OECD Environmental Performance Reviews: Colombia 2026

Report

28 January 2026

Chapter 1. Towards green growth

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Abstract

This chapter provides a brief overview of key environmental trends and progress towards Colombia’s environmental objectives. It assesses the environmental effectiveness and economic efficiency of the environmental policy mix, including regulatory, fiscal and economic instruments. It also examines the interaction between the environment and other policy areas with a view to highlighting the opportunities and barriers to enhance policy coherence for green growth. Finally, the chapter concludes with an assessment of the alignment of finance and investment with climate goals.

1.1. Introduction

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Colombia is an upper middle-income country that has maintained steady economic growth over the past decade, except for a sharp decline of 6.8% in 2020 due to the COVID-19 pandemic. A strong fiscal response helped support a robust recovery. Growth averaged 1.6% year-on-year in 2024 and the economy is projected to expand by 2.6% in 2026, roughly in line with the average of regional peers (OECD, 2025[1]).

Gross domestic product (GDP) per capita is among the lowest in the OECD at about USD 21 000 (in current purchasing power parities) compared to the OECD average of USD 59 000. Unemployment of 9.1% as of March 2025 marked a low for the country and the strong labour market has supported consumption. Informality has declined in recent years but remains pervasive, accounting for 56.3% of employment in 2023. Inflation is expected to continue to decline from around 5% but to remain above the 3% target throughout 2026 (OECD, 2025[2]). The country faces a large fiscal deficit, which is projected to remain high in 2026 (OECD, 2024[3]; OECD, 2025[2]). Lower oil prices have reduced export and budget revenues, although the recent extractive resource surtax may provide a small boost (OECD, 2024[3]).

The country’s population is growing (by 1.4% on average over 2014-2023) and is relatively young. Levels of poverty, extreme poverty and inequality are relatively high and remain above the regional averages for Latin America and the Caribbean (LAC).

Colombia is rich in natural resources, particularly coal, oil and minerals. It is Latin America’s largest coal producer and one of the world’s largest exporters. The hydrocarbon sector contributes significantly to fiscal revenues (GoC, 2025[4]). Agriculture also plays a key role, with coffee, flowers and bananas, among others, accounting for 21% of total exports in 2023. The United States is the main trading partner, accounting for 28% of exports, notably minerals and oil products (OECD, 2025[2]). Colombia also has large reserves of metallic and non-metallic minerals; gold, ferronickel and emeralds are the most important in terms of export revenue (OECD, 2025[5]), while critical minerals offer opportunities to support the Just Energy Transition.

Environmental governance is highly decentralised. At national level, the Ministry of Environment and Sustainable Development (MinAmbiente) leads policy implementation, supported by five decentralised institutes, including the Institute of Hydrology, Meteorology and Environmental Studies (IDEAM). At subnational level, 33 Autonomous Regional Corporations (CARs) have major responsibilities for environmental management and account for the largest share of public spending on the environment. CARs enjoy a high degree of administrative and fiscal autonomy. MinAmbiente has improved oversight of the CARs (Section 1.3.1), although co‑ordination issues persist. MinAmbiente co‑ordinates the National Environmental System (SINA), which aims to integrate environmental management through territorial entities (municipalities, departments and Indigenous and Traditional Territories [ITTs]) and across sectors through co‑operation with other ministries.

1.2. Addressing key environmental challenges

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1.2.1. Decoupling environmental pressures from economic growth

Colombia has yet to achieve absolute decoupling of environmental pressures from economic growth

Most environmental pressures have continued to rise since 2010. Domestic material consumption, greenhouse gas (GHG) emissions and total energy supply (TES) all rose, albeit at a slower rate than GDP. Over 2010-2021, the relative decoupling of most air pollutant emissions has been more pronounced with only slight increases in sulphur oxides (SO_x) and carbon monoxide (CO). Emissions of fine particulate matter (PM_2.5) declined until 2020 but have since risen again. Household waste increased at roughly the same pace as economic activity (Figure 1.1).

Figure 1.1. Many environmental pressures have continued to rise, although most at a slower rate than economic growth
Copy link to Figure 1.1. Many environmental pressures have continued to rise, although most at a slower rate than economic growth

Decoupling trends, 2010-2023

1.2.2. Climate change adaptation

Increasing temperatures and shifting precipitation patterns amplify climate-related risks

Colombia is increasingly exposed and vulnerable to climate-related risks. In the absence of adaptation, declining labour productivity, lost agricultural yield, increased flooding and damage to physical capital could reduce GDP by 1.5-2.5% by 2050 (World Bank, 2023[6]). Climate change projections by IDEAM for 2020‑2100 indicate average temperatures could reach between 1.2-5°C by 2100. Precipitation is expected to increase overall, although expected to decline in some regions (notably the Caribbean and parts of the Orinoquia). Projections also indicate a potential increase in the intensity and frequency of extreme weather events, including floods and droughts (IDEAM, 2024[7]). El Niño and La Niña cycles exacerbate precipitation extremes, accentuating wetter and drier conditions, respectively. Forests are particularly vulnerable; in several departments more than half of forest cover is exposed to wildfire risk. IDEAM’s climate change projections cover a broad range of variables and are downscaled to a high degree of spatial resolution. As such, they provide valuable information to assess climate risks and inform adaptation planning.

Figure 1.2. Colombia is increasingly exposed to extreme precipitation, while a high share of forests is exposed to wildfire in many departments
Copy link to Figure 1.2. Colombia is increasingly exposed to extreme precipitation, while a high share of forests is exposed to wildfire in many departments

Colombia has progressively strengthened its institutional and policy framework for adaptation (Box 1.1). The National Plan for Adaptation to Climate Change, adopted in 2016, is periodically updated. Adaptation targets are also embedded in the Nationally Determined Contribution (NDC 2.0) submitted in December 2020. This includes 30 targets related to water resources, protection of terrestrial and coastal marine ecosystems, restoration, protected areas, risk management, infrastructure, agriculture, housing, transportation, energy, health and trade. The NDC 2.0 emphasises nature-based solutions to achieve both adaptation and mitigation objectives, and to enhance synergies with biodiversity conservation and combatting desertification. Land-use plans and development plans adopted by municipalities are legally required to incorporate climate risks, but this is not done consistently (OECD, 2024[8]). As a result, spatial planning and infrastructure projects may not reflect climate-related risks in siting and design, thereby undermining resilience to climate impacts. MinAmbiente issued guidelines for municipalities to support the inclusion of climate change in land-use planning. These guidelines should be considered by municipalities and reinforced by the regional environmental authorities when municipal land-use plans are updated.

Monitoring and evaluation (M&E) remain a challenge, but the National Adaptation Monitoring and Evaluation system – established in 2023 – provides a structured framework to assess and report on adaptation progress. There is a comprehensive set of adaptation indicators, including to assess vulnerability and risk to climate change in the Integrated Information System on Vulnerability, Risk and Adaptation (SIIVRA). The government set out quantitative adaptation targets to reduce the estimated economic costs of climate-related risks in the long-term strategy for Carbon Neutrality and Climate Resilience Strategy of Colombia (E2050), adopted in 2021.

While the suite of indicators for adaptation provides a good basis to monitor progress, indicators in the national M&E system rely primarily on national-level data, which can overlook disparities across the territory. Efforts to enhance the territorial dimension of the M&E system should be continued, building on developments to track progress at the subnational level, such as SIIVRA. In addition, setting mid-term targets for 2030 and securing the corresponding means of implementation would further strengthen the monitoring of progress towards enhancing climate resilience.

Financing for adaptation remains insufficient. DNP (2020[9]) estimated that the country should invest 0.2% of GDP per year in adaptation through 2030, and that financing levels were only one-third of total needs. The 1st Biennial Transparency Report estimated financing needs for adaptation at more than USD 2 billion to implement the 30 NDC 2.0 targets (GoC, 2024[10]). A Department of National Planning indicator reveals low alignment between climate risk exposure and investment. Of the departments, Vaupés, Amazonas, Guainia and Vichada have low levels of alignment. Meanwhile, Norte de Santander and Caquetá have the highest levels, although they have significant scope for improvement (DNP, 2020[11]). In addition, local communities face resource constraints (financial and technical) to implement adaptation projects, further hindering progress.

1.2.3. Greenhouse gas emissions profile and trends

Colombia has raised climate ambition, but emissions continue to rise

Colombia’s GHG emissions per capita are relatively low at 3.7 tonnes/capita (compared to the OECD average of 10.7 tonnes/capita) and accounted for 0.43% of global GHG emissions in 2021. Unlike most other OECD Member countries, Colombia’s GHG emissions profile is dominated by the agriculture, forestry and other land use (AFOLU) sector, which accounted for 55% of total emissions in 2021 (Figure 1.3). This is considerably higher than the estimate of 13-21% of GHG emissions globally from AFOLU (Nabuurs et al., 2022[12]). In 2021, land use, land-use change and forestry (LULUCF) accounted for 34% of total net emissions, the energy sector 33% and agriculture 21%. Methane emissions (from livestock, mining, oil and gas production, wastewater and landfills) accounted for 27% (CO₂e) of total emissions; this share has remained largely stable since 2014.

The carbon intensity of the economy has declined over time. Between 1971 and 2017, overall CO₂ emissions increased, driven mainly by population growth and economic development. However, these increases were partially offset by improved energy efficiency (notably in the transport and industrial sectors) and structural changes in the economy (Patiño, Alcántara and Padilla, 2021[13]).

Still, energy consumption continues to rise, driven by economic and population growth. The government estimates that energy demand could grow by 21-48% to 2050 (IEA, 2023[14]). Transport represented the largest share of energy sector emissions (15% of total net emissions in 2021). They grew at the fastest rate, increasing by 54% between 2010 and 2021. Industrial processes and waste combined accounted for 12% of emissions in 2023.

Figure 1.3. Emissions from agriculture, forestry and other land uses account for over half of Colombia’s GHG emissions
Copy link to Figure 1.3. Emissions from agriculture, forestry and other land uses account for over half of Colombia’s GHG emissions

Colombia has ambitious climate mitigation targets but is not on track to meet them

The government has committed to ambitious climate mitigation targets and has progressively strengthened its policy and institutional framework for climate action over the past decade (Box 1.1). In its NDC 2.0, Colombia raised its targets to reduce net GHG emissions1 by 51% by 2030 compared to the business‑as‑usual scenario (GoC, 2020[15]). The LTS E2050 set a net-zero target for 2050 and introduced an absolute emissions cap for 2030. The NDC 2.0 also set a target to reduce black carbon emissions by 40% compared to 2014 by 2030.2 Achieving these unconditional targets will require sharp emissions reductions: the average annual growth rate of GHG emissions between 2005-2020 was 1.7%, while reaching the 2030 target will require annual average reductions of 5.4%. The NDC 3.0 submitted in September 2025 reaffirms the 2030 targets and sets a new target to limit GHG emissions to 155‑161 Mt CO₂e in 2035 (GoC, 2025[16]). The 2035 target requires a slower rate of emissions reductions between 2030 and 2035 than those required to meet the 2030 target and will require an acceleration of emissions cuts after 2035 to meet net zero by 2050.

The Climate Action Law adopted in December 2021 consolidated NDC 2.0 commitments and enshrined the net-zero target in law. The 2018 Climate Change Law requires the development of Sectoral Climate Change Management Plans (PIGCCS) with binding targets for 2030, including an “intersectoral” deforestation target. PIGCCS have been adopted for agriculture, energy and mining, housing, health and industry but are lacking for other key sectors, notably transport. PIGCCS also need updating to align with NDC targets. Integrated Territorial Climate Change Management Plans (PIGCCTS) are mandatory for all departments; only one has yet to formulate a plan.3 In principle, the PIGCCTS should be integrated into the land-use plans (POTs) adopted by municipalities. The government has also introduced instruments to monitor the PIGCCS and PIGCCTS and track their compliance with binding targets. A national carbon budget covering the periods 2020-2025, 2026-2030 and 2031-2035 was approved by the Intersectoral Commission on Climate Change and submitted to the Intersectoral Commission of the Presidential Cabinet for Climate Action in November 2024.

Although Colombia has taken important steps towards climate action, the mitigation policies, actions and measures identified in the NDC 2.0 are not sufficient to reach net zero (GoC, 2024[10]). Detailed actions and measures have not yet been defined under the NDC 3.0. A portfolio of sectoral and territorial measures is expected to be detailed as part of the updated NDC 3.0 by the end of 2025. The country’s climate ambition is commendable, and a solid framework is in place. Emissions have recently declined relative to the NDC 2.0 reference scenario, mainly due to growing stabilisation in the LULUCF and energy sectors (Figure 1.4). Nevertheless, achieving the 2030, 2035 and 2050 targets will require identifying and implementing additional mitigation measures to deliver steep emissions reductions, especially from deforestation and agriculture, while also curbing fast-rising transport emissions.

Figure 1.4. Colombia has increased climate mitigation ambition, but emissions continue to rise
Copy link to Figure 1.4. Colombia has increased climate mitigation ambition, but emissions continue to rise

Historical GHG emissions, targets, projections and indicative pathways to targets, 1990-2050

Box 1.1. Colombia has progressively strengthened its institutional and policy framework for climate action

Copy link to Box 1.1. Colombia has progressively strengthened its institutional and policy framework for climate action

Key milestones in the development of Colombia’s legal, institutional and policy framework to address climate change are summarised below:

2016: The National Climate Change System established (Decree No. 298) to co‑ordinate and mainstream climate change across actors and instruments of government, as well as the private sector and civil society. The Intersectoral Commission on Climate Change is the leading body. National Carbon Tax (Law 1819) adopted.
2018: Climate Change Law (Law 1931) adopted. It provides the legal and institutional framework for climate change mitigation and adaptation policy and governance. Key elements include the requirement for PIGCCTS and PIGCCS with binding targets for each sector. The National Carbon Market enables implementation of projects that generate carbon credits. The Integral Strategy for Deforestation Control and Forest Management was adopted.
2019: Law on Electric Mobility (Law 1964) adopted; National Circular Economy Strategy; Law on Air Quality (Law 1972) adopted.
2020: NDC 2.0 submitted, including raising climate mitigation targets. National Strategy for the Mitigation of Short-Lived Climate Pollutants (including black carbon) approved; the National Policy for the Control of Deforestation and Sustainable Forest Management (CONPES 4021) updated the deforestation goal to achieve net-zero deforestation by 2030.
2021: Climate Action Law (2169/2021) adopted. Enshrined in law Colombia’s commitment to carbon neutrality by 2050 and consolidated commitments in NDC 2.0, such as strengthening fiscal incentives for sustainable projects and emissions reduction. The CONPES 4058 policy to reduce disaster risk and adapt to climate variability was adopted.
2022: Energy transition policy (CONPES 4075) approved to support consolidation of the clean energy transition.
2025: NDC 3.0 submitted, reaffirming the 2030 targets and sets new targets for 2035.

1.2.4. Progress on climate mitigation

Deforestation reached a record low in 2023, but continued vigilance is required

Reducing deforestation is central to meeting Colombia’s climate and biodiversity targets (Chapter 2), as well as improving water security. Forests cover over half (55%) of the country, 51% of which are classified as “natural forests”.4 Main drivers of deforestation include land grabbing and uncontrolled expansion of agriculture (including extensive livestock production), illicit activities (such as illegal mining and illicit crops) and infrastructure development (GoC, 2024[17]). Deforestation accelerated between 2015 and 2017 in the post-conflict period when the Revolutionary Armed Forces of Colombia (FARC) were demobilised and previously isolated territories became more accessible (Correa Ayram et al., 2020[18]).5 As a result, net LULUCF emissions rose sharply, increasing by 80% between 2015 and 2017.

Since 2017, deforestation levels have generally declined from their peak of 220 000 ha/year (Chapter 2) but have begun to climb again. In 2022, deforestation surpassed the target set for 2026 in the National Development Plan (NDP) 2022-2026; in 2023, they reached their lowest point since 2000. Various factors contributed to this progress, including strengthened enforcement against illegal activities; greater inter‑ministerial co‑ordination; peace agreements with illegal armed groups; the formal delimination of the agricultural frontier and conservation agreements with communities, such as REM Visión Amazonia and “Conservar Pagar” (Chapter 2). However, preliminary data for 2024 indicate a renewed increase in deforestation, rising by an estimated 35% compared to 2023, calling for the reinforcement of measures and continued vigilance.

Targets in line with Colombia’s NDC 2.0 were set in the 2020 National Policy for the Control of Deforestation and Sustainable Forest Management (CONPES 4021) with a time horizon until 2030. These include reducing deforestation to no more than 100 000 ha per year by 2025 and achieving net-zero deforestation by 2030.6 The government intends to use co‑operation and market approaches (including those under Article 6.2 of the Paris Agreement) to reach this goal. The National Biodiversity Action Plan (BAP) to 2030, updated in 2024, raised ambition further, committing to restoring 5 million ha and limiting annual net deforestation to no more than 33 000 ha by 2030 (GoC, 2024[17]). The NDC 3.0 set a target to reduce emissions from deforestation to a level equivalent to decreasing the deforestation rate to between 37 500 and 49 999 ha/year in 2035, which is less stringent than the target in the BAP. Ensuring coherence of deforestation reduction and restoration targets across various policies would provide a clearer and more consistent trajectory to guide policy and track progress.

