Understanding the impact of a low carbon transition on Colombia
Key Findings and Recommendations
Read the press release on the report
How is Colombia exposed to climate transition risks? Who s exposed? What options can the country implement to face them?
1/ Risk of losses from a global transition totalling $88 billion in net present value terms (or 27% of 2019 GDP) between 2022 and 2050
> Recommendation: Accelerate investment in low-carbon technologies to avoid macroeconomic and financial impacts. Take proactive measures to diversify its economy and in particular its exports, including non-extractive sectors such as agriculture and tourism.
2/ Risk of thermal coal exports are likely to be affected much sooner than other sectors
With the falling costs of wind and solar generation, the world is increasingly moving away from coal, which, combined with falling investment in coal mining, means that demand for internationally traded thermal coal has probably already peaked. Colombian coal exports, moreover, will not be competitive in the long term in Asian markets, due to transport costs.
> Recommendation: Stop all new investments in coal, oil and gas production to avoid adding to the $88 billion downside risk identified.
3/ Risk of decline in conventional production of oil and gas that could make the Colombia country a net importer of hydrocarbons by the early-to-mid 2030s
Recent offshore gas finds do not appear large or advanced enough to change this dynamic.
> Recommendation: End exploration, so that it does not add further investment to the estimated heavy losses, and accelerate Colombia's internal decarbonisation, in particular in transport and industry, in order to mitigate risk by reducing possible future oil and gas imports.
4/ Risk of impacts on the fossil fuel industry sector and on workers
Ecopetrol se enfrenta a la mayor desventaja absoluta por su exposición a los precios del petróleo y el gas, con un riesgo de pérdidas estimado entre 25.000 y 30.000 millones hasta 2050.
> Recomendación: La industria de los combustibles fósiles tiene opciones para protegerse mediante la diversificación, aunque los mineros del carbón son los que menos tiempo tienen para hacer la transición).
5/ Risk of passing on the risks to the most vulnerable
Risk mitigation actions by the fossil fuel industry are likely to shift the downside risk to workers (25,000-30,000 direct jobs at risk), communities and local governments (a decrease in hydrocarbon fees would create a major challenge for the local government financing system and thus for the central government).
> Recommendation: The government should proactively target support to those parts of the economy that face the risk of climate transition, but have limited capacity to withstand it:
Draw on sources of fiscal revenue (including additional taxes during periods of high commodity prices)
Draw on international sources of financial support