Colombia, a country heavily reliant on fossil fuel exports, is actively working to complete its low-carbon transition and achieve its Nationally Determined Contribution (NDC) targets under the Paris Climate Agreement.

To support these efforts, Agence Française de Développement (AFD) has partnered with Colombian authorities to adapt the GEMMES macroeconomic model to Colombia's specific context. The objective was to assess the long-term macroeconomic vulnerabilities and opportunities linked to Colombia's energy transition within the broader global shift to low-carbon economies.

This research work has culminated in a collaborative publication, which outlines the scientific findings and public policy recommendations derived from the GEMMES Colombia project: Modelling low-carbon transitions in Colombia: Macrofinancial risks and opportunities

While macroeconomic modelling is crucial for understanding the impacts of policy decisions and addressing macroeconomic imbalances during transitions, it is equally important to consider the behavioral aspects that shape the decision-making processes and strategies of stakeholders involved in Colombia’s low-carbon transition.

About GEMMES: AFD and Macroeconomic Modelling Tools for the Ecological Transition

Building on the empirical findings from the GEMMES model scenarios, this project focuses on developing a strategy game to collectively explore future scenarios. Beyond the economic and financial dimensions, this tool also incorporates social, climatic, and—albeit to a lesser extent—biodiversity-related aspects, providing a more holistic approach to the energy transition.

The primary objective of this participatory modelling process is to foster dialogue among the key stakeholders in Colombia's transition, including ministries, the central bank, entrepreneurs, and researchers. By doing so, it aims to help them anticipate and prepare for the short-, medium-, and long-term macroeconomic impacts that the low-carbon transition may bring.

To achieve this, the Powershift strategy game aims to:

• Familiarize stakeholders involved in the transition with the macroeconomic challenges associated with it, enabling them to take ownership of these issues.
• Identify the "mental maps" of each category of stakeholder regarding the energy transition, thereby shedding light on the tensions and synergies that arise and supporting the evolution of these mental models.

In doing so, the project seeks to strengthen high-level interministerial and intersectoral dialogue, ultimately improving coordination among stakeholders—including the private sector—in support of Colombia's environmental commitments.

 

Download the project presentation leaflet (in Spanish)

The design, modeling, and implementation of the strategy game are grounded in the ComMod methodology, initially developed by CIRAD to facilitate multi-stakeholder processes and support collective decision-making and action.

The process includes modelling workshops with stakeholders, crash-test sessions, and game workshops with decision-makers. Key stages involve conceptualization, validation, and scenario exploration. An ex-ante and ex-post evaluation of stakeholder positions will be conducted to measure the impact of the initiative.

To ensure the effective integration of findings into public policies, feedback workshops will be organized with policymakers.

The project has led to the creation of a validated strategy game, which is now being used by Colombian counterparts to explore energy transition scenarios. To date, six crash-test and game sessions have been conducted, engaging around fifty public and private stakeholders in the energy transition and involving more than twenty institutions. These include Colombian universities, ministries (Finance, Environment, Labour, Planning), the central bank, research centers, international cooperation agencies, NGOs, business associations, and consultancies.

Future outputs will include workshop summary reports, a research paper, policy recommendations, and mediation materials. The lessons learned will be shared with Colombian partners through dedicated feedback workshops.

Find out more: 

• Summary of the workshops held in June 2024
• Summary of the workshops held in September 2024

Feedback from participants in the sessions highlights an improved understanding of the effects of the energy transition on the real economy of a country heavily reliant on hydrocarbon exports, as well as increased awareness of the associated challenges.

 

The main feedback points were as follows:

• Creation of an educational space conducive to dialogue: The sessions fostered connections with stakeholders who had not previously been in contact, facilitating new opportunities for collaboration.
• Flexibility and adaptability: The tool proved its ability to adapt to diverse audiences, making it a valuable resource for engaging a wide range of participants.
• Awareness of complex dynamics: Participants gained deeper insight into the intricate dynamics of the energy transition and the crucial role of research in this field.
• Highlighting behavioral dynamics: The sessions revealed that organized collective action often arises in response to emergencies or shared challenges.
• Challenge of a holistic vision: Developing a comprehensive understanding of the energy transition and stakeholder strategies was noted as particularly difficult due to the subject's complexity.

Future sessions will expand to include parliamentarians and deputy ministers, broadening the dialogue to higher levels of decision-making.

Contacts: 

• Annabelle Moreau Santos, Scientific Mediation Officer, AFD
• Antoine Godin, Economist, Head of AFD Macroeconomic Modelling Team
• Audrey Perraud, Research Officer, AFD
• Julien Calas, Agronomist and Research Officer on Biodiversity, AFD

Contactos: 

• Annabelle Moreau Santos, responsable de divulgación científica, AFD
• Antoine Godin, economista, responsable de la célula de modelización macroeconómica GEMMES, AFD
• Audrey Perraud, investigadora, AFD
• Julien Calas, agrónomo e investigador en biodiversidad, AFD

Voluntary carbon markets (VCMs), created in 2000, are carbon credit trading mechanisms that allow companies, in particular, to voluntarily offset their carbon footprint. They can be traced back to the Kyoto Protocol, which introduced the principle of trading greenhouse gas emission reduction credits (or ‘CO2 equivalents’) in 1997. However, they are distinct from ‘carbon allowances’, which are part of a compliance scheme rather than a voluntary one. 

