Latin America and the Caribbean facing the crucial challenge of reducing emissions

Latin America and the Caribbean are at a crucial crossroads when it comes to reducing greenhouse gas emissions by the year 2030. According to the recent Economic and Development Report presented by the Regional Development Bank, this geographical area accounts for 11% of total global emissions, while developed countries contribute an alarming 45%. In a detailed breakdown, it is revealed that the agricultural sector, forestry, and other land uses represented 65% of the emissions generated in Latin America and the Caribbean in 2019, with the rest coming from the consumption of fossil energy. Globally, fossil energy consumption stands as the main emitter at a concerning 80%. Amidst this landscape, the region has committed to reducing its emissions by 10.8% by 2030 compared to 2020 levels. In this regard, experts like Fernando Álvarez, a senior economist at the CAF's Socioeconomic Research Department, highlight the need to undertake a "new energy transition" that fits the regional reality, considering factors such as economic growth, poverty rates, and the energy gap. One of the options proposed in the report is the use of natural gas as a fuel, despite being fossil-based, as it emits fewer greenhouse gases than oil and coal. According to estimates from the Development Bank, the region could reduce its emissions by 6.5% if 50% of coal and oil usage is replaced with natural gas, thus fulfilling part of its commitments for 2030. This perspective also advocates for a decoupling between economic growth and emissions, seeking to reduce the latter while promoting sustainable GDP growth. Additionally, it suggests increasing electrification and the involvement of unconventional renewable energies as key measures in this transition. Currently, 57% of electricity generation in the region comes from renewable sources, with 11% being from unconventional ones. Moreover, 80% of non-combustible energies are generated from water resources, showing significant potential in this area. Other proposed alternatives include improving the efficiency and operation of energy systems, reducing losses in energy production and distribution, and considering storage technologies to ensure the continuity of renewable unconventional energy supply. Despite these advancements, there is a possibility that in the long term, a certain capacity of electricity generation based on fossil fuels may need to be maintained, which could lead to the implementation of carbon capture technologies to mitigate emissions. Looking ahead, there is a need for comprehensive policies ranging from green financing to promoting the circular economy, including the implementation of carbon taxes and the encouragement of carbon capture and use technologies. In this vein, the CAF Development Bank has set a goal to allocate 40% of its project portfolio to green initiatives by 2026, in an effort to contribute to a fair and sustainable energy transition in Latin America and the Caribbean.