Rethinking Latin America's Energy Transition

This chapter explores the opportunities and constraints of Latin America and the Caribbean (LAC) in the global energy transition. While surveys show that LAC societies express some of the greatest concern about climate change, mainstream debates often neglect the principle of common but differentiated responsibilities and the region’s dependent integration into the international division of labor. Decarbonization may open a window for LAC to move beyond extractivist specialization by building technological capacities and capturing greater value in low-emission industries. Realizing this potential, however, requires a significant reorientation of industrial policy, financing, and regional coordination. This chapter situates LAC in a global landscape of intensifying geopolitical competition. China’s rise in green manufacturing, the United States’ Inflation Reduction Act, and the European Union’s Green Deal Industrial Plan have transformed the green economy into a contested arena of subsidies, local-content rules, and trade defenses. LAC possesses structural advantages—low reliance on coal, modest fossil-fuel dependence, broad electricity access, and relatively low per-capita energy use—but these are offset by limited renewable investment, dependence on resource rents, and weak participation in renewable value chains. Without deliberate policies for technological upgrading, stronger regional bargaining power, and inclusive industrial strategies, LAC risks reproducing extractivist patterns. With coordinated green investment and active industrial policy, however, the energy transition could become a pathway to sustainable development.