Decarbonising Latin American and Caribbean economies will create 15 million jobs

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IDB study finds that every dollar invested in greening economies repays four dollars.

A new study by the Inter-American Development Bank (IDB) has suggested that a better focus on green policies across Latin America and the Caribbean will create 15 million jobs by 2030, as well as help countries transition to greater climate resilience.

The study highlights the importance of reducing economic dependence on fossil fuels and sets out that, along with decarbonisation creating new jobs, every dollar invested in making infrastructure and economies more resilient can generate up to four dollars in economic benefits.

The IDB also warns that change is needed now as the impact of climate change grows, and calls on finance ministries in particular to take an active role on targeting sustainable outcomes.

Benigno López, IDB vice president for sectors and knowledge explained: “The clock is ticking. The unprecedented level of transformations that must occur in all economic sectors demands a much deeper level of involvement by finance ministries with policies to combat the effects of climate change. These ministries play a central role as they need to implement adequate fiscal management to mitigate risks and use public investment and their spending and taxation policies to leverage the opportunities of the green economy and promote a just transition for citizens affected by these changes.”

The region’s economies will have to create new patterns of production and consumption of goods and services to achieve net-zero emissions by 2050. To meet this objective, governments will have to implement policies that promote these changes while mitigating risks generated by extreme climatic events and the upcoming structural and technological changes.

The frequency of extreme climatic events per country in the region has already increased. From 1980-2000 each country experienced an average of four such events, compared to six between 2001 and 2019. It is estimated that these extreme events have resulted in lost GDP across the region of around 1% every four years this century.

The region is also facing another challenge as the rest of the world decarbonises. Latin American oil production may be reduced to less than 4 million barrels per day by 2035, as demand falls thanks to the Paris Climate Agreement to prevent global warming exceeding 1.5°C. That would represent a 60% reduction in oil production relative to pre-pandemic levels – hitting jobs, tax revenues and the regional economy.

The publication identifies three key areas of intervention. These are:

  • Management of economic and fiscal risks related to extreme weather events and the transition to net-zero,
  • Promoting a just and green transition with policies that distribute new employment opportunities widely, and
  • Providing access to financing by attracting private investment, proposing public investments, and embracing green bonds.

Read the report, Politica Fiscal Y Cambio Climatico, here (available in Spanish only)