Latin America's Green Leap: Reforming Resources for a Low-Carbon Economic Future

The World Bank’s 2025 report delivers a strategic blueprint for Latin America and the Caribbean (LAC) to seize the unprecedented opportunities presented by the global energy transition. Developed in collaboration with prominent research institutes such as the Natural Capital Project (Stanford University and University of Minnesota), Adelphi, Energiewirtschaftliches Institut an der Universität zu Köln, and Hinicio, the report combines cutting-edge analytics with grounded policy insight. It argues that while LAC is exceptionally well endowed with natural resources, including 23% of the world’s forests, 47% of lithium reserves, and some of the world’s cleanest energy grids, these assets must be strategically harnessed through reforms in institutions, infrastructure, and innovation. Simply possessing resource wealth, the report emphasizes, has never guaranteed inclusive growth. True transformation will come only by becoming “resource smart.”

The Global Green Shift and LAC’s Comparative Advantage

As nations implement tighter decarbonization policies and consumers increasingly demand sustainable products, global trade and investment are shifting. Firms are pursuing "greenshoring," relocating energy-intensive industries to areas with abundant clean energy. Regulations like the EU’s Carbon Border Adjustment Mechanism (CBAM) and deforestation-free product mandates are further reshaping trade. In this landscape, LAC’s clean energy mix, vast biodiversity, and rich mineral reserves provide it a crucial edge. But the report warns that this opportunity window won’t stay open forever. To capture emerging “green premiums” and avoid future penalties in carbon-intensive industries, the region must act swiftly and smartly. The economic-environmental production possibilities frontier (EE-PPF), a central analytical tool in the report, captures both the productivity and sustainability potential of land and resources. Advancing along this frontier means not just catching up with global efficiency standards but pushing boundaries outward and innovating entirely new markets.

Land and Forests: A Sleeping Economic Giant

The land and forest sector embodies both the region’s greatest natural strengths and its gravest underutilization. Despite being the world’s top provider of ecosystem services and a major food exporter, LAC ranks lowest globally in the economic efficiency of land use. The report calculates that more rational land allocation, shifting fertile zones toward high-yield crops while using marginal lands for reforestation, could generate $94 billion in additional annual income and sequester 25 billion more tons of CO₂ equivalent. But current land use is marred by weak institutions: insecure tenure, outdated cadastral systems, and lax enforcement allow deforestation and land speculation to thrive. Almost 30% of Amazon land remains undesignated, a loophole that fuels illegal forest clearing and land grabbing. The report highlights the urgent need for institutional reform to protect carbon rights, strengthen land governance, and enforce environmental laws. Moreover, innovation in satellite monitoring, product traceability, and agricultural R&D will be key to improving productivity while preserving biodiversity. Countries like Costa Rica and Colombia show how targeted policy and investment can simultaneously improve rural incomes and reduce deforestation.

Mining: Greening a Legacy Sector

LAC’s rich deposits of lithium, copper, and other energy transition minerals could make the region a linchpin in the global push for clean energy. Yet today’s mining sector remains largely extractive and environmentally damaging, with limited value addition or technological spillover. The report underscores that to shift the EE-PPF outward, mining must be upgraded through cleaner technologies, stronger environmental and social safeguards, and deeper linkages to global value chains. Clean energy integration, improved water efficiency, and emissions reduction should become baseline expectations, not exceptions. Investment in infrastructure, like renewable-powered grids and better transport, is also critical. The report points to the need for innovation ecosystems that connect universities, research centers, and firms to foster green mining technologies and downstream processing capabilities. If managed wisely, mining can fund broader development goals through royalty systems, local benefits, and green industrial clustering. The alternative, continued extraction without transformation, risks social unrest, environmental degradation, and missed economic potential.

Green Hydrogen: The New Economic Frontier

Green hydrogen (GH2) represents the cutting edge of energy innovation, and LAC’s renewable energy abundance positions it well to become a global leader in this emerging field. Countries like Chile, Colombia, and Brazil have already launched national hydrogen strategies and pilot projects. However, the sector faces steep challenges: high production costs, regulatory gaps, and fragmented supply chains. The report develops a GH2 readiness scorecard, ranking countries based on policy frameworks, infrastructure, and innovation ecosystems. Chile emerges as a leader due to its integrated strategy, public-private coordination, and export focus. To compete globally, other countries must follow suit, establishing certification systems, de-risking investment through public finance, and supporting R&D tailored to national strengths. GH2 is not just about energy exports; it can power decarbonized domestic industries like steel, fertilizers, and shipping. The report calls for bold experimentation, supported by regional collaboration and regulatory learning, to ensure that LAC doesn’t miss the hydrogen wave the way it did previous industrial revolutions.

The Path Forward: Institutions, Investment, Innovation

The report concludes with a clear message: achieving sustainable, inclusive prosperity in the energy transition hinges on policy coherence and systemic reform. Institutions must define clear rules, protect rights, and build trust through enforcement and participation. Investments must fill gaps in green infrastructure, information systems, and capacity building. Innovation systems must evolve to support both early-stage adoption and cutting-edge invention. Governments should help firms climb the “capabilities escalator”, from basic production to adopting and adapting technologies, and eventually inventing new ones. Crucially, the green transformation must be inclusive. Indigenous communities, smallholder farmers, and marginalized populations must not only be protected but also empowered as partners. If the region succeeds in aligning its natural capital with strategic reforms, it may finally unlock the lasting prosperity that has long eluded it, not despite its resource abundance, but because it has become smart about using it.