Comment: At COP29 talks in Baku, rewarding Colombia’s leadership would build confidence in the transition to a greener, fairer world
Paola Yanguas Parra, Eduardo Posada Perlaza and Megan Darby work with the International Institute for Sustainable Development (IISD) energy team.
At COP 29 climate negotiations in Baku, Azerbaijan, the top priority is to land a new climate finance package. The summit will be closely followed by a fresh round of national climate plans, setting emissions reduction targets to 2035. Together, these need to deliver on last year’s historic agreement to transition away from fossil fuels.
While climate finance talks are fraught, progressive governments don’t need to wait for consensus to set an example of what good transition finance looks like.
Colombia’s environment minister, Susana Muhamed, has arrived in Baku with a pitch that stands out. She is seeking $10 billion from international partners towards a $40 billion climate investment plan.
This plan is geared to not just scale up clean energy, but to diversify the economy away from fossil fuel production. It targets renewables, yes – but also sustainable agriculture, nature restoration and ecotourism, to create a greener and more inclusive economy.
For the world to meet the Paris Agreement goal of holding global warming to 1.5°C, this kind of economic diversification is essential.
Push-back against bold vision
Gustavo Petro was elected president of Colombia in 2022, promising to halt fossil fuel expansion and reduce economic dependence on coal, oil and gas. It has not been easy.
While environmental and human rights groups celebrated this vision, it met push-back from industry and some national think-tanks. Worse, credit rating downgrades for sovereign bonds are making it harder to finance the transition to alternatives.
But his administration has not lost sight of the urgency of climate action. Ironically, Petro cancelled plans to attend COP29 to oversee relief from a weather emergency at home – floods affecting 25,000 families.
Colombia’s change of course on fossil fuels is pragmatic, as much as it is ambitious. Coal, oil and gas extraction has traditionally played a major role in Colombia’s economy. In the last 10 years, fossil fuels accounted for around half the country’s exports, two thirds of final energy consumption and 3-6% of GDP.
Colombia adds nature to the mix with its $40-billion energy transition plan
However, as the world moves toward cheap, clean renewable power, global demand for all fossil fuels is set to peak by 2030. Beyond that, producers will compete for shares of a shrinking market.
Colombia faces particularly high transition risk, and is already seeing demand for its coal decline with an accompanying decline in production capacity, despite high international coal prices.
Moreover, its oil and gas reserves are being depleted, and new discoveries, even if fully exploited, would not reverse the trend. Remaining offshore gas reserves are uneconomical to exploit under most price scenarios.
These trends show that Colombia can no longer depend on the fossil fuel industry as a locomotive of economic growth.
Reforming fossil fuel subsidies
The answer is to transition away from fossil fuels, redirecting investment into sustainable growth sectors. Colombia has untapped potential in renewable energy, bioeconomy, and tourism, among many other sectors identified in its Just Transition roadmap .
Attention is also needed to the workers and communities most affected by the decline in fossil fuel extraction. They will require access to retraining, jobs and social security. Colombia has taken steps in this direction, signing a pledge for green jobs and just transition with the International Labour Organization in 2019, and launching pilot projects in the coal mining region of Cesar.
Critics accuse the Petro administration of scaring off investors and weakening Colombia’s economy with its stance on phasing out fossil fuels. They point to Colombia’s credit rating, which has gradually deteriorated in recent years.
In fact, that trend started before Petro took office, when the country lost its decade-old BBB-rating in 2020. Since the COVID-19 pandemic, Colombia has faced sluggish growth rates, high inflation, and a rising fiscal deficit, all of which have contributed to the credit rating downgrades.
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One drag on the government budget is fossil fuel subsidies. These spiked in 2022 to $8 billion, or 2.5% of GDP, as soaring international oil prices diverged from fixed motor fuel prices. While there is progress in the gradual reduction of gasoline subsidies, further subsidy cuts have been met with resistance. For instance, in August 2024 the Petro government attempted to substantially decrease the subsidies but scaled back its plans for diesel after truckers went on strike.
These challenges underscore the importance of a comprehensive strategy for fossil fuel subsidy reform. Some 33% of Colombia’s population lives below the poverty line and any changes to subsidies need to address impacts on their livelihoods and purchasing power.
Test case for transition finance
Colombia’s $40 billion climate investment plan is a test case for transition finance. The Petro administration has a bold vision for a post-fossil fuel economy. And while a diversified economy is ultimately more stable and prosperous, it takes time to establish new sectors.
This is where the call for international support comes in. Colombia needs grants and concessional loans, technical assistance and access to clean technology to make its vision a reality. Targeted public finance can leverage private investment and revitalize the economy, under Petro’s administration and beyond.
COP29 must deliver on the world’s energy transition promises
There were hopes that the recent UN biodiversity talks in Cali, Colombia, would produce a new plan for nature financing. However, countries could not agree on the finance mechanism, further raising the stakes for climate finance talks at COP29.
It is in the interests of the international community that a Global South fossil fuel producer succeeds in forging a greener path. The expected US withdrawal from the Paris Agreement only makes it more important for other powers to renew their commitment to advancing climate action. Rewarding Colombia’s leadership with international support can increase the chances of success and inspire others to follow.