Emissions reductions in agriculture are critical to reach climate targets, but progress is too slow

Agriculture remains a major contributor to Colombia’s GHG emissions. Enteric fermentation, manure management, use of synthetic fertilisers and rice cultivation are the major sources of methane and nitrous oxide (N₂O) emissions. Agriculture emissions have been rising steadily since 2014, albeit at a slower rate than in other sectors, including forestry and other land uses, industrial processes and waste. Livestock production, mainly cattle, accounting for the largest share of emissions (14%) in 2021. Livestock also uses 77.2% of the country’s agricultural land (DANE, 2023[19]) and is a major driver of deforestation.

Colombia has taken action to reduce agricultural emissions. The PIGCCS, approved in 2021, aims to mainstream climate change mitigation and adaptation in the agricultural sector. The sector is expected to reduce 22.1 Mt of CO₂e by 2030, requiring average emissions reductions of 6.4% per year. The Sustainable Bovine Livestock Policy 2022-2050 (Resolution 126) seeks to achieve carbon neutrality in the livestock sector through low-carbon production systems. Action plans to operationalise these policies are under development.

Despite these initiatives, progress has been slow. Most measures focus on managing livestock more sustainably, promoting agroforestry and ecosystem restoration, and encouraging climate-smart practices such as improved fertiliser use and reducing methane emissions from rice and livestock. Nationally Appropriate Mitigation Actions have been in place since 2017 for livestock, and since 2016-2018 for key crops such as coffee and sugar cane However, the mitigation policy mix is still dominated by regulatory measures (zoning, land-use plans, technology and performance standards) (OECD, 2024[20]). The PIGCCS include 49 goals for 2030, but implementation has progressed slowly; 65% of initiatives are still in the early stages; 26% have yet to start; and only 8% have been implemented.

Land tenure reform is also critical for rural and sectoral development and should be accelerated. More than half of land in Colombia is owned informally. Regularising land tenure could reduce deforestation pressures, support rural investment and secure farmers’ rights, particularly in forested areas. Implementation of the multi-purpose cadastre policy should therefore continue, upgrading the cadastre system and accelerating registration. The ministries of Environment and Agriculture have developed a strategy to advance this agenda, which will be essential to long-term mitigation efforts.

Colombia has progressively increased climate action but could better align it with sectoral emissions

Policies tracked by the OECD Climate Actions and Policies Measurement Framework (CAPMF) covering the transport, buildings, electricity and industrial sectors show a steady increase in climate action in Colombia between 2010 and 2023 (Figure 1.5). This progress is broadly in line with regional peers. However, climate action remains uneven across sectors, and the level of action is not always proportionate to the share of emissions from each sector. This suggests scope to better align climate action with the sectors that generate a greater share of emissions. For example, industry and buildings show the highest levels of climate action but account for smaller shares of total emissions (excluding LULUCF) than transport. By contrast, transport has the lowest level of climate action, despite being the largest source of emissions among these sectors (Figure 1.5).

Figure 1.5. Climate action in Colombia has steadily increased, but there is scope for stronger alignment with sectoral emissions
Copy link to Figure 1.5. Climate action in Colombia has steadily increased, but there is scope for stronger alignment with sectoral emissions

The government aims for a gradual transition to shift the economy from fossil fuels towards more sustainable economic activities

Reducing reliance on fossil fuel production and consumption is a core pillar of Colombia’s clean energy transition strategy. The Socio-Ecological Transition Portfolio launched in 2023 aims to mobilise USD 36 billion to restore ecosystems, promote nature-based tourism, encourage sustainable production systems and reduce vulnerability to climate risks. Efforts to attract domestic and international finance are ongoing. In 2023, Colombia became the first Latin American country and the largest producer of coal and gas to endorse efforts to negotiate a Fossil Fuel Non-Proliferation Treaty. The government also announced it would not sign new hydrocarbon exploration contracts and has identified coal-producing regions for transition towards more sustainable activities. Mining leases are set to progressively expire through the 2030s (Argus, 2024[21]).

The Roadmap for a Just Energy Transition launched in 2024 set up a multi-sector strategy aimed at phasing out fossil fuels, while promoting economic diversification, social inclusion and environmental protection (GoC, 2025[4]). Implementing the Roadmap is projected to require additional investment between 0.5% and 1.8% of GDP, above business as usual. Most financing is expected to come from the private sector, including companies and households (particularly in transport and residential sectors). Public investment would target strategic projects (GoC, 2025[4]). The NDP 2022‑2026 also highlights the government’s intention to use financial surpluses from coal and oil production to support the energy transition.

The Roadmap emphasises a gradual transition but does not provide a clear date to exit coal. It highlights that exploratory activity, hydrocarbon reserves and production volumes need to remain at levels sufficient to ensure economic and energy security (GoC, 2025[4]). It also indicates an exit from coal in electricity generation in 2035 due to increases in operational costs (including due to expanded carbon tax coverage) and expiring contracts. However, the government has not yet committed to a formal coal exit date. Further, Law 2128 passed in 2021 declared natural gas to be of national interest and promoted its widespread use. It also established a legal basis to subsidise installation of related infrastructure and consumption (Fifth Permanent Constitutional Commission, 2021[22]). Natural gas can provide a transition fuel, but the increasing reliance on natural gas needs to be managed to ensure alignment with climate objectives, as envisaged in the just energy transition scenario in the Roadmap.

The clean energy transition is at a nascent stage

Colombia continues to rely heavily on fossil fuels, despite having a relatively high share of renewables in TES. Renewables accounted for 24% of TES in 2024, about twice the OECD average, but less than in some regional peers such as Costa Rica and Chile (Figure 1.6). Nearly all renewables are from roughly equal shares of biomass/waste and hydropower, while non-conventional renewable energy (NCRE) (solar, wind, geothermal7), remains marginal. The share of renewables has been stagnant since 2010, while TES grew by one-third. During this period, the share of renewables in electricity production dropped from 70.7% in 2010 to 64.2% in 2024. The target in the NDP 2018-2022 to increase electricity supply from non‑conventional renewables was not met.

Figure 1.6. Colombia’s total energy supply relies heavily on fossil fuels, and the share of renewables has remained stagnant
Copy link to Figure 1.6. Colombia’s total energy supply relies heavily on fossil fuels, and the share of renewables has remained stagnant

While the government has progressively increased targets for renewable energy, they lack consistency across policy documents. The E2050 set a target to double the share of renewable energy in TES (to 50% in 2050), largely by increasing bioenergy and solar. The NDP 2022-2026 also set a target to add 2 000 MW of new capacity for electricity generation from NCRE, in addition to promoting “energy communities” to encourage associations of energy users to generate, market and efficiently use non-conventional renewable energy (GoC, 2023[23]). The updated National Energy Plan (PEN) 2022-2052 aims to expand generation capacity of specific NCRE technologies like solar, wind, geothermal and green hydrogen but is not aligned with NDC 2.0 emission reduction targets. Overall, the PEN aims to achieve between 7-30% participation of NCRE in primary energy production by 2052. However, none of the PEN scenarios would meet the emissions reduction targets set out in the NDC 2.0, with the most ambitious scenario (“energy transition”) achieving only part of the emission reductions needed by 2030 and 2050 (UPME, 2023[24]). Low storage capacity in hydropower infrastructure, along with extreme precipitation and periods of drought, results in important fluctuations in hydropower supply. These will become more acute with climate change, underscoring the need to further diversify renewable energy supply. The clean energy transition will require greater consistency across policy documents, as well as measures to further expand investment in NCRE and improve energy efficiency.

Colombia maintained incentives for NCRE and expanded their application to a broader range of energy sources. Law 1955 (2019) increased tax benefits for renewables. Furthermore, the 2021 Energy Transition Law (Law 2099) expanded benefits for energy efficiency and a broader range of clean energy technologies (Section 1.4.1), as well as establishing the Fondo Único de Soluciones Energéticas (FONENERGIA), consolidating several funds. In addition, the NDP 2022-2026 established the Fund for the Promotion of Technological Advancement to advance towards zero- and low-emissions mobility in all transportation segments, means and modes.

The government has increased renewable capacity in non-interconnected zones, but additional finance and new business models are needed to bring costs down. These zones are typically remote with high costs and logistical barriers that limit grid expansion. They cover just over half of the territory and are home to about 4% of the population. Diesel generation still provides most of the electricity in these areas (Davies and Saygin, 2023[25]). Between 2020 and 2022, renewable capacity rose from 16 MW to 46 MW. Updated tariff and subsidy regulations improved cost recovery on operation and maintenance. Still, covering the high cost of new connections requires mobilising additional finance and exploring new business models, such as lease-to-own8 (Davies and Saygin, 2023[25]).

Colombia also needs to accelerate efficiency and electrification to meet 2030 energy savings and decarbonisation targets for buildings, industry and transport9 (IEA, 2023[14]). Policies such as the green building code, tax incentives and innovative financing instruments have spurred energy efficiency gains, especially in buildings (World Bank, 2023[6]). However, evidence of the impact and cost effectiveness of these programmes remains limited (IEA, 2023[14]).

Barriers to the clean energy transition remain significant. Most carbon emissions are either not priced, priced at low levels or subsidised. The Roadmap for the Just Energy Transition and the PEN highlight the carbon tax as a key market signal for decarbonisation, but its effectiveness is weakened by the low tax rate and offsetting mechanism (Section 1.4.1). Transmission capacity from high potential sites is lacking and support for projects by local communities in remote areas is often weak, contributing to delays in permitting (IEA, 2023[14]). The NDC 2.0 does not specify a 2030 target for renewable energy. Investment in fossil fuels continues to far outstrip that in renewables (Section 1.4.2). Mobilising additional finance, including from the private sector, is essential for the clean energy transition.

Progress on electrification of transport is advancing, but the challenge is steep

To support progress towards climate goals and reduce transport-related air pollution (Section 1.2.5), Colombia has strengthened policies to promote vehicle electrification. Law 1964 of 2019 introduced fiscal incentives such as capped vehicle taxes (purchase and annual ownership), inspection discounts and reduced insurance premiums for EVs. The National Electric Mobility Strategy (ENME) complements these efforts through import tariff exemptions, infrastructure development and forthcoming energy efficiency labelling (MinAmbiente, 2022[26]). Colombia met its NDP 2018-2022 target with the addition of over 6 600 EVs (IEA, 2023[14]). The country has also committed to 100% zero-emission light-duty vehicle sales by 2035 through the Zero Emission Vehicles Declaration.

Despite these advances, achieving the 2030 target of 600 000 EVs remains a challenge. By 2024, only 38 057 EVs were in circulation – just over 6% of the goal (RUNT, 2024[27]). Nonetheless, market uptake is growing. Hybrids and EVs accounted for 26% of new vehicle sales in 2024, surpassing the 16% of diesel and narrowing the gap with petrol at 58% (BBVA Research, 2025[28]). Yet, EVs still represent only 1.1% of the over 1 million new vehicle registrations (RUNT, 2024[27]) and meeting long-term targets will require a much faster pace of deployment (GoC, 2019[29]) and prioritising electrification of motorcycles, as they are the most common vehicle in the country (Section 1.2.5).

Expanding charging infrastructure is critical, especially in underserved areas, to ensure continued uptake of EVs and accelerate the transition to clean transport. In 2024, Colombia had 218 public charging stations, an increase of 83% compared to 2021. This growth was led by private investment, especially in Bogotá, Antioquia and Valle del Cauca. Over 1 000 new charging stations are under way. However, this remains far from the national target of 6 000 public charging stations by 2030, underscoring the need for greater investment.

The government should continue to prioritise the electrification of public transport, notably buses. The Electric Mobility Law requires that all new urban bus purchases be zero emission by 2035 – a target that aligns with regional peers such as Chile and Ecuador. However, the government could consider advancing this timeline to 2030, particularly in major urban centres. In so doing, it could build on the experience of frontrunners such as Bogotá, which is expected to operate the largest electric bus fleet in the region by 2025 (World Bank, 2023[6]). OECD analysis shows that electrifying public transport and implementing distance-based road charges and a carbon tax, combined with appropriate revenue recycling programmes, can contribute considerably to reducing emissions of air pollutants and GHGs in dense urban areas in an equitable manner (Tikoudis, Udsholt and Oueslati, 2022[30]). Complementary measures to support sustainable mobility are essential, including low-emission zones and improved connectivity across transport modes within and between regions to reduce car dependency (Miguel Muñoz, Poveda and Gil, 2024[31]). Addressing road safety and infrastructure inequities, integrating active mobility into national climate policies and prioritising clean mobility programmes in urban corridors with high air pollution exposure will be also key to achieving cleaner and more inclusive urban mobility.

1.2.5. Air quality

Air pollution remains a serious public health concern, imposing significant economic and social costs

Despite recent progress, air pollution remains one of Colombia’s most urgent public health challenges. The economic burden of air pollution is substantial, with welfare costs from premature mortality due to exposure to PM_2.5estimated at 2.9% of the country’s GDP in 2019 (OECD, 2025[32]). In 2023, an estimated 7 180 adult deaths – mainly from cardiovascular and respiratory diseases – could have been avoided by meeting the World Health Organization (WHO) PM_2.5guideline level. Bogotá, Medellín and Calí accounted for 72% of these cases, primarily affecting children, older people and low-income populations (World Bank, 2023[33]; Garzón Herrera and Buitrago Mesa, 2024[34]).

Nationally, air pollutant emissions have increased over 2010-2021: nitrogen oxides (NOₓ) rose by 14%; non-methane volatile organic compounds (NMVOCs) by 8.9%; black carbon by 8.3%; and CO by 3.8%; and sulphur dioxide (SO₂) by 0.6%. Only PM₁₀ and PM_2.5showed marginal declines of 1.2% and 0.3%, respectively (IDEAM et al., 2024[35]).

Emissions from fuel combustion remain a major driver of air pollution in Colombia (Figure 1.7). SO₂ emissions originate mainly from energy industries, manufacturing and construction. By contrast, transport is one of the largest contributors to emissions of NO_x, NMVOCs and CO, making it a key focus for abatement efforts. While emissions of some transport-related pollutants declined, overall emissions rose between 2015 and 2021. This increase was largely driven by a sharp rise in CO emissions (IDEAM et al., 2024[35]). These trends are particularly visible in urban centres, where deteriorating air quality is closely linked to the growing vehicle fleet and increased industrial activity, both driven by demographic growth and rising consumption of goods and services (Garzón Herrera and Buitrago Mesa, 2024[34]).

Figure 1.7. Energy-related emissions remain concerning, and PM_2.5 levels in municipalities are still high
Copy link to Figure 1.7. Energy-related emissions remain concerning, and PM<sub>2.5</sub> levels in municipalities are still high

Colombia has committed to the WHO target of halving air pollution-related health impacts by 2040 (MinAmbiente, 2025[36]). To achieve this, it is promoting intersectoral co‑ordination, enhancing public health surveillance and strengthening analytical capacity to assess impacts from air pollution. The country has expanded use of automatic monitoring stations and reinforced early warning systems to address pollution spikes from forest fires (MinAmbiente, 2025[36]). Monitoring remains focused on particulate matter, with limited coverage of other pollutants and uneven temporal representativity. In all, 89 municipalities lack required monitoring systems and 38 need upgrades to infrastructure. Moreover, persistent human, operational and financial constraints result in uneven coverage across and within municipalities (Garzón Herrera and Buitrago Mesa, 2024[34]). To address these gaps, the “Strengthening Ambient Air Quality Monitoring in Colombia” project seeks to expand and modernise monitoring networks, broaden pollutant coverage and reduce operational disparities. A stronger focus on under-monitored pollutants and regions will be essential to support more effective air quality management and reduce related health risks.

Although Colombia remains among the top ten countries in the region with the highest average PM_2.5 levels (IQAir, 2023[37]), it has made measurable progress to reduce particulate matter pollution. The share of municipalities with Air Quality Monitoring Systems (SVCA) exceeding the national 2030 PM_2.5standard (15 µg/m³) fell from 78% to 29% between 2017-2023 (Garzón Herrera and Buitrago Mesa, 2024[34]). Projections indicate that 70% of monitoring stations could meet PM_2.5and PM₁₀ standards by 2026 and 2027, respectively – well ahead of national targets (Garzón Herrera and Buitrago Mesa, 2024[34]).

However, all municipalities exceed the WHO PM_2.5guideline level and only 7.2% meet the interim target IV of 10 µg/m³ (Figure 1.8). For NO₂, while national standards are met, 83.3% of monitoring stations exceed the 2030 compliance threshold of 40 µg/m³ (Garzón Herrera and Buitrago Mesa, 2024[34]). Exposure to air pollution is uneven, with lower-income households often located in peripheral areas near arterial roads with intense freight transport and ageing bus fleets.

Colombia has strengthened its air quality standards by adopting WHO interim targets III through Resolution 2254 (2017), which is under review to incorporate interim targets IV. Ongoing efforts should focus on moving towards more stringent standards, using interim targets as achievable milestones considering the national context and evolving capacities.

