The tale of two climate risks in Latin America: the perspective of the NGFS climate scenarios

This article investigates physical and transition risks for Latin America using as benchmarks the 2023 models and results from the Network for Greening the Financial System (NGFS). We show that the NGFS has room for improvement when it comes to the usability of its models, especially in the context of Latin America. First, the need to reduce the existence of extremely large and potentially uninformative uncertainty ranges across models (e.g. for the estimate of the carbon price). Second, the need to account for the fact that the future will not look like the past in model calibrations. Third, in the context of physical risks only, the improvement of the hazard suite (to include, e.g. sea-level rise and wildfires) and the consideration of tail risks. Considering these limitations, meeting the 2050 Net Zero emissions objective in Latin America is going to be challenging. It will depend crucially on energy demand and consumption, as well as the use of land in terms of forestry and agriculture. GDP impacts from the transition will likely be negative and worsened by high physical risks, making Latin America worse off than the USA and the EU in the Net Zero 2050 scenario. Our article aims to help the NGFS in the quest to improve its models, and policymakers, especially in Latin America, in better understanding climate risks and finding adequate policy tools to tackle them.

Bressan, G. M., & Nieto, M. J. (2025). The tale of two climate risks in Latin America: the perspective of the NGFS climate scenarios. Climate Policy, 1–14. https://doi.org/10.1080/14693062.2025.2563063