# The Benefits and Costs of Reaching Net Zero Emissions in Latin America and the Caribbean

Nidhi Kalra, Edmundo Molina-Pérez, James Syme, Fernando Esteves, Hermilio Cortés, Mateo Tonatiuh Rodríguez-Cervantes, Víctor Manuel Espinoza-Juárez, Marcela Jaramillo, Richard Baron, Claudio Alatorre, et al.

<figure><img src="image_1.png" /></figure>

## To cite this version:

Nidhi Kalra, Edmundo Molina-Pérez, James Syme, Fernando Esteves, Hermilio Cortés, et al. The Benefits and Costs of Reaching Net Zero Emissions in Latin America and the Caribbean. Inter American Development Bank, 2023, 10.18235/0005330. halshs-04458161

HAL Id: halshs-04458161

https://shs.hal.science/halshs-04458161

Submitted on 14 Feb 2024

HAL is a multi-disciplinary open access archive for the deposit and dissemination of scientific research documents, whether they are published or not. The documents may come from teaching and research institutions in France or abroad, or from public or private research centers.

L'archive ouverte pluridisciplinaire HAL, est destinée au dépôt et à la diffusion de documents scientifiques de niveau recherche, publiés ou non, émanant des établissements d'enseignement et de recherche français ou étrangers, des laboratoires publics ou privés.

<figure><img src="image_2.png" /></figure>
# The Benefits and Costs of Reaching Net Zero Emissions in Latin America and the Caribbean

Nidhi Kalra, Edmundo Molina-Pérez, James Syme, Fernando Esteves, Hermilio Cortés, Mateo Tonatiuh Rodríguez-Cervantes, Víctor Manuel Espinoza-Juárez, Marcela Jaramillo, Richard Baron, Claudio Alatorre, et al.

<figure><img src="image_1.png" /></figure>

## To cite this version:

Nidhi Kalra, Edmundo Molina-Pérez, James Syme, Fernando Esteves, Hermilio Cortés, et al. The Benefits and Costs of Reaching Net Zero Emissions in Latin America and the Caribbean. Inter American Development Bank, 2023, 10.18235/0005330. halshs-04458161

HAL Id: halshs-04458161

https://shs.hal.science/halshs-04458161v1

Submitted on 14 Feb 2024

HAL is a multi-disciplinary open access
archive for the deposit and dissemination of sci-
entific research documents, whether they are pub-
lished or not. The documents may come from
teaching and research institutions in France or
abroad, or from public or private research centers.

L'archive ouverte pluridisciplinaire HAL, est
destinée au dépôt et à la diffusion de documents
scientifiques de niveau recherche, publiés ou non,
émanant des établissements d'enseignement et de
recherche français ou étrangers, des laboratoires
publics ou privés.

<figure><img src="image_2.png" /></figure>
<figure><img src="image_3.png" /></figure>

# The Benefits and Costs of Reaching Net Zero Emissions in Latin America and the Caribbean

Nidhi Kalra

Edmundo Molina-Perez

James Syme

Fernando Esteves

Hermilo Cortés

Mateo Tonatiuh Rodríguez-Cervantes

Víctor Manuel Espinoza-Juárez

Marcela Jaramillo

Richard Baron

Claudio Alatorre

Marco Buttazzoni

Adrien Vogt-Schilb
<figure><img src="image_3.png" /></figure>

# The Benefits and Costs of Reaching Net Zero Emissions in Latin America and the Caribbean

Nidhi Kalra

Edmundo Molina-Perez

James Syme

Fernando Esteves

Hermilo Cortés

Mateo Tonatiuh Rodríguez-Cervantes

Víctor Manuel Espinoza-Juárez

Marcela Jaramillo

Richard Baron

Claudio Alatorre

Marco Buttazzoni

Adrien Vogt-Schilb
<figure><img src="image_4.png" /></figure>
<figure><img src="image_4.png" /></figure>
Cataloging-in-Publication data provided by the
Inter-American Development Bank
Felipe Herrera Library

The benefits and costs of reaching net zero emissions in Latin America and the Caribbean /
Nidhi Kalra, Edmundo Molina-Perez, James Syme, Fernando Esteves, Hermilo Cortés, Mateo
Tonatiuh Rodríguez-Cervantes, Víctor Manuel Espinoza-Juárez, Marcela Jaramillo, Claudio
Alatorre, Marco Buttazzoni, Adrien Vogt-Schilb.

p. cm. — (IDB Monograph ; 1159)

Includes bibliographical references.

1. Climate change mitigation-Latin America. 2. Climate change mitigation-Caribbean Area.

3. Carbon dioxide mitigation-Latin America. 4. Carbon dioxide mitigation-Caribbean Area.

5. Sustainable development-Latin America. 6. Sustainable development-Caribbean Area. 7.

Greenhouse gas mitigation-Latin America. 8. Greenhouse gas mitigation-Caribbean Area. I.

Kalra, Nidhi. II. Molina-Perez, Edmundo. III. Syme, James (James C.). IV. Esteves, Fernando. V. Cortés, Emilio. VI. Rodríguez-Cervantes, Mateo Tonatiuh. VII.

Espinoza-Juárez, Víctor Manuel. VIII. Jaramillo, Marcela. IX. Alatorre, Claudio. X.

Buttazzoni, Marco. XI. Vogt-Schilb, Adrien. XII. Inter-American Development Bank.

Climate Change Division. XIII. Series.

IDB-MG-1159

Keywords: decarbonization, long-term strategy, climate mitigation, NDC

JEL codes: Q01; Q54; Q56; O13; O44

Copyright © 2023 Inter-American Development Bank ("IDB"). This work is subject to a
Creative Commons license CC BY 3.0 IGO
(https://creativecommons.org/licenses/by/3.0/igo/legalcode). The terms and conditions
indicated in the URL link must be met and the respective recognition must be granted to the
IDB.

Further to section 8 of the above license, any mediation relating to disputes arising under such
license shall be conducted in accordance with the WIPO Mediation Rules. Any dispute related
to the use of the works of the IDB that cannot be settled amicably shall be submitted to
arbitration pursuant to the United Nations Commission on International Trade Law
(UNCITRAL) rules. The use of the IDB's name for any purpose other than for attribution, and
the use of IDB's logo shall be subject to a separate written license agreement between the IDB
and the user and is not authorized as part of this license.

Note that the URL link includes terms and conditions that are an integral part of this license.

The opinions expressed in this work are those of the authors and do not necessarily reflect the
views of the Inter-American Development Bank, its Board of Directors, or the countries they
represent.
Cataloging-in-Publication data provided by the
Inter-American Development Bank
Felipe Herrera Library

The benefits and costs of reaching net zero emissions in Latin America and the Caribbean /
Nidhi Kalra, Edmundo Molina-Perez, James Syme, Fernando Esteves, Hermilo Cortés, Mateo
Tonatiuh Rodríguez-Cervantes, Víctor Manuel Espinoza-Juárez, Marcela Jaramillo, Claudio
Alatorre, Marco Buttazzoni, Adrien Vogt-Schilb.

p. cm. — (IDB Monograph ; 1159)

Includes bibliographical references.

1. Climate change mitigation-Latin America. 2. Climate change mitigation-Caribbean Area.

3. Carbon dioxide mitigation-Latin America. 4. Carbon dioxide mitigation-Caribbean Area.

5. Sustainable development-Latin America. 6. Sustainable development-Caribbean Area. 7.

Greenhouse gas mitigation-Latin America. 8. Greenhouse gas mitigation-Caribbean Area. I.

Kalra, Nidhi. II. Molina-Perez, Edmundo. III. Syme, James (James C.). IV. Esteves, Fernando. V. Cortés, Emilio. VI. Rodríguez-Cervantes, Mateo Tonatiuh. VII.

Espinoza-Juárez, Víctor Manuel. VIII. Jaramillo, Marcela. IX. Alatorre, Claudio. X.

Buttazzoni, Marco. XI. Vogt-Schilb, Adrien. XII. Inter-American Development Bank.

Climate Change Division. XIII. Series.

IDB-MG-1159

Keywords: decarbonization, long-term strategy, climate mitigation, NDC

JEL codes: Q01; Q54; Q56; O13; O44

Copyright © 2023 Inter-American Development Bank ("IDB"). This work is subject to a
Creative Commons license CC BY 3.0 IGO
(https://creativecommons.org/licenses/by/3.0/igo/legalcode). The terms and conditions
indicated in the URL link must be met and the respective recognition must be granted to the
IDB.

Further to section 8 of the above license, any mediation relating to disputes arising under such
license shall be conducted in accordance with the WIPO Mediation Rules. Any dispute related
to the use of the works of the IDB that cannot be settled amicably shall be submitted to
arbitration pursuant to the United Nations Commission on International Trade Law
(UNCITRAL) rules. The use of the IDB's name for any purpose other than for attribution, and
the use of IDB's logo shall be subject to a separate written license agreement between the IDB
and the user and is not authorized as part of this license.

Note that the URL link includes terms and conditions that are an integral part of this license.

The opinions expressed in this work are those of the authors and do not necessarily reflect the
views of the Inter-American Development Bank, its Board of Directors, or the countries they
represent.
At COP28, countries are expected to
announce emission reduction plans that are
more ambitious—in terms of long-term
targets, sectoral composition, or
implementation means. This timely new
report may help countries' efforts to do so.
Rather than reiterating the important
messages from the IPCC about the world's
capacity to reach net-zero emissions and limit
warming to 1.5°C, this work brings a
pragmatic and compelling approach to
analyze practical policy and technology
options at the country level.

The goal of SiSePuede is to facilitate
discussions with various national and
subnational decision makers by expressing
emissions reductions in terms of tangible
actions in their sectors and metrics they
readily understand. It also provides robust
estimates of the so-called "co-benefits" of
these transformations across society.

As an actor and observer of long-term
climate strategies, the 2050 Pathways
Platform is frequently challenged to explain
the relevance of its work. How can a
long-term vision for 2050 or 2060, with all its
inherent uncertainties, usefully inform
decisions today? One way to meet this
challenge is to acknowledge major
uncertainties and test the robustness of
options for reducing emissions while
advancing development goals against
unpredictable changes ahead. That is exactly
the approach taken in this report.

By bringing results to life at the sectoral
level in metrics decision makers use—such as
tons of clinker for cement makers, ecosystem
services values for forestry authorities, or
costs for electricity utilities—this approach
can help make countries' net-zero strategies
fully palatable to those who must implement
them.

As many nations beyond Latin America
and the Caribbean have yet to design robust
long-term climate strategies, I hope that this
innovative approach will spread more
broadly. The advances presented here matter
significantly if we are to transition our
economies and societies rapidly to a net-zero
emissions future in a way that is equitable,
resilient, and leaves no one behind.

<figure><img src="image_5.png" /><figcaption>Richard Baron
Executive Director
2050 Pathways Platform</figcaption></figure>
At COP28, countries are expected to
announce emission reduction plans that are
more ambitious—in terms of long-term
targets, sectoral composition, or
implementation means. This timely new
report may help countries' efforts to do so.
Rather than reiterating the important
messages from the IPCC about the world's
capacity to reach net-zero emissions and limit
warming to 1.5°C, this work brings a
pragmatic and compelling approach to
analyze practical policy and technology
options at the country level.

The goal of SiSePuede is to facilitate
discussions with various national and
subnational decision makers by expressing
emissions reductions in terms of tangible
actions in their sectors and metrics they
readily understand. It also provides robust
estimates of the so-called "co-benefits" of
these transformations across society.

As an actor and observer of long-term
climate strategies, the 2050 Pathways
Platform is frequently challenged to explain
the relevance of its work. How can a
long-term vision for 2050 or 2060, with all its
inherent uncertainties, usefully inform
decisions today? One way to meet this
challenge is to acknowledge major
uncertainties and test the robustness of
options for reducing emissions while
advancing development goals against
unpredictable changes ahead. That is exactly
the approach taken in this report.

By bringing results to life at the sectoral
level in metrics decision makers use—such as
tons of clinker for cement makers, ecosystem
services values for forestry authorities, or
costs for electricity utilities—this approach
can help make countries' net-zero strategies
fully palatable to those who must implement
them.

As many nations beyond Latin America
and the Caribbean have yet to design robust
long-term climate strategies, I hope that this
innovative approach will spread more
broadly. The advances presented here matter
significantly if we are to transition our
economies and societies rapidly to a net-zero
emissions future in a way that is equitable,
resilient, and leaves no one behind.

<figure><img src="image_5.png" /><figcaption>Richard Baron
Executive Director
2050 Pathways Platform</figcaption></figure>
Countries across Latin America and the Caribbean are charting their paths toward net-zero emissions and climate-resilient development. This report offers insights into how governments can accelerate climate progress while advancing broader economic and social goals.

Climate change poses grave threats, and we need to respond to these threats. At the same time, the global technological revolution toward renewable energy, electromobility, and sustainable land use presents new opportunities for sustainable economic growth and better lives. Several countries have embarked on transformational journeys, evidenced by implementing long-term and cross-sectoral strategies aligned with the Paris Agreement. Other countries are beginning to identify and implement sector reforms that point the way forward.

The work presented in this report shows that transitioning to net-zero emissions in Latin America and the Caribbean will confer substantial economic benefits, including cheaper energy, enhanced productivity, and improved public health. In this sense, it confirms what country studies have found before; but this study estimates for the first time the size of the economic benefits—which could be as high as 2.7 trillion dollars of net benefits between now and 2050.

Beyond the numbers, the study offers a comprehensive, rigorous, and transparent framework for assessing decarbonization options. The work presented here follows the highest technical standards. It reflects the results of extensive consultation with experts across the Inter-American Development Bank (IDB) Group, our partners at the French Development Agency (AFD), and the 2050 Pathways Platform. The open source modeling platform arising from this work enables stakeholders to evaluate the costs, benefits, and uncertainties linked to

development choices.

The participatory processes and modeling used in this study mimic what countries can and should do to plan decarbonization in a way that responds to local priorities and capabilities. This report points to the benefits of climate action and beginning the process of green technological transformation. The study confirms the pivotal role in reaching net-zero emissions of renewable energy, electrification of energy uses, particularly in transport, and integrated management of food production and biodiversity.

Transformation will not be easy—it will require alignment of finance, leadership, and governance to manage complex winner and loser consequences. Governments must develop and communicate clear visions, systematically diagnose and address barriers to change, and align financing to deliver critical investments.

As climate impacts intensify and the global green transformation accelerates, time is of the essence. Realizing a just, equitable, and prosperous net-zero future is achievable, but countries must act rapidly and judiciously. As the largest source of climate and development financing for Latin America and the Caribbean, the IDB Group can help plan and change policies with knowledge and technical assistance while providing finance for the critical investments needed to drive transformation in countries.

<figure><img src="image_6.png" /><figcaption>Graham Watkins
Chief of the Climate Change Division
Inter-American Development Bank</figcaption></figure>
Countries across Latin America and the Caribbean are charting their paths toward net-zero emissions and climate-resilient development. This report offers insights into how governments can accelerate climate progress while advancing broader economic and social goals.

Climate change poses grave threats, and we need to respond to these threats. At the same time, the global technological revolution toward renewable energy, electromobility, and sustainable land use presents new opportunities for sustainable economic growth and better lives. Several countries have embarked on transformational journeys, evidenced by implementing long-term and cross-sectoral strategies aligned with the Paris Agreement. Other countries are beginning to identify and implement sector reforms that point the way forward.

The work presented in this report shows that transitioning to net-zero emissions in Latin America and the Caribbean will confer substantial economic benefits, including cheaper energy, enhanced productivity, and improved public health. In this sense, it confirms what country studies have found before; but this study estimates for the first time the size of the economic benefits—which could be as high as 2.7 trillion dollars of net benefits between now and 2050.

Beyond the numbers, the study offers a comprehensive, rigorous, and transparent framework for assessing decarbonization options. The work presented here follows the highest technical standards. It reflects the results of extensive consultation with experts across the Inter-American Development Bank (IDB) Group, our partners at the French Development Agency (AFD), and the 2050 Pathways Platform. The open source modeling platform arising from this work enables stakeholders to evaluate the costs, benefits, and uncertainties linked to

development choices.

The participatory processes and modeling used in this study mimic what countries can and should do to plan decarbonization in a way that responds to local priorities and capabilities. This report points to the benefits of climate action and beginning the process of green technological transformation. The study confirms the pivotal role in reaching net-zero emissions of renewable energy, electrification of energy uses, particularly in transport, and integrated management of food production and biodiversity.

Transformation will not be easy—it will require alignment of finance, leadership, and governance to manage complex winner and loser consequences. Governments must develop and communicate clear visions, systematically diagnose and address barriers to change, and align financing to deliver critical investments.

As climate impacts intensify and the global green transformation accelerates, time is of the essence. Realizing a just, equitable, and prosperous net-zero future is achievable, but countries must act rapidly and judiciously. As the largest source of climate and development financing for Latin America and the Caribbean, the IDB Group can help plan and change policies with knowledge and technical assistance while providing finance for the critical investments needed to drive transformation in countries.

<figure><img src="image_6.png" /><figcaption>Graham Watkins
Chief of the Climate Change Division
Inter-American Development Bank</figcaption></figure>
<figure><img src="image_7.png" /></figure>
<figure><img src="image_7.png" /></figure>
Droughts, floods, wildfires, and other climate-related catastrophes are unfolding around the globe and upending lives, wiping out economies, and leaving in their wake destruction many hoped would be decades away. It is not too late, however, to stave off the worst climate effects. Limiting temperature increases to 1.5-2°C above pre-industrial levels consistent with the Paris Agreement requires reaching net-zero greenhouse gas emissions by about 2050. This, in turn, requires transformations in every sector of the economy. Fortunately, many transformations that would help achieve climate targets often come with enormous economic and development benefits that directly align with the goals of ministries and sectors that will implement them.

This report follows in the footsteps of studies in Chile, Costa Rica, Colombia, the Dominican Republic, and Peru (Benavides et al., 2021; Groves et al., 2020; Arguello et al., 2022; Quirós-Tortos et al., 2023; Quirós-Tortos et al., 2021) that connect development and decarbonization goals by identifying and quantifying the social, economic, and environmental costs and benefits of actions that would help countries reach net zero. This work introduces SiSePuede, a toolkit for developing and assessing transformations, and uses it to develop robust decarbonization strategies for all Latin America and the Caribbean while also diving into implications for each sector and select countries.

This work is the result of collaboration between the RAND Corporation, Tecnólogico de Monterrey, the IDB, and the 2050 Pathways Platform. Funding was provided by the IDB and the European Climate Foundation. The contents of this work reflect the authors' analyses and do not necessarily represent the views and opinions of the funding organizations.

Here, we endeavor to demystify the idea of reaching net-zero and to connect climate change to the goals and concerns of many people across the economy who would enact and be affected by much-needed changes. We hope this report will be of interest to climate, finance, transverse, and line ministries and private sector leaders throughout Latin America, the Caribbean, and beyond; resonating with international finance organizations and other nongovernmental organizations (NGOs) helping to bring about these changes; and beckoning to climate policy makers around the globe.

### About RAND Social and Economic Well-Being

RAND Social and Economic Well-Being is a division of the RAND Corporation that seeks to improve the health and social and economic well-being of populations and communities throughout the world. This research was conducted in the Community Health and Environmental Policy Program within RAND Social and Economic Well-Being. The program focuses on such topics as infrastructure, science and technology, industrial policy, community design, community health promotion, migration and population dynamics, transportation, energy, and climate and the environment, as well as other policy concerns influenced by the natural and built environment, technology, and community organizations and institutions that affect well-being. For more information, email chep@rand.org.
Droughts, floods, wildfires, and other climate-related catastrophes are unfolding around the globe and upending lives, wiping out economies, and leaving in their wake destruction many hoped would be decades away. It is not too late, however, to stave off the worst climate effects. Limiting temperature increases to 1.5-2°C above pre-industrial levels consistent with the Paris Agreement requires reaching net-zero greenhouse gas emissions by about 2050. This, in turn, requires transformations in every sector of the economy. Fortunately, many transformations that would help achieve climate targets often come with enormous economic and development benefits that directly align with the goals of ministries and sectors that will implement them.

This report follows in the footsteps of studies in Chile, Costa Rica, Colombia, the Dominican Republic, and Peru (Benavides et al., 2021; Groves et al., 2020; Arguello et al., 2022; Quirós-Tortos et al., 2023; Quirós-Tortos et al., 2021) that connect development and decarbonization goals by identifying and quantifying the social, economic, and environmental costs and benefits of actions that would help countries reach net zero. This work introduces SiSePuede, a toolkit for developing and assessing transformations, and uses it to develop robust decarbonization strategies for all Latin America and the Caribbean while also diving into implications for each sector and select countries.

This work is the result of collaboration between the RAND Corporation, Tecnólogico de Monterrey, the IDB, and the 2050 Pathways Platform. Funding was provided by the IDB and the European Climate Foundation. The contents of this work reflect the authors’ analyses and do not necessarily represent the views and opinions of the funding organizations.

Here, we endeavor to demystify the idea of reaching net-zero and to connect climate change to the goals and concerns of many people across the economy who would enact and be affected by much-needed changes. We hope this report will be of interest to climate, finance, transverse, and line ministries and private sector leaders throughout Latin America, the Caribbean, and beyond; resonating with international finance organizations and other nongovernmental organizations (NGOs) helping to bring about these changes; and beckoning to climate policy makers around the globe.