In addition, Colombia has developed a broad regulatory framework to address air pollution. As of 2024, significant progress had been made towards achieving the objectives of the 2010 Air Pollution Prevention and Control Policy across most defined actions (Table 1.1). Implementation accelerated between 2021 and 2024 but remains uneven – particularly at the local level – due to institutional, resource and capacity constraints. At the national level, a notable gap remains due to the absence of guidelines for acute pollution episodes, despite a 2006 mandate to develop them (CONPES, 2018[38]; Garzón Herrera and Buitrago Mesa, 2024[34]).

Cargo trucks, buses and minibuses are the primary contributors to PM_2.5emissions from the transport sector, accounting for up to 60% of such emissions in cities like Medellín and across the municipalities of the Valle de Aburrá (GoC, 2019[29]). These vehicles also account for 34% of national NOx emissions. Meanwhile, motorcycles – representing 62% of the national vehicle fleet (RUNT, 2024[27]) – are a major source of air pollution, contributing to a third of NMVOCs and a quarter of CO emissions (IDEAM et al., 2024[35]).

Objective	Action	Progress 2021	Progress 2024
1. Reduce air pollutant emissions from mobile sources	1.1. Implement a national strategy for the renewal and modernisation of the vehicle fleet, prioritising highly polluting categories.	86%	92%
	1.3. Develop a proposal to amend the law that establishes the vehicle tax.	100%	100%
	1.4. Adopt a national strategy to increase the incorporation of zero- and low-emission technologies.	40%	63%
	1.5. Update regulations to reduce sulphur content in fuels distributed to the vehicle fleet.	100%	100%
	1.8. Implement measures to reduce and eliminate evasion of the technical-mechanical review and pollutant emissions.	25%	75%
	1.11. Define and implement alternatives for the reduction and control of emissions from vehicles in circulation.	80%	88%
2. Reduce air pollutant emissions from fixed sources	2.1. Design and implement portfolios with the best available techniques and environmental practices oriented to promote sustainable production processes in the industry.	67%	91%
	2.4. Develop national guidelines to facilitate the incorporation of high air pollution areas in the regulation of industrial uses in land-use plans.	69%	100%
	2.6. Review and adjust the procedure for accessing tax incentives for industry to implement systems to control and reduce air pollutant emissions.	100%	100%
3. Improve air quality prevention, reduction and control strategies	3.1. Define and implement a national strategy to improve the generation of emission inventories and air quality models, the operation of SVCA, and the monitoring and control of stationary and mobile emission sources.	100%	100%
	3.8. Develop national guidelines for risk management in the event of critical air pollution episodes.	78%	80%
	3.9. Adopt retributive rates for air pollutant emissions.	45%	50%
	3.10. Define and implement strategies for air quality governance.	80%	91%

Note: Large municipalities have a population equal to or greater than 150 000 inhabitants. Colour according to percentage of compliance:

0-25%; 26-50%; 51-75%; 76-100%.

Source: SisCONPES (2024), Sistema de Gestión de Documentos CONPES, https://sisconpes.dnp.gov.co/SisCONPESWeb//AccesoPublico/DocumentosAprobados.

The prevalence of motorcycles is driven by a mix of affordability, ease of financing and an ability for them to navigate congested roads. Post-pandemic labour shifts, such as the rise of delivery services, have further accelerated their uptake (Cuadros et al., 2023[39]; Rico Muñoz, 2025[40]). At the same time, transport emissions intensity remains high, primarily due to outdated engine technologies and an ageing fleet. Colombia’s vehicle fleet averages 13-17.3 years for heavy-duty trucks, 15.5 years for cars and 11.4 years for motorcycles (Rico Muñoz, 2025[40]). The outdated freight transport fleet not only worsens air quality but also undermines logistical efficiency and contributes to road accidents and urban congestion. The slow pace of vehicle fleet renewal is exacerbated by a taxation system that favours older, high-emission vehicles; newer, low-emission and electric models are penalised, which discourages fleet modernisation (CONPES, 2018[38]) (Section 1.4.1).

The government has banned imports of used vehicles and updated emission limits for mobile sources under Law 1972 of 2019 and Resolution 762 of 2022 to reduce transport emissions. As of 2023, all newly manufactured or imported diesel, liquefied petroleum gas and liquefied natural gas vehicles must comply with Euro VI standards. Meanwhile, all new motorcycles have been required to meet Euro 3 standards since 2021 (GoC, 2019[41]). In addition, since 2024, off-road mobile sources must meet European or US emission standards and conform to the Montreal Protocol (MinAmbiente, 2022[42]). Despite stricter regulations, enforcement of vehicle emission standards and mandatory technical inspections remains weak. More than 56% of the vehicle fleet failed to comply to mandatory technical inspections in 2024 (RUNT, 2024[27]), undermining their effectiveness.

National regulations have improved fuel quality with the reduction of sulphur content to 10-15 ppm for diesel and 50 ppm for petrol. Meanwhile, targets for diesel and petrol are set to align with international standards (10 ppm) by 2025 and 2030, respectively (CONPES, 2018[38]; MinAmbiente, 2022[26]). Since 2021, low-sulphur petrol (50 ppm) has been distributed, further enabling adoption of Euro 4 technologies. Nonetheless, ensuring consistent fuel across the supply chain remains a key challenge. Colombia’s multi-product pipeline system lacks sufficient safeguards to maintain low sulphur levels during transport from refineries to service stations.

While Colombia has made progress with regulating fixed-source emissions, it needs to update standards in line with international best practices. Colombia has advanced regulatory efforts for fixed-source emissions through updates to Resolution 909 of 2008; the Protocol for Control and Monitoring of Atmospheric Pollution from Stationary Sources; and national standards for sectors such as cement, power generation, copper smelting and waste incineration. However, emission limits remain largely outdated and do not incorporate best available techniques (BAT) (Section 1.3.1). Although voluntary sectoral guidelines based on BAT and best environmental practices exist, mandatory enforcement is lacking. Given that industrial and energy sectors account for over 80% of SO₂ emissions (IDEAM et al., 2024[35]), stricter standards aligned with international best practices and enhanced monitoring are needed. Furthermore, complex procedures, long permitting times and limited awareness of available tax incentives discourage adoption of cleaner technologies in the industrial sector.

Indoor air pollution remains a significant health risk in rural areas where about 1 million families rely on firewood as their primary fuel for cooking and heating (IEA, 2023[14]). In 2021, the stationary residential subsector, largely reliant on firewood, contributed 33% of CO and 59% of total PM_2.5emissions (Figure 1.8). The National Firewood Substitution Plan (PNSL) aims to achieve universal access to clean, efficient cooking energy by 2050. It prioritises vulnerable populations based on fuel type, infrastructure access and rural gas coverage. The plan targets an 87% reduction in firewood use by promoting cleaner alternatives such as biogas and hydrogen, with socio-economic benefits estimated at COP 1.7 trillion (UPME, n.d.[43]). To that end, it builds on initiatives like the LPG pilot subsidy programme, although this has faced challenges related to project timelines, as well as delays in budget and funding execution (IEA, 2023[14]; Zapata Quinchía, 2024[44]). To ensure the PNSL’s long-term effectiveness and sustainability, timely and full allocation of committed resources is essential. In parallel, promoting epidemiological studies to better assess the health impacts of indoor air pollution could help inform and justify more ambitious and mandatory policy measures.

Box 1.2. Bogotá’s path to cleaner air and smarter mobility

Copy link to Box 1.2. Bogotá’s path to cleaner air and smarter mobility

Promoting sustainable urban mobility

Nearly 70% of daily trips in Bogotá are made by public transport, walking or cycling. The city aims to raise this share to 74% by 2027 through expanded cycling lanes, improved sidewalks and an extended System of Integrated Public Transport. A flagship initiative is the Ciclovía, which transforms 127 km of major roads into car-free routes every Sunday, engaging 1.5 million residents. The programme has inspired over 200 cities worldwide, promoting active mobility and reducing car dependency.

Electrifying public transit and new infrastructure

Bogotá is phasing out fossil fuel buses, with all new public transport acquisitions since 2022 based on electric or low-emission technologies. With 1 061 electric buses already in operation, the city’s fleet upgrade is projected to cut over 3 tonnes of particulate matter and 33 300 tonnes of CO₂e annually. As part of Phase VI of the TransMilenio system, the city will deploy 269 new articulated and bi-articulated buses with zero- or low-emission technologies, supported by new charging infrastructure. Bogotá plans to launch its first metro line in March 2028, expected to carry 1 million passengers per day, and introduce a river navigation system with a daily capacity of up to 120 000 passengers.

Managing congestion and vehicle use

To address traffic congestion and air pollution, Bogotá operates the “Pico y Placa” system, restricting vehicle circulation based on licence plate numbers. In 2020, it added exemption fees earmarked to fund public transport (Pico y Place Solidario). Calí and Medellín followed with a similar system in 2021 and 2022, but they differ in design. Bogotá applies an odd-even schedule, restricting about half of the fleet on weekdays. Medellín and Calí apply rotating digit-based systems (typically one or two digits of the licence plate per weekday). While Medellín and Calí apply fixed fees, Bogotá’s fees vary according to a vehicle’s commercial value, age, fuel and engine size. This approach aims to address air pollution and to overcome a key drawback of standard plate-based restrictions: the tendency to encourage the purchase of cheap, more polluting second-hand vehicles to circumvent the rules (Blackman, Li and Liu, 2018[45]). While Bogotá offers daily, monthly and six-month permits, Medellín offers only daily permits – a feature that helps reduce the risk of overdriving, since long-term permits can act as sunk costs.

Source: Blackman, Li and Liu (2018[45]), Efficacy of command-and-control and market-based environmental regulation in developing countries, https://doi.org/10.1146/annurev-resource-111820-032340; UNEP (2021[46]), Actions on air quality in Latin America and the Caribbean Regional Report, https://www.ccacoalition.org/resources/actions-air-quality-latin-america-and-caribbean-executive-summary; López Restrepo et al. (2022[47]), Escenarios de emisiones hacia 2030: potencial de reducción de la presión ambiental provocada por los autobuses del transporte público en Bogotá, Buenos Aires, Ciudad de México, Santiago y São Paulo, www.cepal.org/apps; GlobalFleet (2023[48]), Colombia Wikifleet, https://www.globalfleet.com/en/wikifleet/colombia; Miguel Muñoz, Poveda and Gil (2024[31]), Políticas y regulaciones para impulsar la electrificación de los sistemas de transporte público urbano: los casos de Bogotá, Buenos Aires, Ciudad de México, San José, Santiago y São Paulo, https://hdl.handle.net/11362/80646; Sánchez (2024[49]), Encuesta de Movilidad Bogotá-Región: Transporte Público y Viajes a Pie Lideran, https://bogota.gov.co/mi-ciudad/movilidad/encuesta-de-movilidad-bogota-region-transporte-publico-y-viajes-pie; Taylor (2024[50]), The tranquility frees you: Bogotá, the city that shuts out cars every week, https://www.theguardian.com/environment/article/2024/may/30/the-tranquility-frees-you-bogota-the-city-that-shuts-out-cars-every-week; Concejo de Bogotá (n.d.[51]), El transporte público fluvial por el Río Bogotá es una realidad dentro del Plan Distrital de Desarrollo, https://concejodebogota.gov.co/lo-logramos-el-transporte-publico-fluvial-por-el-rio-bogota-es-una/cbogota/2024-05-26/134857.php.

1.2.6. Water

Colombia benefits from abundant water resources, although it faces localised shortages

Colombia ranks among the world’s most water-abundant countries10 (IDEAM, 2023[52]), although several areas are still vulnerable to scarcity (Figure 1.8). Runoff varies considerably across regions, with the Amazon and Pacific regions having the highest and the Caribbean the lowest. Freshwater abstractions, including for non-consumptive uses, rose considerably between 2010 and 2022, driven primarily by cooling for electricity production (DANE, 2022[53]). The main pressures on water resources are from the agricultural, energy and livestock sectors. In 2020, the agriculture sector accounted for 43.3% of total water demand11 (IDEAM, 2023[52]). Hydropower accounts for the second highest demand. In 2020, the Magdalena-Cauca basin alone (IDEAM, 2023[52]) supplied 64% of national water demand, despite covering only one-quarter of the territory while home to nearly 80% of the population. Between 2016 and 2020, water demand declined by 9% (IDEAM, 2023[52]). Yet, despite overall freshwater abundance, scarcity has significantly disrupted supply. Between April 2024 and 2025, household water supply was rationed due to low reservoir levels caused in part by drought conditions (Bogotá Mayor’s Office, 2025[54]).

Figure 1.8. Very high pressures on water quality and vulnerability to water scarcity are concentrated in major population centres and areas of economic activity
Copy link to Figure 1.8. Very high pressures on water quality and vulnerability to water scarcity are concentrated in major population centres and areas of economic activity

Industry, wastewater discharges, agriculture, and the oil and gas sector exert significant pressure on water quality

Colombia needs to expand national and regional monitoring of water quality, which faces very high pressures in areas with concentrated industrial activities and population centres (Figure 1.8). As of 2022, a quarter of monitoring points were classified as having “bad” water quality, based on the Water Quality Index, Indice de Calidad del Agua. This is based on pH, dissolved oxygen, chemical oxygen demand (COD), total suspended solids, electrical conductivity and total nitrogen/phosphorus ratio (IDEAM, 2023[52]). Industry exerted the greatest pressure on organic pollutants in 2020, accounting for 78% of total COD and 56% of total biochemical oxygen demand. Household wastewater accounts for most of the total suspended solids (75%), phosphorus (92%) and a significant share of nitrogen (46%) (IDEAM, 2023[52]). The oil and gas sector is also a key source of water and soil contamination, with heavy metals prominent in areas of hydrocarbon exploration and extraction (Arias and Andrea, 2017[55]). The potential pressure on water quality is very high in 27 sub-basins mainly in the Caribbean and Magdalena-Cauca areas, according to the Indice de Alteración Potencial de la Calidad del Agua (IACAL). Contamination from pesticide use and mercury, including from illegal gold mining, is also problematic. National and regional water quality monitoring needs to be expanded and provide more granular information on pollutant loads in municipalities and sub-basins (IDEAM, 2023[52]).

Colombia has improved its policy framework for water management, but investment in watershed protection falls short of levels required

Despite improved management, water quality in Colombia has continued to decline. The country has significantly advanced its policy framework for water management, emphasising freshwater ecosystem restoration, watershed protection, water quality standards and improved monitoring. Water resources management is also a key pillar of the NDP 2022-2026, which aims to place water at the heart of territorial planning. Páramos – vital sources of freshwater supply – are more strictly protected as a key strategy for climate change adaptation and mitigation. Extractive activities have been banned in Ramsar wetlands and páramos, with termination of some mining titles in those areas. Other notable developments include the update of the National Policy on Wetlands, the 2015 National Plan for Ecological Restoration, Rehabilitation and Recovery of Degraded Areas. Water quality standards have been strengthened by Resolution 631 in 2015, which defined maximum allowable discharges. The technical guide for Water Resource Management Plans set objectives for water quality and use in 2018, while new quality criteria for wastewater reuse in agriculture were defined in 2021 (Resolution 1256 and 699). Despite a comprehensive regulatory framework for water quality, several factors have contributed to the deterioration of water quality: regulatory shortcomings (due to weak institutions, lack of enforcement and compliance); the influence of interest groups; and increasing pressures from a growing population and economic activity (Tobón-Orozco and Vasco Correa, 2021[56]).

All licensed projects involving freshwater resources in Colombia are legally required to allocate at least 1% of total investment to recover, preserve, conserve and monitor the water source. However, major shortcomings in implementation should be addressed. Allocation of the collected funds is guided by any Watershed Planning and Management Plans (POMCAs) in place. This requirement could raise significant funds to manage water resources, but there are major deficiencies in implementation. A 2021 review identified high levels of non-compliance (43% of projects failed to meet the 1% obligation), legislative gaps (lack of requirement for timely execution of investments) and significant delays in approving compensation plans and execution (ANLA, 2021[57]; Contraloria General De La Republica, 2023[58]). As of February 2022, the total approved value of the 1% investment was COP 605 billion, but only 10% of that amount had been invested. A bill was introduced to Congress to raise the compulsory investment from 1% to 4%. Nevertheless, the deficiencies of the policy must be addressed, including through increased transparency and accountability; strengthened monitoring and enforcement by the National Environmental Licensing Authority (ANLA); and clearer guidelines and requirements for timely execution of investment (Contraloria General De La Republica, 2023[58]).

Progress to expand access to drinking water and sanitation has been slow and disparities in access exacerbate inequality

Progress to improve access to safely managed drinking water and sanitation has stalled over the past decade and Colombia lags behind regional peers. As of 2022, 73.9% of the population had access to safely managed drinking water – a small increase from 71.8% in 2012. This compares to access rates of 98.9% in Chile, 87.3% in Brazil and 80.5% in Costa Rica. The contrast is starker for sanitation. As of 2022, only 18.4% of the Colombian population had access to safely managed sanitation, a marginal increase from 17.1% in 2012. This is far below rates of access in Chile (95.3%), Mexico (62.5%), Peru (57.7%), Brazil (49.6%) and Costa Rica (25.4%) (Figure 1.9).

