Latin America and the Caribbean must double their financing for clean energy projects to reach $150 billion by 2030, according to the International Energy Agency's (IEA) Latin America Energy Outlook. The report highlights the importance of fulfilling the Announced Pledges Scenario (APS), which outlines the necessary emissions reductions to achieve net-zero emissions by 2050. The APS includes major national announcements and targets made up to August 2023.
While the region possesses abundant resources, including renewables, oil, gas, and critical minerals, the IEA emphasizes the need for substantial increases in renewable investments. The IEA recommends attracting private capital to achieve the $150 billion goal by 2030, with the overall investment needing to increase fivefold by 2050. In this scenario, the ratio of investment in clean sources to unabated fossil fuels is projected to rise from 1:1 today to 4:1 in the 2030s.
Challenges in attracting private capital include high financing costs, political and regulatory instability, and limited domestic credit capacity. The IEA suggests that supportive policies, tailored solutions such as hedging instruments, and more concessional financing, particularly for energy efficiency and emerging technologies, are essential to achieving renewable energy targets.
The report notes that Latin America and the Caribbean already have one of the world's cleanest electricity sectors, with renewables, led by hydropower, generating 60% of the region's electricity—twice the global average. The region accounts for only 5% of global cumulative energy-related greenhouse gas emissions to date.
Countries in the region, including Brazil, Mexico, Chile, and Argentina, have some of the best wind and solar resources globally. Additionally, the region holds significant reserves of essential minerals for clean energy technologies, such as lithium, copper, and silver.
IEA Executive Director Fatih Birol emphasized the region's potential, stating, “Latin America and the Caribbean can play an outsize role in the new global energy economy. With incredible natural resources and a longstanding commitment to renewables, countries in the region already have a head start on secure and sustainable transitions to clean energy.”
While half of the countries in the region have pledged to achieve net-zero emissions by mid-century or earlier, the IEA suggests that efforts to reduce emissions should also focus on agriculture and land-use change, accounting for 25% and 20% of the region's total greenhouse gas emissions, respectively.
Last month, the IEA's World Energy Outlook highlighted that renewables are expected to contribute 80% of new power capacity by 2030, with solar PV accounting for more than half of this. The IEA forecasts solar manufacturing capacity to exceed 1.2TW per year by the end of the decade, with global deployment reaching 500GW in 2030, less than half of available nameplate capacity.