Latin America Energy Outlook 2023

Implications for global transitions and energy security

Summary

  • Latin America and the Caribbean (LAC) currently accounts for just 6% of global energy demand, rising to 7% in 2050 in the Announced Pledges Scenario (APS). Yet it has an outsized role in renewable energy. LAC accounts for 14% of global renewable energy use, relying heavily on hydropower and bioenergy. Its ample solar and wind resources enable it to contribute 8% of the global increase in renewables to 2050 in the APS.
  • LAC is set to make a significant contribution to the global clean energy transition. In the APS, it accounts for almost 10% of the global reduction in oil demand to 2050 and about 5% of the decline in natural gas demand. Reducing fossil fuel use in LAC cuts energy-related CO2 emissions by about 860 million tonnes (Mt) from 2022 to 2050. This reduction means halving its emissions when compared to 2022 levels, further lowering its already less than average emissions intensity.
  • Forests and land use in LAC have a vital role to contribute to climate mitigation, carbon storage and biodiversity preservation. The region witnessed significant tree cover loss between 2000 and 2020. In the APS, pledges lead to an 80% reduction in primary forest deforestation by 2030 and net forest growth of 100 million hectares by 2050. The near cessation of deforestation accounts for more than two-thirds of the reduction in emissions from land use and agriculture by 2030, and land use becomes a net greenhouse gas sink by 2030, removing about 1.6 billion tonnes of carbon dioxide equivalent annually by 2050, with the near halting of deforestation and afforestation in Brazil and Mexico playing key roles.
  • LAC plays a crucial role to enhance global energy security with diversified fossil fuel supply. Recent oil discoveries and expansion plans lead Guyana and Brazil to see particularly strong increases in production, as they are projected to make the two largest increases in the world to 2035 in the APS. Argentina has the potential to significantly expand its natural gas production, compensating for reduced output in several other LAC countries, notably Trinidad and Tobago.
  • Excellent renewable energy resources in the region mean that LAC has the potential to become a major low-emissions hydrogen producer and exporter. It is projected to increase its share in global hydrogen production, becoming a major net exporter of low-emissions hydrogen and hydrogen-based fuels by 2050 in the APS. Developing cost-competitive low-carbon iron and low-emissions ammonia production could further boost the region's re-industrialisation and attract foreign investment.
  • LAC has further opportunities to enhance its economic development and support global clean energy transitions by supplying critical minerals such as copper, nickel, lithium and rare earth elements. Copper and lithium exports are projected to be particularly important in the years ahead.