As in many other countries, the access of urban residents to water supply and sanitation (WSS) far exceeds access of the rural population (Figure 1.9). Most urban areas (88.3%) have water supply coverage greater than 75%, while in rural areas, 54% of municipalities have coverage of less than 45% (Superservicios, 2024[59]). Meanwhile, 79.14% of urban areas have at least 75% sewerage coverage. The situation is dire in rural areas with 73.52% of municipalities with coverage of no more than 30%, and 607 with coverage below 15% (Superservicios, 2024[59]).

Figure 1.9. Access to safely managed drinking water and sanitation lags behind regional peers
Copy link to Figure 1.9. Access to safely managed drinking water and sanitation lags behind regional peers

The share of wastewater treated is relatively low and losses to public water supply are significant, highlighting the need for further investments in improving and expanding infrastructure. While urban areas collected just over 70% of wastewater in 2021, they treated only 31.8%. The NDC 2.0 adaptation target aims to treat 68% of urban domestic wastewater by 2030, more than doubling the current share. There is also a target to reuse 10% of the domestic wastewater treated by public waste service providers by 2030. Based on the indicator measuring water loss per user, the national average of 10.51 m³/subscriber-month in 2022 exceeded the established maximum value (6 m³/subscriber-month) (Superservicios, 2022[60]).

Drinking water quality is a concern in several departments, and many rural areas do not comply with drinking water standards set out in Resolution 2115 of 2007. A national surveillance system to monitor drinking water quality has significant reporting gaps. The national average of municipalities with timely reporting was only 49% in 2024, down from 63% in 2023, with several departments (Caquetá, Chocó, and Vaupés) hardly reporting at all (INS-MINSAL, 2024[61]). Overall, the lack of access to drinking water and sanitation, low levels of wastewater treatment, high water losses in public supply and concerns about drinking water quality underscore the urgent need to increase investments to expand and improve water-related infrastructure.

Public investment in water infrastructure has declined and is far below levels needed

WSS account for most of the public investment in water infrastructure, but overall levels of investment have declined since 2012. In 2019, investment in WSS was only 37% of the peak invested in 2012 (Figure 1.10). Over 2014-2023, Colombia invested 1.53% of GDP in economic infrastructure, about one-third of which was allocated to water (Figure 1.10). Reaching the Sustainable Development Goals on WSS access will require an estimated investment of USD 79.8 billion between 2018 and 2030 (MVCT, 2021[62]). Colombia needs to improve the efficiency of public investment, enhance co‑ordination among a large number of institutions (over 80) in the sector and diversify commercial sources of finance (MVCT, 2021[62]).

Figure 1.10. Public investment in water infrastructure has declined
Copy link to Figure 1.10. Public investment in water infrastructure has declined

While Colombia has several charges to manage water resources, revenues raised fall far short of covering costs. Abstraction and pollution charges are intended to incentivise more efficient water use, reduce pollution and generate revenue for water management. The abstraction charge (“Water Use Fee”) applies to all users. Since 2017, a “regional factor” has been applied to the fee, which reflects water scarcity, investment needs for watershed recovery and the socio-economic conditions of the population. The regional factor is updated annually for each river basin. The water pollution charge (“Retributive Fee”) applies to point source discharges based on total pollutant loads, with a regional factor also applied. In principle, these charges are useful to manage water resources and tailoring fees with the regional factor providing scope to adjust to local conditions. In practice, however, low fees and weak collection rates limit their effectiveness to promote more efficient water use and reduce pollution (World Bank, 2020[63]). Revenue raised only covers a small share of water management costs.

While WSS tariffs have risen, they remain below the OECD LAC average and several regional peers. Between 2011-2024, Colombia nearly doubled water tariffs and increased wastewater tariffs by nearly half (World Bank/IBNet, 2025[64]). Water tariff regulations (Resolution CRA 688 of 2016) aim to ensure financial stability of service providers by allowing them to recover the total cost of the service.12 Direct subsidies to low-income households to cover the basic subsistence cost aim to ensure affordability. In addition, a charge on higher-income households, and commercial and industrial users, helps subsidise low-income households (MVCT, 2021[62]). However, the direct subsidies are poorly targeted and regressive (Pérez-Urdiales and Ramos dos Santos, 2024[65]) and merit reform to better target the most vulnerable population. At the same time, WSS service quality should be expanded and improved to reduce reliance on costly alternative water sources (Pérez-Urdiales and Ramos dos Santos, 2024[65]).

1.2.7. Waste management and circular economy

Colombia’s circular economy ambitions align with global efforts to decouple growth from environmental harm, but stronger action is needed to advance resource efficiency. Per capita domestic material consumption remains relatively low at 7.4 tonnes. Material productivity, at USD 2.3 per tonne, is just below the OECD average (2.9) but higher than most regional peers such as Mexico (1.7), Peru (0.7) and Chile (0.5). Material use increased after the pandemic, primarily due to biomass (60%) and construction minerals (32%) (OECD, 2025[66]). By 2024, 82% of institutional targets under the National Policy for Integrated Solid Waste Management (DNP, 2024[67]) had been achieved, supported by the Green Growth Policy (Table 1.2). Still, challenges remain across the waste cycle. One estimate suggests that circular economy policies could raise GDP by 3.27%, increase employment by 2.9% and reduce GHG emissions by around 3.2% by 2030 (Rodriguez et al., 2023[68]).

Growing waste volumes, uneven collection and gaps in source separation stall progress towards circular economy goals

Solid waste generation rose by 36% between 2012 and 2022 to over 24 million tonnes (Figure 1.11). Colombia’s per capita municipal waste generation (469 kg/year) (Figure 1.11) remains below the OECD average (552 kg) but surpasses regional peers such as Chile (433 kg), Argentina (420 kg) and Costa Rica (325 kg) (OECD, 2023[69]). Waste generation is concentrated in urban areas, with the eight largest cities accounting for 45% of total disposal in 2023 (Superservicios, 2024[70]). Households contributed 55% of non-hazardous waste in 2022. Recent policy efforts, such as the Basura Cero (Zero Waste) programme, regulated by Decree 0670 of 2025, aims to reduce waste, phasing out landfilling and advancing circular economy goals. To date, it has invested nearly COP 119 billion in 12 recovery-focused projects. Ensuring success will require stronger co‑ordination, measurable short- and mid-term targets, and closer alignment with the Green Growth Policy and the National Circular Economy Strategy.

Colombia has made significant strides in reducing waste from single-use plastics (SUPs). It plans to phase out 21 categories of SUPs by 2030, allowing only products that are biodegradable, compostable, fully recyclable or made entirely from domestically sourced recycled materials (MinAmbiente, 2024[71]). The National Excise Tax on plastic bags (2016) and the tax on SUP packaging (2022) support this goal. Collection targets have been set at 25% by 2025 and 50% by 2030 for plastic containers and packaging. In 2023, the Ministry of Environment reported the collection and management of over 111 600 tonnes of packaging and containers under extended producer responsibility (EPR) programmes.

Action	Progress 2021	Progress 2024
2.56. Present before the Congress of the Republic a bill for the integral management of solid waste.	30%	70%
2.57. Define a long-term National Circular Economy Strategy and its comprehensive action plan for the private sector.	100%	100%
2.58. Implement circular economy pilot projects (eco-design, eco-innovation) and/or industrial symbiosis in the prioritised sectors.	30%	100%
2.59. Define basic criteria for the storage and treatment infrastructure location for the recovery of materials and products.	100%	100%
2.60. Establish protocols to promote source separation, collection and transport of materials and products within the circular economy framework.	95%	100%
2.61. Design and implement standard solid waste treatment infrastructure projects with a cycle closure approach.	60%	80%
2.62. Update the National Policy for Sustainable Production and Consumption.	25%	50%
2.63. Publish the Public Procurement Guide with sustainability criteria.	100%	100%
2.64. Train suppliers and entities on the appropriation of sustainability criteria for state purchases and the application of the Public Procurement Guide.	100%	100%
2.65. Incorporate sustainability criteria into the new framework agreements for products offered in the virtual store.	100%	100%
2.66. Formulate the methodological proposal for the material flow account within the framework of DANE’s environmental accounts to measure productivity in the use of materials at the national level.	41%	100%

Note: Colour according to percentage of compliance: 0-25%; 26-50%; 51-75%; 76-100%.

Source: SisCONPES (2024), Sistema de Gestión de Documentos CONPES, https://sisconpes.dnp.gov.co/SisCONPESWeb//AccesoPublico/DocumentosAprobados.

Despite these policy advances, limited and fragmented data remain a major challenge for effective waste management and circular economy planning. Data on waste generation – especially outside manufacturing – are incomplete,13 and weak separation practices hinder understanding of waste composition. Major streams – including construction and demolition waste, agricultural residues, and mining and quarrying by-products – are not fully captured in national datasets. Moreover, current figures on waste generation and recovery include solid waste products not classified as waste under OECD methodology,14 limiting international comparability and performance tracking.

To address these gaps, Colombia has developed new traceability systems, including the Pollutant Release and Transfer Register (RETC), the Environmental Account of Solid Waste Material Flows (CAEFM-RS) and the Circular Economy Information System. RETC reporting becomes mandatory in 2025 for manufacturing, and in 2026 for hydrocarbons, electricity, mining and services (DNP, 2024[72]). Integrating these platforms and aligning methodologies across institutions will be essential to streamline reporting and improve both data quality and consistency.

Strengthening waste separation at source is the next critical step. Decree 1077 of 2015 mandated separation, supported by technical guidelines and awareness campaigns. Resolution 2184 of 2019 introduced a standardised colour-coding system to improve classification and recycling performance (ECLAC, 2021[73]). According to the 2024 Quality of Life Survey (ECV), 53% of households reported sorting waste, with higher rates in urban areas. However, weak co‑ordination and limited infrastructure often result in mixed disposal even when separation occurs, undermining recycling performance and eroding public trust and long-term participation.

Collection coverage remains uneven, particularly in rural areas. While 87% of municipalities report urban collection rates above 75%, rural coverage lags. Nearly 70% of municipalities report rural collection rates below 30% (Superservicios, 2024[59]). As a result, over half of rural households burn their waste, and 17% rely on informal services or illegal dumping (DANE, 2024[74]). Moreover, several municipalities fail to meet the legally mandated minimum collection frequency of twice per week (ECLAC, 2021[73]). Strengthening and expanding selective collection and treatment services – particularly in underserved areas – remains critical. Ensuring the visibility of these services to the public is equally important to sustained household engagement in waste separation practices.

Figure 1.11. Despite growth in solid waste recovery, landfilling remains dominant as waste generation continues to rise
Copy link to Figure 1.11. Despite growth in solid waste recovery, landfilling remains dominant as waste generation continues to rise

Structural and geographic disparities are compounded by sanitation fee systems that are inadequate to support the financial sustainability of waste recovery services. Fees are based primarily on conventional collection and disposal costs, rather than the actual costs of treatment and recovery. For waste picker organisations (OROs), fee revenues only cover up to 16% of operational costs, with 84-100% of income derived from sales of recovered materials (DNP, 2019[76]). This misalignment makes landfilling economically preferable and discourages investment in separate collection (ECLAC, 2021[73]). Although all households must pay a sanitation fee, this charge often fails to reflect the extent of treatment and recovery services provided. Moreover, fee increases – estimated at 18% – have not translated into expanded or improved recovery infrastructure (DNP, 2019[76]).

A comprehensive review of fee regimes is needed to strengthen economic signals. This should include reformulating user fees to reflect service coverage, traceability, and full costs and benefits of waste treatment and recovery. The review should also consider context-specific pay-as-you-throw (PAYT) programmes and allow deductions for revenues from material and by-product sales. International examples may hold lessons for Colombia. Switzerland, for example, combines PAYT with modulated fees based on waste volume and type. This approach illustrates how economic instruments can be aligned with circular economy goals to incentivise source separation and investment in recovery systems (Svatikova, Brown and Börkey, 2025[77]).

Colombia has made initial progress in deploying economic instruments to support waste recovery, most notably through the Incentive for Waste Recovery and Treatment (IAT), introduced in 2019. The IAT functions as a disposal surcharge set at approximately USD 1.5 per tonne. On the one hand, it provides an incentive to reduce waste generation and reliance on landfilling. On the other, it generates funding for recovery projects (Carolina et al., 2023[78]). While modest by international standards, it marks a shift towards linking disposal pricing with recovery objectives.

However, the implementation of IAT is constrained by administrative complexity, outdated territorial planning tools (POTs) and limited eligibility, which depends on whether a municipality's PGIRS includes recovery components. As it is administered locally, revenues also depend on the coverage of waste collection services, limiting resources where investment needs are greatest. Expanding the IAT’s scope and effectiveness – through differentiated rates by waste stream – could attract greater private investment and improve the viability of sorting and treatment systems (Svatikova, Brown and Börkey, 2025[77]). Strong enforcement capacity and robust waste tracking can help avoid unintended consequences such as illegal dumping.

Expanding recovery infrastructure and economic incentives could accelerate the shift from landfilling

With 48% of solid waste still directed to landfills (Figure 1.11), Colombia’s rising waste generation is increasing pressure on already limited disposal capacity. As of 2023, nearly one-third of landfills had less than three years of operational life remaining, and a similar share operated without permits (Superservicios, 2024[70]). Many sites lack biogas capture systems and function as controlled dumps, raising concerns over environmental and public health impacts. Nearly one-third of sites operate without authorisation, most of them located in the Caribbean. While 98% of urban households use formal disposal services, rural populations rely mostly on informal sites (Superservicios, 2024[70]). The government’s landfill regionalisation strategy has helped improved coverage and reduced illegal dumping but is limited by the finite capacity of facilities.

Colombia’s transition from traditional landfilling to more modern approaches is a welcome development, but disposal management could be strengthened for greater effectiveness. The country is adopting Technological and Environmental Parks (PTAs) to address pressures on landfills. PTAs aim to treat and recover over 20 000 tonnes of biodegradable organic waste per facility annually. Landfill closure plans and the expansion of PTAs offer an opportunity to implement nature-based adaptation measures and climate change mitigation actions – such as those promoted under the NAMA on municipal solid waste – and accelerate the shift towards more sustainable waste treatment. Effective disposal management will require real-time monitoring, proactive planning and strengthened emergency response systems.

Organic waste represents nearly 61% of urban solid waste in Colombia, yet the country still lacks a consolidated strategy, reliable data and adequate infrastructure for its management (ECLAC, 2021[73]). Colombia has made progress to improve urban solid waste management. Recent advances include the Deperdicio Cero initiative (FINAGRO, 2024[79]), the 2022 Action Plan for Sustainable Biomass Management and agroecological policies promoting bio-inputs under the National Agroecology Programme. However, the absence of consistent organic waste tracking limits the design and implementation of effective recovery policies and reinforces reliance on landfilling. A partial landfill ban on organic waste – once supporting conditions are in place – could help divert biodegradable waste towards energy and agricultural uses.

To address food loss and waste, the regulatory framework has been strengthened through several key instruments. Decree 375 (2022) establishes mandatory measures across the agriculture and fisheries sectors integrated with rural development frameworks. Experimental statistics are available for wholesale and retail (including traded food), as well as manufacturing. Agricultural data, including on pre-harvest losses, are expected to follow. In addition to compiling information both in volume and pesos equivalent, the National Administrative Department of Statistics (DANE) reports data on the fate of food losses, i.e. amounts recovered through composting or energy recovery. DANE also tracks flows diverted from waste streams such as through food donation or transformation into animal feed. Continued efforts are required to expand statistical coverage to other stages of the value chain, including transport, storage and households. This comprehensive tracking represents good practice in food waste statistics and could serve as a model for other countries aiming to strengthen the evidence base for circular economy and food security policies.

As of 2022, Colombia’s recycling rate reached 16%, nearing the Green Growth Policy’s 2030 target of 17.9% (Figure 1.11). Incineration with energy recovery accounts for 30% of treated waste. While the country has set a target to increase biomass recovery by 20% by 2030, progress remains limited; biogas, primarily from sugarcane bagasse and municipal waste, contributes just 1.1% of national energy capacity (CONPES, 2023[80]). Achieving this goal will require better integration with land-use planning and stronger support for local infrastructure development.

However, recovery operators continue to face operational challenges, limited capacity and restricted access to financial resources, particularly when dealing with complex or hazardous waste (Box 1.3). Among municipalities with waste recovery, 96% have approved Municipal Solid Waste Management Plans (PGIRS), underscoring their key enabling role (ECLAC, 2021[73]). Nonetheless, 39% of municipalities lack updated PGIRS, which are often underused for regulatory and evaluative purposes (DNP, 2019[76]). The ongoing update of PGIRS under Decree 0670 (2025) is expected to improve alignment with Basura Cero objectives and expand recovery system implementation.

Formalisation efforts spearheaded by the Ministry of Housing, alongside ANDI’s Visión Circular and the expansion of Classification and Recovery Stations (ECAs), have enhanced informal recyclers’ integration into waste value chains and improved their working conditions. As of 2023, over 1 100 OROs were formalised, with more than 74 000 affiliated recyclers registered. Adoption of Decree 1381 of 2024, a key milestone, grants OROs exclusive rights for recovery activities within the Public Cleaning Service, further strengthening their legal recognition.

