Latin America and the Caribbean (LAC) emerge as a key player in the global energy sector, with rich natural resources in both fossil fuels and renewables. A recent report (October, 2023) by the International Energy Agency (IEA) highlights the region’s commitment to clean energy transitions, emphasizing the potential for economic growth, increased energy security, and sustainability.

Current Energy Mix and Environmental Impact

Fossil fuels currently constitute approximately two-thirds of the LAC’s energy mix, a decrease from the global average of 80%. The region is recognized for its clean electricity mix, driven by an average 60% share of renewables in electricity generation. Hydropower, contributing 45% to the electricity supply, has historically been a cornerstone in countries like Brazil, Colombia, and Costa Rica. Despite this progress, fossil fuels still dominate various end-use sectors, particularly in transportation where oil remains the primary fuel.

Renewable Energy Transition

The IEA report outlines three scenarios:

  1. The Stated Policies Scenario (STEPS)
  2. The Announced Pledges Scenario (APS)
  3. The Net Zero Emissions by 2050 (NZE) Scenario.

While fossil fuels are expected to persist in the short term, renewable energy sources are anticipated to play an increasingly significant role in supplying the region with energy. Under the APS, the region aims to exceed a 70% share of renewables in its energy mix by 2030, a decade ahead of the STEPS scenario, reaching over 90% by 2050. Solar PV and wind development, led by countries such as Brazil, Mexico, Chile, and Argentina, are crucial components of this transition.

Oil Production and Export Dynamics

Latin America and the Caribbean, producing over 8 million barrels of oil per day in 2022, are net exporters exceeding regional demand with a production value of USD 230 billion. Major players like Brazil, Mexico, Colombia, Venezuela, and Argentina contribute significantly, with Brazil and Guyana expected to lead in net exports as production increases. However, there are commercial risks associated with new oil projects, particularly if global efforts align with achieving net zero emissions by 2050, which may result in a decline in oil demand.