Latin America Energy Outlook 2023

Energy and emissions outlook

Summary

  • This outlook explores three scenarios for Latin America and the Caribbean (LAC), focussing on the Stated Policies Scenario (STEPS), which reflects current policies and measures, and the Announced Pledges Scenario (APS), which achieves in full and on time all ambitions and pledges by countries and industries, notably in their Nationally Determined Contributions and net zero emissions goals. Where appropriate, progress is benchmarked against the Net Zero Emissions by 2050 (NZE) Scenario.
  • Population and economic growth are fundamental factors that influence energy consumption. The LAC population is expected to increase from 658 million today to nearly 700 million by 2030 and 750 million by 2050, along with continuing urbanisation. Emerging from a period of slow growth, the region’s GDP growth accelerates due in part to growth in services and re-industrialisation.
  • CO2 emissions in LAC increase slightly from 1 660 million tonnes (Mt) in 2022 to just over 1 690 Mt in 2030 in the STEPS, though they are 200 Mt lower on the track to meet the announced longer term pledges and targets in the APS. Accelerating the deployment of renewables can close nearly 40% of the gap, complemented by electrification, avoided demand and energy efficiency. To 2050, the CO2 emissions gap widens further, reaching 1 850 Mt in the STEPS, but falling to 800 Mt by 2050 in the APS. Ambient air pollution worsens in the STEPS, but improves to some extent in the APS; household air pollution improves in both scenarios as progress is made in clean cooking.
  • While total energy demand increases in each scenario, its composition varies widely. In the STEPS, fossil fuel consumption rises slowly, but they continue to meet the bulk of energy demand, though the fossil fuel share in the energy mix falls from 67% in 2022 to 63% in 2030. In the APS, consumption of all fossil fuels peak in the mid-2020s and their share in the energy mix declines to 57% in 2030. Renewables meet 80% of demand growth to 2030 in the STEPS, raising their share in the energy mix from 28% in 2022 to 33% in 2030, while strong growth in the APS puts renewables on track to overtake fossil fuels in LAC before 2040. In the NZE Scenario, faster uptake of renewables and larger energy efficiency gains push the share of fossil fuels to 50% by 2030.
  • Final energy consumption in LAC increases by 1.5% per year to 2030 in the STEPS. The annual rate of increase is 0.8% in the APS reflecting improved energy and material efficiency. Both scenarios see a decline in the share of oil in energy demand, which falls from 48% today to 41% in the STEPS and 23% in the APS in 2050, largely due to the uptake of electric vehicles and use of biofuels. The share of coal in final energy consumption remains low in the region in all scenarios, mainly used in industry. Countries implement a range of decarbonisation strategies. Brazil leads the way on expanding use of biofuels, for example, while Chile and Mexico promote electric vehicles and Argentina raises the number of compressed natural gas vehicles.
  • Electricity demand growth is set to increase its share of total energy demand from 20% today to 21% by 2030 in the STEPS and 23% in the APS. The buildings and industry sectors see demand grow fastest as air conditioner ownership increases by 40% by 2030 and industry is progressively electrified. Minimum energy performance standards and energy-related building codes help to partially offset demand growth, especially in the APS. By 2050, electricity demand in LAC increases by nearly 90% in the STEPS and by 180% in the APS. Peak electricity demand grows even faster.
  • Expanding renewable sources of electricity are projected to outpace electricity demand growth in the region and to raise their share in the power mix from just over 60% today to over two-thirds in 2030 in the STEPS and over 70% in the APS. The renewables share continues to rise through to 2050. Today hydropower is the largest source of electricity, but solar PV and wind power installations meet the majority of new demand. Nuclear power accounts for a small amount of generation in some countries, notably Brazil, Argentina and Mexico. Natural gas continues to provide about one-quarter of electricity supply in LAC to 2030, while coal-fired and oil-fired generation decline rapidly, further reducing the emissions footprint of what is already one of the least emissions-intensive power sectors in the world. Power sector investment focusses on renewables, grid expansion and modernisation, and new sources of system flexibility, including batteries and demand-response management.
  • The energy production landscape in the region is set to undergo significant changes. In the STEPS, oil production increases through to 2050, with notable jumps in production in Guyana and Brazil, and natural gas production swells strongly after 2030 as Argentina exploits its unconventional reserves. In the APS, oil production in the region declines after 2030 in the face of lower global demand. Natural gas production in the region falls by more than 10% by 2030 and another 20% by 2050 in the APS, despite notable growth in Argentina. In both scenarios, coal production declines rapidly, and bioenergy accounts for a substantial portion of energy supply, with strong growth in liquid biofuels and biogases. Low-emissions hydrogen production growth takes off after 2030 in both scenarios, but it rises ten-times higher by 2050 in the APS relative to the STEPS.
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