IEA publishes first-ever Latin America Energy Outlook report, argues the region "can play an outsized role" in the green energy transition

On November 8th, the International Energy Agency unveiled its first-ever in-depth report on the current energy landscape and sustainable potential in Latin America and the Caribbean. According to the organization, the region "is well placed to thrive as clean energy transitions move forward and to contribute to global energy security and climate goals".

"Latin America and the Caribbean today represent 8% of the global population and 7% of the global economy, but it can play an outsized role in the new energy economy", adds the report.

In a region where renewables keep gaining traction, the use of fossil fuels, at 60%, is considerably lower than the 80% global average. While hydropower provides 45% of the region’s electricity supply, biofuel use doubles the worldwide average.

Latin America and the Caribbean have been responsible for only 5% of greenhouse gas emissions stemming from the energy sector since 1971, according to IEA, yet they remain most affected by the climate crisis and extreme weather events.

After a decade of slow GDP increases, with inflation and high debt as factors hampering progress, IEA argues that "stronger economic growth can be unlocked with sound energy policies and resource developments".

The local energy matrix can be made even cleaner, with hydropower showing the most promise in countries where its use has been steady for decades (Brazil, Colombia, Costa Rica, Ecuador, Panama, Paraguay, and Venezuela). "Renewable electricity sources outpace electricity demand growth in all scenarios, raising their share of electricity supply from just over 60% today to two-thirds in 2030 and 80% in 2050 with today’s policy settings", explains the report.

Additionally, Brazil, Mexico, Chile, and Argentina are becoming regional industry leaders for solar PV and wind projects.

Even if current policies remain unchanged, the share of renewables would rise from 28% in 2022 to over 40% by 2050, according to the report’s projections. In a scenario in which all government pledges are complied with, "the use of oil is cut by more than half by 2050, with most reductions in transport due to increased availability of public transit, electric vehicles, efficiency gains, and cleaner fuels".

What most countries in the region lack is comprehensive energy efficiency codes and standards for the energy performance of buildings, machines, and appliances. Such measures would "cut final energy consumption growth by a fifth in 2030", says the report.

With an abundance of lithium, copper, and silver, Latin America and the Caribbean have the possibility of combining economic growth and unlocking the global energy transition. Producing processed, refined products, instead of relying on mere raw material extraction, opens a window of opportunities.

Finally, IEA argues Latin America and the Caribbean "must close policy gaps, raise investment, and put people at the center of its strategies". Reducing methane emissions from oil and gas extraction, improving land use, minimizing deforestation, attracting private capital, and guaranteeing energy access and jobs for vulnerable populations in the most unequal region in the world are essential steps to take.

Author: Marina Vanni