Implications of Climate Targets on Oil Production and Fiscal Revenues in Latin America and the Caribbean
An energy transition driven by climate policy and technological change creates uncertainty for oil producers. Many Latin American and Caribbean (LAC) governments rely on oil for fiscal revenues. Here, we explore prospects for oil production, public revenues, and unused oil reserves in LAC across hundreds of scenarios. We use the BUEGO (Bottom-Up Economic and Geological Oil field production) model to simulate field development and production decisions globally. LAC competes depending on global oil prices and domestic fiscal regimes. We find that 66-81% of 3P oil reserves in LAC will remain unused by 2035. Stringent global climate action could reduce fiscal revenues in LAC to $1.3-2.6 trillion, compared to $2.7-6.8 trillion if reserves were strongly exploited. Global demand and OPEC quotas drive production and fiscal returns in LAC; domestic fiscal management has limited potential to increase revenues. Governments may therefore need to diversify their fiscal revenues away from oil production.