Despite progress towards formalisation, challenges remain, including incomplete registry oversight, gaps in labour formalisation, unreliable census data, limited traceability of recovered materials and insufficient funding. In addition, a sharp drop in PET prices, restrictive collection routes and fragmented governance – including competition for recyclable materials – have further weakened recyclers’ livelihoods and access to inputs. The persistence of a large informal sector highlights the urgent need for better integration, equitable remuneration, improved waste separation in residential areas, stronger government monitoring, and unified legal and governance framework. A bill on comprehensive solid waste management under discussion in Congress could provide a more coherent foundation. It could also help align ECAs, PGIRS, sanitation services and EPR programmes to boost the efficiency and sustainability of Colombia’s recycling system.

The expansion of EPR programmes, primarily through six mandatory post-consumer programmes, has driven progress in Colombia’s circular economy. These programmes cover priority waste streams, including packaging, hazardous waste, and electrical and electronic equipment (EEE). They have attracted over COP 178 billion in private investment since 2012, supporting development of collection and treatment infrastructure. The Visión Circular post-consumer programme alone recovered more than 214 000 tonnes of waste between 2021 and 2024, representing 26% of the national annual recovery target of 830 000 tonnes by 2030 (ANDI, n.d.[81]). Overall, waste collected and treated under EPR programmes has steadily increased, with lower recovery in some streams, such as pesticides and packaging, reflecting higher recycling rates (ANLA, 2024[82]).

In 2025, a newly introduced pilot for a voluntary EPR programme for textiles offers a platform for early innovation. Its transition to a mandatory post-consumer programme will be essential to secure long-term investment, ensure compliance, expand recovery infrastructure and create a level playing field (Ellen MacArthur Foundation, 2024[83]). This expansion must be carefully aligned with the sector’s capacity to implement and comply with EPR obligations across the entire value chain.

Enhancing Colombia’s EPR programmes calls for the gradual rollout of economic instruments tailored to the maturity and characteristics of each product sector. For advanced streams like EEE, modulated fee structures – including bonus-malus systems – can incentivise eco-design, product durability and reparability, drawing lessons from France and Chile (Brown, Laubinger and Börkey, 2023[84]). In less mature sectors, simpler tools such as advanced disposal fees can help internalise end-of-life management costs and lay the groundwork for more comprehensive EPR systems. Colombia has introduced fiscal incentives to complement EPR initiatives. For instance, Decree 2143 offers a reduced value-added tax (VAT) rate of 5% to consumers for trading in old refrigerators compared to the standard 19%, incentivising responsible disposal and adoption of more efficient appliances (Clerc et al., 2021[85]). Broadening targeted tax measures – such as exemptions, deductions or credits for repair services, eco-design or recycled material use – can provide strong market signals, foster innovation and facilitate the transition to circular business models (Svatikova, Brown and Börkey, 2025[77]).

Box 1.3. Tackling Colombia’s chemical and hazardous waste challenge

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The generation of hazardous waste in Colombia rose by 226% between 2012 and 2018, reflecting its close link with industrial growth, particularly in the oil sector. Between 2018 and 2023, it increased by 113%, with annual growth ranging from 8-25% partly driven by a sharp rise in annal reporting. Key waste streams – hydrocarbons, healthcare waste, used lubricating oils and lead-containing materials – represent around 70% of total hazardous waste (RESPEL). Progress has been made, including a ten-fold increase in licensed waste management facilities from 23 to 264 between 2005 and 2025.

Colombia has significantly strengthened its regulatory framework for hazardous waste and chemical management, in line with its OECD accession commitments. Recent milestones include the update of the Integrated Management Policy for Hazardous Waste (2022) and its Action Plan 2022-2030, which follow the waste hierarchy and circular economy principles, the issuance of new healthcare waste standards and pilot projects to promote recycling and recovery alternatives for hazardous waste. New chemical management legislation has enhanced risk prevention, including establishment of a national inventory of chemical substances; safety management protocols for major accidents; and procedures for facility registration and incident reporting. Moreover, hazardous waste collection and management systems have been implemented based on EPR principles, such as for WEEE.

On transboundary movements of waste, MinAmbiente Resolution 1519 adopted in October 2025 aligns Colombia’s regulations with OECD Decision OECD/LEGAL/0266, a welcome development. The new regulation introduces updated control measures for exports, imports and transit of wastes destined for recovery operations while maintaining the constitutional ban on imports of most categories of hazardous waste.

The country also adopted the Pollutant Release and Transfer Register (PRTR) and has expanded implementation of the Globally Harmonised System across workplaces, pesticides, transport and consumer products. As Colombia does not yet have a dedicated hazardous waste traceability system, it could leverage the PRTR as a supporting mechanism.

Despite this progress, challenges persist. In 2023, 24% of RESPEL was eliminated in security cells, 64% was treated and 12% was recovered. Institutional co‑ordination and commitment to hazardous waste management have strengthened over the past two decades. However, some institutional fragmentation, limited enforcement capacity, poor source separation and incomplete monitoring continue to hinder effective implementation. To strengthen chemical and hazardous waste management, Colombia should accelerate implementation and use of its PRTR – the National Inventory of Industrial Chemical Substances – to improve characterisation, and continue implementation of related action plans. At the same time, it should enhance public awareness and targeted stakeholder training. Introducing economic instruments – such as targeted tax incentives for recycling – would support achievement of the hazardous waste action plan targets and encourage greater private sector participation.

Source: MinAmbiente (2022[86]), Política Ambiental para la Gestión Integral de Residuos Peligrosos y Plan de Acción 2022-2030; CONPES (2023[80]), Documento CONPES 4129: Política Nacional de Reindustrialización.

1.3. Improving environmental governance and management

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1.3.1. Strengthening the regulatory framework for environmental management

Colombia should swiftly conclude reforms to expand the coverage of its environmental licensing regime and address gaps related to legacy projects

Colombia has progressively strengthened its environmental licensing regime and committed to expanding coverage of projects with significant impact on the environment to align with the OECD Council Recommendation on the Assessment of Projects, Plans and Programmes with Significant Impact on the Environment (OECD/LEGAL/0172). However, key economic sectors and activities that could have significant environmental impacts, such as food and beverage production, textile manufacturing, pulp and paper industry and mining exploration, are not yet included in the licensing regime. This represents an important gap and should be swiftly addressed by pursuing the required reforms. While environmental licensing has been streamlined, many procedures remain complex and costly, with long processing times. This makes it especially difficult for small and medium-sized businesses to navigate the process (CONPES, 2018[38]; CONPES, 2023[80]).

Despite some improvements, a major gap remains for projects governed by a transition regime, which applies less stringent requirements than current regulations. There are 621 large-scale legacy projects (including 441 in mining) operating without updated licences and not subject to current environmental standards. This increases environmental risk due to inadequate evaluation and control measures (SIEMBRA – Centro Sociojurídico para la Defensa Territorial, 2023[87]).

In the context of decentralised environmental governance in Colombia, licensing authority is shared between ANLA at the national level, CARs at the regional level, and certain large municipalities and urban areas. Project scale and location determine selection of the relevant authority. MinAmbiente has established co‑ordination mechanisms to enhance regional dialogue and promote policy integration across CARs and government departments. These efforts include facilitating co-ordination, training and technical assistance to strengthen environmental governance. MinAmbiente has strengthened its monitoring of the CARs. An annual comprehensive management report, for example, includes an Institutional Performance Evaluation Index that monitors response time for licences. Periodic assessments using pollution and risk reduction indicators are needed to strengthen progress tracking towards environmental policy objectives and enhance effectiveness of the environmental licensing process. These assessments should include clear metrics evaluating the environmental performance of licensed projects, works and activities (POAs) at both national and regional levels.

The requirement to evaluate alternatives in EIAs should be adopted and consistently applied

Colombia has committed to requiring alternatives in environmental impact assessment (EIA) for POAs. EIAs are the core instrument to assess POAs requiring a licence. Of the 38 POA categories, only 42.1% require an environmental diagnosis of alternatives (DAA). The DAA is a preliminary assessment of alternatives to execute a project (in terms of design, location and a “zero alternative”), identifying options with lower environmental risk. The general methodology for environmental impact studies (MGEPEA) required for all POAs was updated in 2018, with a revised version released for public consultation in 2024. The latest version, aligned with Colombia’s commitments to the OECD, unifies concepts, methods, procedures and guidelines for information collection. It requires an evaluation of alternatives in design, technology and location for projects in cases where a DAA was not required. If projects may have transboundary effects, neighbouring countries must be notified.

The economic evaluation of project alternatives must be applied consistently. Both EIAs and DAAs must include an economic evaluation of the positive and negative impacts of project alternatives based on cost‑benefit analysis (CBA) and multi-criteria analysis. However, the valuation of non-market environmental benefits in CBA depends on the selected social discount rates and potential stakeholder bias in assumptions, which can affect the consistency of results. To address this, Colombia should adopt official reference values for CBAs, specifying marginal external costs for non-market prices (e.g. social cost of GHGs) and standardised discount rates, as is common practice in other OECD Member countries. For instance, the United Kingdom published updated damage costs per tonne (£/t) for five air pollutants (UK GOV, DEFRA, 2023[88]); the US Environmental Protection Agency publishes reports on the social cost of GHGs (US EPA, 2023[89]). Other countries that apply similar standardised CBA methods include Canada (Government of Canada, 2023[90]), Israel (OECD, 2025[91]) and Australia (NSW EPA, 2021[92]). A manual with recommended methodological guidelines for CBA has been published, representing an important step towards standardised practices in project evaluation. Colombia should establish a clear legal requirement for strategic environmental assessment.

Colombia has made effective use of strategic environmental assessment (SEA) in certain cases, but the practice remains ad hoc. MinAmbiente has led SEAs in multiple sectors, including transport, mining and energy, agriculture, tourism and environmental health. Regional SEAs have also been developed for areas such as the Pacific, Caribbean, northwestern Amazon and Altillanura. Notable examples include the 2016 SEA for the Master Plan for Intermodal Transport, which provided sustainability recommendations; the 2017 SEA for the Caribbean agricultural sector to improve ecosystem services; and the 2019 SEA for the northwestern Amazon, which proposed sustainable land-use models and deforestation mitigation strategies.

SEAs should be mandatory to support more consistent application and more sustainable outcomes. Despite the positive contributions of SEAs, they are not legally required in Colombia. Yet, international experience highlights the benefits of a robust and consistent approach to SEA. In the European Union, for example, the SEA Directive is a key pillar of environmental legislation. SEAs influence the final content of plans and programmes, including siting, design and implementation of projects. The impact varies by the type and governance level of the plan or programme (e.g. national, regional, local). A 2019 assessment found that it significantly contributes to environmental protection through effective consultations, informed by CBA (European Commission, 2019[93]). Colombia should establish a clear legal requirement for SEAs to promote consistent application across all sectors and governance levels. This would lead to better integration of environmental considerations into development planning and support more sustainable outcomes.

Best available techniques should guide permitting standards and be updated regularly

Colombia has better integrated the environmental permitting system, but multiple permits are still required for specific activities, creating overlap and inconsistency. The Environmental Licence is the main permit for any POA with significant environmental impacts. Once granted, it remains valid for the duration of the POA and covers all project phases – from construction, assembly, operation and maintenance to dismantling, final restoration and closure. It also implicitly includes all related permits, authorisations and concessions for the use of renewable natural resources (ANLA, n.d.[94]). However, several permits are still required for specific activities such as hazardous waste management and disposal, electricity production, forest exploitation, groundwater and surface water concessions, and air emissions among others.

To improve consistency, ANLA’s Minimum Obligations Instrument, launched in 2020, set baseline requirements across all project phases. General binding rules, such as Resolution 909 (2008) for air pollution from stationary sources, define applicable activities, pollutants and emission limits for both existing and new installations. However, emission standards set in Resolution 909 do not reflect BAT. BAT standards aim to ensure that industries adopt the most advanced and efficient technologies to reduce emissions, thereby limiting the release of harmful pollutants into the air, water and soil. Indeed, a selected comparison of emission standards for various activities against BAT-based standards highlights a significant gap in advanced control measures (Table 1.3). For example, compared to the EU BAT for cement kilns, Resolution 909 sets weaker standards for SO₂, NO_x, PM, hydrochloric acids and hydrogen fluoride, dioxins, furans and metals (GoC, 2008[95]; European Union, 2013[96]).

	SO₂ (mg/Nm³)*		NOx (mg/Nm³)*		Mercury (mg/Nm³)*
	COL Resolution 909**	BAT conclusions (EU)***	COL Resolution 909	BAT conclusions (EU)	COL Resolution 909	BAT conclusions (EU)
New facility	2 000	25-220	600	80-200	None	1-3
Existing facility	2 800	25-400	760	85-330	None	1-9

Note: *Reference condition 6% O₂; daily average.

** emission standards for thermal power plants with an installed capacity ≥20 MW.

*** BAT conclusions, under Directive 2010/75/EU for large combustion plants (>50 MWth). The range of emission limits depends on thermal input and technology.

Source: GoC (2008[95]), Resolution Number (909) June 5, 2008; Ministerieo de Ambiente, Vivenda y Desarrollo territorial, https://www.minambiente.gov.co/wp-content/uploads/2021/08/resolucion-909-de-2008.pdf; EU (2021[97]), Commission Implementing Decision (EU) 2021/2326 of 30 November 2021 establishing best available techniques (BAT) conclusions, under Directive 2010/75/EU of the European Parliament and of the Council, for large combustion plants (notified under document C, https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32021D2326.

To strengthen the licensing and permitting system, Colombia should adopt a BAT-based approach. This would include setting BAT-based permit conditions with emission limit values, technical and maintenance requirements, monitoring and reporting obligations, and resource efficiency measures, as well as implementing environmental management systems (Box 1.4). A focus on decarbonisation and resource efficiency would improve environmental outcomes and contribute to climate targets, while promoting adoption of emerging technologies. BAT standards should be periodically reviewed to reflect technological advancements. Inspection and enforcement systems can be strengthened through regular quality assurance checks to verify compliance, identify implementation gaps and address improvement needs from field-level regulators and inspectors.

Box 1.4. BAT-based licensing for industry: Demonstrated benefits

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BAT can upgrade industrial operations, making them greener, more resource efficient and cost effective

BAT promotes state-of-the-art techniques for preventing and controlling industrial emissions, implemented under economically and technically viable conditions. BAT Reference Documents (BREFs) provide the basis for legally binding permit conditions. They determine technical, design and operational approaches as BAT, as well as quantitative emission and performance standards. In the past decade, many countries have implemented BAT-based emission standards, incorporating abatement techniques and monitoring requirements. Those with existing standards are updating their BREFs to reflect technological advancements and operational improvements.

EU experience with BAT: A key driver for the EU zero-pollution ambition

The EU Industrial and Livestock Rearing Emissions Directive (2010/75/EU or “IED 2.0”) is the main tool to reduce emissions and prevent waste from large industrial installations and intensive livestock farms. National authorities grant permits under this directive. BAT Conclusions become legally binding within four years. Permits must include emission limits and binding quantitative resource efficiency requirements for materials, water and energy. To ensure compliance, competent authorities must conduct harmonised environmental inspections on site at least every one to three years, depending on risks levels.

The OECD BAT Project, initiated in 2015, provides a forum to share best practices in BAT implementation, promotes peer to peer learning, technical capacity building and guidance on effective pollution control measures.

Source: OECD (2023[98]), The future of best available techniques in industrial pollution prevention and control, https://www.oecd.org/en/events/2023/11/future-of-best-available-techniques-in-industrial-pollution-prevention-and-control.html; OECD (2024[99]), Activity 7: Cross country analysis of BAT and BAT-associated emission and environmental performance levels in iron and steel, paper and pulp, and waste incineration industries, https://www.oecd.org/content/dam/oecd/en/publications/reports/2024/09/best-available-techniques-bat-for-preventing-and-controlling-industrial-pollution-activity-7-cross-country-analysis-of-selected-brefs-for-iron-steel-paper-pulp-and-waste-incineration-se; European Commission (2025[100]), Industrial and livestock rearing emissions directive (IED 2.0), https://environment.ec.europa.eu/topics/industrial-emissions-and-safety/industrial-and-livestock-rearing-emissions-directive-ied-20_en.

1.4. Enhancing policy coherence for green growth

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1.4.1. Greening the system of taxes and subsidies

Colombia would benefit from a comprehensive tax reform that includes more environmental taxation and fewer subsidies

Successive tax reforms have helped Colombia increase tax revenue in the last decade (OECD, 2024[8]). In 2023, total tax revenues were 22% of GDP, in line with the LAC region average of 21%, but well below the OECD average of 34% (OECD et al., 2025[101]).15 Weak receipts are due to a large informal economy, low personal income taxes, high tax evasion and numerous tax expenditures. The system is skewed towards taxes on consumption and corporate income (Figure 1.12, panel B). This constrains entrepreneurship, while complexity and disparities in tax treatment across sectors foster job informality (OECD, 2024[8]). The 2022 tax reform improved progressivity, but the redistributive performance of Colombia’s tax system remains weak (OECD, 2024[8]).