### About RAND Social and Economic Well-Being

RAND Social and Economic Well-Being is a division of the RAND Corporation that seeks to improve the health and social and economic well-being of populations and communities throughout the world. This research was conducted in the Community Health and Environmental Policy Program within RAND Social and Economic Well-Being. The program focuses on such topics as infrastructure, science and technology, industrial policy, community design, community health promotion, migration and population dynamics, transportation, energy, and climate and the environment, as well as other policy concerns influenced by the natural and built environment, technology, and community organizations and institutions that affect well-being. For more information, email chep@rand.org.
## About Tecnológico de Monterrey

Tecnológico de Monterrey is the largest private university in Mexico, with 31 campuses in 25 cities. It is a private, nonprofit, independent institution with no political or religious affiliations. Since 2018, the Quacquarelli Symonds World University Rankings has recognized Tecnológico de Monterrey as the best private university in Mexico, and in 2021 among the top 30 private universities worldwide. Its work is supported by civil associations of leaders from all over Mexico who are committed to quality in higher education. Research programs include strategic partnerships with the Massachusetts Institute of Technology, Femsa Biotechnology Center, the Water Center for Latin America and the Caribbean (financed by the IDB and the Femsa Foundation), the Motorola Research and Development Center on Home & Networks Mobility, the Center for Advanced Design at the Guadalajara Campus, and the School of Government and Public Transformation Energy Knowledge Networks funded by Mexico's National Science and Technology Council (Conacyt). For more information, email edmundo.molina@tec.mx.

## About the Inter-American Development Bank

IDB is a leading source of long-term financing for economic, social, and institutional projects in Latin America and the Caribbean. Besides loans, grants, and guarantees, the IDB conducts cutting-edge research to offer innovative and sustainable solutions to the region's most pressing challenges. Founded in 1959 to help accelerate progress in its developing member countries, IDB works every day to improve lives. The opinions expressed in this publication are the authors' and do not necessarily reflect the views of IDB, its board of directors, or the countries they represent.

## About the 2050 Pathways Platform

The 2050 Pathways Platform is a multistakeholder initiative launched in 2016 by the United Nations Climate Change Conference (COP21) Climate Change Ambassador for France Laurence Tubiana, one of the architects of the Paris Agreement. It was established at the request of countries who wanted a collective space to exchange best practices for the elaboration of long-term low emissions development strategies, one of the key elements of the Paris Agreement. In addition to its 38 country members, the Platform brings together a network of bilateral and multilateral donors, international and national think tanks, and climate policy experts interested in long-term planning in response to the climate challenge.
## About Tecnológico de Monterrey

Tecnológico de Monterrey is the largest private university in Mexico, with 31 campuses in 25 cities. It is a private, nonprofit, independent institution with no political or religious affiliations. Since 2018, the Quacquarelli Symonds World University Rankings has recognized Tecnológico de Monterrey as the best private university in Mexico, and in 2021 among the top 30 private universities worldwide. Its work is supported by civil associations of leaders from all over Mexico who are committed to quality in higher education. Research programs include strategic partnerships with the Massachusetts Institute of Technology, Femsa Biotechnology Center, the Water Center for Latin America and the Caribbean (financed by the IDB and the Femsa Foundation), the Motorola Research and Development Center on Home & Networks Mobility, the Center for Advanced Design at the Guadalajara Campus, and the School of Government and Public Transformation Energy Knowledge Networks funded by Mexico's National Science and Technology Council (Conacyt). For more information, email edmundo.molina@tec.mx.

## About the Inter-American Development Bank

IDB is a leading source of long-term financing for economic, social, and institutional projects in Latin America and the Caribbean. Besides loans, grants, and guarantees, the IDB conducts cutting-edge research to offer innovative and sustainable solutions to the region's most pressing challenges. Founded in 1959 to help accelerate progress in its developing member countries, IDB works every day to improve lives. The opinions expressed in this publication are the authors' and do not necessarily reflect the views of IDB, its board of directors, or the countries they represent.

## About the 2050 Pathways Platform

The 2050 Pathways Platform is a multistakeholder initiative launched in 2016 by the United Nations Climate Change Conference (COP21) Climate Change Ambassador for France Laurence Tubiana, one of the architects of the Paris Agreement. It was established at the request of countries who wanted a collective space to exchange best practices for the elaboration of long-term low emissions development strategies, one of the key elements of the Paris Agreement. In addition to its 38 country members, the Platform brings together a network of bilateral and multilateral donors, international and national think tanks, and climate policy experts interested in long-term planning in response to the climate challenge.
## Acknowledgments

We thank the many subject matter experts at IDB and the AFD who offered their expertise in our workshops and whose feedback guided our research methodology, data, and findings. We are particularly grateful for written reviews from Karla Arias, Hector Baldivieso, Lenin Balza, Allen Blackman, Carlos Beltrán, Agustina Calatayud, Magda Correal, Isaura Espinosa de los Monteros, Christiaan Gischler, Jose Irigoyen, Nora Lambrecht, Benoit Lefevre, Luisa Fernanda Lema Velez, Nora Libertun de Duren, Natacha Marzolf, Pedro Martel, Juan Roberto Paredes, Katia Queiroz Fenyves, Maria Perez-Urdiales, Juan Alfredo Rihm Silva, Camila Rodriguez Taylor, Lina Salazar, Malini Samtani, Jose Antonio Urteaga, and Niels van Eybergen at the IDB, and Richard Baron at 2050 Pathways. We sincerely appreciate Yessica Zeltzin Orozco Armenta, María Esperanza Plaza Ferreira, and Robin Eriksson for their ongoing coding support. We also thank our formal peer reviewers, David G. Groves at the World Bank and Michelle Miro at RAND, for their excellent comments and continued guidance.

Verónica Corona is the graphic designer for this report. Tammi Titsworth is the editor.
## Acknowledgments

We thank the many subject matter experts at IDB and the AFD who offered their expertise in our workshops and whose feedback guided our research methodology, data, and findings. We are particularly grateful for written reviews from Karla Arias, Hector Baldivieso, Lenin Balza, Allen Blackman, Carlos Beltrán, Agustina Calatayud, Magda Correal, Isaura Espinosa de los Monteros, Christiaan Gischler, Jose Irigoyen, Nora Lambrecht, Benoit Lefevre, Luisa Fernanda Lema Velez, Nora Libertun de Duren, Natacha Marzolf, Pedro Martel, Juan Roberto Paredes, Katia Queiroz Fenyves, Maria Perez-Urdiales, Juan Alfredo Rihm Silva, Camila Rodriguez Taylor, Lina Salazar, Malini Samtani, Jose Antonio Urteaga, and Niels van Eybergen at the IDB, and Richard Baron at 2050 Pathways. We sincerely appreciate Yessica Zeltzin Orozco Armenta, María Esperanza Plaza Ferreira, and Robin Eriksson for their ongoing coding support. We also thank our formal peer reviewers, David G. Groves at the World Bank and Michelle Miro at RAND, for their excellent comments and continued guidance.

Verónica Corona is the graphic designer for this report. Tammi Titsworth is the editor.
<figure><img src="image_8.png" /></figure>
<figure><img src="image_8.png" /></figure>
Climate change poses a grave threat to sustainable development in Latin America and the Caribbean (Talbot-Wright and Vogt-Schilb, 2023). Its effects include more frequent and intense natural disasters, sea-level rise, changes in local weather patterns, and loss of vital ecosystem services. The impacts for humans are vast, including threats to food and water security, disruption of infrastructure, increased human morbidity and mortality, and lower labor productivity, household income, fiscal balances, and tourism revenues. Moreover, climate change disproportionately affects poor and underrepresented people, creating a vicious cycle. It can spur migration, both within and across national boundaries. The vulnerability of urban populations and small island states is of particular concern. While adaptation is essential and urgent, it is proving inadequate in the face of unchecked climate change (Parmesan et al., 2022).

Global warming will continue to worsen as the world emits greenhouse gases (GHGs). Limiting the temperature increase between 1.5 and 2°C above pre-industrial levels, the Paris Agreement's overarching goal requires reaching net-zero emissions of GHGs by around 2050 (Paris Agreement to the United Nations Framework Convention on Climate Change, 2015). This ambitious goal requires massive, on-the-ground changes in every sector and country (IDB and DDPLAC, 2019; Fazekas et al., 2022). Meeting both resilience and decarbonization goals requires realigning the equivalent of 7 to 19% of gross domestic product (GDP) with climate change goals every year (Galindo Paliza et al., 2022).

A key question is how much Latin American and Caribbean countries should do to reduce emissions. Emissions in the region averaged 4 gigatons of carbon dioxide equivalent (GtCO2e) per year from 2015 to 2020 (Climate Watch Historical GHG Emissions, 2022). Figure ES.1 shows the breakdown of emissions in the region by economic sector. Agriculture, forests, and other land uses account for 50% of emissions, which reflect the large role agriculture plays in the region, which is a net exporter of agricultural products, as well as the rapid deforestation that has accompanied the expansion of agriculture in general and conversion of forests to grazeland in particular (Climate Watch Historical GHG Emissions, 2022; Hernández-Blanco et al., 2020, Zalles et al., 2021). Electricity and energy production, on the other hand, contribute much less to emissions in large part because of the region's significant reliance on hydropower, though growing reliance on natural gas for electricity is an important driver of emissions (Marinkovic, 2023; Vogt-Schilb, 2023). This contrasts with the rest of the world, in which agriculture, forests, and other land uses account for 15% of emissions and electricity and energy production account for 40% (Climate Watch Historical GHG Emissions, 2022).
Climate change poses a grave threat to sustainable development in Latin America and the Caribbean (Talbot-Wright and Vogt-Schilb, 2023). Its effects include more frequent and intense natural disasters, sea-level rise, changes in local weather patterns, and loss of vital ecosystem services. The impacts for humans are vast, including threats to food and water security, disruption of infrastructure, increased human morbidity and mortality, and lower labor productivity, household income, fiscal balances, and tourism revenues. Moreover, climate change disproportionately affects poor and underrepresented people, creating a vicious cycle. It can spur migration, both within and across national boundaries. The vulnerability of urban populations and small island states is of particular concern. While adaptation is essential and urgent, it is proving inadequate in the face of unchecked climate change (Parmesan et al., 2022).

Global warming will continue to worsen as the world emits greenhouse gases (GHGs). Limiting the temperature increase between 1.5 and 2°C above pre-industrial levels, the Paris Agreement's overarching goal requires reaching net-zero emissions of GHGs by around 2050 (Paris Agreement to the United Nations Framework Convention on Climate Change, 2015). This ambitious goal requires massive, on-the-ground changes in every sector and country (IDB and DDPLAC, 2019; Fazekas et al., 2022). Meeting both resilience and decarbonization goals requires realigning the equivalent of 7 to 19% of gross domestic product (GDP) with climate change goals every year (Galindo Paliza et al., 2022).

A key question is how much Latin American and Caribbean countries should do to reduce emissions. Emissions in the region averaged 4 gigatons of carbon dioxide equivalent (GtCO2e) per year from 2015 to 2020 (Climate Watch Historical GHG Emissions, 2022). Figure ES.1 shows the breakdown of emissions in the region by economic sector. Agriculture, forests, and other land uses account for 50% of emissions, which reflect the large role agriculture plays in the region, which is a net exporter of agricultural products, as well as the rapid deforestation that has accompanied the expansion of agriculture in general and conversion of forests to grazeland in particular (Climate Watch Historical GHG Emissions, 2022; Hernández-Blanco et al., 2020, Zalles et al., 2021). Electricity and energy production, on the other hand, contribute much less to emissions in large part because of the region's significant reliance on hydropower, though growing reliance on natural gas for electricity is an important driver of emissions (Marinkovic, 2023; Vogt-Schilb, 2023). This contrasts with the rest of the world, in which agriculture, forests, and other land uses account for 15% of emissions and electricity and energy production account for 40% (Climate Watch Historical GHG Emissions, 2022).
<figure><img src="image_9.png" /></figure>

Source: Climate Watch, World Resources Institute (2023).

<caption>**Figure ES.1 Emissions by sector in Latin America and the Caribbean (2015-2020).**</caption>

The region's emissions represent less than 10% of total global emissions of 47.5 Gt CO2e (Climate Watch Historical GHG Emissions. 2022). Many therefore propose that most emission reductions should happen in developed countries, which already have benefited from fossil-fueled economies and whose emissions are far larger. Poorer countries, meanwhile, should be given room to develop as they see fit, perhaps polluting in the process (Vogt-Schilb, 2023).

Traditional development patterns around the world, however, including in Latin American and the Caribbean, have been far from optimal. There is increasing evidence that development and decarbonization can be more aligned than conflicting (Fazekas et al., 2022). As just one example, economic growth in the region has led to the fastest increase in car ownership in the world (SLOCAT 2021). While this has brought economic opportunity and high living standards to millions, it also poses huge costs from accidents, road congestion, and air pollution (Calatayud et al., 2021; Chen et al., 2019; Husaini et al., 2022). Policies and investments promoting non-motorized transport and transit, higher vehicle occupancy, increased vehicle efficiency, and electrified vehicles could improve quality of life and promote growth while also reducing emissions. As another example, many in the region lack access to safe water and sanitation. Achieving universal safe water and sanitation is not only a key Sustainable Development Goal (SDG) but the collection, safe management, treatment, and energy recovery of waste and wastewater is key to reducing emissions (Rani et al., 2022; de Foy et al., 2023).
<figure><img src="image_9.png" /></figure>

Source: Climate Watch, World Resources Institute (2023).

<caption>**Figure ES.1 Emissions by sector in Latin America and the Caribbean (2015-2020).**</caption>

The region's emissions represent less than 10% of total global emissions of 47.5 Gt CO2e (Climate Watch Historical GHG Emissions. 2022). Many therefore propose that most emission reductions should happen in developed countries, which already have benefited from fossil-fueled economies and whose emissions are far larger. Poorer countries, meanwhile, should be given room to develop as they see fit, perhaps polluting in the process (Vogt-Schilb, 2023).

Traditional development patterns around the world, however, including in Latin American and the Caribbean, have been far from optimal. There is increasing evidence that development and decarbonization can be more aligned than conflicting (Fazekas et al., 2022). As just one example, economic growth in the region has led to the fastest increase in car ownership in the world (SLOCAT 2021). While this has brought economic opportunity and high living standards to millions, it also poses huge costs from accidents, road congestion, and air pollution (Calatayud et al., 2021; Chen et al., 2019; Husaini et al., 2022). Policies and investments promoting non-motorized transport and transit, higher vehicle occupancy, increased vehicle efficiency, and electrified vehicles could improve quality of life and promote growth while also reducing emissions. As another example, many in the region lack access to safe water and sanitation. Achieving universal safe water and sanitation is not only a key Sustainable Development Goal (SDG) but the collection, safe management, treatment, and energy recovery of waste and wastewater is key to reducing emissions (Rani et al., 2022; de Foy et al., 2023).
In addition, the cost of low-carbon technology such as solar and wind has plummeted (IEA, 2023). Technologies that run on electricity, such as electric vehicles or heat pumps, often are cheaper to operate and maintain than their fossil fuel-based counterparts, even while financing high upfront costs remains a challenge (Rissman, 2022; AAA, 2019; Burke et al. 2022). In some sectors, decarbonization is becoming the fastest way to reduce costs and improve services.

Indeed, prior country-level research has found that reaching net-zero emissions could result in net benefits of approximately $41 billion in Costa Rica, $7 billion in Chile, $330 billion in Colombia, and $140 billion in Peru (Groves et al., 2020; Benavides et al., 2021; Arguello et al., 2022; Quirós-Tortos et al., 2021). Regional studies have suggested that net-zero efforts can increase GDP in Latin American and the Caribbean by 1% by 2030 (Vogt-Schilb, 2021) while creating millions of green jobs (Saget et al., 2020).

Even if reducing emissions contributes to development, it is easy for decarbonization plans to feel disconnected from the goals, knowledge, and context of ordinary citizens and decisionmakers who must implement them. Governments' ministries of environment are typically responsible for designing climate strategies. But the actions described in these plans must be implemented by the private sector; by government agencies in other ministries such as transport, energy, agriculture, industry, and finance; and by various levels of government—from national to municipal (Rakes et al., 2023; Vera et al., 2023). These actors may be sympathetic to climate change, but they have other priorities—such as growth and productivity, labor, and sector-specific concerns such as congestion, health care costs, and food security—and little knowledge of what net-zero emissions mean for them and how to reach these goals. To be motivated and able to act, farmers, transit authorities, or factory operators, who speak in terms of heads of cattle, numbers of buses, and tons of cement, need to know what specific transformations in their sector are needed from them to make progress towards net zero, and what their costs and benefits from those transformations would be.

## Purpose and Approach

In this study, we explore options for Latin America and the Caribbean to robustly meet two goals: reaching net-zero emissions in alignment with Paris Agreement targets and providing net social, economic, and environmental benefits to the people who would walk that path.

We have developed SiSePuede (Simulation of Sectoral Pathways and Uncertainty Exploration for Decarbonization), a toolbox for designing development strategies and analyzing amid uncertainty their emissions, costs, benefits, and alignment with development goals and Paris Agreement targets. We have used SiSePuede to assess decarbonization strategies in Latin America and the Caribbean under uncertainty. We calibrated SiSePuede with data from 18 countries that are IDB borrowing members: Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, El Salvador, Guatemala, Honduras, Jamaica, Mexico, Nicaragua, Panama, Paraguay, Peru, and Uruguay.
In addition, the cost of low-carbon technology such as solar and wind has plummeted (IEA, 2023). Technologies that run on electricity, such as electric vehicles or heat pumps, often are cheaper to operate and maintain than their fossil fuel-based counterparts, even while financing high upfront costs remains a challenge (Rissman, 2022; AAA, 2019; Burke et al. 2022). In some sectors, decarbonization is becoming the fastest way to reduce costs and improve services.

Indeed, prior country-level research has found that reaching net-zero emissions could result in net benefits of approximately $41 billion in Costa Rica, $7 billion in Chile, $330 billion in Colombia, and $140 billion in Peru (Groves et al., 2020; Benavides et al., 2021; Arguello et al., 2022; Quirós-Tortos et al., 2021). Regional studies have suggested that net-zero efforts can increase GDP in Latin American and the Caribbean by 1% by 2030 (Vogt-Schilb, 2021) while creating millions of green jobs (Saget et al., 2020).

Even if reducing emissions contributes to development, it is easy for decarbonization plans to feel disconnected from the goals, knowledge, and context of ordinary citizens and decisionmakers who must implement them. Governments' ministries of environment are typically responsible for designing climate strategies. But the actions described in these plans must be implemented by the private sector; by government agencies in other ministries such as transport, energy, agriculture, industry, and finance; and by various levels of government—from national to municipal (Rakes et al., 2023; Vera et al., 2023). These actors may be sympathetic to climate change, but they have other priorities—such as growth and productivity, labor, and sector-specific concerns such as congestion, health care costs, and food security—and little knowledge of what net-zero emissions mean for them and how to reach these goals. To be motivated and able to act, farmers, transit authorities, or factory operators, who speak in terms of heads of cattle, numbers of buses, and tons of cement, need to know what specific transformations in their sector are needed from them to make progress towards net zero, and what their costs and benefits from those transformations would be.

## Purpose and Approach

In this study, we explore options for Latin America and the Caribbean to robustly meet two goals: reaching net-zero emissions in alignment with Paris Agreement targets and providing net social, economic, and environmental benefits to the people who would walk that path.

We have developed SiSePuede (Simulation of Sectoral Pathways and Uncertainty Exploration for Decarbonization), a toolbox for designing development strategies and analyzing amid uncertainty their emissions, costs, benefits, and alignment with development goals and Paris Agreement targets. We have used SiSePuede to assess decarbonization strategies in Latin America and the Caribbean under uncertainty. We calibrated SiSePuede with data from 18 countries that are IDB borrowing members: Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, El Salvador, Guatemala, Honduras, Jamaica, Mexico, Nicaragua, Panama, Paraguay, Peru, and Uruguay.
SiSePuede models emissions in six integrated economic sectors based on the Intergovernmental Panel on Climate Change (IPCC) methodology (IPCC, 2006; 2019): agriculture, industry, buildings, transport, waste, and electricity and fuel production. SiSePuede's process of modeling emission reductions can be understood through the ASIF framework, originally designed for the transport sector (Schipper and Marie-Lilliu, 1999). ASIF stands for Activity, mode Share, emissions Intensity, and emissions intensity of Fuel. First, levels of activity (e.g., demand for food, transport, buildings, industrial output, and energy) are based on underlying GDP and population drivers. Then, each activity is apportioned to a production mode (e.g., the fraction of residential heat demand met by natural gas furnaces, wood-burning stoves, or heat pumps). Each mode is associated with a specific emission intensity shaped by efficiency and fuel sources. The variables that drive emissions are calibrated against publicly available datasets on economic activity, energy consumption, and emissions from sources such as IDB, World Bank, International Monetary Fund (IMF), International Energy Agency (IEA), and United Nations Food and Agriculture Organization (UN FAO). SiSePuede is a free and open source model, available on GitHub at https://github.com/jcsyme/sisepuede and https://hub.docker.com/r/jsyme816/sisepuede, documented at https://sisepuede.readthedocs.io.

