilean public sector had very low public debt and massive dollar reserves, these additional expenditures did not involve any macroeconomic or financial dislocation.

Aside from its greater economic might, Germany today has three advantages that Chile lacked. 

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