According to the International Energy Agency (IEA) Latin America Energy Outlook report, to achieve announced commitment plans, Latin America and the Caribbean will need to double clean energy project financing to $150 billion by 2030.
The IEA said the commitment plans launched in 2021 show the extent to which the ambitious announced targets will realize the emissions reductions needed for net zero by 2050. The plans include major countries’ recent announcements through end-August 2023, comprising both 2030 targets and longer-term net zero or carbon neutrality pledges.
The IEA said in its report that Latin America and the Caribbean boast abundant resources like renewables, oil, natural gas, and critical minerals, and experience in developing these resources can make major contributions to global energy security and the clean energy transition.
However, the region will need to significantly increase investments in renewables in the coming years. The IEA said a total of $150 billion is needed through 2030, and financing will need to grow 5 times to achieve the pledges by 2050. In this scenario, the ratio of clean energy to fossil fuel investment will rise from around 1:1 today to 4:1 in the 2030s.
The IEA advised attracting private capital to meet increased renewable investment goals. But multiple challenges exist currently, including high financing costs, political and regulatory instability, and limited domestic credit capabilities. Supportive policies, tailored solutions (like hedging instruments), and more favorable financing, especially for efficiency and emerging technologies, are needed to aid renewable targets.
The IEA report also pointed out the region’s potential for renewable development. Latin America and the Caribbean is one of the world’s cleanest power sectors, with renewables led by hydropower accounting for 60% of generation, twice the global average. As a result, greenhouse gas emissions so far are just 5% of cumulative global energy-related emissions.
Meanwhile, countries like Brazil, Mexico, Chile and Argentina boast some of the “world’s best wind and solar resources.”
The region also holds critical minerals that are key components of clean energy technologies, with lithium reserves of about half of the global total, and more than a third of global copper and silver reserves.
IEA Executive Director Fatih Birol said: “Latin America and the Caribbean can play a major role in the emerging global energy economy.”
“With their phenomenal natural resources and longstanding commitment to renewables, countries in the region have a head start on the secure and sustainable pathway to clean energy.”
Currently, half the region’s countries have pledged net zero emissions by mid-century or sooner. These account for about 65% of regional GDP and 60% of energy-related CO2 emissions. The IEA advised the region’s decarbonization efforts must also look at agriculture and land use changes, which respectively comprise 25% and 20% of total greenhouse gas emissions.
Last month, the IEA released its World Energy Outlook report, pointing out that under stated policies, renewables will make up 80% of new power capacity additions by 2030, with solar PV alone accounting for over half.
The IEA expects global solar module production capacity to surpass 1.2 TW annually by the end of this decade, but according to the World Energy Outlook’s forecast, just 500GW of solar capacity will be deployed globally by 2030, less than half the 1.2TW of available capacity.
