Financing a domestic transition in Colombia, in the context of a global transition

Colombia faces multiple challenges in climate change mitigation and adaptation as well as biodiversity protection, which require significant investments made by the public and private sectors. Using the SFC model presented in Chapter 2, this chapter analyses some of the macroeconomic, fiscal, and external sector impacts of the investments made to meet Colombia's Nationally Determined Contribution (NDC) by 2030, achieve carbon neutrality by 2050, and become more resilient to climate change. The analysis shows that these investments have multiple social, economic, and environmental returns, which allows us to envision these investments beyond a cost narrative. They will however generate short-to-medium-term fiscal and external sector pressures that may become vulnerabilities and transition risks in the absence of appropriate policy responses. A more ambitious policy of structural change is necessary to ensure the viability and sustainability of the transition. The scenarios tested include different financing approaches—ranging from conventional to mixed financing methods—and quantify different rates of decline in fossil fuel exports by 2.5% annually from 2023, alongside a 10% increase in the propensity to export non-traditional goods over a 15-year period.