Environment at a Glance in Latin America and the Caribbean

Executive summary

Latin America and the Caribbean is composed of 48 countries and dependent territories with varying geographical conditions, land use patterns, political systems, economic activities and development levels. The region has a diverse cultural and ethnic heritage, with a common identity. Natural resources and biodiversity are the pillars of the region’s development, and countries face significant environmental challenges.

The LAC region has a diverse and open economy. Agriculture and industry account for a larger share of value added than in the OECD area. As the region is endowed with valuable mineral resources and significant oil and natural gas deposits, mining and energy are major sectors. Tourism plays a significant role in Central America and the Caribbean. Most countries have been severely affected by the COVID-19 pandemic and the global economic downturn. Gross domestic product plunged by 8.2% in 2020 and the region experienced one of the highest mortality rates in the world, due to the high concentration of population in urban areas and unequal access to health services. High levels of poverty and income inequality are major issues.

Though not a major contributor to global greenhouse gas emissions, LAC is extremely vulnerable to climate change. Land use change, urban sprawl and densification, rising temperatures, fluctuating rainfall patterns, melting glaciers, and the increased occurrence of extreme weather events exert strong pressures on the environment, causing biodiversity loss and affecting economic activity and people's livelihood. Governments of the region will have to step up their efforts to address the growing risks posed by climate change and implement more ambitious and effective policies to achieve a green transition of their economies.

LAC countries are not major contributors to global greenhouse gas emissions…

Gross GHG emissions in LAC represented around 6.7% of global emissions in 2019, which is proportional to the region’s share in global GDP and slightly lower than its share in global population. Emissions per capita are lower than in the OECD area, though intensities vary widely across countries. This reflects lower income and consumption levels and a high share of renewables in electricity production, mainly hydropower. Emissions have risen between 1990 and 2019, driven by increased transport activities and electricity and heat production, which continue to rely on fossil fuels. From 2014, they grew at a slower pace than economic growth suggesting a relative decoupling.

Most GHG are emitted in South America (71%), followed by Central America (24%) and the Caribbean (4%). Emissions from agriculture and from land use, land use change and forestry play an important role. In South America they account for a third and a fourth of net emissions, respectively. This reflects the importance of agriculture in the economy and the extensive deforestation occurring in the sub‑region. In Central America and the Caribbean, energy production and transport are major emitters.

But vulnerability to climate risks is high

Due to its reliance on natural resources and ecosystem services, its geographic configuration, and high inequalities and levels of poverty, LAC is one of the most vulnerable regions in the world to climate change. Out of the 50 countries most affected by climate change worldwide, 13 are in the region.

Climate change impacts are already challenging the fiscal sustainability of the region when natural disasters strike; in the longer term key economic sectors such as agriculture, forestry, tourism and hydropower production will be increasingly affected.

The population in the region is increasingly exposed to heat stress. The surface temperature in 2019-21 was on average 0.6°C higher than in 1981-2010. Temperature increases were larger in Central America and more modest in the Caribbean. The country most affected is Paraguay with nearly 90% of its population exposed to more than 2 weeks of hot summer days, compared to only 28% in 1979. Increasing temperatures combined with extreme rainfall pose significant risks for countries that depend on agricultural production. Droughts are becoming more frequent, resulting in significant decreases in soil moisture on agricultural land. Countries such as Peru, Chile, Argentina and Mexico experience a decrease of up to 40% in soil moisture on cropland. These developments heavily impact agricultural productivity and raise concerns over food security.

Wildfires are also expected to occur more frequently. Almost a third of LAC forest areas is exposed to wildfire risks, which presents a danger for populations and ecosystems. In Jamaica, Paraguay, Mexico and El Salvador over 70% of the forest area is exposed to wildfire risks. Rising sea levels are another critical hazard in the region. Twenty-three of the 33 LAC countries (i.e. excluding dependent territories) have a marine territory larger than their land territory; for 18 countries the maritime area exceeds 75% of the total territory. The impact of sea level rise on coastal populations and tourism could thus be significant.

Threats to human health and biodiversity are major concerns

LAC countries face other pressing environmental challenges, such as local air pollution and biodiversity loss, which exacerbate climate change vulnerabilities.

GHGs are often emitted from the same sources as air pollutants such as fine particulates (PM_2.5) that include black carbon, a short-lived climate forcer, and pose severe environmental health risks in the region. Population exposure to PM_2.5 has been slowly decreasing over the past few decades, but annual exposure levels (18 µg/m³ in 2019) remain significantly above the World Health Organisation guideline (5 µg/m³). Exposure is particularly high in large urban areas where economic activity is concentrated and demand for mobility highest. The welfare costs associated with related mortality and morbidity were estimated at 2.8% of the region’s GDP in 2019. A strengthening of local air pollution policies would help mitigate GHGs while at the same time improving air quality and human health.