As in most other LAC countries, revenue from environment-related taxes is low in Colombia.16 In 2022, it contributed 2.7% of total tax revenue, well below the OECD average of 4.3% (Figure 1.12, panel B). In 2023, revenue from environment-related taxes was only 0.6% of GDP, the lowest share among OECD countries and below the LAC average of 0.9% of GDP (OECD et al., 2025[101]) (Figure 1.12, panel A). Most receipts came from the excise duty on fuels and, to a lesser extent, vehicle taxes. Colombia is one of the few LAC countries to have implemented a carbon tax and plans to introduce an emissions trading system (ETS) (see below).

The 2022 tax reform took steps to better integrate environmental considerations into the tax system, such as strengthening the national carbon tax (see below) and introducing a national tax on SUP packaging (Section 1.2.7). Other taxes apply to plastic bags (Section 1.2.7), water discharges (Section 1.2.6) and forestry products (Chapter 2). The revenue from taxes on pollution and resource management, however, remain negligible (Figure 1.12, panel A). Revenue from pollution and resource fees finances the SINA and is mostly transferred to CARs.17

Figure 1.12. Revenue from environment-related taxes is the lowest in the OECD
Copy link to Figure 1.12. Revenue from environment-related taxes is the lowest in the OECD

Colombia has traditionally favoured granting tax benefits for environmental purposes as opposed to taxing environmentally damaging activities. This reflects its general approach to taxation, characterised by a systematic over-use of tax expenditures (exemptions, non-standard deductions, credits, reduced rates and deferrals), many of which are poorly targeted (OECD, 2022[102]).18 The government provides a wide range of environmentally motivated tax benefits. These include corporate income tax discounts to support business investment in environmental management, energy efficiency and renewable sources, lower VAT on EVs, VAT exemptions on equipment for environment-related projects and property tax exemptions for landowners who undertake nature conservation activities (MFPC and IDB, 2024[103]). While these tax benefits aim to encourage environment-friendly investment and consumption, they reduce revenue, entail higher administrative costs and distort resource allocation. In practice, they are frequently captured by large companies that do not need financial support and can more easily navigate complex application processes.

Colombia should improve coherence of its environmental tax and benefit system. The country’s approach to introducing environment-related fiscal instruments has been piecemeal, much like its broader approach to tax reforms. The environmental effectiveness, economic efficiency and social fairness of environment-related taxes and fiscal incentives are unclear (MFPC and IDB, 2024[103]). Colombia should conduct a comprehensive review of environment-related taxes at all levels of government, as outlined in the 2024 Comprehensive Climate Change and Biodiversity Management Plan for Fiscal and Financial Policy (PIGCCSH+B). Such a review should also cover environmentally motivated fiscal incentives and fiscal instruments that may run counter to environmental objectives – primarily fossil fuel subsidies (see below). This review should inform an analysis of the environmental, social, fiscal and economic effects of environment-related fiscal instruments. This would help identify reform priorities and develop a tax and subsidy reform plan in consultation with relevant stakeholders. Such a plan should outline a stepwise phase-out of inefficient tax breaks and harmful subsidies, along with measures to support vulnerable households and help businesses adapt during the transition (Elgouacem, 2020[104]).

Reforming fossil fuel subsidies and improving environment-related taxes and benefits should be an integral part of a much-needed comprehensive tax reform. This would be in line with the NDC 2.0 and the 2021 Climate Action Law, which set the objective of strengthening fiscal incentives for sustainable development and climate mitigation (Box 1.1). The tax reform should rebalance the tax burden, simplify the tax system and combat tax evasion, with a view to increasing revenue, improving progressivity and stimulating entrepreneurship and investment (OECD, 2024[8]).

Reforming fossil fuel subsidies and energy and vehicle taxes (see below) would incentivise energy efficiency and cleaner fuels and vehicles, as well as a shift to public transport and active mobility. This, in turn, would help tackle emissions of GHGs and air pollutants from road transport, a major source of emissions (Section 1.2.4 and 1.2.5). There is also room for redesigning taxes and fees related to water and forestry, as well as for using their revenue more effectively (MFPC and IDB, 2024[103]) (Section 1.2.6; Chapter 2). Colombia could also introduce taxes on resource use and pollution. These could target air emissions from energy and industrial plants, which are a major source of emissions of SO_x and other pollutants (Figure 1.7). Colombia could also consider taxing chemical fertilisers and pesticides, which are intensively used (Chapter 2). Removing inefficient tax expenditure and fossil fuel subsidies would also improve spending efficiency (OECD, 2024[8]).

Part of the revenues from new or increased environment-related taxes, as well as from removal of inefficient environmentally motivated tax benefits and harmful subsidies, should target low-income households and the most affected economic sectors to mitigate the impact of higher prices. This would improve social acceptability of the reforms (Dechezleprêtre et al., 2025[105]). In many countries, transferring a third of the additional revenues to poor households through means-tested benefits is sufficient to mitigate energy affordability risk linked to higher taxes on fuels (Flues and van Dender, 2017[106]). Compensation through preferential tax rates should be avoided as it undermines the price incentive.

Colombia’s practice of earmarking revenue from green taxes to fund environmental projects helps ensure that resources support environmental objectives, but it may undermine fiscal sustainability. The 2022 tax reform increased the carbon tax revenue share allocated to environmental initiatives from 50% to 80%. It also established the Fund for Life and Biodiversity to manage these resources (Chapter 2).19 Revenue from the planned ETS will also be allocated to this Fund. The governance of the Fund for Life and Biodiversity aims to ensure traceability, budget co‑ordination and execution efficiency. However, like all earmarking mechanisms, ring-fencing carbon tax and ETS revenue to special purpose funds can reduce fiscal flexibility and efficiency of public spending, while further fragmenting the country’s budget. It also makes funding of environmental investment dependent on continued revenue from taxing fossil fuels or pricing GHG emissions, which conflicts with climate mitigation objectives. Such earmarking arrangements should be clearly communicated and periodically reassessed in a transparent way (Marten and van Dender, 2019[107]), with a focus on their environmental effectiveness and fiscal sustainability. Colombia should reinforce and clarify the methodology for monitoring, reporting and verifying emission reductions achieved by initiatives financed by carbon pricing revenue. It should also develop a strategy to gradually decouple environmental investment funding from carbon pricing revenue as the net-zero transition advances.

Efforts to remove support to fossil fuel consumption should continue in earnest

Colombia should reform and gradually remove fossil fuel subsidies as a priority. The country has long subsidised energy use for transport and residential purposes, primarily to stabilise fuel prices and address energy affordability concerns. These subsidies run counter to climate mitigation objectives and weigh on public finances. In addition, they are socially unfair, as they largely benefit higher-income households and contribute little to reducing income inequality (Baquero, Davalos and Monroy Barragan, 2023[108]). However, vested interests and social concerns are major barriers to reform fuel subsidies, along with generous tax breaks.

Subsidies to energy utilities to keep electricity and gas prices low should be removed and replaced by means-tested cash transfers to preserve the energy price incentive. At a minimum, such price discounts should be better targeted. Households in low-income categories benefit from lower electricity and gas prices. These are financed by a 20% surcharge on households in higher-income categories and commercial and industrial users.20 However, socio-economic categories (so-called estratos) are based on proxies such as dwelling and neighbourhood quality and not actual household income. In addition, many municipalities fail to update the estratos, which can date back 30 years (IEA, 2023[14]). As a result, 90% of households pay electricity prices and 60% pay gas prices below cost-recovery levels. Further, one-third of electricity price subsidies benefit households in the top four income deciles (IEA, 2023[14]; OECD, 2024[8]). As the surcharge is insufficient to cover the cost to utilities, the government fills most of the difference at high fiscal costs (0.8% of GDP in 2022) (OECD, 2024[8]). The improved household social registry (Sisbén) would provide a sounder basis for accurately identifying low-income households, enabling more targeted support through discounted energy prices or, preferably, direct cash transfers (OECD, 2024[8]). This, in turn, would help build public trust and political legitimacy for subsidy reform.

In a much welcome development, the government eliminated petrol subsidies in 2023. More recently, it also cut diesel subsidies for large consumers,21 although these subsidies remain substantial. Prior to these reforms, Colombia’s fuel price stabilisation mechanism (Fondo de Estabilización de Precios de los Combustibles or FEPC), introduced in 2007, compensated fuel suppliers for differences between domestic and international prices of petrol and diesel without passing them on to final consumers (OECD, 2023[109]). In practice, fuel users were subsidised (paid fuels below costs) when global oil prices were high, which undermines the incentive function of fuel prices (and taxes). The fiscal cost of these subsidies has burdened the national budget over the years. With increasing global energy prices and unfavourable exchange rates, it reached 2.5% of GDP in 2022.22 This prompted the government to gradually adjust petrol prices and fully link them to the international market. As a result, the petrol price more than doubled and the fiscal cost of subsidies dropped to 1.3% of GDP in 2023.

Colombia should follow through with its plan to phase out diesel subsidies. Estimates indicate that linking the diesel price to its international level could bring fiscal savings of 0.5-0.7% of GDP by 2025 (IMF, 2024[110]; MHCP, 2024[111]). However, political and stakeholder resistance has been slowing diesel subsidy reform. Colombia’s dependency on road transport gives freight transport operators strong bargaining power and the ability to resist policy implementation through strikes, as past experiences have demonstrated (Böhl Gutierrez, Vega Araújo and Arond, 2024[112]).

In the short term, Colombia should restart stakeholder dialogues on phasing out diesel subsidies, involving key actors from various ministries and the transport sector. Based on these discussions, the government should develop a co‑ordinated action plan that includes support measures for the transport sectors (e.g. for energy efficiency and improved logistics) and targeted programmes to support vulnerable households. In the medium term, Colombia should restructure and modernise its freight transport sector to reduce reliance on road transport (Böhl Gutierrez, Vega Araújo and Arond, 2024[112]). At the same time, ending diesel subsidies would make more sustainable transport modes more competitive.

Energy and carbon taxes provide weak incentives to shift away from fossil fuels and towards cleaner vehicles

Energy taxes and the carbon tax are the main instruments to reflect the social costs of fuel use in Colombia.23 They broadly apply to liquid fuels, while solid fuels and natural gas remain largely untaxed. Low nominal rates along with several discounts and exemptions reduce the incentive for energy savings and fuel switching, as well as revenue generation. As a result, tax revenues from energy use were 0.4% of GDP in 2023, the lowest among OECD countries (Figure 1.12).

As in other OECD countries, Colombia’s fuel taxes do not fully reflect the social costs of fuel use. These include costs associated with emissions of GHGs and local air pollutants, as well as accidents and congestion for road fuels (Black et al., 2024[113]). For instance, energy tax rates on diesel and regular petrol (used in old vehicles) are 50-52% of those on petrol extra (used in modern vehicles), despite the higher carbon content of diesel and emissions of local pollutants from diesel and older petrol vehicles.24 This diesel tax discount is common to most other OECD and Latin American countries. However, it remains unjustified on environmental grounds (OECD, 2022[114]), as is the lower tax on regular petrol. The diesel tax discount is also regressive, as it primarily benefits wealthier households that own diesel vehicles, as well as freight operators. In addition, Colombia still regulates and subsidises pre-tax diesel price (see above), keeping its total retail price (including taxes) far below that of petrol.25 While removal of diesel price subsidies should be prioritised, Colombia should also gradually increase the excise duty rate on diesel and regular petrol to at least match that on petrol extra. This would encourage a shift towards newer, potentially cleaner vehicles.

Colombia’s carbon tax (Impuesto Nacional al Carbono) has been in place since 2017. It applies to most uses of liquid fuels, as well as selected industrial uses of solid fuels and natural gas, although several fuel uses are exempt (OECD, 2024[115]).26 The 2022 tax reform extended the carbon tax to coal sales, starting at 25% of the standard tax rate in 2025 and progressively increasing this share to reach the full carbon tax rate in 2028.27 In line with international best practice, Colombia initially set the carbon tax rate at a low level and gradually raised it according to a pre-determined formula.28 By 2025, the rate had reached COP 27 400 (about USD 7) per tonne of CO₂. However, this is still well below estimated climate-related costs (OECD, 2024[116]),29 and below rates of other similar-income countries (World Bank, 2025[117]).

Colombia’s carbon tax system is one of the few in the world permitting carbon offsets to fulfil tax obligations.30 The so-called non-causation mechanism (mecanismo de no causación) allows regulated entities to avoid paying part of the tax by offsetting CO₂ emissions through verified domestic emission mitigation projects and surrendering the corresponding carbon credits.31 This hybrid approach can extend incentives to sectors not directly targeted by the tax but able to generate carbon credits (such as land-use sectors). At the same time, it can reduce the compliance cost of regulated entities. This, in turn, can make the carbon tax more politically and socially acceptable (Wang-Helmreich and Kreibich, 2019[118]).

The carbon tax offsetting mechanism has helped develop a voluntary carbon credit market. In 2018-2022, Colombia was one of the largest suppliers of carbon credits among developing countries (Wetterberg, Ellis and Schneider, 2024[119]). The mechanism has also helped engage the business community, particularly large companies, in emission reduction efforts (World Bank, 2020[120]). More than 121 million tonnes of CO₂ were offset in 2017-2024, mostly through forestry and land-use projects (MinAmbiente, 2025[121]), while providing finance to ITTs, as well as ethnic, peasant and local communities, that implement emission reduction projects.

However, the non-causation mechanism further weakens the carbon tax price signal, along with its cost effectiveness and revenue potential. As a result of the offsets, the price signal from the carbon tax is not fully passed on to final consumers. This lowers the incentives to reduce fossil fuel use or to shift to low-carbon energy sources, technology and processes, undermining the core purpose of a carbon tax. This could ultimately lead to carbon lock-in (Wang-Helmreich and Kreibich, 2019[118]). The regulated entities have an incentive to buy carbon credits that are cheaper than the tax. As cheaper credits often come from projects with low mitigation impact, the government is potentially over-subsidising emission reductions with high fiscal revenue losses: over half of the carbon tax revenue was lost due to the offsets in 2021-2024 (MinAmbiente, 2025[121]). Forgoing carbon tax revenue also implies fewer resources for the Fund for Life and Biodiversity, which receives most of the tax proceeds. In addition to the non-causation mechanism, Colombia employs a range of policy instruments to support climate and biodiversity goals in the forestry and land-use sectors, which can generate carbon credits (Chapter 2). This overlap heightens the risk of double counting and double financing of projects that would have proceeded without additional public support.

Colombia has made progress in developing a national system for environmental and social safeguards for carbon credits, but several implementation challenges remain (GFI, Transparency for Colombia and CEALDES, 2025[122]). As in many other carbon credit markets worldwide, there are concerns that a considerable portion of carbon credits come from low-impact projects. As such, many credits may not correspond to additional emission cuts – i.e. those emission reductions would have occurred also in the absence of the non-causation mechanism (Wang-Helmreich and Kreibich, 2019[118]; Castiblanco Rozo, 2022[123]).32 Most carbon credits generated in Colombia come from independent carbon crediting mechanisms, with limited government oversight on the underlying emission reduction activities (Wetterberg, Ellis and Schneider, 2024[119]).33 In addition, most such mechanisms have not been assessed against international quality benchmarks such as the Paris Agreement Crediting Mechanism (PACM), the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) or the Integrity Council for the Voluntary Carbon Market (ICVCM) (Gómez, 2024[124]). Offsets must be verified by accredited auditors, comply with the national system of monitoring, reporting and verification (MRV) and be registered in the National Greenhouse Gas Emission Reduction Registry (RENARE). However, the registry was largely inactive until mid-2024;34 the administration does not verify registered information; and there are no sanctions for non-compliant projects. This has limited access to key project information and hindered transparency, making it difficult to verify project credibility and integrity, and potentially undermining foreign investment (GFI, Transparency for Colombia and CEALDES, 2025[122]). It also increases the risk of double counting and carbon tax evasion (Gómez, 2024[124]).

Therefore, Colombia should further strengthen the environmental integrity safeguards of the carbon tax offset system and its monitoring and enforcement capacity.35 At a minimum, the government should encourage improvements in the quality of carbon offsets by requiring that all offset-generating mechanisms align with CORSIA’s programme-level assessment. It could also specify a timeline for carbon crediting mechanisms and projects to meet more stringent requirements under ICVCM or PACM. This would significantly enhance the effectiveness of the non-causation mechanism at limited administrative costs. It would also promote investment in higher-impact mitigation projects. This, in turn, would increase the quality of carbon credit supply in the medium to long term (Wetterberg, Lanzi and Gómez, 2025[125]).

Along with stricter environmental safeguards, lowering the permitted share of offsets would help strengthen the incentive function of the carbon tax for fossil fuel users, while continuing to promote emission reductions in non-taxed sectors. In a welcome move, the 2022 tax reform capped the offsetting possibility under the non-causation mechanism at 50% of the carbon tax liability, down from the previous 100%. The government should consider progressively tightening this cap. Setting and announcing a clear timeline to do so would help avoid jeopardising mitigation projects with sudden drops in credit demand as happened following the cap introduction (Argus, 2025[126]). The additional revenue generated could then be redirected – among other things – to support projects with greater emission abatement potential, particularly those more challenging to implement and unlikely to attract private investment on their own.

