A Fossil Fuel Phase-Out for Colombia: Tread with Caution
Colombia has recently made news as one of the fossil fuel-dependent countries that are committed to a fossil fuel phase-out.
This is a monumental task. In 2023, about 50% of Colombia’s export revenue came from fossil fuels, notably oil and coal. Despite this, the government under President Gustavo Petro has announced a range of initiatives to reduce its production and consumption of fossil fuels.
Upon taking office in August, President Petro declared that Colombia would cease signing new oil and gas exploration contracts. Though this initiative takes the risk in sacrificing the already declining oil revenues in the country, it aims to encourage investments in cleaner energy sources.
In December 2023, Colombia became the first major fossil-producing nation to join the Fossil Fuel Non-Proliferation Treaty Initiative. Colombia’s decision was delivered at COP 28 in Dubai, where Petro and other world leaders uniformly joined together to spearhead a global transition away from coal, oil and gas.
Additionally, the Petro administration has unveiled a comprehensive $40 billion plan to facilitate Colombia’s energy transition. This strategy includes investments in renewable energy, sustainable tourism, and nature restoration, aiming to diversify the economy and reduce the country’s overall reliance on its fossil fuel reserves. This transition plan mobilizes investments from both the public and private sectors, with the United Nations (UN) and the Inter-American Development Bank being key actors in financing this initiative.
In what follows, I use Colombia as a case study for what a fossil fuel phase-out could look like for a middle-income country with fossil fuel resources. I show that Colombia has many opportunities to reduce its fossil fuel use in the short and long run, but diversifying away from dependence on fossil fuel exports is a much more difficult task.
The Jepírachi wind farm on the Guajira Peninsula, Colombia. Manuel Salinas Bustamante, Archivo Indepaz.
1. The basics: Colombia’s energy profile
Colombia’s domestic energy mix consists of the usual suspects: coal (11%), oil (41%), natural gas (23%), hydro (12%), and others. Colombia produces almost all its energy and exports substantial amounts of coal and oil.
The country’s energy use consists mostly of transportation (43%), industry (22%), and residential (26%) sectors. Oil and natural gas dominate the energy mix because transportation and residential use are so important. In contrast, Colombia’s industry is relatively light and consumes only one-fifth of all energy.
2. Beyond petroleum: Colombia’s transportation sector
Transportation is the primary use of oil within Colombia. While the primary long-term solution will be electric mobility, natural gas is increasingly used to replace oil in transportation. In 2022, 12% of Colombia’s natural gas consumption went toward transportation, largely in the form of compressed natural gas for heavier vehicles, such as trucks and buses.
Colombia has seen some progress in electric mobility. In 2024, electric and hybrid vehicle sales grew by nearly 25%, though from a low base. More than 10,000 battery-powered or hybrid vehicles were sold, while total automobile sales were slightly over 200,000. This growth stems partly from the government’s push to adopt policies that promote electric mobility and the necessary infrastructure to support it.
A number of key policies provide tax incentives, reduced import duties, and subsidies in order to meet the country’s UN Sustainable Development Goals of deploying 600,000 EVs by 2030. Major cities like Bogota and Medellin have made the push for electric buses. Bogota has deployed over 1,000 electric buses, making it one of the largest electric bus fleets in Latin America.
Electric mobility is an essential next step for Colombia. Over 80% of Colombians live in urban settlements, which have population densities that can support charging infrastructure. Colombia also has more two-wheelers than cars. Given the lighter weight of two-wheelers, they are easy to electrify and can often be charged at home without specialized infrastructure.
But Colombia also exports a lot of oil. In 2023, 51% of the oil produced was exported. In terms of volume, the country exported approximately 484,000 barrels per day (b/d) in 2023, with key markets including the United States, Panama, and China.
The value of oil exports fluctuated due to global price shifts, but in 2023, petroleum exports generated nearly $16 billion. Over the past decade, Colombia’s oil production has production declined from its peak of 838,000 b/d to around 780,000 b/d in 2023, reflecting the challenges with its reserves.
As I have argued earlier, Colombia’s dependence on oil exports is an economic risk. First, Colombia’s oil resources are dwindling. The country has only about seven years of oil reserves left at the current rate of production. New exploration has so far replenished those reserves to keep them steady, but the left-leaning Petro government has promised to halt exploration.
Second, the energy transition casts a shadow over the future of oil demand. With electric vehicle sales growing rapidly around the world, led by China, global oil demand is facing downward pressure. Additionally, neither the global economy nor the global population are growing at rates that would support increased demand.
On the other hand, Colombia does not have an easy way to replace the substantial oil export revenue. In 2022, Colombia exported oil worth over $12 billion. This is over three times the value of tourism or the value of agricultural exports. Many Colombian social programs are funded with royalties, tax revenue, and dividends from the oil sector.
3. Reducing dependence on natural gas
About 18% of Colombia’s electricity is generated from natural gas. Natural gas generation has increased with demand alongside the other main sources, hydro and coal.