These voluntary markets have grown significantly in recent years. One of the driving forces behind this development has been the implementation of initiatives to achieve ‘Net-Zero’ targets – the vast majority of which are voluntary, although some compliance mechanisms allow the use of carbon credits (e.g. the Corsia mechanism in the aviation sector). All this should contribute to the development of an ecosystem for trading the regulatory environmental service of carbon capture, in support of the objective of reducing consumption of the ‘global carbon budget’, itself set by the IPCC.

However, voluntary carbon markets have been the subject of criticism and controversy since their inception, and questions remain as to whether they will actually help to achieve the objectives of the Paris Agreements. 

Based on an analysis of the existing situation and the conceptual framework that currently structures the voluntary carbon markets and carbon credits, the study identifies the pitfalls not only of these markets and their organisation, but also of the instruments traded and the underlying paradigms that validate the current structuring of these markets. 

The aim is to put forward proposals to ensure that the realities of the climate and the available carbon budget are better integrated into the operation of voluntary carbon markets, so that they become genuine tools for helping companies to make the climate transition. For example, it answers fundamental questions such as: should I offset, what part and what volume of my emissions are legitimate for offsetting, should I contribute to maintaining climate regulation services without offsetting?  

Using an accounting and management approach, the study questions current approaches to voluntary carbon markets, centred on the neoclassical economic paradigm. It promotes a ‘climate debt’ approach, as well as the management of this ‘climate debt’ through carbon budgets to be managed by means of preservation activities whose primary function must be to reduce greenhouse gas (GHG) emissions. 

Using an ecological accounting method, the study describes how companies should contribute to global climate debt reduction beyond the voluntary carbon markets, and, through their organisational processes, addresses the levels of accountability for the various emission sources (scopes 1, 2, 3).

The study shows that carbon credits and voluntary carbon markets are disconnected from climate and organisational realities. Opening the ‘black box’ of VCMs shows that behind this name lie several conceptions of these instruments, and therefore several ways of using and accounting for them within companies. What's more, the tools used by companies are not linked to the objectives of national or international climate policies, so they cannot be used to steer progress towards a global low-carbon trajectory. 

To reconnect these instruments with climate policies, these markets need to be thought outside the neoclassical conceptual framework that gave rise to the other carbon management tools. The study proposes principles for reorganising these markets around a ‘managerial’ approach (using in particular the C.A.R.E. ecological accounting and management framework). It makes it possible to design VCMs to ensure compliance with carbon budgets allocated between companies, based on the global carbon budget defined by the IPCC. It thus gives theoretical and operational meaning to the ‘avoid/reduce/compensate’ sequence and to the use of compensation for ‘residual emissions’. 

In other words, in order to collectively stay below 1.5°C of global warming, companies would each have to respect a given carbon budget each year (the carbon credit not being a licence to pollute or an emission right, but rather an instrument to be included in a strategy to limit greenhouse gas emissions). This would make it possible to support businesses while reconnecting the tool (VCMs), businesses and climate policies, from the perspective of global governance of the climate system.

Find out more: 

• Download the research paper (in French): Crédits carbone et marché carbone volontaire : analyse critique au regard des politiques climatiques et des sciences de gestion, et proposition d'un cadrage comptable écologique des crédits carbone
• Watch the research webinar (in French): Pertinence des marchés volontaires de carbone : aujourd'hui et dans un futur neutre en carbone

Contact: 

• Djedjiga Kachenoura, Research Officer on Climate Finance, AFD

South Africa is one of the largest GHG emitting countries due to its heavy reliance on coal for most of its energy needs. The South African government is cognisant of the fact that shifting away from carbon-intensive forms of technology to more sustainable ways of production means that some jobs will be destroyed, and new ones will be created. A concern therefore for policy makers is ensuring that the transition is just and that it will not exacerbate existing inequalities.

South Africa comes into this employment transition discussion facing a triple challenge: persistent high unemployment, inequality, and poverty. This situation has worsened since the 2007-2008 financial crisis and was further exacerbated by the recent COVID-19 pandemic. This complicates the discussion of an optimal social transition to a “green” economy.

This project is part of a wider research program on the just transition in South Africa, conducted with several South African research centres and in close collaboration with the South African authorities.

See also: Research on inequalities

The project will carry out a study of the South African labour market with the aim of identifying the proportion and distribution of workers engaged in “green” jobs and “brown” jobs – in other words, jobs that are ecologically sustainable and jobs that are not. It will also examine the possibilities of transitioning labour from brown jobs into low emitting sectors.

We will measure green intensity as the share of total tasks in an occupation that are green. We will also identify the share of workers in green jobs using employment information from surveys such as the Quarterly Labour Force Surveys (QLFSs) and the Census. Using industry level information on pollution, we will go further to identify occupations more likely to be in highly polluting sectors than in any other sectors. This will be described as brown jobs. Next, we will utilise occupational tasks, skills, and knowledge information from the O*NET dataset to identify important skills for brown and green jobs. This will enable us to estimate the probability of transitioning workers to green jobs. Finally, to map the location of green jobs, we will use employment information from the Census, the Community Survey, and the Spatial Tax data.

Contact: 

• Anda David, research officer, AFD