Given the many deep uncertainties that influence emissions, costs, and benefits, we couple SiSePuede with Robust Decision Making (RDM), a method for managing deep uncertainties (Lempert, Popper, and Bankes, 2003; Groves and Lempert, 2007; Kalra et al., 2015; Lempert, et al., 2013). RDM is an iterative, stakeholder-supported process for conducting exhaustive “what-if” analyses. Using RDM’s vulnerability-analysis techniques, we evaluate strategies under an array of future conditions and assumptions to understand the potential range of outcomes and conditions that lead strategies to meet (or fail to meet) decarbonization and economic goals. This method previously has been used in Latin America and the Caribbean to inform decarbonization planning (Groves et al., 2020, 2022; Quirós-Tortós et al., 2021, 2023; Benavides et al., 2021; Arguello et al., 2022) and resilient water and transport planning (Kalra et al., 2015; Groves et al., 2021; Molina-Perez et al., 2019; Olaya et al., 2020).

Consistent with RDM’s process, our experimental design was informed by the input of IDB sector experts. We engaged them at the start of our research in a first round of sector-specific workshops in which they provided guidance on transformations for achieving decarbonization, those transformations’ costs and benefits, uncertainties that would shape outcomes, and data and models available to inform our analysis. After our preliminary analysis, we then held sector-specific workshops to solicit revisions to our experimental design and review data and outcomes. We revised our final analysis based on this expert feedback.
SiSePuede models emissions in six integrated economic sectors based on the Intergovernmental Panel on Climate Change (IPCC) methodology (IPCC, 2006; 2019): agriculture, industry, buildings, transport, waste, and electricity and fuel production. SiSePuede's process of modeling emission reductions can be understood through the ASIF framework, originally designed for the transport sector (Schipper and Marie-Lilliu, 1999). ASIF stands for Activity, mode Share, emissions Intensity, and emissions intensity of Fuel. First, levels of activity (e.g., demand for food, transport, buildings, industrial output, and energy) are based on underlying GDP and population drivers. Then, each activity is apportioned to a production mode (e.g., the fraction of residential heat demand met by natural gas furnaces, wood-burning stoves, or heat pumps). Each mode is associated with a specific emission intensity shaped by efficiency and fuel sources. The variables that drive emissions are calibrated against publicly available datasets on economic activity, energy consumption, and emissions from sources such as IDB, World Bank, International Monetary Fund (IMF), International Energy Agency (IEA), and United Nations Food and Agriculture Organization (UN FAO). SiSePuede is a free and open source model, available on GitHub at https://github.com/jcsyme/sisepuede and https://hub.docker.com/r/jsyme816/sisepuede, documented at https://sisepuede.readthedocs.io.

Given the many deep uncertainties that influence emissions, costs, and benefits, we couple SiSePuede with Robust Decision Making (RDM), a method for managing deep uncertainties (Lempert, Popper, and Bankes, 2003; Groves and Lempert, 2007; Kalra et al., 2015; Lempert, et al., 2013). RDM is an iterative, stakeholder-supported process for conducting exhaustive “what-if” analyses. Using RDM’s vulnerability-analysis techniques, we evaluate strategies under an array of future conditions and assumptions to understand the potential range of outcomes and conditions that lead strategies to meet (or fail to meet) decarbonization and economic goals. This method previously has been used in Latin America and the Caribbean to inform decarbonization planning (Groves et al., 2020, 2022; Quirós-Tortós et al., 2021, 2023; Benavides et al., 2021; Arguello et al., 2022) and resilient water and transport planning (Kalra et al., 2015; Groves et al., 2021; Molina-Perez et al., 2019; Olaya et al., 2020).

Consistent with RDM’s process, our experimental design was informed by the input of IDB sector experts. We engaged them at the start of our research in a first round of sector-specific workshops in which they provided guidance on transformations for achieving decarbonization, those transformations’ costs and benefits, uncertainties that would shape outcomes, and data and models available to inform our analysis. After our preliminary analysis, we then held sector-specific workshops to solicit revisions to our experimental design and review data and outcomes. We revised our final analysis based on this expert feedback.
## Traditional Development Results in High Emissions

A Traditional Development trajectory for the region serves as a backdrop against which other decarbonization actions (called transformations) are compared. Traditional Development reflects a future mostly unconcerned with decarbonization and consistent with historical development trajectories—for instance, car ownership increases with GDP per capita. This scenario also includes an increase in energy efficiency and productivity through improved technology, and a modest increase in using renewables for electricity production. Under a Traditional Development trajectory, we estimate emissions in the region would increase by 70% from 4.1 GtCO2e in 2020 (Climate Watch Historical GHG Emissions, 2022) to 6.9 by 2050 (see Figure ES.2).

<figure><img src="image_10.png" /><figcaption>Figure ES.2 Emissions under Traditional Development.</figcaption></figure>
## Traditional Development Results in High Emissions

A Traditional Development trajectory for the region serves as a backdrop against which other decarbonization actions (called transformations) are compared. Traditional Development reflects a future mostly unconcerned with decarbonization and consistent with historical development trajectories—for instance, car ownership increases with GDP per capita. This scenario also includes an increase in energy efficiency and productivity through improved technology, and a modest increase in using renewables for electricity production. Under a Traditional Development trajectory, we estimate emissions in the region would increase by 70% from 4.1 GtCO2e in 2020 (Climate Watch Historical GHG Emissions, 2022) to 6.9 by 2050 (see Figure ES.2).

<figure><img src="image_10.png" /><figcaption>Figure ES.2 Emissions under Traditional Development.</figcaption></figure>
Importantly, Traditional Development is not and should not be interpreted as a projection of how Latin America and the Caribbean currently are developing or likely to develop soon. In important ways, it is consistent with current trends in the region, such as a reliance on natural gas to offset drought-induced hydropower shortages (Climate Watch Historical GHG Emissions, 2022). However, there are many efforts to decarbonize by moving the region away from such a traditional development trajectory (Iyer et al., 2017; IDB and DDPLAC, 2019). At least 10 countries in the region have set net-zero targets, most of them for 2050.

Against the traditional development backdrop, we define more than 50 different transformations across the economy (Table ES.1). Emissions can be reduced by curtailing activity—for instance, reducing travel demand by encouraging work from home or reducing total food production by decreasing waste and losses. Transformations also can affect the carbon intensity of sector activity, such as improving road vehicles' and appliances' energy efficiency or adapting agriculture practices to increase yields. Structural changes also can be made, such as by producing electricity from renewable sources rather than fossil fuels, using public transport instead of cars, and producing foods that have a lower carbon intensity and land requirements per unit of nutrition. Finally, shifts can be made from dirtier to cleaner sources of energy—for instance, by producing electricity with solar instead of natural gas, and by using electricity instead of fossil fuels in road vehicles and to produce heat in buildings and industry.

<table><caption>Table ES.1 Consolidated list of transformations by sector</caption><thead><tr><td>Sector</td><td>Transformations</td></tr></thead><tbody><tr><td>Agriculture, forests, and other land use</td><td><ul><li>Reduce excess fertilizer use</li><li>Expand conservation agriculture</li><li>Improve rice management</li><li>Accelerate productivity</li><li>Use gains in productivity to conserve land</li><li>Reduce enteric fermentation</li><li>Expand silvopasture</li><li>Manure management</li><li>Reduce supply chain losses</li><li>Halt deforestation</li><li>Induce afforestation with a shift in agricultural production and consumption</li></ul></td></tr><tr><td>Industry</td><td><ul><li>Shift from virgin to recycled inputs</li><li>Substitute clinker in cement</li><li>Increase energy efficiency</li><li>Increase efficiency of materials use</li><li>Fuel shift low-temperature heat to heat pumps</li><li>Fuel shift high-temperature heat to electricity and hydrogen</li><li>Reduce fluorinated (F) -gases</li><li>Abate nitrous oxide (N2O) in chemical production</li><li>Use carbon capture and storage (CCS) for steel, cement, chemicals, and plastics</li></ul></td></tr></tbody></table>
Importantly, Traditional Development is not and should not be interpreted as a projection of how Latin America and the Caribbean currently are developing or likely to develop soon. In important ways, it is consistent with current trends in the region, such as a reliance on natural gas to offset drought-induced hydropower shortages (Climate Watch Historical GHG Emissions, 2022). However, there are many efforts to decarbonize by moving the region away from such a traditional development trajectory (Iyer et al., 2017; IDB and DDPLAC, 2019). At least 10 countries in the region have set net-zero targets, most of them for 2050.

Against the traditional development backdrop, we define more than 50 different transformations across the economy (Table ES.1). Emissions can be reduced by curtailing activity—for instance, reducing travel demand by encouraging work from home or reducing total food production by decreasing waste and losses. Transformations also can affect the carbon intensity of sector activity, such as improving road vehicles' and appliances' energy efficiency or adapting agriculture practices to increase yields. Structural changes also can be made, such as by producing electricity from renewable sources rather than fossil fuels, using public transport instead of cars, and producing foods that have a lower carbon intensity and land requirements per unit of nutrition. Finally, shifts can be made from dirtier to cleaner sources of energy—for instance, by producing electricity with solar instead of natural gas, and by using electricity instead of fossil fuels in road vehicles and to produce heat in buildings and industry.

<table><caption>Table ES.1 Consolidated list of transformations by sector</caption><thead><tr><td>Sector</td><td>Transformations</td></tr></thead><tbody><tr><td>Agriculture, forests, and other land use</td><td><ul><li>Reduce excess fertilizer use</li><li>Expand conservation agriculture</li><li>Improve rice management</li><li>Accelerate productivity</li><li>Use gains in productivity to conserve land</li><li>Reduce enteric fermentation</li><li>Expand silvopasture</li><li>Manure management</li><li>Reduce supply chain losses</li><li>Halt deforestation</li><li>Induce afforestation with a shift in agricultural production and consumption</li></ul></td></tr><tr><td>Industry</td><td><ul><li>Shift from virgin to recycled inputs</li><li>Substitute clinker in cement</li><li>Increase energy efficiency</li><li>Increase efficiency of materials use</li><li>Fuel shift low-temperature heat to heat pumps</li><li>Fuel shift high-temperature heat to electricity and hydrogen</li><li>Reduce fluorinated (F) -gases</li><li>Abate nitrous oxide (N2O) in chemical production</li><li>Use carbon capture and storage (CCS) for steel, cement, chemicals, and plastics</li></ul></td></tr></tbody></table>
<table><thead><tr><th></th><th></th></tr></thead><tbody><tr><td>Buildings</td><td><ul><li>Increase appliances' energy efficiency</li><li>Increase building shell efficiency</li><li>Fuel switch heat to heat pumps</li></ul></td></tr><tr><td>Transport</td><td><ul><li>Increase transportation energy efficiency</li><li>Fuel switch medium- and heavy-duty road transport</li><li>Electrify rail</li><li>Fuel switch maritime</li><li>Mode shift freight</li><li>Electrify light-duty road transport</li><li>Increase occupancy for private vehicles</li><li>Mode shift local passenger travel to transit and non-motorized</li><li>Mode shift regional passenger travel to bus and rail</li></ul></td></tr><tr><td>Energy production</td><td><ul><li>Reduce transmission losses</li><li>Produce electricity with renewables</li><li>Produce hydrogen with renewables</li><li>Flare vented fugitive emissions</li><li>Fix leaks of fugitive emissions</li></ul></td></tr><tr><td>Waste</td><td><ul><li>Universal safe sanitation</li><li>Full wastewater treatment</li><li>Expand solid waste collection and end open dumping/burning</li><li>Divert waste to recyclables</li><li>Energy recovery from wastewater treatment</li><li>Increasing capture and use of biogas in digesters and landfills</li><li>Reduce consumer food waste</li><li>Divert organic material to composting or digesters</li></ul></td></tr></tbody></table>

## Reaching Net Zero Is Feasible and Beneficial

We first analyze the region's decarbonization and economic potential. We find that when all transformations are implemented to maximum effect, which we call an All Actions strategy, the region could achieve net-zero emissions as soon as 2040 under nominal assumptions (see Figure ES.3). (This development strategy is probably overly ambitious, and thus we consider less drastic, more realistic scenarios next). All Actions means simultaneously minimizing emissions from each economic sector (industry, transport, waste, buildings, and energy production), and making changes that enable massive afforestation to offset residual emissions, such as increasing livestock productivity, protecting forests, and shifting agricultural patterns.

Figures ES.4 shows the costs and benefits of All Actions relative to Traditional Development between 2025 and 2050—all our figures are given in 2019 US dollars, and future flows are discounted using a 7% discount rate. Under nominal assumptions, taking all actions can create $2.7 trillion in total net benefits for Latin America and the Caribbean. The main benefits are fuel savings ($900 billion), avoided pollution ($500 billion), and other health, safety, and productivity gains ($1 trillion); these more than compensate the significant additional investment needs ($1.3 trillion). But even when only considering financial costs and benefits to sectors (and excluding hard-to-value and largely public benefits of avoided pollution, ecosystem services, and gains in health, safety, and productivity), we find net benefits of $700 billion.
<table><tr><td>Buildings</td><td><ul><li>Increase appliances' energy efficiency</li><li>Increase building shell efficiency</li><li>Fuel switch heat to heat pumps</li></ul></td></tr><tr><td>Transport</td><td><ul><li>Increase transportation energy efficiency</li><li>Fuel switch medium- and heavy-duty road transport</li><li>Electrify rail</li><li>Fuel switch maritime</li><li>Mode shift freight</li><li>Electrify light-duty road transport</li><li>Increase occupancy for private vehicles</li><li>Mode shift local passenger travel to transit and non-motorized</li><li>Mode shift regional passenger travel to bus and rail</li></ul></td></tr><tr><td>Energy production</td><td><ul><li>Reduce transmission losses</li><li>Produce electricity with renewables</li><li>Produce hydrogen with renewables</li><li>Flare vented fugitive emissions</li><li>Fix leaks of fugitive emissions</li></ul></td></tr><tr><td>Waste</td><td><ul><li>Universal safe sanitation</li><li>Full wastewater treatment</li><li>Expand solid waste collection and end open dumping/burning</li><li>Divert waste to recyclables</li><li>Energy recovery from wastewater treatment</li><li>Increasing capture and use of biogas in digesters and landfills</li><li>Reduce consumer food waste</li><li>Divert organic material to composting or digesters</li></ul></td></tr></table>

## Reaching Net Zero Is Feasible and Beneficial

We first analyze the region's decarbonization and economic potential. We find that when all transformations are implemented to maximum effect, which we call an All Actions strategy, the region could achieve net-zero emissions as soon as 2040 under nominal assumptions (see Figure ES.3). (This development strategy is probably overly ambitious, and thus we consider less drastic, more realistic scenarios next). All Actions means simultaneously minimizing emissions from each economic sector (industry, transport, waste, buildings, and energy production), and making changes that enable massive afforestation to offset residual emissions, such as increasing livestock productivity, protecting forests, and shifting agricultural patterns.

Figures ES.4 shows the costs and benefits of All Actions relative to Traditional Development between 2025 and 2050—all our figures are given in 2019 US dollars, and future flows are discounted using a 7% discount rate. Under nominal assumptions, taking all actions can create $2.7 trillion in total net benefits for Latin America and the Caribbean. The main benefits are fuel savings ($900 billion), avoided pollution ($500 billion), and other health, safety, and productivity gains ($1 trillion); these more than compensate the significant additional investment needs ($1.3 trillion). But even when only considering financial costs and benefits to sectors (and excluding hard-to-value and largely public benefits of avoided pollution, ecosystem services, and gains in health, safety, and productivity), we find net benefits of $700 billion.
<figure><img src="image_11.png" /><figcaption>Figure ES.3 Emissions under Traditional Development and All Actions.</figcaption></figure>

<figure><img src="image_12.png" /><figcaption>Figure ES.4 Nominal (left) and discounted net benefits (right) from taking All Actions</figcaption></figure>
<figure><img src="image_11.png" /><figcaption>Figure ES.3 Emissions under Traditional Development and All Actions.</figcaption></figure>

<figure><img src="image_12.png" /><figcaption>Figure ES.4 Nominal (left) and discounted net benefits (right) from taking All Actions</figcaption></figure>
Key to these benefits is that taking All Actions combines the many necessary structural changes with efficiency gains throughout the economy. For instance, emissions from the electricity sector could be eliminated by switching from fossil fuels to renewables, but this approach on its own poses a high cost in a future where electricity demand increases from fuel switching to electricity and hydrogen across the economy. By coupling this structural change with increasing energy efficiency, the sector can reduce emissions by 95% at a net benefit compared to a traditional development scenario. Similarly, costly investments in using carbon capture and storage (CCS) to abate industrial process emissions can be lessened when industrial outputs such as steel and cement are used more efficiently, thereby reducing the need for production in the first place. In buildings, savings in electricity from efficiency interventions outpace the additional need for more electricity because of fuel switching.

## A Robust Decarbonization Strategy Has Three Critical Actions

Our All Actions strategy serves as an upper bound on what the overall region could gain if it aggressively implemented changes to decarbonize. But doing everything everywhere all at once may not be feasible or necessary. In practice, countries' decarbonization strategies, including their Nationally Determined Contributions (NDCs) and Long-Term Strategies (LTSs), will involve transformations at different implementation levels based on the impacts, costs, benefits, technological availability, political feasibility, and other barriers and drivers of those actions.

To inform those conversations, we assessed which actions are most important to reaching net zero. We generate approximately 1,000 decarbonization strategies that implement every transformation in Table ES.1 to different degrees and analyzed the outcome of each strategy in terms of emissions, costs, and benefits under uncertainty.

Consistently with previous findings at the global scale (IPCC, 2023), we find that while there are thousands of different paths to net zero, three changes are critical:

1. Produce electricity (and, to a lesser extent, hydrogen) from renewable energy sources. Fuel shifts throughout the economy abate emissions only to the extent that electricity and hydrogen—the main replacement fuels—are produced with renewables and not fossil fuels. So, cleaning the grid and producing green hydrogen are critical to decarbonization.

2. Use electricity (and to a lesser extent, hydrogen) instead of fossil fuels to power transport. Transport is one of the hardest to abate sectors, given the many diffuse sources of emissions, growing demands for private vehicle travel, and built infrastructure that entrenches travel patterns by road. Our analysis points to fuel shifts in transport as a key, as it reduces emissions even if shifts in mode and activity turned out to be constrained.

3. Return the land to a carbon sink. This is necessary to offset any residual emissions from the rest of the economy. It involves protecting forests and enabling afforestation through a combination of increasing agricultural productivity and shifting agricultural production and consumption from higher to lower-carbon foods, which are often healthier.
Key to these benefits is that taking All Actions combines the many necessary structural changes with efficiency gains throughout the economy. For instance, emissions from the electricity sector could be eliminated by switching from fossil fuels to renewables, but this approach on its own poses a high cost in a future where electricity demand increases from fuel switching to electricity and hydrogen across the economy. By coupling this structural change with increasing energy efficiency, the sector can reduce emissions by 95% at a net benefit compared to a traditional development scenario. Similarly, costly investments in using carbon capture and storage (CCS) to abate industrial process emissions can be lessened when industrial outputs such as steel and cement are used more efficiently, thereby reducing the need for production in the first place. In buildings, savings in electricity from efficiency interventions outpace the additional need for more electricity because of fuel switching.

## A Robust Decarbonization Strategy Has Three Critical Actions

Our All Actions strategy serves as an upper bound on what the overall region could gain if it aggressively implemented changes to decarbonize. But doing everything everywhere all at once may not be feasible or necessary. In practice, countries' decarbonization strategies, including their Nationally Determined Contributions (NDCs) and Long-Term Strategies (LTSs), will involve transformations at different implementation levels based on the impacts, costs, benefits, technological availability, political feasibility, and other barriers and drivers of those actions.

To inform those conversations, we assessed which actions are most important to reaching net zero. We generate approximately 1,000 decarbonization strategies that implement every transformation in Table ES.1 to different degrees and analyzed the outcome of each strategy in terms of emissions, costs, and benefits under uncertainty.

Consistently with previous findings at the global scale (IPCC, 2023), we find that while there are thousands of different paths to net zero, three changes are critical:

1. Produce electricity (and, to a lesser extent, hydrogen) from renewable energy sources. Fuel shifts throughout the economy abate emissions only to the extent that electricity and hydrogen—the main replacement fuels—are produced with renewables and not fossil fuels. So, cleaning the grid and producing green hydrogen are critical to decarbonization.

2. Use electricity (and to a lesser extent, hydrogen) instead of fossil fuels to power transport. Transport is one of the hardest to abate sectors, given the many diffuse sources of emissions, growing demands for private vehicle travel, and built infrastructure that entrenches travel patterns by road. Our analysis points to fuel shifts in transport as a key, as it reduces emissions even if shifts in mode and activity turned out to be constrained.

3. Return the land to a carbon sink. This is necessary to offset any residual emissions from the rest of the economy. It involves protecting forests and enabling afforestation through a combination of increasing agricultural productivity and shifting agricultural production and consumption from higher to lower-carbon foods, which are often healthier.
These three actions must be coupled with other, potentially more modest changes across the economy, such as increasingly building energy efficiency, shifting to heat pumps, using materials more efficiently, and destroying potent fluorinated (F)-gases.