Colombia is blessed with abundant renewable energy resources. The country’s proximity to the equator makes it an advantageous location for solar PV due to its high irradiance. Areas like the Guajira Peninsula receive daily radiation levels close to 6.0 kWh/m2 .
Wind is another notable resource in Colombia. As the Andes Mountain stretches through the country, so do its high-speed winds. Colombia receives average wind speeds of 4.5 mph, but in the remote northern area of La Guajira, the average wind speed is over 21 mph, with consistency across the year.
Renewable energy development faces many challenges in Colombia. The first is permitting and regulations. COVID-19 caused many restrictive lockdowns delays in the permitting process for various projects in the country. In addition, uncertainty surrounding grid connection is a big obstacle that stands in the way of the rollout of renewable energy projects in the country.
Historically, under the open access principle established by CREG Resolution 106 of 2006, about 90% of installed capacity was connected to the grid. However, recent regulations have introduced stricter requirements, leading to delays and increased costs.
The second is social acceptance. In May 2023, the Italian energy giant Enel suspended a large wind project in La Guajira because of protests by the local communities. Many of Colombia’s best renewable resources are in relatively poor areas with indigenous communities, who are concerned about environmental and social impacts.
In the short run, Colombia can continue decarbonizing its electricity mix with distributed energy. Unlike wind, Colombia’s solar resource is quite widely spread across the country, with average insolation levels of 4.5 kWh/m2. Colombia’s decentralized political structure creates opportunities for entrepreneurial municipal leaders to promote technologies such as rooftop or community solar.
Today, Colombia has a low share of variable renewables in the grid, with wind and solar generating less than one per cent of total electricity. In the short run, Colombia can increase its renewable power generation without worrying about battery storage. However, Colombia’s transmission infrastructure is not well suited to capitalize on, for example, the exceptional wind resource in La Guajira.
About 41% of Colombia’s natural gas goes to final users outside electricity generation. Here the two primary sectors are industry and residential, at 37% each.
Of the two sectors, residential gas use offers a way forward, but this transition will take time. In residential use, natural gas is primarily used for cooking and water heating. Natural gas stoves can be replaced with electric stoves, notably induction, through regulations and, where necessary, consumer subsidies. As renewable power generation grows, it can be used to meet growing residential demand with appropriate battery storage, transmission, and demand management measures.
Blessed with abundant sunshine, solar water heaters are a natural technology for Colombia. While the popularity of solar water heaters has been growing overall in South America, Colombia has taken advantage of solar resources to satisfy the needs of a growing population. The country’s estimated installed capacity for solar water heating is now over 520,000 m2 , amounting to hundreds of thousands of households.
Replacing industrial natural gas is difficult and requires introducing new technologies that are at the early stages of commercialization. Given that Colombian industry is not technologically sophisticated at the global level, industrial decarbonization will likely be a long-term prospect.
4. The question of coal
Domestically, Colombian coal is primarily used for electricity generation (65%) and in industry (34%).
Electricity generation offers an easier way to reduce coal dependence. As noted above, Colombia has excellent renewable resources. But even this process will likely be slow. The permitting and social acceptance issues are serious and addressing them is complicated by Colombia’s volatile electoral politics.
But the far bigger challenge for Colombia is coal exports. In 2023, Colombia exported 94% of its domestic coal production. Colombian coal is of high quality and responsible for 52% of the country’s energy exports.
Colombia itself is too small a country to shape global coal markets. With a four per cent global market share, it is more important for Colombia to adapt to potential declines in demand and prices. Given the high quality of Colombian coal, it will likely be among the last exporters.
But as coal demand flattens and begins to decrease, Colombia’s export revenue will also decline. Like oil, this dynamic will result in problems such as currency devaluation, budget deficits, and reduced social spending.
5. Renewable power and economic diversification win the day
From the above, Colombia’s fossil fuel phase-out has two priorities. First, developing renewable sources of power is critical. The electrification of transportation and residential energy is the easiest way to reduce the direct use of fossil fuels, but Colombia must be prepared to generate the electricity needed.
Second, Colombia must diversify its economy to avoid serious financial hardship as global demand for fossil fuels begins to fall in the future. The country itself is too small to shape the global energy markets, but it can prepare for a future without robust fossil fuel demand.
One side of the coin is oil. The other side is coal. Together, these resources bring in over $20 billion per year. They are very hard to replace in the short run. Colombia will likely need decades to complete an export diversification program away from fossil fuels.
Will Colombia succeed? The challenges are significant. The leftist Petro government has not made significant progress on the energy transition despite various announcements on the global arena. If the next elections, scheduled for 2026, result in a turn to the right, a new set of policy priorities will emerge. This oscillation in policy priorities is a reality of Colombian politics, and no amount of wishful thinking will change it.
Colombia’s energy transition will not be rapid, smooth, or painless. The good news is that Colombia’s carbon emissions are low, at 1.7 tons of carbon dioxide per capita. The country does not have to aggressively decarbonize, but it does need to replace fossil fuels as a source of export revenue and gradually transition into an electrified, renewables-based domestic economy.