Latin America – Just Transition Initiative

What is "Just Transition"?

Commentary/Guidelines, Strategies and Recommendations

Aug 2021

COP26: The Perfect Opportunity for Latin America and the Caribbean to Champion a Just Transition to Net Zero

This commentary narrates the disproportionate impacts of the pandemic and extreme weather events on the Latin America and Caribbean region and highlights the urgent need for a just and equitable transition to net zero.

Geographic Scope
Sectors: Energy
Focus Areas: COVID-19; Economic diversification/restructuring > Infrastructure investment; Employment > Job creation and/or equality; Government intervention > Public finance, Regulation
Keywords: COP26; net-zero; energy efficiency
By: Leonardo Beltran
Publishing Organization: Center for Strategic and International Studies, Climate Investment Funds (CIF)
Academic/research institution or journal, Development finance institution
Summary: The disproportionate impacts of the pandemic and extreme weather events on the Latin America and Caribbean (LAC) region highlight the urgent need for a just and equitable transition to net zero in LAC. The region has a unique opportunity to step up at the upcoming COP26 by incorporating just transition priorities into two foundational energy initiatives. The Renewable Energy for Latin America and the Caribbean (RELAC) Initiative along with the implementation of the Observatory of Energy Management Systems in Latin America and the Caribbean, supported by sources of climate finance, have the potential to help deliver on the region’s energy and climate goals while also generating the new economic and employment opportunities needed for a new green economy that works for all.

Report/Guidelines, Strategies and Recommendations; Policy Tools or Evaluations

Jul 2020

Jobs in a Net-Zero Emissions Future in Latin America and the Caribbean

The report details a decarbonization pathway for Latin America and the Caribbean region, identifies expected labor changes in various sectors, and focuses on equity considerations needed in each of the affected sectors.

Geographic Scope
Sectors: Agriculture; Energy; Industrial; Transportation
Focus Areas: COVID-19; Economic diversification/restructuring > Economic development plans, Industry and/or sector assistance or plans, Infrastructure investment; Employment > Job creation and/or equality, Skills, Social protections; Environment and/or pollution > Human health, Nature; Government intervention > Public finance; Inequality and/or poverty > Gender inequality; Investment > Competitiveness, Stranded assets
Keywords: decarbonization; input-output analysis; manufacturing; animal-based and plant based food systems; energy subsidy reform; social protection systems; Public employment programs; dietary shift; gender
By: Catherine Saget, Adrien Vogt-Schilb, Trang Luu
Publishing Organization: Inter-American Development Bank, International Labor Organization (ILO)
Inter-governmental/international organization, Labor organization
Summary: This report takes a detailed look at decarbonization pathways in the Latin America and the Caribbean region and highlights the potential to create 15 million net jobs in sectors, such as sustainable agriculture, forestry, solar and wind power, manufacturing, and construction during such a transition. The report suggests that, with adequately-designed measures to ensure that these jobs are decent and that those who lose out in the transition are protected and supported, recovery plans can create climate benefits, while also boosting growth, tackling inequality, and making progress towards the Sustainable Development Goals.

This report is based on an input-output analysis using a Global Trade Analysis Project Power database, a commonly employed tool for assessing the direct and indirect environmental and socioeconomic impacts of decarbonization efforts. The study finds that only three sectors would shrink in the transition to a decarbonized economy: 1) fossil-fuel based electricity, with about 80,000 jobs lost, or more than half of the current number; 2) fossil-fuel extraction, with almost a third of the current number, or 280,000 jobs eliminated; and 3) animal-based food production systems, with five percent of current jobs lost, representing half a million jobs.

The report provides a sectoral overview of the region and highlights how it is still struggling with gender and ethnic inequalities, skills gaps, insufficient social protection, and a large informal sector, despite more than a decade of steady progress. Prevailing decent work deficits, inequalities, and dependence on fossil fuel exports are expected to make Latin America and the Caribbean particularly susceptible to the social and economic impacts of climate change. The report also identifies the critical need for fairness in this transition and devotes a chapter to identifying the sector-wise equity and justice considerations needed to allow a successful transition in sectors that include energy, agriculture, forestry, waste management, tourism, transport, and construction.

