Solutions to encourage decarbonization

Latin American countries face a series of unique challenges and opportunities on their path to decarbonization. On the one hand, the region is rich in natural resources, such as renewable energy and vast areas of forest, providing significant potential to reduce emissions and promote climate resilience. On the other hand, historical dependence on sectors such as agriculture and the extractive industry has generated significant emissions and poses challenges in the transition to a low-carbon economy. In this article, we will analyze challenges, benefits and actions to take into account in this process.

Challenges on the road to decarbonization

Identifying the right combination of strategies is essential to advance the decarbonization process, but it is crucial that companies recognize the difficulties that may arise when implementing projects and that may hinder the transformation of their operations. Some of these barriers are:

1. Funding: This is a barrier that still worries many companies. There are several reasons behind this concern, each of which has a similar impact.
   • La Lack of government incentives for low-carbon projects or the lack of clarity on how to access state grants.
   • La Expectation that the investment will generate a quick return (for example, within 24 months), which is often incompatible with the deadlines required for decarbonization solutions.
   • La Difficulty raising initial capital necessary to implement these solutions, due to investor reticence or insufficient profit margins to release funds for decarbonization.
2. Technology: Despite the increasing availability and price reduction of technologies that reduce emissions, many companies still consider technology to be a constraint. This is due to two reasons:
   • La Risk aversion when investing in innovative decarbonization technologies, partly because they are not fully understood.
   • The lack of data to measure and monitor the progress of implementing technologies in achieving objectives, or if data exists, is not properly integrated into decision-making.
3. Stakeholder Commitment: Initial success in using strategies with a quick return on investment and easy access to funding can lead to a simple commitment by the parties involved. However, as the process becomes more complex and a lack of information becomes a problem, the commitment and governance of the parties can become a barrier. This is due to:
   • La Lack of Commitment at Executive Levels necessary to lead decarbonization actions.
   • La Talent Shortage internal or experience in decarbonization.
   • La Lack of a multidisciplinary approach to achieve decarbonization objectives.

While these barriers present challenges, they are not insurmountable. Progress towards decarbonization can be achieved through sound planning and the appropriate selection of key strategies, without the need to significantly increase the resources invested.

5 ways in which decarbonization boosts governments

1. Encouraging the private sector and promoting competitiveness: Establishing long-term strategies toward carbon neutrality by 2050, which inform stronger goals for 2030, provides clear signals to investors and companies. This motivates them to adopt new technologies, access markets and participate in public-private investment opportunities, thus promoting sustainable recovery in the short term. Small and medium-sized businesses can also benefit from improving their energy efficiency as part of decarbonization.
2. Attracting investment and support from multilateral agencies and donors: Long-term strategies (LTS) help chart a path to achieving net-zero emissions and building climate resilience. This makes it easier to identify projects, policies, reforms and capacities needed in all sectors. In addition, it makes it possible to establish milestones that guide international climate finance. For example, multilateral banks can support through policy-based loans that promote reforms and policies to attract private investment. International climate funds can support flagship projects and feasibility studies.
3. Job Creation and Just Transition: The transition to net-zero emission economies in Latin America and the Caribbean (LAC) can generate up to 15 million net new jobs by 2030 in sectors such as renewable energy, construction and manufacturing, thus supporting sustainable recovery. However, job losses in fossil fuel extraction and animal food production must be anticipated. LTS can help design policies that facilitate the reassignment of workers and provide social protection.
4. Improving public spending to increase resilience and fiscal responsibility: Decarbonization and resilience can generate significant economic benefits. For example, Costa Rica's Decarbonization Plan will generate net benefits of USD 41 billion by 2050. Despite the necessary investments, these actions generate superior economic benefits. Clarity about priority areas for investment helps to effectively use limited public resources to achieve a sustainable recovery and achieve climate objectives.
5. Protecting natural resources and promoting sustainable recovery: In LAC, agriculture, forestry and land use are responsible for approximately half of greenhouse gas emissions, highlighting the importance of reducing these emissions. In addition, the region is facing a serious loss of species and habitats, affecting the provision of essential natural resources. Protecting nature can also increase resilience to climate impacts and generate significant economic benefits, such as water purification. Land restoration and the conservation of damaged areas make clear economic sense and contribute to recovery through job creation and private sector investment, while protecting critical ecosystem services.

How to achieve greater impact with decarbonization?

1. Take a long-term approach and believe in transformation:
   • Dissolve the tension between expectations of rapid return on investment and long-term investment cycles.
   • Consider actions that generate long-term benefits, such as access to finance, competitive advantages, and regulatory risk mitigation.
2. Establish internal carbon governance:
   • Create a team dedicated to implementing decarbonization solutions.
   • Establish a clear agenda and accountability to drive action
3. Closing the expectations gap in implementation:
   • Align executive vision with operational experience
   • Recognize and address the constraints of reality in the company's vision.
4. Make the executive staff responsible:
   • Associate the responsibility to meet decarbonization objectives with incentives.
   • Prioritize meeting these objectives in the same way as financial objectives.
5. Activate the correct enablers:
   • Use technological solutions as part of the strategy.
   • Implement enablers such as innovative financing models, internal carbon pricing, and access to emissions data.
6. Foster collaboration within the supply chain:
   • Establish alliances with shared incentives between organizations in the value chain.
   • Collaborate with suppliers and competitors to reduce emissions and find joint solutions.