Implementing these key changes also results in net benefits under nearly all future conditions we examined. Figure ES.5 shows the net benefit from 2025-2050 (horizontal axis) and net 2050 emissions (vertical axis) of 1,000 variants of decarbonization strategies with the three critical actions implemented and evaluated across a wide range of uncertain conditions (each mark on the plot represents a different variant of this strategy under different conditions). They are categorized by whether they meet, miss, or overshoot net-zero emissions by 2050, and whether they pose net costs or benefits. We find a median benefit of $1 trillion across all the deeply uncertain conditions we explored, net of substantial technical investments which range from $0.5 to $1.5 trillion. Here too, the largest consistent benefits are in the form of fuel cost savings, health, productivity, safety benefits, and ecosystem services.

<figure><img src="image_13.png" /><figcaption>Figure ES.5 Net benefits and net 2050 emissions of critical action strategies under uncertainty.</figcaption></figure>
These three actions must be coupled with other, potentially more modest changes across the economy, such as increasingly building energy efficiency, shifting to heat pumps, using materials more efficiently, and destroying potent fluorinated (F)-gases.

Implementing these key changes also results in net benefits under nearly all future conditions we examined. Figure ES.5 shows the net benefit from 2025-2050 (horizontal axis) and net 2050 emissions (vertical axis) of 1,000 variants of decarbonization strategies with the three critical actions implemented and evaluated across a wide range of uncertain conditions (each mark on the plot represents a different variant of this strategy under different conditions). They are categorized by whether they meet, miss, or overshoot net-zero emissions by 2050, and whether they pose net costs or benefits. We find a median benefit of $1 trillion across all the deeply uncertain conditions we explored, net of substantial technical investments which range from $0.5 to $1.5 trillion. Here too, the largest consistent benefits are in the form of fuel cost savings, health, productivity, safety benefits, and ecosystem services.

<figure><img src="image_13.png" /><figcaption>Figure ES.5 Net benefits and net 2050 emissions of critical action strategies under uncertainty.</figcaption></figure>
Strategies with the aforementioned features still can be vulnerable to missing net zero when the sequestration and offsets provided by forests are reduced, because of reduced livestock productivity and lower forest sequestration rates—stressors that may be exacerbated by climate change (Gatti et al. 2021, Rojas-Downing et al., 2017). Reduced livestock productivity increases the amount of land needed for raising livestock, thereby increasing pressures to deforest. Reduced sequestration means that even more areas must be reserved to protect existing forests and return grazeland to secondary forests. Hedging against these risks requires maximizing cattle productivity and more intense efforts to end deforestation and enable afforestation. Measures such as silvopastures may help on all fronts.

## Low-Carbon Development Strategies Are Development Enhancing

Our analysis suggests that Latin America and the Caribbean can transition to a net-zero economy while enjoying better development, with potential gains to social, economic, and environmental outcomes. It is therefore logical to ask why these transformations are not occurring at a pace that these results might warrant.

There are a host of regulatory, fiscal, information, and other barriers that stand in the way of changes that would lead to better development (Fazekas et al., 2022). For example, the widespread subsidies associated with fossil fuels (International Monetary Fund, 2021) entrench the use of fossil fuels in transport and energy production, even when renewables are the more cost-effective alternative. Even the built environment can pose barriers to change: urban sprawl enabled by historical emphasis on road travel and an absence of bike lanes and walking paths can make it difficult to then shift development toward walking, biking, transit, and other sustainable modes—even for those who would be ready to take them (Mouratidis et al., 2019).

Compounding the challenge is that the costs and benefits of transformations are borne by different people, and many of the largest costs are internalized but many of the benefits remain external to market forces. For instance, many of the health, safety, productivity, and environmental benefits are diffuse and would improve many people's lives, whereas the technical costs and benefits are experienced more acutely by sector actors. The timing of costs and benefits also poses a barrier: sector costs are often up-front capital investments, whereas sector benefits are enjoyed over time in the form of operational, maintenance, and fuel savings.

This points to the significance of government interventions to redistribute benefits through society, fiscal and industrial policies, tariff structure, and social policy. For instance, governments could internalize some of the social benefits of reduced congestion and air pollution by adjusting taxes on fuel and vehicle ownership or reforming fossil fuel subsidies while reinforcing cash transfers or subsidizing adoption of clean technology (e.g., Victor-Gallardo et al., 2022, Missbach et al., 2023). In Latin America and the Caribbean, where half of emissions come from agriculture and deforestation, ensuring a just transition will be critical. Decarbonization cannot come at the cost of slowing efforts to reduce rural poverty or ensuring food security for all. Our analysis suggests that this sector's advancement will make decarbonization efforts more robust.
Strategies with the aforementioned features still can be vulnerable to missing net zero when the sequestration and offsets provided by forests are reduced, because of reduced livestock productivity and lower forest sequestration rates—stressors that may be exacerbated by climate change (Gatti et al. 2021, Rojas-Downing et al., 2017). Reduced livestock productivity increases the amount of land needed for raising livestock, thereby increasing pressures to deforest. Reduced sequestration means that even more areas must be reserved to protect existing forests and return grazeland to secondary forests. Hedging against these risks requires maximizing cattle productivity and more intense efforts to end deforestation and enable afforestation. Measures such as silvopastures may help on all fronts.

## Low-Carbon Development Strategies Are Development Enhancing

Our analysis suggests that Latin America and the Caribbean can transition to a net-zero economy while enjoying better development, with potential gains to social, economic, and environmental outcomes. It is therefore logical to ask why these transformations are not occurring at a pace that these results might warrant.

There are a host of regulatory, fiscal, information, and other barriers that stand in the way of changes that would lead to better development (Fazekas et al., 2022). For example, the widespread subsidies associated with fossil fuels (International Monetary Fund, 2021) entrench the use of fossil fuels in transport and energy production, even when renewables are the more cost-effective alternative. Even the built environment can pose barriers to change: urban sprawl enabled by historical emphasis on road travel and an absence of bike lanes and walking paths can make it difficult to then shift development toward walking, biking, transit, and other sustainable modes—even for those who would be ready to take them (Mouratidis et al., 2019).

Compounding the challenge is that the costs and benefits of transformations are borne by different people, and many of the largest costs are internalized but many of the benefits remain external to market forces. For instance, many of the health, safety, productivity, and environmental benefits are diffuse and would improve many people's lives, whereas the technical costs and benefits are experienced more acutely by sector actors. The timing of costs and benefits also poses a barrier: sector costs are often up-front capital investments, whereas sector benefits are enjoyed over time in the form of operational, maintenance, and fuel savings.

This points to the significance of government interventions to redistribute benefits through society, fiscal and industrial policies, tariff structure, and social policy. For instance, governments could internalize some of the social benefits of reduced congestion and air pollution by adjusting taxes on fuel and vehicle ownership or reforming fossil fuel subsidies while reinforcing cash transfers or subsidizing adoption of clean technology (e.g., Victor-Gallardo et al., 2022, Missbach et al., 2023). In Latin America and the Caribbean, where half of emissions come from agriculture and deforestation, ensuring a just transition will be critical. Decarbonization cannot come at the cost of slowing efforts to reduce rural poverty or ensuring food security for all. Our analysis suggests that this sector's advancement will make decarbonization efforts more robust.
These barriers and opportunities crucially depend on a nation's resources and local economic and political conditions, and so do development priorities. Therefore, each country will have to build its own vision of a low-emission future that begins the development outcomes it needs most; diagnose the barriers that prevent it from securing a future with a healthier population, healthier environment, and stronger economy; and make its own plans to enable a just transition to net-zero emissions. For example, Brazil is the largest country in the region and hosts the most rainforest of any country in the world. It has significant potential to reduce emissions, compared to the Traditional Development strategy, by safeguarding existing forests and promoting afforestation. Brazil also enjoys a relatively clean electricity grid, thanks to enormous amounts of hydropower. In that sense, Brazil's situation is somewhat similar to the regional averages we show here. In contrast, as an island nation with 0.5% of Brazil's land area, the Dominican Republic has much less sequestering potential and a different mix of emissions sources, where industrial processes and electricity production play a larger role. In the full report, we show that trying to indiscriminately apply regional findings at the country level would be inadequate.

In designing country-specific climate-friendly development strategies, it will be essential to involve active participation from the private sector, civil society, and relevant government agencies. By engaging early in the process, each stakeholder's insights, expertise, and concerns can shape the plan, buttress support for it, and facilitate its implementation toward a highly developed and low-carbon future.
These barriers and opportunities crucially depend on a nation's resources and local economic and political conditions, and so do development priorities. Therefore, each country will have to build its own vision of a low-emission future that begins the development outcomes it needs most; diagnose the barriers that prevent it from securing a future with a healthier population, healthier environment, and stronger economy; and make its own plans to enable a just transition to net-zero emissions. For example, Brazil is the largest country in the region and hosts the most rainforest of any country in the world. It has significant potential to reduce emissions, compared to the Traditional Development strategy, by safeguarding existing forests and promoting afforestation. Brazil also enjoys a relatively clean electricity grid, thanks to enormous amounts of hydropower. In that sense, Brazil's situation is somewhat similar to the regional averages we show here. In contrast, as an island nation with 0.5% of Brazil's land area, the Dominican Republic has much less sequestering potential and a different mix of emissions sources, where industrial processes and electricity production play a larger role. In the full report, we show that trying to indiscriminately apply regional findings at the country level would be inadequate.

In designing country-specific climate-friendly development strategies, it will be essential to involve active participation from the private sector, civil society, and relevant government agencies. By engaging early in the process, each stakeholder's insights, expertise, and concerns can shape the plan, buttress support for it, and facilitate its implementation toward a highly developed and low-carbon future.
<figure><img src="image_14.png" /></figure>
<figure><img src="image_14.png" /></figure>
<table><tr><td>Foreword</td><td>iii</td></tr><tr><td>About This Research Report</td><td>vi</td></tr><tr><td>About RAND Social and Economic Well-Being</td><td>vi</td></tr><tr><td>About Tecnológico de Monterrey</td><td>vii</td></tr><tr><td>About the Inter-American Development Bank</td><td>vii</td></tr><tr><td>About the 2050 Pathways Platform</td><td>vii</td></tr><tr><td>Acknowledgments</td><td>viii</td></tr><tr><td>Executive Summary</td><td>x</td></tr><tr><td>Purpose and Approach</td><td>xii</td></tr><tr><td>Traditional Development Results in High Emissions</td><td>xiv</td></tr><tr><td>Reaching Net Zero Is Feasible and Beneficial</td><td>xvi</td></tr><tr><td>A Robust Decarbonization Strategy Has Three Critical Actions</td><td>xviii</td></tr><tr><td>Low-Carbon Development Strategies Are Development Enhancing</td><td>xx</td></tr><tr><td>Figures</td><td>xxvi</td></tr><tr><td>Tables</td><td>xxvii</td></tr><tr><td>1. Introduction</td><td>1</td></tr><tr><td>Cooperating to Mitigate Climate Change</td><td>2</td></tr><tr><td>An opportunity for more sustainable growth?</td><td>3</td></tr><tr><td>Decarbonization planning is complex, and many countries lack capacity</td><td>5</td></tr><tr><td>Our Goals</td><td>6</td></tr><tr><td>Develop a global analytical toolkit for more accessible decarbonization planning</td><td>7</td></tr><tr><td>Develop and evaluate emissions, costs, and benefits of bottom-up transformations</td><td>7</td></tr><tr><td>Identify and quantify robust decarbonization strategies that meet net-zero goals and provide net socioeconomic benefits</td><td>10</td></tr><tr><td>Organization of This Report and Accompanying Material</td><td>11</td></tr><tr><td>2. Approach to Assessing Emissions, Costs, and Benefits</td><td>12</td></tr><tr><td>Design of Experiments</td><td>13</td></tr><tr><td>The SiSePuede Analytical Framework</td><td>15</td></tr><tr><td>SiSePuede approach to emissions, costs, and benefits accounting</td><td>18</td></tr><tr><td>SiSePuede contrasts with and complements other modeling approaches</td><td>19</td></tr><tr><td>SiSePuede's limitations</td><td>21</td></tr><tr><td>Strategies and Transformations</td><td>21</td></tr><tr><td>Emissions, Cost, and Benefit Metrics</td><td>24</td></tr><tr><td>Exogenous Uncertainties</td><td>24</td></tr></table>
<table><tr><td>Foreword</td><td>iii</td></tr><tr><td>About This Research Report</td><td>vi</td></tr><tr><td>About RAND Social and Economic Well-Being</td><td>vi</td></tr><tr><td>About Tecnológico de Monterrey</td><td>vii</td></tr><tr><td>About the Inter-American Development Bank</td><td>vii</td></tr><tr><td>About the 2050 Pathways Platform</td><td>vii</td></tr><tr><td>Acknowledgments</td><td>viii</td></tr><tr><td>Executive Summary</td><td>x</td></tr><tr><td>Purpose and Approach</td><td>xii</td></tr><tr><td>Traditional Development Results in High Emissions</td><td>xiv</td></tr><tr><td>Reaching Net Zero Is Feasible and Beneficial</td><td>xvi</td></tr><tr><td>A Robust Decarbonization Strategy Has Three Critical Actions</td><td>xviii</td></tr><tr><td>Low-Carbon Development Strategies Are Development Enhancing</td><td>xx</td></tr><tr><td>Figures</td><td>xxvi</td></tr><tr><td>Tables</td><td>xxvii</td></tr><tr><td>1. Introduction</td><td>1</td></tr><tr><td>Cooperating to Mitigate Climate Change</td><td>2</td></tr><tr><td>An opportunity for more sustainable growth?</td><td>3</td></tr><tr><td>Decarbonization planning is complex, and many countries lack capacity</td><td>5</td></tr><tr><td>Our Goals</td><td>6</td></tr><tr><td>Develop a global analytical toolkit for more accessible decarbonization planning</td><td>7</td></tr><tr><td>Develop and evaluate emissions, costs, and benefits of bottom-up transformations</td><td>7</td></tr><tr><td>Identify and quantify robust decarbonization strategies that meet net-zero goals and provide net socioeconomic benefits</td><td>10</td></tr><tr><td>Organization of This Report and Accompanying Material</td><td>11</td></tr><tr><td>2. Approach to Assessing Emissions, Costs, and Benefits</td><td>12</td></tr><tr><td>Design of Experiments</td><td>13</td></tr><tr><td>The SiSePuede Analytical Framework</td><td>15</td></tr><tr><td>SiSePuede approach to emissions, costs, and benefits accounting</td><td>18</td></tr><tr><td>SiSePuede contrasts with and complements other modeling approaches</td><td>19</td></tr><tr><td>SiSePuede's limitations</td><td>21</td></tr><tr><td>Strategies and Transformations</td><td>21</td></tr><tr><td>Emissions, Cost, and Benefit Metrics</td><td>24</td></tr><tr><td>Exogenous Uncertainties</td><td>24</td></tr></table>
<table><tbody><tr><td>3. Understanding the Effects of Transformations on Decarbonization and Development</td><td>28</td></tr><tr><td>&nbsp;&nbsp;&nbsp;&nbsp;Emissions Under a Traditional Development Trajectory</td><td>29</td></tr><tr><td>&nbsp;&nbsp;&nbsp;&nbsp;Exploring Transformations' Emissions, Costs, and Benefits</td><td>29</td></tr><tr><td>&nbsp;&nbsp;&nbsp;&nbsp;Maximizing Incremental Improvements</td><td>32</td></tr><tr><td>&nbsp;&nbsp;&nbsp;&nbsp;Maximizing Supply-Side Solutions</td><td>33</td></tr><tr><td>&nbsp;&nbsp;&nbsp;&nbsp;Maximizing Changes in Consumption</td><td>34</td></tr><tr><td>&nbsp;&nbsp;&nbsp;&nbsp;Maximizing All Actions</td><td>34</td></tr><tr><td>Sector Snapshots</td><td>39</td></tr><tr><td>&nbsp;&nbsp;&nbsp;&nbsp;Energy production</td><td>39</td></tr><tr><td>&nbsp;&nbsp;&nbsp;&nbsp;Agriculture, forests, and other land use</td><td>42</td></tr><tr><td>&nbsp;&nbsp;&nbsp;&nbsp;Buildings</td><td>46</td></tr><tr><td>&nbsp;&nbsp;&nbsp;&nbsp;Industry</td><td>48</td></tr><tr><td>&nbsp;&nbsp;&nbsp;&nbsp;Transport</td><td>50</td></tr><tr><td>&nbsp;&nbsp;&nbsp;&nbsp;Waste</td><td>53</td></tr><tr><td>4. A Robust Path to Net Zero in Latin America and the Caribbean</td><td>56</td></tr><tr><td>&nbsp;&nbsp;&nbsp;&nbsp;Key Ingredients of Decarbonization Strategies for the Region</td><td>57</td></tr><tr><td>&nbsp;&nbsp;&nbsp;&nbsp;Robustly Meeting Net-Zero Targets Amid Deep Uncertainty</td><td>61</td></tr><tr><td>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Do critical transformations robustly reach net-zero emissions under uncertainty?</td><td>62</td></tr><tr><td>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;What combination of conditions most threaten net-zero goals?</td><td>63</td></tr><tr><td>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;What strategy robustly reaches net-zero goals?</td><td>65</td></tr><tr><td>&nbsp;&nbsp;&nbsp;&nbsp;Costs and Benefits of Decarbonizing Latin America and the Caribbean</td><td>66</td></tr><tr><td>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;What are the range of costs and benefits of reaching net zero with this strategy?</td><td>66</td></tr><tr><td>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;What conditions might cause decarbonization to pose net costs?</td><td>67</td></tr><tr><td>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To whom do costs and benefits accrue?</td><td>67</td></tr><tr><td>5. Country Snapshots</td><td>70</td></tr><tr><td>&nbsp;&nbsp;&nbsp;&nbsp;Brazil</td><td>71</td></tr><tr><td>&nbsp;&nbsp;&nbsp;&nbsp;Dominican Republic</td><td>77</td></tr><tr><td>&nbsp;&nbsp;&nbsp;&nbsp;Mexico</td><td>83</td></tr><tr><td>6. Discussion and Conclusions</td><td>88</td></tr><tr><td>&nbsp;&nbsp;&nbsp;&nbsp;Key Regional Findings</td><td>89</td></tr><tr><td>&nbsp;&nbsp;&nbsp;&nbsp;Barriers to Change</td><td>90</td></tr><tr><td>&nbsp;&nbsp;&nbsp;&nbsp;Developing Long-Term Decarbonization Plans for Individual Countries</td><td>91</td></tr><tr><td>&nbsp;&nbsp;&nbsp;&nbsp;Next Steps</td><td>93</td></tr><tr><td>References</td><td>94</td></tr><tr><td>Technical Appendices</td><td>106</td></tr></tbody></table>
# Contents

