Inflationary pressures and reduced macroeconomic policy space make it more difficult for LAC economies to return to a path of sustainable growth and protect the most vulnerable. According to estimates, vulnerable households in LAC will face an average price increase of 3.6 percentage points higher than the nationally representative household in 2022. LAC countries, which account for half of the world’s biodiversity, are key players in international climate negotiations. To capitalise on new international green norms and regulations, as well as manage the impact of policies implemented in partner countries, such as trade, LAC countries must strengthen collaboration with key actors, including the private sector and multilateral institutions.
Climate change has the potential to deteriorate long-term economic prospects and exacerbate inequalities in Latin America and the Caribbean (LAC).
According to the OECD’s Latin American Economic Outlook, an effective green transition in LAC could create 10.5% more jobs by 2030.
The region is well-positioned to launch an effective green transition and accelerate progress toward its economic, social, and environmental development objectives. LAC’s share of global GHG emissions is proportional to its population share (8.4%), slightly higher than its share of total GDP (6.4%), but lower than per capita emissions in other regions with comparable development levels.
Priority areas for the economic outlook include shifting the region’s energy mix away from fossil fuels and progressing toward decarbonization and electrification across all sectors, particularly heavy industries and transportation.
Developing fiscal policies that are both sustainable and compatible with only green transitions, as well as phase-out of environmentally harmful subsidies
Innovative financial instruments, such as debt-for-nature swaps may be developed, and development finance institutions may be mobilised.
Adopting circular economy principles and leveraging the blue economy through investments in new technologies and skills, as well as workforce retraining to capitalise on emerging opportunities.
The green agenda can serve as the foundation for a new, more sustainable social contract. Climate change is viewed as a very serious threat to the region’s citizens by 68% over the next 20 years.
Improve institutional mechanisms to foster consensus on the policy choices required to move the green transition forward.
LAC countries, which account for half of the world’s biodiversity, are key players in international climate negotiations. To capitalise on new international green norms and regulations, as well as manage the impact of policies implemented in partner countries, such as trade, LAC countries must strengthen collaboration with key actors, including the private sector and multilateral institutions.
Inflationary pressures and reduced macroeconomic policy space make it more difficult for LAC economies to return to a path of sustainable growth and protect the most vulnerable. According to estimates, vulnerable households in LAC will face an average price increase of 3.6 percentage points higher than the nationally representative household in 2022.
These difficulties are exacerbated by environmental shocks. The LAC region is home to 13 of the 50 countries most affected by climate change. According to LEO 2022, pursuing a green transition through active mitigation and adaptation policies that are implemented in a systemic manner can make LAC societies more resilient to climate change and promote better development.
Galactik Views