Most of Colombia’s GHG emissions are either not priced, priced at low levels or effectively subsidised

Low headline energy and carbon tax rates, several tax exemptions and substantial fossil fuel subsidies (see above) result in a negative average effective carbon rate (ECR), with only a small share of GHG emissions effectively subject to a carbon price. In 2023, Colombia priced about 32% of its GHG emissions through energy and carbon taxes, well below the OECD average of 53% (OECD, 2024[116]). The proportion of emissions covered by a positive ECR dropped to 13% when accounting for fossil fuel subsidies (Figure 1.13, panel A). Only 1% of emissions face a net ECR (i.e. an ECR net of subsidies) above EUR 60 per tonne of CO₂e, which is the midpoint estimate of climate damage caused by each tonne of CO₂ emitted in 2020 (OECD, 2024[116]).

Figure 1.13. Most of Colombia’s GHG emissions are either not priced or subsidised
Copy link to Figure 1.13. Most of Colombia’s GHG emissions are either not priced or subsidised

Adding up energy and carbon taxes yielded an economy-wide ECR of only EUR 8.2 per tonne of CO₂ in 2023. Not only was this among the lowest in the OECD and LAC (Figure 1.13, panel C), but it was also lower than the average fossil fuel subsidy. As a result, Colombia’s CO₂ emitters (fuel consumers) received an average subsidy of EUR 12.2 per tonne of CO₂ as opposed to paying a price (Figure 1.13, panel B) (OECD, 2024[116]). As a result of the FEPC subsidies, road transport is the most heavily subsidised sector. Less than 3% of transport emissions were priced in 2023, while most transport emissions benefitted from a subsidy of 77 EUR per tonne of CO₂e (Figure 1.13, panel B). Colombia’s ECRs have likely increased in more recent years with the removal of petrol subsidies and the reduction of diesel subsidies (see above).

Increasing the ECR could raise substantial fiscal revenue while contributing to cutting emissions cost effectively. According to Colombia’s strategies, carbon pricing should play a key role in accelerating the clean energy transition and achieving the NDC 2.0 (Section 1.2.4). A higher carbon tax rate would not only motivate taxed entities to implement their own emission reduction measures but also stimulate demand of carbon offsets (see above). OECD (2024[8]) suggests that a carbon tax reaching EUR 60 per tonne of CO₂e would drive emissions down by up to 40% from the NDC 2.0 baseline scenario by 2030 compared to a 2.6% decrease under the current carbon tax design. OECD estimates indicate that removing fossil fuel subsidies and introducing a minimum ECR of EUR 60 per tonne of tCO₂e would also yield up to 1% of GDP of additional revenue per year compared to current net spending (the difference between fossil fuel subsidies and energy and carbon tax revenue) of 0.7% of GDP (OECD, 2024[116]). Even if the carbon pricing revenue decreases with decarbonisation of the economy, raising the ECR can help finance the adjustment costs at the start of the transition away from fossil fuels.

Colombia should reinforce the institutional framework to support implementation of a national ETS, which presents an opportunity to streamline carbon pricing instruments. The 2021 Climate Action Law foresees launching the ETS by 2030, but a longer timeframe may be warranted. While the legal framework for introducing the ETS (PNCTE in Spanish) is in place, the introduction of an ETS pilot – originally planned in 2024 – has not yet started. Work is ongoing to develop the regulatory framework and mechanisms for emission verification and reporting. Colombia could initially pilot an ETS in key industrial sectors and fossil‑fuel based electricity and expand coverage over time. A phased approach would allow for capacity building, stakeholder engagement and alignment with international best practices. Over time, Colombia could also explore linking its ETS with other carbon markets emerging in the region (Chile, Mexico) or globally, enhancing market liquidity and cost effectiveness. Transparent emission reporting systems and co‑ordination between the ETS, the voluntary carbon credit market and the carbon tax are needed to ensure effectiveness and prevent duplicate regulations, as well as loopholes. As Colombia’s ETS legal framework includes use of carbon credits, clarity about the future role and rules of carbon credits relative to the carbon tax and the planned ETS is needed to provide certainty to investors.

Vehicle taxes and subsidies should be better targeted

Colombia’s vehicle taxation system discourages fleet renewal (CONPES, 2018[127]). The annual vehicle ownership tax (Impuesto sobre Vehículos Automotores) is calculated as a percentage on the fiscal value of vehicles. Tax rates vary by municipalities, which levy the tax and collect the revenue.36 Rates increase with the vehicle’s value and decreases with its age, regardless of fuel consumption or emission levels. As a result, many consumers retain older, less efficient and more polluting vehicles (IEA, 2023[14]). This leads to an ageing fleet with higher emissions and fuel consumption (Section 1.2.5). Colombia should revise vehicle taxes and modulate them according to the vehicles’ fuel efficiency and levels of local pollutant emissions, as outlined in its national air quality strategy. Adding a weight element would help address road wear and associated particulate pollution. Vehicle taxes should be combined with more stringent emission standards (Section 1.2.5).

EVs benefit from several tax exemptions, including lower VAT and vehicle taxes, and non-fiscal incentives such as free parking spaces.37 These incentives have encouraged a rapid increase in sales of hybrid and electric cars in recent years. While subsidies can help establish a domestic EV market, they must be time‑bound. Experience from EV leaders such as Norway shows that exemptions from sales taxes and vehicle taxes are a costly way to reduce GHG emissions and air pollution from vehicle use (OECD, 2022[128]). In addition, purchase subsidies for electric cars tend to be regressive, as only households that can afford a new vehicle can benefit from them. As Colombia’s EV market matures, higher taxation of internal combustion engine vehicles should accompany and progressively replace EV purchase subsidies. Several countries have been phasing out EV subsidies in recent years (IEA, 2025[129]), while imposing vehicle taxes based on CO₂ emissions. Others, such as France and Sweden, apply fee-bate systems combining a subsidy for the purchase of EVs and a heavy tax for the registration of high-emitting cars. In 2024/25, the Colombian government started to reduce incentives for plug-in hybrid electric cars. Further reducing subsidies for private electric cars would free up resources that could be repurposed towards investment in charging infrastructure and electric buses, as well as supporting the renewal of the freight vehicle fleet and the shift to electric motorbikes – the most commonly used private vehicle in Colombia (Section 1.2.4).

There is scope to improve road pricing

In the longer term, as Colombia moves to electromobility, a shift from taxation of fuel use to the taxation of road use, in addition to vehicles (including EVs), will be needed to ensure a sustained revenue stream (van Dender, 2019[130]; OECD, 2024[116]). Road tolls apply to major roads and highways across the country. Tolls are based on vehicle category and toll plaza rather than kilometres driven. Colombia would benefit from setting the groundwork for a distance-based road pricing system that applies different rates based on location and time of driving and emission performance of vehicles. This, in turn, would allow road pricing to reflect the various environmental and social costs (air pollution, road wear and tear, accidents, congestion) of driving.

Colombia’s biggest cities – Bogotá, Medellín and Calí – have introduced light forms of congestion charging alongside longstanding plate-based traffic restrictions (Box 1.2). All three cities restrict vehicle circulation on weekdays based on the last digit of the licence plates but allow drivers to purchase permits to bypass the restriction (Box 1.2). These hybrid systems are a step in the right direction, as the permit fees help internalise some of the social costs of driving. While their introduction led to increased congestion and air pollution, the overall welfare effect can be positive as permit fees enable necessary, socially valuable car trips that were inefficiently rationed by the blanket Pico y Placa restrictions (Montero, Sepúlveda and Basso, 2023[131]). Colombia’s largest cities should build on these experiences by gradually tightening restrictions and raising exemption fees as a pathway towards implementing fully-fledged congestion charges, where drivers must pay a congestion fee whenever they use their vehicles. A pilot charging system and effective communication campaigns could help showcase the benefits of the system and gain citizens’ support (OECD, 2021[132]).

Colombia could better leverage revenue from natural resource extraction for the green transition

Colombia faces the challenge of reducing its dependence on fossil fuel exports and related government revenues as the world shifts to low-carbon energy. The government acknowledges the need for a gradual fiscal and economic transition, aiming to shift towards a more diversified, knowledge-based and sustainable economy (MFPC and IDB, 2024[103]). Between 2014 and 2023, the fossil fuel sector generated government revenue – through taxes, dividends and royalties – that averaged 1.8% of GDP annually. Amid global economic instability and falling oil and gas prices, Colombia’s fiscal revenues from fossil fuels extraction and mining were cut in half in 2024. This indicates the impact of the energy transition on Colombia’s total government revenue, which could drop by up to 6% by 2050 (OECD, 2024[8]). The transition will also likely affect local employment and undermine the finances of subnational governments reliant on resource-based income (MFPC and IDB, 2024[103]).

Colombia has moved to tax windfall profits in the energy sector, but oil and mining industries still enjoy favourable tax rates. In a welcome move, the 2022 tax reform increased corporate income taxes for oil and coal companies when international prices exceed historic levels.38 The government aims to create a fund from fossil fuel sector royalties and taxes to finance clean energy initiatives (IEA, 2023[14]). However, the oil and mining industries still benefit from favourable tax discounts (OECD, 2023[109]). While these incentives may attract foreign investment, they also reduce tax transparency and accountability. A comprehensive review of the fiscal framework is needed to determine whether it adequately reflects the environmental externalities generated by these industries (OECD/ECLAC, 2014[133]).

Royalties from the exploitation of non-renewable resources have traditionally played an important role in financing environment-related public investment in Colombia (OECD/ECLAC, 2014[133]).39 The system for allocating royalties (Sistema General de Regalías, SGR) was reformed in 2012 to improve the distribution of revenues across regions. As a result, the share of funding directed to areas without natural resource endowments rose from 20% to 80% of the total. The reform helped improve social outcomes but also led to greater fragmentation (OECD, 2019[134]).

Colombia could better leverage royalty income to support productive transformation, the net-zero transition and biodiversity conservation. Between 2011 and 2022, royalties from natural resources accounted for 17% of public sector resources allocated to climate-related projects in Colombia (estimated in COP 18 trillion) (MFPC and IDB, 2024[103]). However, in 2021-2022, projects in the environment and sustainable development sectors represented about 5% of total funding. Conversely, transport (mainly roads), and housing, urban development and land use accounted for 35% and 14.5% of total funding, respectively. In the same period, the CARs that host some of Colombia’s most valuable ecosystems received the lowest share of SGR funding (MFPC and IDB, 2024[103]). This highlights the need to explore more equitable approaches to resource distribution across regions and to incorporate environmental sustainability and climate resilience criteria in the projects financed through the SGR.

Weak governance and capabilities of some subnational governments, along with insufficient disclosure of information about royalty use, are major barriers to making better use of royalties (OECD, 2019[134]; World Bank, 2020[135]). Subnational governments often lack the capacity to design and execute projects effectively, resulting in fragmented, small-scale and low-impact initiatives (MFPC and IDB, 2024[103]). Delays in project execution have led to incomplete use of allocated funds. Strengthening local governments’ capacities in project planning, evaluation and execution is essential to improve the impact of regional environmental and development investments financed through the SGR. Disclosure of information about SGR use of resources has much improved, but more progress is needed to improve transparency and provide complete information to stakeholders. This is essential to ensure that the benefits of SGR-funded investments are shared equitably and target populations and regions most in need (World Bank, 2020[135]).

1.4.2. Aligning finance and investment with climate goals

Finance plays a key role in achieving Colombia’s climate objectives and the goals of the Paris Agreement. Article 2.1c of the Paris Agreement calls for aligning finance with a low-GHG pathway and climate‑resilient development (UNFCCC, 2015[136]). The alignment of finance with these goals should be assessed across real‑economy investments, financial assets and financial institutions (OECD, 2024[137]). In Colombia, such an assessment must consider the country’s heavy economic reliance on fossil fuel extraction and production, banking concentration and large informal economy. Colombia’s financial sector is generally considered resilient through well-capitalised banks (although concentrated in a few conglomerates) and large liquidity buffers (OECD, 2024[8]). Financial development is still below the OECD average (World Bank, n.d.[138]).

Colombia is a regional pioneer in integrating climate into financial sector policies but needs to expand their scope and understand impacts

Real-economy policies, such as subsidies, taxes and performance standards, are fundamental levers to steer investments towards climate goals. Current barriers include negative ECRs, high reliance of revenues from fossil fuel extraction and production, and limited public funds – see earlier sections and OECD (2024[8]). As in many other OECD Member countries, some policies in Colombia, such as fossil fuel subsidies, continue to provide incentives to investors and financial institutions that undermine climate policy objectives. Given limited fiscal space, Colombia needs to develop innovative financing mechanisms and attract private investment for the clean energy transition, while phasing out incentives that are inconsistent with climate objectives.

Colombia made progress in integrating climate considerations into financial sector policies, mainly through transparency measures and, to a lesser extent, prudential policies. It has, so far, not embedded climate considerations in monetary policies.

Among LAC countries, Colombia is a frontrunner in adopting policies to increase climate-related transparency in the financial sector. Its green taxonomy, issued in 2022 and governed across five policy authorities, was the first in the region (SFC, 2022[139]).40 Since then, other regional peers, such as Costa Rica and Panama, have adopted similar taxonomies (World Bank, 2024[140]). Since 2012, Colombia has also developed several other climate-related transparency and information policies for the financial sector. It stands out in the LAC region for issuing sustainable finance guidelines not only for banks and non-financial corporates but also for non-bank financial institutions (OECD, 2024[141]). Examples include the 2012 Green Protocol between the government and national credit institutions; the 2015 Legal Guide to Do Business; the Green Bond Guide issued by the Superintendencia Financiera de Colombia (SFC) in 2020; climate-related disclosures requirements for large issuers adopted in 2021; and environment, social and governance (ESG) disclosure requirements for mutual funds, and binding guidelines on thematic bonds in 2022 (López Carbajal, Rojas Squella and Watson, 2021[142]; SFC, 2020[143]; SFC, 2021[144]; SFC, 2022[145]; SFC, 2024[146]). By 2023, several other LAC countries had also adopted at least one climate-related transparency and information policy, including Argentina, Brazil, Chile, Costa Rica and Panama (D’Orazio, 2023[147]). For example, Brazil and Chile also require disclosure aligned with the Task Force on Climate-related Financial Disclosures (TCFD) recommendations as of fiscal year 2023. Globally, 61 other countries and the European Union had adopted at least one climate-related transparency and information policy by this time (OECD, 2024[137]).

While progress to promote climate-related transparency in the financial sector is commendable, several policies remain limited in scope or voluntary. Mandatory disclosure policies only cover large issuers (SFC, 2021[144]), while the green taxonomy and Green Bond Guide are not mandatory. The green taxonomy functions as the national classification reference system for climate-related activities. It is expected to be progressively adopted across the financial sector, especially in sustainable bond issuances; ESG disclosure; and portfolio management. Further, both mandatory and voluntary climate transparency policies do not yet sufficiently track climate-misaligned financial flows and stocks. Expanding the green taxonomy to address climate transition activities could help. The Biennial Survey on ESG and Climate-Related Risks and Opportunities gathers self-reported, and mainly qualitative, information from financial institutions regarding their governance, strategy, risk management and disclosure practices related to environmental, social and climate factors (SFC, n.d.[148]). However, more quantitative metrics on, for example, emissions and composition of green/brown activities and investments are needed (OECD, 2023[149]), while ensuring an integrated approach with climate adaptation and biodiversity goals.

Although the effects of transparency and information-based policies on achieving emissions reductions and climate resilience are not consistently analysed, case studies highlight progress and remaining gaps in the availability and transparency of climate-related disclosure in Colombia. A 2024 review of 46 security issuers in the country found significant shortcomings. On average, only about a third of the information required by the TCFD was disclosed (Transforma, 2024[150]). Moreover, monitoring use of green finance guidelines and supervisory mechanisms following the issuance of green-labelled financial instruments need to be further developed to avoid risks of greenwashing (OECD, 2024[141]). Colombia should consider expanding the scope of mandatory disclosure requirements and implementing support to close data gaps and improve accountability. This could include building capacity in financial institutions and providing data templates and information, such as carbon footprint factors and sectoral pathways.

Colombia was also among the first countries in the LAC region to integrate climate considerations into prudential policy frameworks. It carried out the region’s first climate stress test for its financial sector, for both physical and transition risks (OECD, 2024[8]). Colombia relies increasingly on its green taxonomy to oversee desired outcomes sought by the financial market regulator and central bank. This includes oversight, or “supervisory practices”, of financial actors such as firms, banks and investors related to financial system integrity and macroeconomic stability. Additionally, the SFC has issued binding guidance on supervisory practices that help identify greenwashing risks (SFC, 2021[144]). Financial stability could be further reinforced by strengthening the supervision of climate-related risks, enhancing information disclosures and expanding data availability (OECD, 2024[8]). Colombia also needs to improve its understanding of the effects of existing financial sector policies on financial and climate policy objectives, including incentives for climate-misaligned financial flows, through econometric analysis, impact studies and stress testing by Banrep and SFC.