<table><tbody><tr><td>3. Understanding the Effects of Transformations on Decarbonization and Development</td><td>28</td></tr><tr><td>Emissions Under a Traditional Development Trajectory</td><td>29</td></tr><tr><td>Exploring Transformations' Emissions, Costs, and Benefits</td><td>29</td></tr><tr><td>Maximizing Incremental Improvements</td><td>32</td></tr><tr><td>Maximizing Supply-Side Solutions</td><td>33</td></tr><tr><td>Maximizing Changes in Consumption</td><td>34</td></tr><tr><td>Maximizing All Actions</td><td>34</td></tr><tr><td>Sector Snapshots</td><td>39</td></tr><tr><td>Energy production</td><td>39</td></tr><tr><td>Agriculture, forests, and other land use</td><td>42</td></tr><tr><td>Buildings</td><td>46</td></tr><tr><td>Industry</td><td>48</td></tr><tr><td>Transport</td><td>50</td></tr><tr><td>Waste</td><td>53</td></tr><tr><td>4. A Robust Path to Net Zero in Latin America and the Caribbean</td><td>56</td></tr><tr><td>Key Ingredients of Decarbonization Strategies for the Region</td><td>57</td></tr><tr><td>Robustly Meeting Net-Zero Targets Amid Deep Uncertainty</td><td>61</td></tr><tr><td>Do critical transformations robustly reach net-zero emissions under uncertainty?</td><td>62</td></tr><tr><td>What combination of conditions most threaten net-zero goals?</td><td>63</td></tr><tr><td>What strategy robustly reaches net-zero goals?</td><td>65</td></tr><tr><td>Costs and Benefits of Decarbonizing Latin America and the Caribbean</td><td>66</td></tr><tr><td>What are the range of costs and benefits of reaching net zero with this strategy?</td><td>66</td></tr><tr><td>What conditions might cause decarbonization to pose net costs?</td><td>67</td></tr><tr><td>To whom do costs and benefits accrue?</td><td>67</td></tr><tr><td>5. Country Snapshots</td><td>70</td></tr><tr><td>Brazil</td><td>71</td></tr><tr><td>Dominican Republic</td><td>77</td></tr><tr><td>Mexico</td><td>83</td></tr><tr><td>6. Discussion and Conclusions</td><td>88</td></tr><tr><td>Key Regional Findings</td><td>89</td></tr><tr><td>Barriers to Change</td><td>90</td></tr><tr><td>Developing Long-Term Decarbonization Plans for Individual Countries</td><td>91</td></tr><tr><td>Next Steps</td><td>93</td></tr><tr><td>References</td><td>94</td></tr><tr><td>Technical Appendices</td><td>106</td></tr></tbody></table>
<table><tr><td>Figure 1.1 Map of countries included in this analysis</td><td>10</td></tr><tr><td>Figure 2.1 Conceptual SiSePuede Modeling Framework</td><td>18</td></tr><tr><td>Figure 3.1 Emissions Under Traditional Development</td><td>30</td></tr><tr><td>Figure 3.2 Emissions Under Maximum Implementation of Transformations by Category</td><td>30</td></tr><tr><td>Figure 3.3 Land Use Under Maximum Implementation of Transformations by Category</td><td>31</td></tr><tr><td>Figure 3.4 Nominal Costs and Benefits Under Maximum Implementation of Transformations by Category</td><td>31</td></tr><tr><td>Figure 3.5 Discounted Costs and Benefits Under Maximum Implementation of Transformations by Category</td><td>32</td></tr><tr><td>Figure 3.6 Net Benefits vs. Net 2050 Emissions Under Maximum Implementation of Transformations by Category</td><td>35</td></tr><tr><td>Figure 3.7 Emissions by sector in 2050 under Traditional Development and All Actions</td><td>37</td></tr><tr><td>Figure 3.8 Net benefits by sector under All Actions</td><td>38</td></tr><tr><td>Figure 3.9 Emissions from energy production by transformation category</td><td>40</td></tr><tr><td>Figure 3.10 Costs and benefits in energy production by transformation category</td><td>41</td></tr><tr><td>Figure 3.11 Emissions produced by agriculture, forests, and land use by transformation category</td><td>43</td></tr><tr><td>Figure 3.12 Costs and benefits of agriculture, forest, and land-use transformations by transformation category</td><td>44</td></tr><tr><td>Figure 3.13 Emissions produced by buildings by transformation category</td><td>47</td></tr><tr><td>Figure 3.14 Costs and benefits of building transformations by transformation category</td><td>47</td></tr><tr><td>Figure 3.15 Emissions produced by industry by transformation category</td><td>49</td></tr><tr><td>Figure 3.16 Costs and benefits of industry transformations by transformation category</td><td>49</td></tr><tr><td>Figure 3.17 Emissions by transport mode by transformation category</td><td>51</td></tr><tr><td>Figure 3.18 Costs and benefits of transforming transport by transformation category</td><td>52</td></tr><tr><td>Figure 3.19 Emissions produced by waste by transformation category</td><td>54</td></tr><tr><td>Figure 3.20 Costs and benefits of transforming the waste sector by transformation category</td><td>54</td></tr><tr><td>Figure 4.1 Emissions trajectories of 1,000 decarbonization strategies</td><td>58</td></tr><tr><td>Figure 4.2. Emissions in 2050 vs. implementation of four critical transformations</td><td>60</td></tr><tr><td>Figure 4.3 Percent of strategies reaching net zero via intensity of critical transformations</td><td>61</td></tr><tr><td>Figure 4.4 Emissions trajectories of 1,000 Critical Actions variants amid uncertainty</td><td>63</td></tr><tr><td>Figure 4.5 Conditions driving emissions of Critical Action variants under uncertainty</td><td>64</td></tr><tr><td>Figure 4.6 Vulnerable conditions (left) and robust levels of implementation (right) of Critical Actions</td><td>65</td></tr><tr><td>Figure 4.7 Net benefits and net 2050 emissions of Critical Action variants under uncertainty</td><td>66</td></tr></table>
<table><tr><td>Figure 1.1 Map of countries included in this analysis</td><td>10</td></tr><tr><td>Figure 2.1 Conceptual SiSePuede Modeling Framework</td><td>18</td></tr><tr><td>Figure 3.1 Emissions Under Traditional Development</td><td>30</td></tr><tr><td>Figure 3.2 Emissions Under Maximum Implementation of Transformations by Category</td><td>30</td></tr><tr><td>Figure 3.3 Land Use Under Maximum Implementation of Transformations by Category</td><td>31</td></tr><tr><td>Figure 3.4 Nominal Costs and Benefits Under Maximum Implementation of Transformations by Category</td><td>31</td></tr><tr><td>Figure 3.5 Discounted Costs and Benefits Under Maximum Implementation of Transformations by Category</td><td>32</td></tr><tr><td>Figure 3.6 Net Benefits vs. Net 2050 Emissions Under Maximum Implementation of Transformations by Category</td><td>35</td></tr><tr><td>Figure 3.7 Emissions by sector in 2050 under Traditional Development and All Actions</td><td>37</td></tr><tr><td>Figure 3.8 Net benefits by sector under All Actions</td><td>38</td></tr><tr><td>Figure 3.9 Emissions from energy production by transformation category</td><td>40</td></tr><tr><td>Figure 3.10 Costs and benefits in energy production by transformation category</td><td>41</td></tr><tr><td>Figure 3.11 Emissions produced by agriculture, forests, and land use by transformation category</td><td>43</td></tr><tr><td>Figure 3.12 Costs and benefits of agriculture, forest, and land-use transformations by transformation category</td><td>44</td></tr><tr><td>Figure 3.13 Emissions produced by buildings by transformation category</td><td>47</td></tr><tr><td>Figure 3.14 Costs and benefits of building transformations by transformation category</td><td>47</td></tr><tr><td>Figure 3.15 Emissions produced by industry by transformation category</td><td>49</td></tr><tr><td>Figure 3.16 Costs and benefits of industry transformations by transformation category</td><td>49</td></tr><tr><td>Figure 3.17 Emissions by transport mode by transformation category</td><td>51</td></tr><tr><td>Figure 3.18 Costs and benefits of transforming transport by transformation category</td><td>52</td></tr><tr><td>Figure 3.19 Emissions produced by waste by transformation category</td><td>54</td></tr><tr><td>Figure 3.20 Costs and benefits of transforming the waste sector by transformation category</td><td>54</td></tr><tr><td>Figure 4.1 Emissions trajectories of 1,000 decarbonization strategies</td><td>58</td></tr><tr><td>Figure 4.2. Emissions in 2050 vs. implementation of four critical transformations</td><td>60</td></tr><tr><td>Figure 4.3 Percent of strategies reaching net zero via intensity of critical transformations</td><td>61</td></tr><tr><td>Figure 4.4 Emissions trajectories of 1,000 Critical Actions variants amid uncertainty</td><td>63</td></tr><tr><td>Figure 4.5 Conditions driving emissions of Critical Action variants under uncertainty</td><td>64</td></tr><tr><td>Figure 4.6 Vulnerable conditions (left) and robust levels of implementation (right) of Critical Actions</td><td>65</td></tr><tr><td>Figure 4.7 Net benefits and net 2050 emissions of Critical Action variants under uncertainty</td><td>66</td></tr></table>
<table><tr><td>Figure 4.8 Major categories of costs and benefits under uncertainty</td><td>68</td></tr><tr><td>Figure 4.9 Internal and external costs and benefits</td><td>69</td></tr><tr><td>Figure 5.1 Emissions Under Maximum Implementation of Transformations by Category, Brazil</td><td>73</td></tr><tr><td>Figure 5.2 Discounted Costs and Benefits Under Maximum Implementation of Transformations by Category, Brazil</td><td>74</td></tr><tr><td>Figure 5.3 Emissions trajectories of 1000 Critical Action variants amid uncertainty, Brazil</td><td>75</td></tr><tr><td>Figure 5.4 Net Benefits and Net 2050 Emissions of Critical Action Variants Under Uncertainty, Brazil</td><td>75</td></tr><tr><td>Figure 5.5 Vulnerable Conditions of Critical Actions, Brazil</td><td>76</td></tr><tr><td>Figure 5.6 Emissions Under Maximum Implementation of Transformations by Category, Dominican Republic</td><td>78</td></tr><tr><td>Figure 5.7 Fuel Demand in Transportation Under Selected Strategies, Dominican Republic</td><td>79</td></tr><tr><td>Figure 5.8 Discounted Costs and Benefits Under Maximum Implementation of Transformations by Category, Dominican Republic</td><td>80</td></tr><tr><td>Figure 5.9 Emissions trajectories of 1000 Critical Action variants amid uncertainty, Dominican Republic</td><td>81</td></tr><tr><td>Figure 5.10 Net Benefits and Net 2050 Emissions of Critical Action Variants Under Uncertainty, Dominican Republic</td><td>82</td></tr><tr><td>Figure 5.11 Vulnerable Conditions of Critical Actions, Dominican Republic</td><td>82</td></tr><tr><td>Figure 5.12 Emissions Under Maximum Implementation of Transformations by Category, Mexico</td><td>84</td></tr><tr><td>Figure 5.13 Discounted Costs and Benefits Under Maximum Implementation of Transformations by Category, Mexico</td><td>85</td></tr><tr><td>Figure 5.14 Total GHG Emissions Trajectories under Uncertainty across Strategies, Mexico</td><td>86</td></tr><tr><td>Figure 5.15 Net Benefits and Net 2050 Emissions of Critical Action Variants Under Uncertainty, Mexico</td><td>86</td></tr><tr><td>Figure 5.16 Vulnerable Conditions of Critical Actions, Mexico</td><td>87</td></tr></table>
<table><tr><td>Figure 4.8 Major categories of costs and benefits under uncertainty</td><td>68</td></tr><tr><td>Figure 4.9 Internal and external costs and benefits</td><td>69</td></tr><tr><td>Figure 5.1 Emissions Under Maximum Implementation of Transformations by Category, Brazil</td><td>73</td></tr><tr><td>Figure 5.2 Discounted Costs and Benefits Under Maximum Implementation of Transformations by Category, Brazil</td><td>74</td></tr><tr><td>Figure 5.3 Emissions trajectories of 1000 Critical Action variants amid uncertainty, Brazil</td><td>75</td></tr><tr><td>Figure 5.4 Net Benefits and Net 2050 Emissions of Critical Action Variants Under Uncertainty, Brazil</td><td>75</td></tr><tr><td>Figure 5.5 Vulnerable Conditions of Critical Actions, Brazil</td><td>76</td></tr><tr><td>Figure 5.6 Emissions Under Maximum Implementation of Transformations by Category, Dominican Republic</td><td>78</td></tr><tr><td>Figure 5.7 Fuel Demand in Transportation Under Selected Strategies, Dominican Republic</td><td>79</td></tr><tr><td>Figure 5.8 Discounted Costs and Benefits Under Maximum Implementation of Transformations by Category, Dominican Republic</td><td>80</td></tr><tr><td>Figure 5.9 Emissions trajectories of 1000 Critical Action variants amid uncertainty, Dominican Republic</td><td>81</td></tr><tr><td>Figure 5.10 Net Benefits and Net 2050 Emissions of Critical Action Variants Under Uncertainty, Dominican Republic</td><td>82</td></tr><tr><td>Figure 5.11 Vulnerable Conditions of Critical Actions, Dominican Republic</td><td>82</td></tr><tr><td>Figure 5.12 Emissions Under Maximum Implementation of Transformations by Category, Mexico</td><td>84</td></tr><tr><td>Figure 5.13 Discounted Costs and Benefits Under Maximum Implementation of Transformations by Category, Mexico</td><td>85</td></tr><tr><td>Figure 5.14 Total GHG Emissions Trajectories under Uncertainty across Strategies, Mexico</td><td>86</td></tr><tr><td>Figure 5.15 Net Benefits and Net 2050 Emissions of Critical Action Variants Under Uncertainty, Mexico</td><td>86</td></tr><tr><td>Figure 5.16 Vulnerable Conditions of Critical Actions, Mexico</td><td>87</td></tr></table>
<table><tr><td>Table 2.1 Overview of experimental design</td><td>16</td></tr><tr><td>Table 2.2 List of and key statistics from 2020 for countries included in the study</td><td>17</td></tr><tr><td>Table 2.3 Transformations in Incremental Improvements, Supply-Side Solutions, and Changing Consumption categories</td><td>19</td></tr><tr><td>Table 2.4 Transformation costs and benefits by sector</td><td>26</td></tr><tr><td>Table 2.5. Uncertainties</td><td>27</td></tr><tr><td>Table 4.1 Critical transformations and explanation of implementation levels</td><td>59</td></tr></table>
<table><tr><td>Table 2.1 Overview of experimental design</td><td>16</td></tr><tr><td>Table 2.2 List of and key statistics from 2020 for countries included in the study</td><td>17</td></tr><tr><td>Table 2.3 Transformations in Incremental Improvements, Supply-Side Solutions, and Changing Consumption categories</td><td>19</td></tr><tr><td>Table 2.4 Transformation costs and benefits by sector</td><td>26</td></tr><tr><td>Table 2.5. Uncertainties</td><td>27</td></tr><tr><td>Table 4.1 Critical transformations and explanation of implementation levels</td><td>59</td></tr></table>
The Benefits and Costs of
Reaching Net Zero Emissions in
Latin America and the Caribbean

<figure><img src="image_15.png" /></figure>

CHAPTER

Introduction
The Benefits and Costs of
Reaching Net Zero Emissions in
Latin America and the Caribbean

# 1
## CHAPTER
# Introduction
Climate change poses a grave threat to sustainable development in Latin America and the Caribbean (Talbot-Wright and Vogt-Schilb, 2023). Its effects include more frequent and intense natural disasters, sea-level rise, changes in local weather patterns, and loss of vital ecosystem services. The impacts for humans are vast, including threats to food and water security, disruption of infrastructure, increased human morbidity and mortality, and lower labor productivity, household income, fiscal balances, and tourism revenues. Moreover, climate change disproportionately affects poor and underrepresented people, creating a vicious cycle. It can spur migration, both within and across national boundaries. Urban populations' and small island states' vulnerability is of particular concern. While adaptation is essential and urgent, it already is proving inadequate in the face of unchecked climate change (Parmesan et al., 2022).

Global warming will only get worse as the world emits GHGs. Limiting the temperature increase between 1.5 and 2°C above pre-industrial levels, the overarching goal of the Paris Agreement, requires reaching net-zero GHG emissions by around 2050 (Paris Agreement to the United Nations Framework Convention on Climate Change, 2015). Net zero means reducing emissions as much as possible and using offsets, such as reforestation, as a last resort to compensate for emissions that are too difficult or expensive to abate.

These are ambitious goals. Mitigating climate change requires massive, on-the-ground changes in every sector and country (IDB, 2019; Fazekas et al., 2022). Meeting both resilience and decarbonization goals requires realigning the equivalent of 7 to 19% of GDP with climate change goals every year (Galindo Paliza et al., 2022). While this is not a net cost, as much of the effort involves redirecting existing domestic private finance from traditional investments or technologies to lower-emitting alternatives (e.g., diesel to electric buses), it illustrates the required effort's magnitude and depth (Fazekas et al., 2022).

**Cooperating to Mitigate Climate Change**

To organize such action, the Paris Agreement requires countries to submit NDCs periodically and strive to formulate and communicate LTSs. At COP26, in Decision 1/CMA.4, signatories of the Paris Agreement also noted the importance of aligning NDCs that have shorter time frames with LTSs to facilitate a just transition toward a net-zero economy by around midcentury (UNFCCC, 2023a). Yet global commitments and policies remain far short of Paris targets. Current policies would result in warming of between 2.6 and 2.9°C and NDCs would limit that to only 2.4° (Climate Action Tracker, 2022c). Only six countries globally have net-zero targets that are rated “acceptable” by Climate Action Tracker in terms of transparent, comprehensive, and robust design.
Climate change poses a grave threat to sustainable development in Latin America and the Caribbean (Talbot-Wright and Vogt-Schilb, 2023). Its effects include more frequent and intense natural disasters, sea-level rise, changes in local weather patterns, and loss of vital ecosystem services. The impacts for humans are vast, including threats to food and water security, disruption of infrastructure, increased human morbidity and mortality, and lower labor productivity, household income, fiscal balances, and tourism revenues. Moreover, climate change disproportionately affects poor and underrepresented people, creating a vicious cycle. It can spur migration, both within and across national boundaries. Urban populations' and small island states' vulnerability is of particular concern. While adaptation is essential and urgent, it already is proving inadequate in the face of unchecked climate change (Parmesan et al., 2022).

Global warming will only get worse as the world emits GHGs. Limiting the temperature increase between 1.5 and 2°C above pre-industrial levels, the overarching goal of the Paris Agreement, requires reaching net-zero GHG emissions by around 2050 (Paris Agreement to the United Nations Framework Convention on Climate Change, 2015). Net zero means reducing emissions as much as possible and using offsets, such as reforestation, as a last resort to compensate for emissions that are too difficult or expensive to abate.

These are ambitious goals. Mitigating climate change requires massive, on-the-ground changes in every sector and country (IDB, 2019; Fazekas et al., 2022). Meeting both resilience and decarbonization goals requires realigning the equivalent of 7 to 19% of GDP with climate change goals every year (Galindo Paliza et al., 2022). While this is not a net cost, as much of the effort involves redirecting existing domestic private finance from traditional investments or technologies to lower-emitting alternatives (e.g., diesel to electric buses), it illustrates the required effort's magnitude and depth (Fazekas et al., 2022).

**Cooperating to Mitigate Climate Change**

To organize such action, the Paris Agreement requires countries to submit NDCs periodically and strive to formulate and communicate LTSs. At COP26, in Decision 1/CMA.4, signatories of the Paris Agreement also noted the importance of aligning NDCs that have shorter time frames with LTSs to facilitate a just transition toward a net-zero economy by around midcentury (UNFCCC, 2023a). Yet global commitments and policies remain far short of Paris targets. Current policies would result in warming of between 2.6 and 2.9°C and NDCs would limit that to only 2.4° (Climate Action Tracker, 2022c). Only six countries globally have net-zero targets that are rated “acceptable” by Climate Action Tracker in terms of transparent, comprehensive, and robust design.
This situation holds true in Latin America and the Caribbean. Of the 33 countries in the region that are party to the Paris Agreement, at least 10 have pledged to reach net-zero emissions by 2050 or sooner (Climate Watch Data, 2023). However, the region's NDCs would reduce emissions only by about one-third compared to today's emissions levels, well short of what is needed to put them on track toward net-zero emissions by 2050 (Cárdenas and Orozco, 2022; Binsted et al., 2020). What is more, only eight countries have prepared LTSs that could inform NDC updates, and of these, only three—Costa Rica, Chile, and Colombia—are rated “acceptable” with respect to a net-zero goal by Net-Zero Tracker (2023). Of these, Costa Rica's LTS translated the 2050 net-zero goal into a framework with more than 70 targets for immediate delivery, which attracted US$1.4 billion in policy-based loans from international funders (Jaramillo et al., 2023). Costa Rica is not representative of the whole region, unfortunately, as most countries lack a public policy strategy to inform immediate action that is consistent with reaching the targets of their NDCs (Jarmillo and Saavedra, 2021).

A key question is whether Latin American and Caribbean countries should do more to reduce emissions. Under the Paris Agreement, parties are expected to act according to the principle of Common but Differentiated Responsibilities and Respective Capabilities (CBDRRC). After all, most GHGs in the atmosphere are emitted from outside the region. For instance, economic development has been fueled chiefly by coal, gasoline, diesel, and natural gas. The richer a country is, the more likely its citizens are to own cars, the more miles per year they travel, the larger homes they live in, and the more food they consume. Thus, many have proposed that most emission reductions should happen in developed countries, leaving room for less-developed countries to follow traditional development paths, perhaps polluting in the process (Vogt-Schilb, 2023).

*An opportunity for more sustainable growth?*

Emission reductions are not necessarily antinomic with economic growth. Development patterns around the world, including in Latin American and Caribbean, have been far from optimal. For instance, recent economic growth in the region has led to the fastest growth in car ownership in the world (SLOCAT 2021). This has brought economic opportunity and high living standards to millions. But it also poses major costs to the region, including loss of lives and health costs related to accidents, road congestion, and air pollution (Calatayud et al., 2021; Chen et al., 2019; Husaini et al., 2022). In Rio de Janeiro and Sao Paulo, for instance, congestion cost 8% of the metropolitan regions' GDPs, and 2% of Brazil's GDP overall, in 2014 (FIRJAN, 2015). The region also has more than 100 million residents living in areas with air pollution levels exceeding World Health Organization (WHO) guidelines (Riojas-Rodríguez et al., 2016). With policies and investments promoting a transition to non-motorized transport and transit, higher vehicle occupancy, increased vehicle efficiency, and electrified vehicles, countries in the region might be able to continue improving living standards while also avoiding locking themselves in a high-carbon development trajectory.
This situation holds true in Latin America and the Caribbean. Of the 33 countries in the region that are party to the Paris Agreement, at least 10 have pledged to reach net-zero emissions by 2050 or sooner (Climate Watch Data, 2023). However, the region's NDCs would reduce emissions only by about one-third compared to today's emissions levels, well short of what is needed to put them on track toward net-zero emissions by 2050 (Cárdenas and Orozco, 2022; Binsted et al., 2020). What is more, only eight countries have prepared LTSs that could inform NDC updates, and of these, only three—Costa Rica, Chile, and Colombia—are rated “acceptable” with respect to a net-zero goal by Net-Zero Tracker (2023). Of these, Costa Rica's LTS translated the 2050 net-zero goal into a framework with more than 70 targets for immediate delivery, which attracted US$1.4 billion in policy-based loans from international funders (Jaramillo et al., 2023). Costa Rica is not representative of the whole region, unfortunately, as most countries lack a public policy strategy to inform immediate action that is consistent with reaching the targets of their NDCs (Jarmillo and Saavedra, 2021).