LAC has the highest biological diversity in the world. Forests and green corridors, such as the Mesoamerican Biological Corridor, play an essential role in carbon sequestration globally. However, deforestation, pollution, overexploitation and illegal trafficking of species, and urban sprawl and densification exert continued pressures on the natural environment, causing habitat loss and fragmentation, and a degradation of ecosystem services. Biodiversity as measured by the Red List Index is declining at twice the rate observed across OECD countries(WWF, 2020_[43]). This in turn undermines the ability of ecosystems to provide a shield against growing climate‑related risks and reduces their resilience to impacts of climate change.

The region progressed in taking measures to protect its biodiversity and landscapes. In 2022, it had 24% of its land area and 21% of its Exclusive Economic Zones, designated as terrestrial and marine protected areas, respectively. Although many of these areas are designated under the least stringent protection objectives, the region as a whole achieved the 2020 Aichi targets. Further efforts are needed to reach the Global Biodiversity Framework target of the CBD to effectively conserve and manage 30% of the national territory including terrestrial, inland water, and coastal and marine areas by 2030.

Climate objectives are not ambitious enough

LAC countries lag behind regarding formal commitments to reduce GHG emissions in line with the Paris Agreement, but ambition is increasing. By the end of 2022, the 33 LAC countries (excluding dependent territories) had submitted their nationally determined contributions under the Paris Agreement. However, only 20 of these NDCs are clear enough to infer targets for 2030 and beyond, and only six cover all GHG. 16 countries committed to net zero by 2050 or earlier. Furthermore, tracking progress towards climate objectives is hampered by the limited availability of GHG emission data. Most LAC countries do not produce regular, official and comprehensive GHG emission inventories.

Stronger policies are needed to effectively address climate change

Data from the OECD for seven LAC countries suggest that, since the adoption of the Paris Agreement in 2015, LAC countries strengthened their climate action in terms of both policy adoption and policy stringency.

Some countries primarily rely on market-based policies such as carbon pricing and subsidies, and feed-in tariffs for renewable energy (e.g. Mexico, Colombia, Chile and Argentina). Others rely primarily on non-market-based instruments such as minimum energy performance standards and bans or phase-outs of fossil-fuel equipment or infrastructure (e.g. Costa Rica and Peru). Despite progress, climate policies and actions remain insufficient. There is much room for enhancing the effectiveness of countries’ policy mixes and strengthening policy stringency.

LAC countries increasingly use environmentally related taxation and carbon pricing mainly through fuel excise duties, but also through explicit carbon taxes. Carbon pricing is most commonly implemented in the transport sector, followed by agriculture and fisheries. These are positive developments, but the revenue raised is modest and effective carbon rates remain too low to effectively incentivise emission reductions. This points at an untapped revenue potential. In addition, governments of LAC countries continue to support fossil fuels. Although government support decreased between 2012 and 2019 (-32%), it more than doubled in 2021 with the rebound of the global economy. It is expected to further increase as global consumption subsidies are anticipated to skyrocket in 2022, due to higher fuel prices and energy use.

Progressively increasing carbon taxes while reforming fossil fuel support could help LAC countries implement the necessary incentives to reduce carbon emissions and free financial resources for social spending.

Countries must choose the best policy mix and instruments for effective climate action in the context of their policy landscape and principal drivers of emissions. Governments must align their climate objectives across policy domains including transport, housing, construction, spatial planning, agriculture and development co‑operation. They must also consider the synergies between emission reduction and adaptation strategies, as well as other environmental and broader well-being objectives, such as biodiversity conservation, cleaner air and improved health. A whole-of-government approach integrating climate policies with actions to improve productivity and reduce poverty and vulnerability are particularly important in the LAC region.

Better information is needed to support the implementation of effective policies

The preparation of this report revealed substantial information gaps that hamper the implementation of effective and coherent policies on climate change and the environment in LAC. For example, most LAC countries do not produce regular and comprehensive GHG emission inventories. This is a major impediment to assess trends and progress in mitigation efforts. Moreover, comprehensive and detailed data on climate-related risks – essential to develop and focus adaptation policies – are missing.

The governments of the region need to further invest in the development and upgrading of their national environmental information systems, including the production of sound and reliable data and indicators on climate, the environment and sustainable development. There is considerable scope in developing national statistical and monitoring capacities, including through improved institutional co-ordination and enhanced regional and multilateral co-operation.