Volume 16, Issue 2 - Special issue: Greened Dependency and Development: The Political Economy of Energy Transition in Latin America; Guest Editors: Barbara Fritz, Martin Middelanis and Jose Carlos Orihuela

Would the energy transition mean more of the same for Latin American economies? Classic political economy of development contended that latecomer economic progress was not the outcome of free trade and comparative advantage, that linkages with the domestic economy mattered, and that peripheral capitalism was not doomed to fail. In its possibilist sense, “dependent development” was both diagnosis -of common structural challenges and diverse national paths- and possibility. At the era of global energy transition, we find this overarching perspective of economic development to be still enlightening. The papers collected in this special issue draw on diverse conceptual frameworks within structuralist development theories, especially on renewed concepts of (green) industrial policy and developmentalism, and on a differentiated understanding of the creation of linkages at different scales, a so-called developmental extraction. The contributions analyze development ideas and state action in response to, as well as opportunities and challenges deriving from the energy transition. Analytically, papers cover growth governance, development finance, and industrial policy, which we conceptualize as the main contributing factors to the transition, with case study research focused on new renewable energy and critical mineral policy sectors. Our political economy of peripheral development is interdisciplinary, centered on understanding Latin American varieties of state (in)action in shaping the energy transition economy.

The global energy transition is leading to a new division of labor in renewable energy production and economic activity in the associated value chains. As trade in renewable energy becomes more technologically feasible and economically viable, it is likely that different countries will focus on different steps in the energy transition value chains, such as the green hydrogen and lithium battery value chains. While industrialized countries are mainly looking to source low-cost renewable energy and critical raw materials in the Global South to green their industries, the benefits for developing countries are less clear. We ask what kind of green industrial policies would be relevant for developing countries to reap more benefits of the global energy transition than reinforcing traditional patterns of commodity exports to the global North. For this, we link the recent debate on green industrial policy to new concepts of developmentalist thinking. We develop a framework to relate specific policies to two distinct neo-developmentalist approaches: one more oriented towards domestic economic diversification and income redistribution, the other one more towards technologically upgrading green energy-linked exports to global markets, thus advancing the economic complexity of the country. Applying recent concepts of industrial policy, we take a broad stance and include macroeconomic and financial policies. We demonstrate that this framework can be used to evaluate green transition strategies and outcomes of countries in the global South with different degrees of economic complexity and size regarding their contribution to economic development.

Has the global energy transition opened new opportunities for natural resource extraction to foster development? To address this question we propose the concept “developmental extraction” (DE), an intermediate option between neoliberal and anti-extraction. For proponents of DE, mining can be a development-enhancing activity that triggers virtuous economic linkages. Focusing on South America’s Lithium Triangle countries (Argentina, Bolivia, and Chile), we find that the results of DE are mixed, with modest advances in fostering developmental linkages at the local level coupled with uneven outcomes at translocal scales. To explain the contrasting outcomes of DE projects, we offer a multilevel framework that highlights political and territorial challenges of forging developmental linkages. The fortunes of DE depend on the distribution of bargaining power among states, mining companies, and communities and, in turn, on the results of local and translocal negotiations over the terms of extraction.

The climate crisis and the energy transition pose significant challenges for peripheral countries. In the case of Latin America, this situation is exacerbated by regional fiscal and institutional limitations, along with specific challenges in financing large-scale green investments. These vulnerabilities, known as the triple vulnerability, encompass environmental, external, and fiscal dimensions (Bedossa, B. 2023. “Climate-Financial Trap: An Empirical Approach to Detecting Situations of Double Vulnerability.” AFD MacroDev (51): 1–29.), leading to a Financial-Environmental Trap where these three forms of vulnerability interact and reinforce one another. To break this trap and create, instead, a Financial-Environmental Virtuous Circle, we introduce a policy innovation – a Green Fiscal Rule (GFR). This rule proposes excluding green investments from fiscal balance accounting, thereby increasing fiscal space for financing green projects while simultaneously mitigating fiscal and macroeconomic risks arising from the climate crisis. Using the case study of Colombia, we examine the aforementioned restrictions and demonstrate how this innovation can enhance the ability of peripheral countries to pursue a decarbonized economy and energy transition.