A key question is whether Latin American and Caribbean countries should do more to reduce emissions. Under the Paris Agreement, parties are expected to act according to the principle of Common but Differentiated Responsibilities and Respective Capabilities (CBDRRC). After all, most GHGs in the atmosphere are emitted from outside the region. For instance, economic development has been fueled chiefly by coal, gasoline, diesel, and natural gas. The richer a country is, the more likely its citizens are to own cars, the more miles per year they travel, the larger homes they live in, and the more food they consume. Thus, many have proposed that most emission reductions should happen in developed countries, leaving room for less-developed countries to follow traditional development paths, perhaps polluting in the process (Vogt-Schilb, 2023).

*An opportunity for more sustainable growth?*

Emission reductions are not necessarily antinomic with economic growth. Development patterns around the world, including in Latin American and Caribbean, have been far from optimal. For instance, recent economic growth in the region has led to the fastest growth in car ownership in the world (SLOCAT 2021). This has brought economic opportunity and high living standards to millions. But it also poses major costs to the region, including loss of lives and health costs related to accidents, road congestion, and air pollution (Calatayud et al., 2021; Chen et al., 2019; Husaini et al., 2022). In Rio de Janeiro and Sao Paulo, for instance, congestion cost 8% of the metropolitan regions' GDPs, and 2% of Brazil's GDP overall, in 2014 (FIRJAN, 2015). The region also has more than 100 million residents living in areas with air pollution levels exceeding World Health Organization (WHO) guidelines (Riojas-Rodríguez et al., 2016). With policies and investments promoting a transition to non-motorized transport and transit, higher vehicle occupancy, increased vehicle efficiency, and electrified vehicles, countries in the region might be able to continue improving living standards while also avoiding locking themselves in a high-carbon development trajectory.
Similarly, current food production and consumption patterns in Latin America and the Caribbean come with substantial public health and environmental costs. Approximately 43 million people in the region are undernourished and 133 million people cannot afford a healthy diet because the region has the highest level of income inequality in the world, a situation made worse by the recent global pandemic (Salazar and Muñoz, 2018; FAO, IFAD, UNICEF, WFP and WHO. 2023). At the same time, obesity rates are high and growing, driven by poor diets low in fruits and vegetables (Popkin & Reardon, 2018; Guthold et al., 2018). In South America, diets high in red meat, the food group most negatively associated with non-communicable diseases (Popkin and Reardon, 2018), have been linked to premature deaths of more than 60,000 people in 2018 (Hartinger et al., 2023). And conversion to pastures is the largest driver of deforestation, threatening $15 trillion in forest services (Climate Watch, 2022; Hernández-Blanco et al., 2020). A shift in production and consumption toward healthier foods, coupled with better agriculture practices, might help avoid more than 500,000 premature deaths and provide $100 billion to $2 trillion in health benefits by 2050 (Springmann et al., 2016), while reducing emissions through forest preservation, afforestation, avoiding enteric fermentation, and reduced manure emissions.

Often the best way to close development gaps also results in emission reductions. Achieving universal safe water and sanitation is not only a key Sustainable Development Goal (SDG) but the collection, safe management, treatment, and energy recovery of waste and wastewater is key to reducing GHG emissions (Rani et al., 2022; de Foy et al., 2023).

Finally, there is growing evidence that emission reductions can be cost beneficial, even in developing countries (Fazekas et al., 2022). One reason is that the cost of key technology has plummeted. The best examples are solar panels and wind turbines, which cost less than 10% and 30%, respectively, of what they cost in 2009 (IRENA, 2022). They are now the cheapest available option for energy production, while they were the most expensive option when European, North American, and Asian countries built the bulk of their coal power plants (IEA, 2023). As such, investments in renewable electricity production offer significant financial benefits in the form of fuel savings. Moreover, technologies that run on electricity, such as electric vehicles or heat pumps, often are cheaper to operate and maintain than their fossil fuel-based counterparts, even while financing high upfront costs remains a challenge (Rissman, 2022; AAA, 2019; Burke et al. 2022).

Indeed, prior country-level research has found that reaching net-zero emissions could result in net benefits of approximately $41 billion in Costa Rica, $7 billion in Chile, $330 billion in Colombia, and $140 billion in Peru (Groves et al., 2020; Benavides et al., 2021; Arguello et al., 2022; Quirós-Tortos et al., 2021). Regional studies have suggested that net-zero efforts can increase GDP in Latin America and the Caribbean by 1% by 2030 (Vogt-Schilb, 2021) while creating millions of green jobs (Saget et al., 2020).
Similarly, current food production and consumption patterns in Latin America and the Caribbean come with substantial public health and environmental costs. Approximately 43 million people in the region are undernourished and 133 million people cannot afford a healthy diet because the region has the highest level of income inequality in the world, a situation made worse by the recent global pandemic (Salazar and Muñoz, 2018; FAO, IFAD, UNICEF, WFP and WHO. 2023). At the same time, obesity rates are high and growing, driven by poor diets low in fruits and vegetables (Popkin & Reardon, 2018; Guthold et al., 2018). In South America, diets high in red meat, the food group most negatively associated with non-communicable diseases (Popkin and Reardon, 2018), have been linked to premature deaths of more than 60,000 people in 2018 (Hartinger et al., 2023). And conversion to pastures is the largest driver of deforestation, threatening $15 trillion in forest services (Climate Watch, 2022; Hernández-Blanco et al., 2020). A shift in production and consumption toward healthier foods, coupled with better agriculture practices, might help avoid more than 500,000 premature deaths and provide $100 billion to $2 trillion in health benefits by 2050 (Springmann et al., 2016), while reducing emissions through forest preservation, afforestation, avoiding enteric fermentation, and reduced manure emissions.

Often the best way to close development gaps also results in emission reductions. Achieving universal safe water and sanitation is not only a key Sustainable Development Goal (SDG) but the collection, safe management, treatment, and energy recovery of waste and wastewater is key to reducing GHG emissions (Rani et al., 2022; de Foy et al., 2023).

Finally, there is growing evidence that emission reductions can be cost beneficial, even in developing countries (Fazekas et al., 2022). One reason is that the cost of key technology has plummeted. The best examples are solar panels and wind turbines, which cost less than 10% and 30%, respectively, of what they cost in 2009 (IRENA, 2022). They are now the cheapest available option for energy production, while they were the most expensive option when European, North American, and Asian countries built the bulk of their coal power plants (IEA, 2023). As such, investments in renewable electricity production offer significant financial benefits in the form of fuel savings. Moreover, technologies that run on electricity, such as electric vehicles or heat pumps, often are cheaper to operate and maintain than their fossil fuel-based counterparts, even while financing high upfront costs remains a challenge (Rissman, 2022; AAA, 2019; Burke et al. 2022).

Indeed, prior country-level research has found that reaching net-zero emissions could result in net benefits of approximately $41 billion in Costa Rica, $7 billion in Chile, $330 billion in Colombia, and $140 billion in Peru (Groves et al., 2020; Benavides et al., 2021; Arguello et al., 2022; Quirós-Tortos et al., 2021). Regional studies have suggested that net-zero efforts can increase GDP in Latin America and the Caribbean by 1% by 2030 (Vogt-Schilb, 2021) while creating millions of green jobs (Saget et al., 2020).
*Decarbonization planning is complex, and many countries lack capacity*

Even if reducing emissions could contribute to development, it is easy for decarbonization plans to feel disconnected from the goals, knowledge, and context of ordinary citizens and decisionmakers who must implement them (Calfucoy et al., 2022). Governments’ ministries of environment are typically responsible for designing climate strategies. However, the actions described in these plans need to be implemented by the private sector, by government agencies in other ministries—such as transport, energy, agriculture, industry, and finance (Fazekas et al., 2022)—and by various levels of government, from national to municipal (Rakes et al., 2023; Vera et al., 2023). These actors may be sympathetic to climate change, but they have other priorities—including growth and productivity, labor, and sector-specific concerns such as congestion, healthcare costs, and food security—and little knowledge of what net-zero emissions mean for them and how to reach these goals.

Indeed, much existing decarbonization research and plan making is not directly usable by these actors. Many analyses describe mitigation measures in terms of their costs per ton of carbon dioxide equivalent (CO2e) avoided (e.g., Cárdenas and Orozco, 2022; Hof et al., 2017; Johnson et al., 2009). A focus on emission reductions and their marginal cost may make sense to climate change economists, but this is not the language of farmers, transit authorities, or factory operators, who speak in terms of heads of cattle, numbers of buses, and tons of cement. To be motivated and able to act, these leaders need to know what specific transformations they must enact in their sector to make progress toward net zero. These should be expressed tangibly and actionably, such as producing electricity with 50% solar and wind power by 2030; shifting 70% of local transport to transit, walking, or biking by 2040; or reforesting 1,000,000 hectares of degraded pasture by 2050 (Fay et al., 2015; Waisman et al., 2019). In turn, this can provide concrete information to ministries of finance to plan public budgets, clarify public investment priorities, assess impacts and required adjustments on fiscal policy (Solano-Rodríguez et al., 2021; Victor-Gallardo et al., 2022), and manage debt to support delivery across sectors in addition to relevant macroeconomic indicators such as jobs, GDP, and trade balance dynamics in the transition (Orozco and Jaramillo, 2021; Delgado et al., 2021).

Developing plans that reach net zero and align with stakeholders’ and citizens’ knowledge, concerns, and priorities is analytically challenging. Integrated, multisectoral emissions models are complex and costly to develop and can be time-consuming and difficult to use. The data needed to produce credible estimates is vast and heterogeneous and, particularly for countries in the region, huge data gaps exist in essential sectors. Conditions also are changing rapidly, requiring sophisticated analytical methods for managing deep uncertainties. Many countries face capacity challenges to create robust decarbonization and development plans (World Bank, 2022). This partly may explain why only 15% of the least-developed countries have submitted LTSs, compared to more than 80% of the Organisation for Economic Co-operation and Development (OECD) countries (Climate Watch LTS Explorer, 2020).
*Decarbonization planning is complex, and many countries lack capacity*

Even if reducing emissions could contribute to development, it is easy for decarbonization plans to feel disconnected from the goals, knowledge, and context of ordinary citizens and decisionmakers who must implement them (Calfucoy et al., 2022). Governments’ ministries of environment are typically responsible for designing climate strategies. However, the actions described in these plans need to be implemented by the private sector, by government agencies in other ministries—such as transport, energy, agriculture, industry, and finance (Fazekas et al., 2022)—and by various levels of government, from national to municipal (Rakes et al., 2023; Vera et al., 2023). These actors may be sympathetic to climate change, but they have other priorities—including growth and productivity, labor, and sector-specific concerns such as congestion, healthcare costs, and food security—and little knowledge of what net-zero emissions mean for them and how to reach these goals.

Indeed, much existing decarbonization research and plan making is not directly usable by these actors. Many analyses describe mitigation measures in terms of their costs per ton of carbon dioxide equivalent (CO2e) avoided (e.g., Cárdenas and Orozco, 2022; Hof et al., 2017; Johnson et al., 2009). A focus on emission reductions and their marginal cost may make sense to climate change economists, but this is not the language of farmers, transit authorities, or factory operators, who speak in terms of heads of cattle, numbers of buses, and tons of cement. To be motivated and able to act, these leaders need to know what specific transformations they must enact in their sector to make progress toward net zero. These should be expressed tangibly and actionably, such as producing electricity with 50% solar and wind power by 2030; shifting 70% of local transport to transit, walking, or biking by 2040; or reforesting 1,000,000 hectares of degraded pasture by 2050 (Fay et al., 2015; Waisman et al., 2019). In turn, this can provide concrete information to ministries of finance to plan public budgets, clarify public investment priorities, assess impacts and required adjustments on fiscal policy (Solano-Rodríguez et al., 2021; Victor-Gallardo et al., 2022), and manage debt to support delivery across sectors in addition to relevant macroeconomic indicators such as jobs, GDP, and trade balance dynamics in the transition (Orozco and Jaramillo, 2021; Delgado et al., 2021).

Developing plans that reach net zero and align with stakeholders’ and citizens’ knowledge, concerns, and priorities is analytically challenging. Integrated, multisectoral emissions models are complex and costly to develop and can be time-consuming and difficult to use. The data needed to produce credible estimates is vast and heterogeneous and, particularly for countries in the region, huge data gaps exist in essential sectors. Conditions also are changing rapidly, requiring sophisticated analytical methods for managing deep uncertainties. Many countries face capacity challenges to create robust decarbonization and development plans (World Bank, 2022). This partly may explain why only 15% of the least-developed countries have submitted LTSs, compared to more than 80% of the Organisation for Economic Co-operation and Development (OECD) countries (Climate Watch LTS Explorer, 2020).
In addition, active participation during the LTS formulation stage for those who will need to implement is essential to inform analysis and increase buy-in; policymakers often do not buy into plans that they had no role in developing (Niet et al., 2021; Calfucoy et al., 2022). By engaging early in the process, their insights, expertise, and concerns can shape the plan and ease its delivery. This approach requires the use of flexible processes and tools to ensure that stakeholder" viewpoints genuinely are considered and integrated into the analysis. This type of expertise often is challenging to set up.

Recognizing the need for support, many organizations have launched initiatives to enable decarbonization planning. At IDB, the Latin American Deep Decarbonization Pathways project sought to create both analytical capabilities and a community of practice around decarbonization planning (Bataille et al., 2020; IDB, 2019). This program launched decarbonization analyses for Argentina, Colombia, Costa Rica, Ecuador, Mexico, and Peru. At the World Bank, the Country Climate and Development Reports seek to help governments, sector leaders, and stakeholders assess and prioritize climate actions, particularly those that also can advance development goals (World Bank, 2022). The 2050 Pathways Platform, a government and multistakeholder initiative, also seeks to support LTS development and provide financial and technical assistance to support governments in formulating LTS tailored to country priorities (The 2050 Pathways Platform, 2023). Other international initiatives to support LTS development include the AFD 2050 Facility (AFD, 2023); the German International Climate Initiative (IKI, 2023); the Global Environment Facility's Net-Zero Nature-Positive Accelerator (GEF, 2023); and the Nationally Determined Contributions Partnership (NDCP, 2023).

One lesson from LTS development is that models can serve a whole-of-government and society conversation, help build consensus, find synergies between decarbonization and development goals, and make any net-zero strategy more actionable. Modeling in universities or think tanks done at the country level also can be one way to convene relevant actors into the process and alleviate the workload of government leads. Finally, modeling work can be used to facilitate coordination among diverse international development partners, making the provision of support more effective (Jaramillo et al., 2023).

## Our Goals

Keeping these factors in mind, we seek to contribute to improving countries' understanding of decarbonization strategies that are aligned with the social, economic, environmental, and development needs of the people who will implement them and experience their effects. Building on prior work done in Chile, Costa Rica, Colombia, the Dominican Republic, and Peru (Benavides et al., 2021; Groves et al., 2020; Arguello et al., 2022; Quirós-Tortos et al., 2023; Quirós-Tortos et al., 2021), we advance these goals for Latin America and the Caribbean through three areas of work.
In addition, active participation during the LTS formulation stage for those who will need to implement is essential to inform analysis and increase buy-in; policymakers often do not buy into plans that they had no role in developing (Niet et al., 2021; Calfucoy et al., 2022). By engaging early in the process, their insights, expertise, and concerns can shape the plan and ease its delivery. This approach requires the use of flexible processes and tools to ensure that stakeholder" viewpoints genuinely are considered and integrated into the analysis. This type of expertise often is challenging to set up.

Recognizing the need for support, many organizations have launched initiatives to enable decarbonization planning. At IDB, the Latin American Deep Decarbonization Pathways project sought to create both analytical capabilities and a community of practice around decarbonization planning (Bataille et al., 2020; IDB, 2019). This program launched decarbonization analyses for Argentina, Colombia, Costa Rica, Ecuador, Mexico, and Peru. At the World Bank, the Country Climate and Development Reports seek to help governments, sector leaders, and stakeholders assess and prioritize climate actions, particularly those that also can advance development goals (World Bank, 2022). The 2050 Pathways Platform, a government and multistakeholder initiative, also seeks to support LTS development and provide financial and technical assistance to support governments in formulating LTS tailored to country priorities (The 2050 Pathways Platform, 2023). Other international initiatives to support LTS development include the AFD 2050 Facility (AFD, 2023); the German International Climate Initiative (IKI, 2023); the Global Environment Facility's Net-Zero Nature-Positive Accelerator (GEF, 2023); and the Nationally Determined Contributions Partnership (NDCP, 2023).

One lesson from LTS development is that models can serve a whole-of-government and society conversation, help build consensus, find synergies between decarbonization and development goals, and make any net-zero strategy more actionable. Modeling in universities or think tanks done at the country level also can be one way to convene relevant actors into the process and alleviate the workload of government leads. Finally, modeling work can be used to facilitate coordination among diverse international development partners, making the provision of support more effective (Jaramillo et al., 2023).

## Our Goals

Keeping these factors in mind, we seek to contribute to improving countries' understanding of decarbonization strategies that are aligned with the social, economic, environmental, and development needs of the people who will implement them and experience their effects. Building on prior work done in Chile, Costa Rica, Colombia, the Dominican Republic, and Peru (Benavides et al., 2021; Groves et al., 2020; Arguello et al., 2022; Quirós-Tortos et al., 2023; Quirós-Tortos et al., 2021), we advance these goals for Latin America and the Caribbean through three areas of work.
*Develop a global analytical toolkit for more accessible decarbonization planning*

We begin by introducing SiSePuede (sImulation of sEctoral Pathways and Uncertainty Exploration for dEcarbonization), a toolbox for designing bottom-up mitigation strategies and analyzing amid uncertainty their emissions, costs, benefits, and alignment with NDCs, SDGs, and Paris Agreement targets.

SiSePuede models emissions in six economic sectors based on IPCC methodology (IPCC, 2006; IPCC, 2019): agriculture, industry, buildings, transport, waste, and electricity and fuel production. SiSePuede's process of modeling emissions can be understood through the ASIF framework, originally designed for the transport sector (Schipper and Marie-Lilliu, 1999). ASIF stands for Activity, mode Share, emissions Intensity, and emissions intensity of Fuel. First, levels of activity (e.g., demand for food, transport, buildings, industrial output, and energy) are based on underlying drivers of GDP and population. Then, each activity is apportioned to a production mode (e.g., the fraction of residential heat demand met by natural gas furnaces, wood-burning stoves, or heat pumps). Each mode is associated with a specific energy intensity met by a fuel mix with specific emissions intensities. The variables that drive emissions are calibrated against publicly available datasets on economic activity, energy consumption, and emissions from sources such as the IDB, World Bank, IMF, IEA, FAO. These sectors also are integrated, e.g., an increase in capture of landfill biogas reduces demand for extracting fossil gas; the reduction of losses in the agricultural supply chain reduces waste in the waste stream; and a switch from using cement to wood in buildings changes deforestation rates. SiSePuede is available on GitHub at https://github.com/jcsyme/sisepuede and https://hub.docker.com/r/jsyme816/sisepuede documented at https://sisepuede.readthedocs.io.

Develop and evaluate emissions, costs, and benefits of bottom-up transformations

Next, we use SiSePuede to assess decarbonization strategies for the 18 countries in Latin America and the Caribbean (see Figure 1.1). These are the subset of the 26 member countries of the IDB for which we subjectively determine that existing data and imputations of missing data would allow us to calibrate the model. For these countries, emissions are approximately 4.1 GtCO2e net of land-use changes and sequestration.

A “Traditional Development” trajectory for the region serves as a backdrop against which other decarbonization options—called transformations—are compared. Traditional Development reflects a future largely unconcerned with decarbonization and consistent with historical development trajectories. It includes a growing demand for goods and services overall; and, consistent with past trends associated with a growth in gross domestic product (GDP) per capita, there is an increase in consumption of beef and private automobile ownership. While there is a modest background improvement in energy intensity (IEA, IRENA, UNSD, World Bank, WHO, 2023) and some transition to renewables (IRENA 2018), there is also significant continued reliance on fossil fuels throughout the economy.
*Develop a global analytical toolkit for more accessible decarbonization planning*

We begin by introducing SiSePuede (sImulation of sEctoral Pathways and Uncertainty Exploration for dEcarbonization), a toolbox for designing bottom-up mitigation strategies and analyzing amid uncertainty their emissions, costs, benefits, and alignment with NDCs, SDGs, and Paris Agreement targets.

SiSePuede models emissions in six economic sectors based on IPCC methodology (IPCC, 2006; IPCC, 2019): agriculture, industry, buildings, transport, waste, and electricity and fuel production. SiSePuede's process of modeling emissions can be understood through the ASIF framework, originally designed for the transport sector (Schipper and Marie-Lilliu, 1999). ASIF stands for Activity, mode Share, emissions Intensity, and emissions intensity of Fuel. First, levels of activity (e.g., demand for food, transport, buildings, industrial output, and energy) are based on underlying drivers of GDP and population. Then, each activity is apportioned to a production mode (e.g., the fraction of residential heat demand met by natural gas furnaces, wood-burning stoves, or heat pumps). Each mode is associated with a specific energy intensity met by a fuel mix with specific emissions intensities. The variables that drive emissions are calibrated against publicly available datasets on economic activity, energy consumption, and emissions from sources such as the IDB, World Bank, IMF, IEA, FAO. These sectors also are integrated, e.g., an increase in capture of landfill biogas reduces demand for extracting fossil gas; the reduction of losses in the agricultural supply chain reduces waste in the waste stream; and a switch from using cement to wood in buildings changes deforestation rates. SiSePuede is available on GitHub at https://github.com/jcsyme/sisepuede and https://hub.docker.com/r/jsyme816/sisepuede documented at https://sisepuede.readthedocs.io.