Academic paper/Guidelines, Strategies and Recommendations

Oct 2019

Cash transfers for pro-poor carbon taxes in Latin America and the Caribbean

The article looks at how cash transfers could be used as an instrument to mitigate the negative consequences of carbon taxes on poverty.

Geographic Scope
Sectors: General
Focus Areas: Government intervention > Carbon pricing, Other
Keywords: carbon tax; cash transfers; Bolsa Familia; taxes; carbon rebate
By: Adrien Vogt-Schilb, Brian Walsh, Kuishuang Feng, Laura Di Capua, Yu Liu, Daniela Zuluaga, Marcos Robles, Klaus Hubaceck
Publishing Organization: Nature Sustainability
Academic/research institution or journal
Summary: The study highlights how carbon taxes, while a potentially useful tool in reducing emissions, increase the cost for consumers directly, and indirectly, by raising the prices of goods and services. It further highlights how the effects are felt more by poorer households.

Imposing a carbon tax, consistent with the Paris Agreement goals, could generate more than USD100 billion in revenue per year in 16 countries in Latin America and the Caribbean region—enough to close the water, sanitation, or electricity access gap. However, on average, the study finds that food prices tend to make carbon taxes regressive. The indirect impacts of carbon taxes on food, public transportation, and electricity would cost households more than the direct impacts on fossil fuels. Nonetheless, the authors cite evidence that adequately compensating negatively-affected households with complimentary policies can enable the reforms to succeed.

The study explores four potential methods using models to study options ranging from the redistribution of carbon revenues to cash transfers, including carbon rebates and different iterations of cash transfer programs. The authors find that in the region studied, 30 percent of the carbon revenues could suffice to compensate poor and vulnerable households on average, leaving 70 percent to fund other priorities. According to the study, international experience, beyond normative views, suggests that any government project to implement carbon taxes without a plan to compensate affected households, at least partially, is unsustainable.

Academic paper/Guidelines, Strategies and Recommendations

Dec 2018

Green Fiscal Reform for a Just Energy Transition in Latin America

This paper identifies four enabling factors for successful implementations of green fiscal reforms in Central and South America, examining why recent reform efforts have either succeeded or failed.

Geographic Scope
Sectors: Energy
Focus Areas: Government intervention > Carbon pricing, Regulation; Inequality and/or poverty > Other
Keywords: green fiscal reform; political economy; enabling conditions; green finance; stakeholder consultation; compensation; subsidies; low-income households; political feasibility
By: Michael Jakob, Rafael Soria, Carlos Trinidad, Ottmar Edenhofer
Publishing Organization: Economics E-journal
Academic/research institution or journal
Summary: The authors of this paper identify and discuss important factors for successful implementations of green fiscal reforms in Chile, Mexico, Colombia, Belize, Venezuela, and Ecuador. When taken into consideration, these factors can help increase the technical and political feasibility of green fiscal reforms.

The authors draw on academic literature and expert knowledge to provide insights into the possibilities for—and limitations of—green fiscal reforms. Based on their analysis, they identify key factors for the successful introduction of green fiscal reforms, emphasizing the importance of favorable political conditions, comprehensive reform planning, and the gradual sequencing of reforms. They also emphasize the need to address distributional impacts on low-income households through social protection schemes based on stakeholder consultations with all relevant social groups. Their inclusion in the decisionmaking process should alleviate concerns about disproportionate adverse impacts on any single group.

The authors conclude by highlighting the international community’s important role in supporting green fiscal reforms through knowledge sharing and financing the macro-economic costs of reforms (such as by tying results-based payments to the introduction of a price on emissions or the de-risking of investments in clean energy and energy efficiency).