Green hydrogen (GH2) ambitions vary significantly across Latin America, despite the region’s favourable conditions for production. This article investigates the contrasting trajectories of GH2 sector development in Chile and Peru – two countries with similar natural endowments but divergent levels of engagement. Drawing on a political economy perspective, the article develops a theoretical typology based on the interaction between state capacity and business positioning. It identifies four ideal-type configurations of state-business relations: cooperative, contentious, business-driven/project-based, and non-alignment/non-development. This typology offers a heuristic tool for analysing different pathways of engagement with GH2. Using a comparative case study design grounded in documentary analysis and 17 expert interviews, the article shows that Chile follows a cooperative model, where a high-capacity state and a supportive business sector jointly advance GH2 development through strategic coordination, public investment, and international partnerships. In contrast, Peru exemplifies a business-driven, fragmented approach, shaped by low state capacity, institutional volatility, and the influence of a powerful fossil fuel sector. The findings highlight the importance of state-business configurations in shaping green industrial policy in the Global South and point to future research avenues including the role of fossil sector resistance, external actors, and civil society mobilization.

This article examines how Chile is navigating the global energy transition, with a focus on the resurgence of industrial policy. While developed countries have led this transformation–through policies such as the U.S. Inflation Reduction Act and the EU’s Green Industrial Plan–peripheral economies are also strategically positioning themselves in the evolving global economy. Chile’s comparative advantages in critical minerals and renewable energy place the country at the forefront of Latin American green growth initiatives. In contrast to long-held neoliberal policy beliefs, the last three governments have introduced strategies aimed at either developing strategic sectors for the energy transition, such as green hydrogen and lithium, or decarbonizing existing operations, such as copper, while simultaneously enhancing new productive capabilities. This contribution examines policy instruments across different segments (upstream, downstream, and offstream) of the green hydrogen and lithium value chains, with a particular focus on the development of new productive capabilities. By analyzing Chile’s new industrial policy and its associated political-economic challenges, the article provides insights into how peripheral economies can leverage their resource endowments to engage in the reconfiguration of global value chains during the energy transition.

This paper aims to analyze the dynamics and characteristics of wind energy financing in Brazil, highlighting the role of its main actors and seeking to evaluate the controversial hypothesis of the replacement of development banks (DBs) by the capital markets. A qualitative analysis supported by empirical data of sustainable energy financing, focusing on the wind sector, supports the prevalence of DBs in the climate transition financing system, particularly in renewable energy. In Brazil, DBs lead the financing of low-carbon activities, especially sustainable infrastructure and renewable energy. The article provides evidence that, although the capital market has recently gained prominence in financing the wind sector in Brazil, the hypotheses advocating for the superiority of private financing over DBs and the replacement of the latter by the former do not hold up. Overall, the profile of the financing and the target audience served by BNDES, Banco do Nordeste do Brasil, and the capital markets are different, showing a complementary relationship between these funding sources.

The green-sustainable transition demands a profound structural transformation of national economies, requiring stable, long-term public financing that can support investments with high uncertainty and delayed returns. Development banks are uniquely positioned to lead this process, as they combine technical expertise with a public mandate to promote structural change and social inclusion. In the case of Brazil, the National Bank for Economic and Social Development (BNDES) has historically played this role; however, it has faced a progressive erosion of its funding base since 2016. Ensuring the effectiveness of BNDES as a key driver of the green transition depends on restoring access to stable sources of financing. In this context, sovereign wealth funds (SWFs) offer a viable institutional solution: as liability-free, intergenerational public savings, they are well suited to finance long-term sustainable investments. This article examines the potential of SWFs as viable and strategic funding instruments for the green transition. SWFs are intergenerational public savings, making them particularly well suited to finance climate mitigation, adaptation, and biodiversity conservation. The article proposes the creation – or reconfiguration – of a national SWF in Brazil with a clear mandate to channel resources to development banks, especially BNDES, in order to finance the transition within a framework of long-term sustainability and social inclusion.

This paper examines how state ownership in the energy sector is linked to climate-related policies, focusing on the Brazilian context. Brazil’s experience is a relevant case study, having undergone significant privatization in the 2010s and early 2020s, followed by the recent announcement of an ambitious industrial policy aimed at reindustrializing the economy and supporting the energy transition. In this sense, the paper’s key objective is, on the one hand, to investigate the recent literature on energy transition focusing on both the energy sector and the state ownership policies, on the other, to bring about the Brazilian experience on privatization and disinvestment policies in the Brazilian energy industry to shed some light on the limits on the new industrial policy proposals concerning energy transition.