Develop and evaluate emissions, costs, and benefits of bottom-up transformations

Next, we use SiSePuede to assess decarbonization strategies for the 18 countries in Latin America and the Caribbean (see Figure 1.1). These are the subset of the 26 member countries of the IDB for which we subjectively determine that existing data and imputations of missing data would allow us to calibrate the model. For these countries, emissions are approximately 4.1 GtCO2e net of land-use changes and sequestration.

A “Traditional Development” trajectory for the region serves as a backdrop against which other decarbonization options—called transformations—are compared. Traditional Development reflects a future largely unconcerned with decarbonization and consistent with historical development trajectories. It includes a growing demand for goods and services overall; and, consistent with past trends associated with a growth in gross domestic product (GDP) per capita, there is an increase in consumption of beef and private automobile ownership. While there is a modest background improvement in energy intensity (IEA, IRENA, UNSD, World Bank, WHO, 2023) and some transition to renewables (IRENA 2018), there is also significant continued reliance on fossil fuels throughout the economy.
Against this backdrop, we define over 50 different transformations across the economy (see Table 2.3 in Section 2). Consistent with the ASIF framework, initially emissions can be diminished by reducing activity—for instance, reducing travel demand by encouraging work from home or reducing total food production by reducing waste and losses. Second, transformations can affect sector activity's energy intensity, such as improving road vehicles' or appliances' energy efficiency or adapting agriculture practices to increase yields. Third, structural changes can be made, producing electricity from renewable sources rather than fossil fuels, using public transport instead of individual cars, and producing foods that have a lower carbon and land footprint per unit of nutrient. Finally, shifts can be made from higher to cleaner energy sources—for instance, by producing electricity with solar instead of gas, and using electricity rather than fossil fuels in road vehicles and to produce heat in buildings and industry (Fazekas et al., 2022).

In addition to this typology of emission reductions, a common question is whether consumers or producers should be held responsible for reducing emissions. This distinction might be misleading, in the sense that both consumers and producers are responsive to infrastructure investments, regulatory choices, and price signals shaped by the government (Fazekas et al., 2022). But it does matter because it shapes how the government communicates with people and firms about decarbonization and how decarbonization is perceived.

We categorize emission-reduction options into three mutually exclusive categories that reflect different approaches to decarbonization. Transformations that are “Incremental Improvements” make marginal gains upon current practices, without making significant structural changes. This includes, for example, increasing vehicles’ energy efficiency, increasing livestock-carrying capacities, and expanding basic waste and wastewater management. Many of these transformations affect the intensity factor in the ASIF framework.

Other transformations fall into the banner of “Supply-Side Solutions” and can involve significant structural changes to production, such as pursuing nearly emissions-free electricity, switching to industrial processes such as hydrogen-based steel production, and transitioning transport to electricity. These changes are typically made by producers and not under the meaningful control of consumers; often they are not even directly observable to consumers. Many of these transformations align with structure and fuel factors.

A third category of transformations involves “Changing Consumption” and includes transformations that are observable by and often involve participation from consumers. Examples include using transit instead of personal auto for travel or changing food production and consumption patterns to reduce the relative importance of high-carbon-footprint foods and increase the importance of low-carbon foods. Many of these transformations affect activity and structure factors. To be clear, these divisions are untidy and subjective: many transformations fall across categories, and the real world will embrace complex combinations of transformations across the divisions.
Against this backdrop, we define over 50 different transformations across the economy (see Table 2.3 in Section 2). Consistent with the ASIF framework, initially emissions can be diminished by reducing activity—for instance, reducing travel demand by encouraging work from home or reducing total food production by reducing waste and losses. Second, transformations can affect sector activity's energy intensity, such as improving road vehicles' or appliances' energy efficiency or adapting agriculture practices to increase yields. Third, structural changes can be made, producing electricity from renewable sources rather than fossil fuels, using public transport instead of individual cars, and producing foods that have a lower carbon and land footprint per unit of nutrient. Finally, shifts can be made from higher to cleaner energy sources—for instance, by producing electricity with solar instead of gas, and using electricity rather than fossil fuels in road vehicles and to produce heat in buildings and industry (Fazekas et al., 2022).

In addition to this typology of emission reductions, a common question is whether consumers or producers should be held responsible for reducing emissions. This distinction might be misleading, in the sense that both consumers and producers are responsive to infrastructure investments, regulatory choices, and price signals shaped by the government (Fazekas et al., 2022). But it does matter because it shapes how the government communicates with people and firms about decarbonization and how decarbonization is perceived.

We categorize emission-reduction options into three mutually exclusive categories that reflect different approaches to decarbonization. Transformations that are “Incremental Improvements” make marginal gains upon current practices, without making significant structural changes. This includes, for example, increasing vehicles’ energy efficiency, increasing livestock-carrying capacities, and expanding basic waste and wastewater management. Many of these transformations affect the intensity factor in the ASIF framework.

Other transformations fall into the banner of “Supply-Side Solutions” and can involve significant structural changes to production, such as pursuing nearly emissions-free electricity, switching to industrial processes such as hydrogen-based steel production, and transitioning transport to electricity. These changes are typically made by producers and not under the meaningful control of consumers; often they are not even directly observable to consumers. Many of these transformations align with structure and fuel factors.

A third category of transformations involves “Changing Consumption” and includes transformations that are observable by and often involve participation from consumers. Examples include using transit instead of personal auto for travel or changing food production and consumption patterns to reduce the relative importance of high-carbon-footprint foods and increase the importance of low-carbon foods. Many of these transformations affect activity and structure factors. To be clear, these divisions are untidy and subjective: many transformations fall across categories, and the real world will embrace complex combinations of transformations across the divisions.
We use these transformations individually and in combinations to see how different actions could affect emissions and development outcomes in Latin America and the Caribbean and reach net zero. We quantify development outcomes using estimates found in the literature of their costs and benefits. This includes technical costs or benefits that actors generally experience within a sector and also generally are internal to markets, such as the cost to the agricultural sector of capturing biogas from livestock, the cost of increasing energy efficiency in industry, or the cost of investments in the electricity sector for new capacity to keep up with growing demand. We also include non-technical costs or benefits that are paramount to aligning decarbonization with development goals, such as health benefits of avoided automobile crashes and air pollution, the value of conserving biodiversity, or the time saved thanks to less congestion (Fazekas et al., 2022). Many of these benefits accrue to those other than sector actors and/or may be external to the market. We exclude the social cost of carbon (Nordhaus, 2017) as one of the benefits of decarbonization, for two reasons. First, decarbonization is a goal per se, aimed at avoiding climate change's impacts. We consider net-zero emissions as a goal that individual governments can set for themselves, not to be offset against other costs and benefits. Second, we seek to understand how strategies to decarbonize can yield costs and benefits to development, outside of their climate effects. This of course means we are undercounting the value of decarbonization to development, e.g., as the cost to produce food in Latin America and the Caribbean will be higher in a world with more climate extremes, and the loss of infrastructure will be massive (Talbot-Wright and Vogt-Schilb, 2023).

Achieving these transformations will require implementing a wide range of policies and regulations. For example, to favor modal shifts in transport, governments may opt to subsidize private mass transit operators, to invest in transit infrastructure, to restrict passenger car use through parking or congestion charges, and so on. Given that many measures will lead to winners and losers, governments will need to adequately manage the transition to mitigate the potential negative impacts, to effect a more just transition. The policies that need to be enacted to carry out the transformations and to appropriately manage their impacts fall outside of the scope of this study.

We also purposely do not evaluate countries’ NDCs and LTSs in this study. While NDCs and LTSs include many of the transformations we discuss, it is well documented that they fall far short of Paris targets (Cárdenas and Orozco, 2022; Binsted et al., 2020). Rather than evaluate existing NDCs and LTS’s here, we hope to inform future iterations of those policies with an analysis that goes beyond the transformations they already consider, including some that are seldom discussed, such as shifts in food production and consumption. Chapter 6 details how we could do so using SiSePuede and our findings.
We use these transformations individually and in combinations to see how different actions could affect emissions and development outcomes in Latin America and the Caribbean and reach net zero. We quantify development outcomes using estimates found in the literature of their costs and benefits. This includes technical costs or benefits that actors generally experience within a sector and also generally are internal to markets, such as the cost to the agricultural sector of capturing biogas from livestock, the cost of increasing energy efficiency in industry, or the cost of investments in the electricity sector for new capacity to keep up with growing demand. We also include non-technical costs or benefits that are paramount to aligning decarbonization with development goals, such as health benefits of avoided automobile crashes and air pollution, the value of conserving biodiversity, or the time saved thanks to less congestion (Fazekas et al., 2022). Many of these benefits accrue to those other than sector actors and/or may be external to the market. We exclude the social cost of carbon (Nordhaus, 2017) as one of the benefits of decarbonization, for two reasons. First, decarbonization is a goal per se, aimed at avoiding climate change's impacts. We consider net-zero emissions as a goal that individual governments can set for themselves, not to be offset against other costs and benefits. Second, we seek to understand how strategies to decarbonize can yield costs and benefits to development, outside of their climate effects. This of course means we are undercounting the value of decarbonization to development, e.g., as the cost to produce food in Latin America and the Caribbean will be higher in a world with more climate extremes, and the loss of infrastructure will be massive (Talbot-Wright and Vogt-Schilb, 2023).

Achieving these transformations will require implementing a wide range of policies and regulations. For example, to favor modal shifts in transport, governments may opt to subsidize private mass transit operators, to invest in transit infrastructure, to restrict passenger car use through parking or congestion charges, and so on. Given that many measures will lead to winners and losers, governments will need to adequately manage the transition to mitigate the potential negative impacts, to effect a more just transition. The policies that need to be enacted to carry out the transformations and to appropriately manage their impacts fall outside of the scope of this study.

We also purposely do not evaluate countries’ NDCs and LTSs in this study. While NDCs and LTSs include many of the transformations we discuss, it is well documented that they fall far short of Paris targets (Cárdenas and Orozco, 2022; Binsted et al., 2020). Rather than evaluate existing NDCs and LTS’s here, we hope to inform future iterations of those policies with an analysis that goes beyond the transformations they already consider, including some that are seldom discussed, such as shifts in food production and consumption. Chapter 6 details how we could do so using SiSePuede and our findings.
<figure><img src="image_16.png" /><figcaption>Figure 1.1 Map of countries included in this analysis.</figcaption></figure>

*Identify and quantify robust decarbonization strategies that meet net-zero goals and provide net socioeconomic benefits*

Last, we look at these transformations' costs, benefits, and effect on emissions over the next 25 years. Such prospects are deeply uncertain and will be shaped by factors we can imagine but not predict—e.g., changing costs of green hydrogen production or the sequestration capacity of forests in an ever-warming planet—as well as factors that may take us by surprise, such as the recent global pandemic. The challenge of assessing effects is further exacerbated by pervasive data gaps and rapidly changing socioeconomic conditions, particularly for developing countries which by their nature are undergoing rapid change.

Deep uncertainty raises key questions: What combination of transformations, at what intensities, most assuredly reach net zero and net benefits? And what actions or uncertainties most threaten these goals? Guided by decision making under deep uncertainty (DMDU) methods (Marchau et al., 2019), we evaluate transformations under thousands of combinations of assumptions about the future. From the results, we can identify which transformations are essential for meeting net-zero emissions, and what combination of transformations most robustly reaches net zero by 2050 while also consistently providing net benefits. These insights can help countries develop and further tailor NDCs, LTSs, and other climate and development plans. They also can help international development partners prioritize their investments and policy dialogue in Latin America and the Caribbean.
<figure><img src="image_15.png" /><figcaption>Figure 1.1 Map of countries included in this analysis.</figcaption></figure>

*Identify and quantify robust decarbonization strategies that meet net-zero goals and provide net socioeconomic benefits*

Last, we look at these transformations' costs, benefits, and effect on emissions over the next 25 years. Such prospects are deeply uncertain and will be shaped by factors we can imagine but not predict—e.g., changing costs of green hydrogen production or the sequestration capacity of forests in an ever-warming planet—as well as factors that may take us by surprise, such as the recent global pandemic. The challenge of assessing effects is further exacerbated by pervasive data gaps and rapidly changing socioeconomic conditions, particularly for developing countries which by their nature are undergoing rapid change.

Deep uncertainty raises key questions: What combination of transformations, at what intensities, most assuredly reach net zero and net benefits? And what actions or uncertainties most threaten these goals? Guided by decision making under deep uncertainty (DMDU) methods (Marchau et al., 2019), we evaluate transformations under thousands of combinations of assumptions about the future. From the results, we can identify which transformations are essential for meeting net-zero emissions, and what combination of transformations most robustly reaches net zero by 2050 while also consistently providing net benefits. These insights can help countries develop and further tailor NDCs, LTSs, and other climate and development plans. They also can help international development partners prioritize their investments and policy dialogue in Latin America and the Caribbean.
## Organization of This Report and Accompanying Material

The remainder of this report documents our approach and findings. Chapter 2 describes our approach, including the model, data, methodology, and experimental design. Chapter 3 explores the emissions, costs, and benefits of transformations in various categories for Latin America and the Caribbean, in aggregate and then for individual sectors. Chapter 4 expands the analysis to chart a robust decarbonization path for the region amid deep uncertainty. Chapter 5 highlights different implications of a regional strategy in select individual countries. Chapter 6 concludes with a review of major findings, implications for decarbonization, and next steps.

In addition to this report, our work is documented in a separate volume with technical appendices that describe SiSePuede and the modeling, data, transformations, and costs and benefits in each sector. As mentioned previously, SiSePuede and the data accompanying it are publicly available to download at https://github.com/jcsyme/sisepuede and https://hub.docker.com/r/jsyme816/sisepuede, documented at https://sisepuede.readthedocs.io.
## Organization of This Report and Accompanying Material

The remainder of this report documents our approach and findings. Chapter 2 describes our approach, including the model, data, methodology, and experimental design. Chapter 3 explores the emissions, costs, and benefits of transformations in various categories for Latin America and the Caribbean, in aggregate and then for individual sectors. Chapter 4 expands the analysis to chart a robust decarbonization path for the region amid deep uncertainty. Chapter 5 highlights different implications of a regional strategy in select individual countries. Chapter 6 concludes with a review of major findings, implications for decarbonization, and next steps.

In addition to this report, our work is documented in a separate volume with technical appendices that describe SiSePuede and the modeling, data, transformations, and costs and benefits in each sector. As mentioned previously, SiSePuede and the data accompanying it are publicly available to download at https://github.com/jcsyme/sisepuede and https://hub.docker.com/r/jsyme816/sisepuede, documented at https://sisepuede.readthedocs.io.
The Benefits and Costs of
Reaching Net Zero Emissions in
Latin America and the Caribbean

2

CHAPTER

Approach to Assessing Emissions,
Costs, and Benefits
<figure><img src="image_16.png" /></figure>

# Approach to Assessing Emissions, Costs, and Benefits
In this study, we have developed and used the SiSePuede analytical framework to identify strategies by which Latin America and the Caribbean can reach net-zero emissions, and the costs and benefits of those strategies. Given the many deep uncertainties that influence emissions, costs, and benefits, we couple SiSePuede with Robust Decision Making (RDM), a method for managing deep uncertainties (Lempert, Popper, and Bankes, 2003; Groves and Lempert, 2007; Kalra et al., 2015; Lempert et al., 2013). RDM is an iterative, stakeholder-supported process for conducting exhaustive “what-if” analyses. Using RDM’s vulnerability analysis techniques, we evaluate strategies under an array of future conditions and assumptions to understand the potential range of outcomes and conditions that lead strategies to meet or fail to meet decarbonization and economic goals. This methodology has had success in Latin America not only for decarbonization planning (Groves et al., 2020; Quirós-Tortós et al., 2021, Benavides et al., 2021; Arguello et al., 2022), but also for resilient water and transport planning in the face of climate uncertainties (Kalra et al., 2015; Groves et al., 2021; Molina-Perez et al., 2019; Olaya et al., 2020), and global sustainability policies (Lempert et al., 2003; Molina-Perez et al., 2020).

Consistent with RDM’s process, our experimental design was informed by the input of IDB’s sector experts. We engaged them at the start of our research in a first round of sector-specific workshops in which they provided guidance on transformations for achieving decarbonization, costs and benefit of those transformations, uncertainties that would shape outcomes, and data and models available to inform our analysis. After our preliminary analysis, we then held sector-specific workshops to solicit revisions to our experimental design and review data and outcomes. We revised our final analysis based on this expert feedback.

**Design of Experiments**

We first used SiSePuede to evaluate emissions in a Traditional Development trajectory in which Latin America and the Caribbean's future development is an extrapolation of its past development trajectory. It is consistent with traditional global development of the 19th and 20th centuries, which pursued rapid and often unsustainable economic growth while also increasing quality of life (Commoner, 2013). This includes the following trends:

* increasing demand for goods and services associated with increasing population and economic growth;

* more production and consumption of red meat and shifts in transport toward more personal automobile travel associated with increasing wealth;

* continued deforestation needed to create greater space for crops and livestock;

* background increases in energy efficiency from technological improvements; and

* a modest increase in renewable energy, but with significant continued reliance on fossil fuels to produce electricity and for energy throughout the economy.
In this study, we have developed and used the SiSePuede analytical framework to identify strategies by which Latin America and the Caribbean can reach net-zero emissions, and the costs and benefits of those strategies. Given the many deep uncertainties that influence emissions, costs, and benefits, we couple SiSePuede with Robust Decision Making (RDM), a method for managing deep uncertainties (Lempert, Popper, and Bankes, 2003; Groves and Lempert, 2007; Kalra et al., 2015; Lempert et al., 2013). RDM is an iterative, stakeholder-supported process for conducting exhaustive “what-if” analyses. Using RDM’s vulnerability analysis techniques, we evaluate strategies under an array of future conditions and assumptions to understand the potential range of outcomes and conditions that lead strategies to meet or fail to meet decarbonization and economic goals. This methodology has had success in Latin America not only for decarbonization planning (Groves et al., 2020; Quirós-Tortós et al., 2021, Benavides et al., 2021; Arguello et al., 2022), but also for resilient water and transport planning in the face of climate uncertainties (Kalra et al., 2015; Groves et al., 2021; Molina-Perez et al., 2019; Olaya et al., 2020), and global sustainability policies (Lempert et al., 2003; Molina-Perez et al., 2020).

Consistent with RDM’s process, our experimental design was informed by the input of IDB’s sector experts. We engaged them at the start of our research in a first round of sector-specific workshops in which they provided guidance on transformations for achieving decarbonization, costs and benefit of those transformations, uncertainties that would shape outcomes, and data and models available to inform our analysis. After our preliminary analysis, we then held sector-specific workshops to solicit revisions to our experimental design and review data and outcomes. We revised our final analysis based on this expert feedback.

**Design of Experiments**

We first used SiSePuede to evaluate emissions in a Traditional Development trajectory in which Latin America and the Caribbean's future development is an extrapolation of its past development trajectory. It is consistent with traditional global development of the 19th and 20th centuries, which pursued rapid and often unsustainable economic growth while also increasing quality of life (Commoner, 2013). This includes the following trends:

* increasing demand for goods and services associated with increasing population and economic growth;

* more production and consumption of red meat and shifts in transport toward more personal automobile travel associated with increasing wealth;

* continued deforestation needed to create greater space for crops and livestock;

* background increases in energy efficiency from technological improvements; and

* a modest increase in renewable energy, but with significant continued reliance on fossil fuels to produce electricity and for energy throughout the economy.
Importantly, Traditional Development is not and should not be interpreted as a projection of how Latin America and the Caribbean is developing or likely to develop in the future. In important ways, it is consistent with current regional trends. For instance, in its country-level assessment of Brazil, Climate Action Tracker notes, “Brazil is laser-focused on boosting the use of fossil gas in the power supply to combat hydropower shortages caused by droughts in 2021, despite the far more promising performance of other renewable energy technologies in the country, such as wind and solar” [emphasis added] (Climate Action Tracker, 2022a). It makes sense that countries globally continue to follow traditional development patterns, as there are many barriers that prevent rapid shifts toward net-zero prosperity, especially in developing countries (Fazekas et al., 2022). However, new efforts to decarbonize also are underway that shift the region away from such a traditional development trajectory (Iyer et al., 2017; IDB, 2019).

The Traditional Development trajectory is instead meant as counterfactual backdrop against which to assess and compare the effects of over 50 different transformations throughout the economy that could reduce emissions, some of which are being undertaken already or have been pledged. For each transformation, we simulated emissions effects, costs, and benefits. We arrange these transformations into three categories, each representing a different approach to development and decarbonization as discussed in the introduction. Table 2.2 lists these transformations and their inclusion in each of the categories.

