Geopolitical considerations/potential influence of multilateral climate commitments

Looking beyond the region itself, expectations that the multilateral climate framework would drive a fossil fuels phaseout have diminished, with the United Nations COP30 climate summit in November 2025 underlining the reasons why. 

Hosted by Brazil’s President da Silva, world leaders failed to agree on a roadmap to transition away from fossil fuels due to opposition from Russia, India, and the OPEC+ nations. In contrast, the COP30 declaration pledged to quadruple the output of “sustainable fuels” such as biofuels, biogas, hydrogen, and e-methane by 2035, an admission that fossil fuels will remain an important part of the energy matrix even if in low-emissions forms.

And while the European Union (EU) pushed for a fossil fuel transition roadmap at COP30, and was part of a bloc that lamented that the summit had “missed its appointment with history” in terms of climate commitments, it has not used all of the tools available to it to pressure Latin American nations to favour renewables over fossil fuels in its direct relations with the region. 

For example, the EU’s Carbon Border Adjustment Mechanism (CBAM), which came into force on 1 January and aims “to encourage cleaner industrial production in non-EU countries,” notably does not cover oil and gas. Although European refiners are lobbying for this to change, the current exclusion underlines that the EU has decided not to place any barriers in the way of fossil fuel imports from Latin America, likely due to concerns around energy security. And the EU trade deal with South America’s Mercosur bloc, which provisionally came into force on 1 May, may facilitate investment in fossil fuels projects by providing greater legal certainty and eliminating tariffs on machinery and chemicals.

If Europe is choosing not to actively disincentivise fossil fuels, the US has been aggressive in pushing for the continued exploitation of hydrocarbons. During Trump’s second term in office he has developed what has become known as the “Donroe Doctrine,” a foreign policy framework that aims to assert US dominance in the Western Hemisphere. 

This rests in part on favourable access to energy and other resources, as illustrated by Trump’s pledge to “take back” Venezuela’s oil and his formation of the National Energy Dominance Council, which has reportedly been liaising closely with the country’s new government in a bid to boost oil production.

While the seizure and imprisonment of Maduro is the most extreme example, US relations with Latin America have become increasingly violent and coercive. Washington has also shown a growing disregard for multilateral frameworks, notably not sending a delegation to the COP30 summit, and has preferred to negotiate bilateral agreements. The approach has relied far more on the metaphorical stick than the carrot, with a lack of financing and infrastructure investment on offer even to those nations that acquiesce in his demands. 

This means that China continues to be the only viable solution for Latin American governments looking to advance the energy transition, and the country’s firms have slowly built up significant positions in strategic infrastructure throughout the region.

In Brazil, Chinese companies own 304 power plants that contribute 10% of total generating capacity and the State Grid Corporation of China operates around 12% of the country’s transmission infrastructure. In total, China has invested US$60bn in public energy finance in Brazil, compared to just US$472m for the US. State Grid also controls more than 57% of Chile’s energy distribution system, and in Peru, Chinese firms control 100% of electricity distribution in the capital, Lima.  

In addition, the conflict in the Middle East is accelerating this process, with concerns over energy security driving investments in renewables as a hedge against oil price shocks, as even oil producing countries in the region lack the refining capacity to meet domestic demand and are therefore still exposed to fluctuations in the global market: Chinese suppliers are the only ones that can provide the necessary equipment at a price point Latin American governments can afford, with the US unwilling or unable to offer an alternative.

But it is not all good news for Beijing, with Washington’s aggressive move to secure access to Venezuela’s oil bringing an end to China’s previous advantages. Nonetheless, it has built up considerable leverage by embedding Chinese firms in physical infrastructure following a sustained investment drive that hasn’t been matched by successive US governments. China has also become the top trading partner for many countries in the region, increasing its leverage over governments that may try to limit its investments or commercial activities due to US pressure.

As a result, there is currently no geopolitical impediment to Latin American nations pursuing both fossil fuels and renewables development. The EU is, at least for now, not working to discourage fossil fuel exports, and the US is actively encouraging new oil and gas exploration. As for China, it remains a willing importer of fossil fuels, while its vast renewables industry supplies clean energy tech at affordable prices to anyone who wants it. The current system in fact rewards a hybrid approach: exploit oil and gas reserves for export to capture the economic benefits, while continuing the energy transition at home to reduce exposure to energy price shocks. Of course, this may change in future if the EU tightens restrictions or a future US administration pivots back to clean energy.