Colombia has taken a leading role on climate action in Latin America and the Caribbean, committing to reduce emissions relative to 2014 by 51% by 2030. The government has equally pushed forward its environment and climate agendas with measures such as the 2018 Green Growth Policy, the 2019 Circular Economy Strategy and the Energy Transition Law of 2021.

Enabling conditions for bioenergy finance and investment in Colombia is an output of the collaborative partnership between the Government of Colombia and the OECD Clean Energy Finance and Investment Mobilisation (CEFIM) programme. The CEFIM Programme aims to support governments in emerging economies to unlock finance and investment in renewable electricity and energy efficiency (“clean energy”).

Colombia is a country abundant in energy resources, including not only fossil fuels but also important hydro capacity and substantial renewable energy potential. Yet, declining oil and natural gas reserves, alongside the growing intensity of “El Niño” events and other climate change impacts on hydropower installations, have placed increasing strains on the country’s capacity to ensure secure, reliable and affordable energy. Commitment to climate action, including the government’s revised Nationally Determined Contribution (NDC) under the Paris Agreement, equally calls for measures to unlock the clean energy transition in Colombia in order to achieve substantial reductions in the country’s greenhouse gas (GHG) emissions.

Colombia relies heavily on fossil fuels to meet its energy needs, but declining domestic reserves for oil and gas are contributing to growing dependence on energy imports. This is evidenced by increased reliance on fossil fuel inputs for power generation, despite the country’s significant hydropower installations. Droughts and constraints on water resources have also highlighted the need to diversify Colombia’s power mix, and the first renewable energy auctions in 2019 and 2021 drew attention to the country’s sizeable solar and wind resources. Bioenergy opportunities, by contrast, remain largely untapped, in spite of considerable available feedstock. Targeted policy interventions are needed to meet political ambitions to unlock this potential, which will also provide other benefits such as reduced waste to landfills, emissions mitigation and ability to supply local, reliable electricity.

Colombia’s ambitious decarbonisation targets are supported by a number of national policy strategies, such as the Green Growth Policy (Política de Crecimiento Verde) and the forthcoming energy transition policy (Política de Transición Energética). Yet, fossil fuels still account for over half of energy supply outlooks to 2050. A clearer strategy for Colombia’s clean energy transition is therefore needed to encourage finance and investment in renewable energy solutions. This includes reflecting long-term power sector needs and opportunities within short- to medium-term generation expansion plans, which do not currently reflect the technical or socio-economic value of potential clean energy solutions like biomethane electricity production. Additional measures such as a more streamlined planning and approval process for power generation projects can equally help reduce barriers to bioenergy development.

Policy reforms and market incentives played a critical role in enabling early growth of bioenergy cogeneration in the sugar and palm industries in Colombia. Over the last decade, the country’s regulatory framework for renewable energy has provided further clarity on the operational rules and remuneration for clean energy additions, such as bioenergy self-generation. Improving the transparency on grid-access rules and connection costs, whilst aligning incentives to encourage retailers to procure distributed energy generation, can further increase opportunities for bioenergy development. Strengthening the regulatory framework on waste management, for instance, to address low landfill and waste collection fees, will also improve incentives for bioenergy projects. Additional regulatory signals could include use of emissions trading and carbon pricing mechanisms to drive demand for clean energy sources like biogas for industry use.

Colombia has implemented a number of measures to increase the attractiveness of the country’s investment environment, which has enabled increasing levels of private capital to be mobilised for renewable energy developments in recent years. Yet, investment in bioenergy projects, which struggle to compete with fossil fuels and the diminishing costs of solar and wind, remains limited. This is compounded by limited local technical expertise to implement projects and perceptions of risks by financial actors regarding bioenergy technologies and the stability of revenue streams from these additions. Addressing these issues requires efforts to increase awareness and familiarity with bioenergy solutions whilst improving overall access to finance, for instance by extending public support and development funds to de-risking tools for bioenergy projects. Use of capital market instruments like green bond issuance can also help to unlock affordable finance for bioenergy projects and to increase the investor base for clean energy solutions in Colombia.

Policy reforms and market signals have played a critical role in enabling clean energy development in Colombia, such as recent solar and wind additions. Unlocking opportunities for bioenergy requires building upon this progress to target regulatory measures and market incentives that enable finance and investment in these solutions. The government of Colombia can take a number of actions such as establishing clear targets and capacity additions, improving co-ordination across relevant authorities, strengthening guidance and regulations on waste disposal, and ensuring access to the grid for distributed energy solutions. The government can also work with partners to improve awareness and familiarity with bioenergy technologies, whilst also supporting targeted financial schemes to encourage affordable finance and de-risk investment in those projects.

Bioenergy solutions, including waste-to-energy applications, make up a diverse landscape of technologies and feedstocks that can be used for heat and power generation, amongst other uses like biofuels for transport. Abundant residues in Colombia, from livestock and agriculture as well as municipal and industrial waste can be used to meet the country’s clean energy ambitions, alongside other socioeconomic and environmental goals such as reduced emissions and limiting waste going to landfills. Bioenergy solutions, like the current use of waste residues for energy generation in Colombia’s sugarcane and palm industries, can address heavy reliance on fossil fuels and the country’s growing dependence on energy imports. Tapping into locally available waste can equally support ambitions to provide clean, reliable and affordable energy, for instance in zones not connected to the national grid. Yet, unlocking opportunities for these solutions will require co-ordinated action to create the enabling environment for bioenergy finance and investment.