We then use SiSePuede to analyze how far a maximum implementation of these categories of transformations can take us toward net zero under a set of nominal assumptions, and what kinds of costs and benefits result. This helps answer questions such as, “How much could we decarbonize through efficiency gains alone, without changing the production structure or consumption patterns?” and “What are the costs and benefits of changing food production and consumption as part of a decarbonization strategy?” We also assess all transformations in an “All Actions” strategy to understand how maximum effort can reach net-zero emissions in 2050.

In practice, countries' decarbonization strategies, including their NDCs and LTSs, will involve transformations at diverse levels of implementation based on the impacts, costs, benefits, technological availability, political feasibility, and other barriers and drivers of those actions. Our next set of experiments answer the question, “What transformations are the most important drivers toward net zero?” We use Latin Hypercube Sampling to generate about 1,000 decarbonization strategies statistically that implement each transformation to different degrees, from almost no implementation to a maximum level. We evaluate each of these strategies under nominal assumptions about exogenous uncertainties, and we used regression analysis to identify the largest drivers and a minimum level of implementation necessary to approach net zero.
Importantly, Traditional Development is not and should not be interpreted as a projection of how Latin America and the Caribbean is developing or likely to develop in the future. In important ways, it is consistent with current regional trends. For instance, in its country-level assessment of Brazil, Climate Action Tracker notes, “Brazil is laser-focused on boosting the use of fossil gas in the power supply to combat hydropower shortages caused by droughts in 2021, despite the far more promising performance of other renewable energy technologies in the country, such as wind and solar” [emphasis added] (Climate Action Tracker, 2022a). It makes sense that countries globally continue to follow traditional development patterns, as there are many barriers that prevent rapid shifts toward net-zero prosperity, especially in developing countries (Fazekas et al., 2022). However, new efforts to decarbonize also are underway that shift the region away from such a traditional development trajectory (Iyer et al., 2017; IDB, 2019).

The Traditional Development trajectory is instead meant as counterfactual backdrop against which to assess and compare the effects of over 50 different transformations throughout the economy that could reduce emissions, some of which are being undertaken already or have been pledged. For each transformation, we simulated emissions effects, costs, and benefits. We arrange these transformations into three categories, each representing a different approach to development and decarbonization as discussed in the introduction. Table 2.2 lists these transformations and their inclusion in each of the categories.

We then use SiSePuede to analyze how far a maximum implementation of these categories of transformations can take us toward net zero under a set of nominal assumptions, and what kinds of costs and benefits result. This helps answer questions such as, “How much could we decarbonize through efficiency gains alone, without changing the production structure or consumption patterns?” and “What are the costs and benefits of changing food production and consumption as part of a decarbonization strategy?” We also assess all transformations in an “All Actions” strategy to understand how maximum effort can reach net-zero emissions in 2050.

In practice, countries' decarbonization strategies, including their NDCs and LTSs, will involve transformations at diverse levels of implementation based on the impacts, costs, benefits, technological availability, political feasibility, and other barriers and drivers of those actions. Our next set of experiments answer the question, “What transformations are the most important drivers toward net zero?” We use Latin Hypercube Sampling to generate about 1,000 decarbonization strategies statistically that implement each transformation to different degrees, from almost no implementation to a maximum level. We evaluate each of these strategies under nominal assumptions about exogenous uncertainties, and we used regression analysis to identify the largest drivers and a minimum level of implementation necessary to approach net zero.
Our final set of experiments answer the questions, “What combination of transformations, at what implementation intensities, most assuredly reach net zero and net benefits amid deep uncertainty? And what uncertainties most undermine the ability to reach net zero?”

We used the prior experiment’s result to increase the number of trajectories that might reach net zero under uncertainty to allow sufficient data for scenario discovery. That is, we generated another 1,000 decarbonization strategies, this time requiring the minimum level of implementation for critical transformations. We also generated 1,000 futures, each representing a unique combination of assumptions about deeply uncertain emissions drivers, transformation effects, and costs and benefits. In each future, we simulated one of the 1,000 decarbonization strategies and compared it to the performance of Traditional Development in that same future to calculate costs and benefits. Using scenario-discovery techniques, we identified conditions under which strategies are vulnerable to either not meeting net-zero goals, net benefit goals, or both. We identified strategies that robustly achieve both goals.

Table 2.1 provides an overview of the experimental design’s key elements: the strategies, emission and development metrics, uncertainties, and modeling framework. The remainder of this section expands upon each of these design elements.

## The SiSePuede Analytical Framework

SiSePuede is a bottom-up greenhouse gas emissions, cost, and benefit simulation model. As noted in the introduction, SiSePuede estimates the emissions that occur in each sector based on economic and population drivers of demand and energy and non-energy emissions that result from meeting those demands. Our implementation is consistent with and informed by the IPCC guidance on greenhouse gas inventories (IPCC 2006; 2019). SiSePuede is implemented at the national level, so region-wide results are the aggregation of outcomes in each of the 18 countries listed in Table 2.2. In Chapter 5, we present detailed results for three individual countries, which illustrate local differences from aggregate findings.
Our final set of experiments answer the questions, “What combination of transformations, at what implementation intensities, most assuredly reach net zero and net benefits amid deep uncertainty? And what uncertainties most undermine the ability to reach net zero?”

We used the prior experiment’s result to increase the number of trajectories that might reach net zero under uncertainty to allow sufficient data for scenario discovery. That is, we generated another 1,000 decarbonization strategies, this time requiring the minimum level of implementation for critical transformations. We also generated 1,000 futures, each representing a unique combination of assumptions about deeply uncertain emissions drivers, transformation effects, and costs and benefits. In each future, we simulated one of the 1,000 decarbonization strategies and compared it to the performance of Traditional Development in that same future to calculate costs and benefits. Using scenario-discovery techniques, we identified conditions under which strategies are vulnerable to either not meeting net-zero goals, net benefit goals, or both. We identified strategies that robustly achieve both goals.

Table 2.1 provides an overview of the experimental design’s key elements: the strategies, emission and development metrics, uncertainties, and modeling framework. The remainder of this section expands upon each of these design elements.

## The SiSePuede Analytical Framework

SiSePuede is a bottom-up greenhouse gas emissions, cost, and benefit simulation model. As noted in the introduction, SiSePuede estimates the emissions that occur in each sector based on economic and population drivers of demand and energy and non-energy emissions that result from meeting those demands. Our implementation is consistent with and informed by the IPCC guidance on greenhouse gas inventories (IPCC 2006; 2019). SiSePuede is implemented at the national level, so region-wide results are the aggregation of outcomes in each of the 18 countries listed in Table 2.2. In Chapter 5, we present detailed results for three individual countries, which illustrate local differences from aggregate findings.
<table><caption>Table 2.1 Overview of experimental design</caption><thead><tr><th>Metrics</th><th>Strategies</th></tr></thead><tbody><tr><td><ul><li>Greenhouse gas (GHG) emissions' 100-year global warming potential (GWP)</li></ul></td><td><ul><li>Traditional development</li></ul></td></tr><tr><td><ul><li>Technical costs or savings</li></ul><ul><li>Capital costs</li><li>Non-fuel operations and maintenance</li><li>Fuel costs</li><li>Other sector input costs</li><li>Change in sector value add</li><li>Consumer costs</li></ul></td><td><ul><li>Transformations in Table 2.1 at maximum implementation evaluated in four groups:<ol><li>Incremental Improvements</li><li>Supply-Side Solutions</li><li>Changing Consumption</li><li>All Actions (all the above)</li></ol></li></ul></td></tr><tr><td><ul><li>Non-technical costs or savings</li></ul><ul><li>Air, soil, and water quality</li><li>Ecosystem services</li><li>Transport congestion and crashes</li><li>Human health and productivity</li></ul></td><td><ul><li>1,000 statistically generated strategies that involve all transformations in Table 2.1, but at varying levels of implementation</li><li>1,000 statistically generated variants of a "Critical Actions" strategy that involve critical transformations at high levels of implementation and other transformations at modest levels of implementation</li></ul></td></tr><tr><th>Uncertainties</th><th>Modeling Framework</th></tr><tr><td><ul><li>Driver uncertainties</li></ul><ul><li>Demand for output or services in each sector</li><li>Demand for beef, private vehicle travel, and other consumption associated with increasing wealth</li><li>Productivity or efficiency gains</li><li>Fuel costs</li><li>Sequestration and emissions associated with land uses and land-use change</li></ul><ul><li>Uncertainties in transformations' effect on emissions</li></ul><ul><li>Effectiveness of enteric fermentation interventions in reducing emissions</li></ul><ul><li>Cost and benefits of transformations</li></ul><ul><li>Technical costs</li><li>Degree or value of non-technical benefits</li></ul></td><td>SiSePuede Analytical Framework</td></tr></tbody></table>
<table><caption>Table 2.1 Overview of experimental design</caption><thead><tr><th>Metrics</th><th>Strategies</th></tr></thead><tbody><tr><td><ul><li>Greenhouse gas (GHG) emissions' 100-year global warming potential (GWP)</li></ul></td><td><ul><li>Traditional development</li></ul></td></tr><tr><td><ul><li>Technical costs or savings</li></ul><ul><li>Capital costs</li><li>Non-fuel operations and maintenance</li><li>Fuel costs</li><li>Other sector input costs</li><li>Change in sector value add</li><li>Consumer costs</li></ul></td><td><ul><li>Transformations in Table 2.1 at maximum implementation evaluated in four groups:<ol><li>Incremental Improvements</li><li>Supply-Side Solutions</li><li>Changing Consumption</li><li>All Actions (all the above)</li></ol></li></ul></td></tr><tr><td><ul><li>Non-technical costs or savings</li></ul><ul><li>Air, soil, and water quality</li><li>Ecosystem services</li><li>Transport congestion and crashes</li><li>Human health and productivity</li></ul></td><td><ul><li>1,000 statistically generated strategies that involve all transformations in Table 2.1, but at varying levels of implementation</li><li>1,000 statistically generated variants of a "Critical Actions" strategy that involve critical transformations at high levels of implementation and other transformations at modest levels of implementation</li></ul></td></tr><tr><th>Uncertainties</th><th>Modeling Framework</th></tr><tr><td><ul><li>Driver uncertainties</li></ul><ul><li>Demand for output or services in each sector</li><li>Demand for beef, private vehicle travel, and other consumption associated with increasing wealth</li><li>Productivity or efficiency gains</li><li>Fuel costs</li><li>Sequestration and emissions associated with land uses and land-use change</li></ul><ul><li>Uncertainties in transformations' effect on emissions</li></ul><ul><li>Effectiveness of enteric fermentation interventions in reducing emissions</li></ul><ul><li>Cost and benefits of transformations</li></ul><ul><li>Technical costs</li><li>Degree or value of non-technical benefits</li></ul></td><td>SiSePuede Analytical Framework</td></tr></tbody></table>
<table><caption>Table 2.2 List of and key statistics from 2020 for countries included in the study</caption><thead><tr><th rowspan="2">Country</th><th colspan="2">Total emissions</th><th colspan="2">Total emissions, excluding land-use change</th><th rowspan="2">Population</th><th rowspan="2">GDP in current US$</th></tr><tr><th>(MtCO2e)</th><th>(% of total)</th><th>(MtCO2e)</th><th>(% of total)</th></tr></thead><tbody><tr><td>Brazil</td><td>1,469.64</td><td>41.8</td><td>1,064.71</td><td>38.4</td><td>213</td><td>36.1</td><td>1,476</td><td>34.7</td></tr><tr><td>Mexico</td><td>609.07</td><td>17.3</td><td>592.32</td><td>21.4</td><td>126</td><td>21.4</td><td>1,091</td><td>25.6</td></tr><tr><td>Argentina</td><td>394.76</td><td>11.2</td><td>361.43</td><td>13.0</td><td>45</td><td>7.6</td><td>386</td><td>9.1</td></tr><tr><td>Colombia</td><td>270.31</td><td>7.7</td><td>187</td><td>6.7</td><td>51</td><td>8.6</td><td>270</td><td>6.3</td></tr><tr><td>Peru</td><td>179.78</td><td>5.1</td><td>89.87</td><td>3.2</td><td>33</td><td>5.6</td><td>202</td><td>4.7</td></tr><tr><td>Bolivia</td><td>131.43</td><td>3.7</td><td>55.2</td><td>2.0</td><td>12</td><td>2.0</td><td>37</td><td>0.9</td></tr><tr><td>Paraguay</td><td>97.29</td><td>2.8</td><td>50.78</td><td>1.8</td><td>7</td><td>1.2</td><td>35</td><td>0.8</td></tr><tr><td>Ecuador</td><td>94.19</td><td>2.7</td><td>68.06</td><td>2.5</td><td>18</td><td>3.1</td><td>99</td><td>2.3</td></tr><tr><td>Chile</td><td>49.69</td><td>1.4</td><td>106.72</td><td>3.8</td><td>19</td><td>3.2</td><td>254</td><td>6.0</td></tr><tr><td>Nicaragua</td><td>38.15</td><td>1.1</td><td>18.45</td><td>0.7</td><td>7</td><td>1.2</td><td>13</td><td>0.3</td></tr><tr><td>Guatemala</td><td>36.78</td><td>1.0</td><td>33.17</td><td>1.2</td><td>17</td><td>2.9</td><td>78</td><td>1.8</td></tr><tr><td>Dominican Republic</td><td>35.5</td><td>1.0</td><td>37.05</td><td>1.3</td><td>11</td><td>1.9</td><td>79</td><td>1.9</td></tr><tr><td>Uruguay</td><td>34.28</td><td>1.0</td><td>35.99</td><td>1.3</td><td>3</td><td>0.5</td><td>54</td><td>1.3</td></tr><tr><td>Honduras</td><td>27.67</td><td>0.8</td><td>21.15</td><td>0.8</td><td>10</td><td>1.7</td><td>24</td><td>0.6</td></tr><tr><td>Panama</td><td>21.46</td><td>0.6</td><td>17.23</td><td>0.6</td><td>4</td><td>0.7</td><td>57</td><td>1.3</td></tr><tr><td>El Salvador</td><td>12.15</td><td>0.3</td><td>11.06</td><td>0.4</td><td>6</td><td>1.0</td><td>25</td><td>0.6</td></tr><tr><td>Jamaica</td><td>7.58</td><td>0.2</td><td>7.43</td><td>0.3</td><td>3</td><td>0.5</td><td>14</td><td>0.3</td></tr><tr><td>Costa Rica</td><td>7.08</td><td>0.2</td><td>14.41</td><td>0.5</td><td>5</td><td>0.8</td><td>62</td><td>1.5</td></tr></tbody><tfoot><tr><td>Total</td><td>3,516</td><td></td><td>2,772</td><td></td><td>590</td><td></td><td>4,256</td><td></td></tr></tfoot></table>

Notes: Emissions data taken from www.climatewatchdata.org and economic data taken from https://data.worldbank.org/. GDP stands for gross domestic product; MtCO2e stands for metric tons of carbon dioxide equivalent.
<table><caption>Table 2.2 List of and key statistics from 2020 for countries included in the study</caption><thead><tr><th rowspan="2">Country</th><th colspan="2">Total emissions</th><th colspan="2">Total emissions, excluding land-use change</th><th rowspan="2">Population</th><th rowspan="2">GDP in current US$</th></tr><tr><th>(MtCO2e)</th><th>(% of total)</th><th>(MtCO2e)</th><th>(% of total)</th></tr></thead><tbody><tr><td>Brazil</td><td>1,469.64</td><td>41.8</td><td>1,064.71</td><td>38.4</td><td>213</td><td>36.1</td><td>1,476</td><td>34.7</td></tr><tr><td>Mexico</td><td>609.07</td><td>17.3</td><td>592.32</td><td>21.4</td><td>126</td><td>21.4</td><td>1,091</td><td>25.6</td></tr><tr><td>Argentina</td><td>394.76</td><td>11.2</td><td>361.43</td><td>13.0</td><td>45</td><td>7.6</td><td>386</td><td>9.1</td></tr><tr><td>Colombia</td><td>270.31</td><td>7.7</td><td>187</td><td>6.7</td><td>51</td><td>8.6</td><td>270</td><td>6.3</td></tr><tr><td>Peru</td><td>179.78</td><td>5.1</td><td>89.87</td><td>3.2</td><td>33</td><td>5.6</td><td>202</td><td>4.7</td></tr><tr><td>Bolivia</td><td>131.43</td><td>3.7</td><td>55.2</td><td>2.0</td><td>12</td><td>2.0</td><td>37</td><td>0.9</td></tr><tr><td>Paraguay</td><td>97.29</td><td>2.8</td><td>50.78</td><td>1.8</td><td>7</td><td>1.2</td><td>35</td><td>0.8</td></tr><tr><td>Ecuador</td><td>94.19</td><td>2.7</td><td>68.06</td><td>2.5</td><td>18</td><td>3.1</td><td>99</td><td>2.3</td></tr><tr><td>Chile</td><td>49.69</td><td>1.4</td><td>106.72</td><td>3.8</td><td>19</td><td>3.2</td><td>254</td><td>6.0</td></tr><tr><td>Nicaragua</td><td>38.15</td><td>1.1</td><td>18.45</td><td>0.7</td><td>7</td><td>1.2</td><td>13</td><td>0.3</td></tr><tr><td>Guatemala</td><td>36.78</td><td>1.0</td><td>33.17</td><td>1.2</td><td>17</td><td>2.9</td><td>78</td><td>1.8</td></tr><tr><td>Dominican Republic</td><td>35.5</td><td>1.0</td><td>37.05</td><td>1.3</td><td>11</td><td>1.9</td><td>79</td><td>1.9</td></tr><tr><td>Uruguay</td><td>34.28</td><td>1.0</td><td>35.99</td><td>1.3</td><td>3</td><td>0.5</td><td>54</td><td>1.3</td></tr><tr><td>Honduras</td><td>27.67</td><td>0.8</td><td>21.15</td><td>0.8</td><td>10</td><td>1.7</td><td>24</td><td>0.6</td></tr><tr><td>Panama</td><td>21.46</td><td>0.6</td><td>17.23</td><td>0.6</td><td>4</td><td>0.7</td><td>57</td><td>1.3</td></tr><tr><td>El Salvador</td><td>12.15</td><td>0.3</td><td>11.06</td><td>0.4</td><td>6</td><td>1.0</td><td>25</td><td>0.6</td></tr><tr><td>Jamaica</td><td>7.58</td><td>0.2</td><td>7.43</td><td>0.3</td><td>3</td><td>0.5</td><td>14</td><td>0.3</td></tr><tr><td>Costa Rica</td><td>7.08</td><td>0.2</td><td>14.41</td><td>0.5</td><td>5</td><td>0.8</td><td>62</td><td>1.5</td></tr></tbody><tfoot><tr><td>Total</td><td>3,516</td><td></td><td>2,772</td><td></td><td>590</td><td></td><td>4,256</td><td></td></tr></tfoot></table>

Notes: Emissions data taken from www.climatewatchdata.org and economic data taken from https://data.worldbank.org/. GDP stands for gross domestic product; MtCO2e stands for metric tons of carbon dioxide equivalent.
*SiSePuede approach to emissions, costs, and benefits accounting*

SiSePuede accounts for emissions by gas in each of the four key IPCC emission sectors: Agriculture, Forestry, and Other Land Use (AFOLU); Waste Management (Circular Economy); Energy; and Industrial Processes and Product Use (IPPU) as described in the technical appendices. For the purposes of our policy-focused audience, however, we remap these subsectors into policy-relevant sectors: Agriculture, Forestry, and Land Use; Transport; Buildings; Industry (including emissions from both energy and processes); Waste; and Energy Production. SiSePuede also has a fifth Socioeconomic subsector to coordinate shared drivers among the other sectors. SiSePuede integrates these sectors by passing key outputs from one subsector to another. For example, livestock manure management creates opportunities for replacing synthetic fertilizers with manure in croplands and pastures; increasing recycling modifies industrial production to reduce demands for virgin materials; and fuel switching in energy subsectors leads to changes in fuel production, including for electricity and hydrogen. Figure 2.1 describes how each of these policy sectors interconnect.

<figure><img src="image_17.png" /><figcaption>**Figure 2.1. Conceptual SiSePuede modeling framework.**</figcaption></figure>
*SiSePuede approach to emissions, costs, and benefits accounting*

SiSePuede accounts for emissions by gas in each of the four key IPCC emission sectors: Agriculture, Forestry, and Other Land Use (AFOLU); Waste Management (Circular Economy); Energy; and Industrial Processes and Product Use (IPPU) as described in the technical appendices. For the purposes of our policy-focused audience, however, we remap these subsectors into policy-relevant sectors: Agriculture, Forestry, and Land Use; Transport; Buildings; Industry (including emissions from both energy and processes); Waste; and Energy Production. SiSePuede also has a fifth Socioeconomic subsector to coordinate shared drivers among the other sectors. SiSePuede integrates these sectors by passing key outputs from one subsector to another. For example, livestock manure management creates opportunities for replacing synthetic fertilizers with manure in croplands and pastures; increasing recycling modifies industrial production to reduce demands for virgin materials; and fuel switching in energy subsectors leads to changes in fuel production, including for electricity and hydrogen. Figure 2.1 describes how each of these policy sectors interconnect.

<figure><img src="image_17.png" /><figcaption>**Figure 2.1. Conceptual SiSePuede modeling framework.**</figcaption></figure>