Investment in fossil fuels largely outpaced clean energy investments in Colombia, running counter to global and regional trends

A comprehensive analysis of the degree of (mis)alignment of real-economy investments is not possible at this stage, but estimates of transition-related investments for specific sectors can track developments over time. For a more comprehensive analysis of (mis)alignment, efforts to collect data on climate-related investments, such as Colombia’s MRV System for Climate Finance (Box 1.5), need to be scaled up. They should be compared to GHG-intensive investments and placed in the context of total real-economy investments, using indicators like gross fixed capital formation (GFCF) (OECD, 2024[137]).

Estimated real‑economy investments supporting clean energy remain smaller than those in fossil fuels and a fraction of total investments in Colombia (Figure 1.14, panel A). Investments in clean energy between 2020 and 2023 are estimated at USD 2.3 billion annually (4% of total GFCF) despite a declining economy‑wide investment rate during that period; this more than doubled the USD 1 billion invested annually between 2015 and 2019. Investments in unabated fossil fuels are estimated at USD 6 billion annually between 2020 and 2023 (10% of total GFCF). This contrasts sharply with the global investment landscape, where clean energy investments were around 7% of total GFCF and unabated fossil fuel investments around 4% (Figure 1.14, panel B). An additional 2% went towards upstream oil and gas investments (IEA, 2024[151]). Fossil fuel investments more than doubled clean energy investments in Colombia in 2023. Conversely, in the LAC region, clean energy investments were higher than fossil fuel investments, further underscoring the additional effort Colombia needs for the transition to clean energy.

To scale up investments aligned with climate goals, Colombia should take steps to attract more private and international investments to activities contributing to climate action. Positive experiences have demonstrated the potential of public-private partnerships in sustainable investment in Colombia (OECD, 2024[8]). Foreign direct investment (FDI) is a potentially important source of international investments contributing to climate goals (OECD, 2022[152]). Foreign firms in the mining and quarrying industry in Colombia are, on average, 16% less carbon intensive than domestic competitors. However, Colombia attracts one of the lowest shares of FDI for renewable energy production among LAC countries (OECD, 2022[153]).

Figure 1.14. Real-economy investment flows in clean and fossil fuel energy
Copy link to Figure 1.14. Real-economy investment flows in clean and fossil fuel energy

Box 1.5. Systematic monitoring, reporting and verification of climate-aligned financial flows

Copy link to Box 1.5. Systematic monitoring, reporting and verification of climate-aligned financial flows

Colombia’s monitoring, reporting and verification (MRV) system for climate finance consolidates information on financing for climate action that is scattered across various information systems into a single platform. The MRV platform collects data on public and private sources of finance, as well as some international financial flows.

The MRV system could better connect data on real-economy investments with underlying financial sector flows and stocks, and start assessing how climate investments are financed through different financial instruments. To strengthen its usefulness, it could also track finance for activities that contradict climate goals (e.g. high-GHG emitting activities and highly vulnerable activities). Stronger collaboration across ministries, the SFC, DANE and Banrep can help ramp up efforts to improve the coverage, quality and availability of data in the MRV system. The Climate Finance Management Committee of the National Climate Change System, which serves as an inter-institutional co‑ordination and dialogue platform between public and private actors, can be leveraged to further facilitate such collaborations. Over time, the system could also be expanded to cover biodiversity related finance.

Estimates of finance across asset classes show low alignment with climate goals, but large blind spots remain

Colombia’s stock market is small and – like other LAC countries – heavily invested in high-emission sectors. Listed corporate equity in carbon-intensive sectors represented close to 40% of total listed equity holdings in 2024, a share that has risen steadily over the past five years (Figure 1.15, panel A). By contrast, only one company, a hydropower producer representing around 3% of the Colombian listed stock in 2024, can be considered “low carbon”. This contrasts to the global average. In 2022, for example, listed corporate equity stocks in renewable electricity and fossil fuel supply represented about 4% and 10% of global listed equity, respectively (Figure 1.15, panel B). There is a clear need for Colombia to transition its stock market away from carbon-intensive activities towards more low-GHG activities.

Corporate debt – including bonds and loans – typically provides most of the financing for established companies, such as in traditionally emissions‑intensive sectors (OECD, 2024[137]). Green-labelled corporate bond issuance remains a fraction of total corporate bond issuance in Colombia and has dropped since 2020. Green-labelled bonds added up to about USD 20 million, representing only around 1% of total corporate bond issuance in 2024 (Figure 1.15, panel C). Green-labelled loans increased from USD 18 million in 2015 to USD 6.5 billion in 2024. Carbon-intensive bonds and loans cannot yet be fully captured. One approach is to consider debt going to carbon-intensive sectors such as energy, manufacturing and transport, which represented just under 40% of corporate bond issuance (Figure 1.15, panel D). Globally, green‑labelled corporate bond issuance reached USD 0.4 trillion, while carbon‑intensive corporate debt security flows were estimated at USD 1.4 trillion (OECD, 2024[137]). Colombia needs to make further efforts to increase adoption of green-labelled corporate bonds and loans and identify carbon-intensive ones as well.

Colombia has had positive experiences issuing sovereign green bonds, showing leadership in the LAC region. It was the second LAC country to issue a green bond to the international market (2019), and the first LAC country to issue a green bond in its domestic market (2021). By 2024, Colombia had issued six sovereign green bonds to the domestic market, valued at USD 1 billion (Ministerio de Hacienda y Crédito Público, n.d.[155]). At a global level, the public sector issued only USD 0.25 trillion in green‑labelled bonds in 2023, a small share of total sovereign bond issuance (OECD, 2024[137]). Identifying sovereign bonds that explicitly undermine climate goals is difficult. National efforts to do so could inform wider practices across OECD Member countries.

Private equity continues to be a growing asset class in Colombia and LAC countries, but the lack of data hinders identification of (mis)aligned financial flows and stocks (ColCapital, 2024[156]). A 2021 study found that less than 3% of private corporate equity in Colombia went to activities contributing to climate mitigation goals (López Carbajal, Rojas Squella and Watson, 2021[142]). Globally, available estimates find only about 3% of total private corporate equity stocks went to low-carbon activities in 2022 (OECD, 2024[137]). Efforts to improve visibility of the climate alignment of this asset class need to be developed. This could include data collaborations between the SFC and ColCapital, as well as developing ESG surveys for private equity funds.

Building on internationally co‑ordinated 2025 updates to the System of National Accounts (SNA), Colombia has an opportunity to collect and report on green finance more systematically. The country could begin a more systematic analysis of green finance with green bonds and expand to loans, equity and investment fund shares. A range of countries across geographies have already started trialling such data collection as part of the G20 Data Gaps Initiative, based on updated SNA standards. In Colombia, DANE could ramp up such tracking efforts at the level of financial jurisdictions and national financial accounts to bring together policy-relevant evidence across asset classes more coherently.

Figure 1.15. Estimates of financial stocks and flows supporting or undermining climate goals
Copy link to Figure 1.15. Estimates of financial stocks and flows supporting or undermining climate goals

Additional policy support and better data from borrowers and investees can improve climate transparency by large financial institutions

Large financial institutions (e.g. banks and institutional investors) dominate the Colombia financial system and have significant scope to improve transparency on activities affecting climate outcomes. The five largest conglomerates control around 60% and 80% of financial system and banking sector assets, respectively (IMF, 2022[157]). However, despite existing disclosure policies, climate-related reporting by these conglomerates and their subsidiaries remains limited (CPI, 2024[158]; Transforma, 2024[150]). This hinders consistent and comprehensive tracking of the climate alignment of Colombian financial institutions. Mandatory disclosure requirements across key metrics, such as on emissions, composition of green/brown activities and investments, and corporate climate strategy and governance, would help track climate performance. Such metrics would ideally be interoperable with international frameworks (OECD, 2024[137]), as is already the case for Colombia’s TCFD-aligned disclosure requirements and green taxonomy.

Large banks in Colombia have made progress in terms of climate transparency but still lack clear transition plans and comparable climate-related disclosures. The three largest banks have partial emissions mitigation targets in place (CPI, 2024[158]) and have committed to engage clients and shareholders on climate topics. However, they have not disclosed concrete actions, climate investment targets or fossil fuel phase-out strategies (CPI, 2024[158]). Banks headquartered in Colombia are developing green lending products (Asobancaria, 2024[159]). However, they do not yet disclose sufficient information to assess their low-carbon to fossil-fuel energy supply financing ratio.41 A first analysis of lending by Colombian banks to the power sector in 2021 found misalignment of companies’ production plans (Pacta and 2DII, 2023[160]). Private credit institutions can learn from the experiences of public credit institutions. For example, the Colombian national development bank (FINAGRO) discloses credit allocations aligned with climate change mitigation and adaptation objectives through its special credit lines (FINAGRO, 2024[161]). Enhanced mandatory climate-related disclosure could support the SFC’s efforts to analyse green and brown lending by Colombian credit institutions.

Little is known about the climate performance of portfolios of Colombian institutional investors42 and their investees, although several studies provide limited insight about the potential climate alignment of their investments. One survey-based stocktake of ESG assets (which include non-climate-related assets) in portfolios of Colombian asset managers showed such assets represented less than 1% of total assets under management in 2021 (Asofiduciarias, 2022[162]). A 2020 study found that collective investment funds from 11 Colombian trust companies (legal entity managing assets on behalf of individuals and businesses) have significant exposure to carbon-intensive technologies in their equity and corporate bond portfolios (Ramirez, Pacheco and Lalechere, 2020[163]). A study of 20 Colombian insurance companies found that just over 10% of their equity investments and over 30% of their corporate bond holdings are tied to emissions-intensive sectors. Investee companies in these sectors are not aligned with a below 2°C scenario when considering their five-year, forward-looking production plans (Pacheco and Herrera, 2022[164]). Companies in the power sector, for example, do not sufficiently build out renewable power capacity. The situation in Colombia is similar to the global level, as only partial or anecdotal estimates are available across some institutional investors (OECD, 2024[137]). Further efforts are needed to build capacities and improve transparency across institutional investors.

Improved transparency by underlying borrowers and investees (notably companies) is a prerequisite for improving transparency of financial institutions. Engaging the Colombian chambers of commerce can help build reporting capacities across Colombian companies. The SFC could undertake more frequent and comprehensive quantitative ESG surveys of financial institutions to provide more comparability across institutions. Continued stress tests by Banrep can help identify exposure to carbon-intensive assets of financial institutions. Such efforts to improve transparency and scale up climate transition of finance in Colombia need to be co‑ordinated nationally across policy communities and departments. They must also consider international-level frameworks and developments to ensure that Colombia can tap into international capital markets and investment sources.

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Notes

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← 1. The mitigation target covers all sectors of the economy. GHG gases included: CO₂, N₂O, methane, hydrofluorocarbons, perfluorinated compounds and sulphur hexafluoride.

← 2. Excluding forest and grassland fires.

← 3. Guidelines to incorporate PIGCCTS into land-use plans (POTs) have been developed.

← 4. Natural forest is defined as land predominantly covered by trees, including shrubs, palms, bamboos, grasses and lianas, with at least 30% canopy density, a canopy height of 5 m, and a minimum area of 1 ha.

← 5. The Peace Agreement between the State and the FARC to end armed conflict was signed in 2016.

← 6. This amounts to a reduction in the rate of deforestation by over 70%, compared to 174 103 ha in 2021 (GoC, 2023[23]). Colombia is also signatory to the Glasgow Leaders’ Declaration on Forests and Land Use, which aims to “halt and reverse forest loss and land degradation by 2030 while delivering sustainable development and promoting inclusive rural transformation.”

← 7. There is considerable potential for offshore wind (50 GW) in the northern regions and geothermal potential along the Pacific Ring of Fire (IEA, 2023[14]).

← 8. Under the lease-to-own model, customers can make payments through their mobile phones over one to several years, until they own their solar home system.

← 9. There are 29 targets for buildings, industry and transport, including achieving a 15% reduction in electricity consumption in the residential sector compared to 2015 levels by 2030; implementing energy management systems in at least 300 large companies and 500 medium-sized companies; and reaching 600 000 EVs in the national fleet by 2030 and reducing the energy intensity in freight transport by 10% compared to 2015 (IEA, 2023[14]).

← 10. Runoff volume in Colombia is equivalent to 1 963 km³ of water annually. In terms of average yield, this equates to 56.2 l/s/km², while the world average is just 10 l/s/km² and the average in Latin America is 21 l/s/km² (IDEAM, 2023[52]).

← 11. IDEAM defines water demand as “the volume of water extracted from the natural system (surface or groundwater), intended to meet the requirements of human consumption, sectoral production and essential demands of existing ecosystems, whether or not they have been intervened.”

← 12. This includes the cost of the investments necessary to comply with coverage and quality indicators, efficient operation and administration costs, and environmental fees.

← 13. Waste generation and management data from economic activities are limited to non-hazardous manufacturing waste, waste from companies engaged in foreign trade, reported hazardous waste from economic activities, and municipal waste collected by public cleaning services from non-residential subscribers. For commerce and services, only an approximation based on the proportion collected by public cleaning services, determined by subscriber numbers, is included. Notably, this scope excludes waste from extraction and agricultural activities, and secondary waste from gas, steam and sewage supply, wastewater treatment plants and disposal sites. Additionally, while data for the construction sector specifically are absent, Construction and Demolition Waste (CDW) from on-site works is included.

← 14. Under the SEEA framework, solid waste products – discarded materials with market value (e.g. scrap metal) – are included in waste accounting. However, in OECD statistics, only solid waste residuals are considered, excluding items still treated as products within the economy. Residuals are flows of solid, liquid and gaseous materials, and energy that are discarded, discharged or emitted by establishments and households through processes of production, consumption or accumulation.

← 15. “Taxes” are defined as compulsory, unrequited payments to general government. Compulsory social security contributions (SSCs) paid to general government are classified as taxes.

← 16. An environment-related tax is a tax whose base is a physical unit (or a proxy of a physical unit) of something that has a proven, specific negative impact on the environment regardless of whether the tax is intended to change behaviours or is levied for another purpose.

← 17. This includes revenue from the water use and wastewater charges, the hunting and timber harvesting fees, the electric sector transfers and the environmental surcharge (a surcharge on the property tax).

← 18. According to Colombia’s finance ministry, the fiscal cost of tax expenditure grew from 6.9% of GDP in 2015 to 8.8% of GDP in 2022.

← 19. The remaining 20% of carbon tax revenue is earmarked for rural development and the substitution of illicit crops. Prior to the 2022 tax reform, half of proceeds from the carbon tax were channelled for this purpose through the Colombia in Peace Fund (FCP) and half were allocated to the National Environmental Fund (FONAM) to support climate- and environment-related projects.

← 20. Similar subsidies apply in the water supply, wastewater treatment and communications sectors.

← 21. Colombia continues to stabilise diesel prices for large consumers, but with faster adjustments than before. This has reduced considerably, but not fully eliminated, diesel subsidies for large consumers.

← 22. For comparison, the subsidies’ fiscal cost was nearly half of the national budget allocated to investment for 2023 (MFPC and IDB, 2024[103]).

← 23. In addition to the national energy taxes on liquid fuels, there are also subnational surtaxes on petrol and diesel.

← 24. As of 1 February 2025, the national tax was COP 762 per gallon of regular petrol; COP 1 447 per gallon of petrol extra; and COP 730 per gallon of diesel.

← 25. In 2024, the price of automotive diesel was 0.633 USD/litre against USD 1.327/litre for petrol extra (IEA, 2025[165]).

← 26. Exemptions from the carbon tax include coal and natural gas used for electricity and heat generation, as well as for all industrial uses except in refineries or in petrochemical industry. Liquid petroleum gas used for heating is also exempt.

← 27. The carbon tax rate on coal sales, excluding exports, is set to increase to 50% of the standard tax rate in 2026, 75% in 2027 and 100% in 2028.

← 28. The initial rate was COP 15 000 per tonne of CO₂ (USD 3.65), adjusted annually based on the Consumer Price Index increased by one percentage point (with a cap).

← 29. The High Level Commission on Carbon Prices concluded that carbon prices must reach a level of at least EUR 60/tCO₂ to EUR 120/tCO₂ by 2030 (converted to real 2023 EUR and rounded) for countries to remain on track with keeping global warming to below 2 degrees Celsius (OECD, 2024[116]).

← 30. As of mid-2025, the other countries were Chile, Mexico (and several Mexican states), Singapore, South Africa and Taiwan.

← 31. The regulated entities are fuel wholesalers, importers or self-consuming producers. A fuel consumer (e.g. an industrial facility or fuel retailer) can purchase certified CO₂ reduction credits and transfer them to the seller in exchange of tax-exempt fuel for the volume of offset emissions. In turn, the fuel wholesaler, importer or producer is exempt from remitting the corresponding carbon tax to the National Tax and Custom Directorate (DIAN).

← 32. For instance, in 2017-2024, more than half of emissions that were offset under the non-causation mechanisms came from REDD+ projects (“Reducing emissions from deforestation and forest degradation, including the role of conservation, sustainable management of forests and enhancement of forest carbon stocks in developing countries”) (MinAmbiente, 2025[121]). However, REDD+ mitigation outcomes do not often2 meet several of the standard environmental integrity requirements applied by carbon crediting mechanisms (Wetterberg, Ellis and Schneider, 2024[119]).

← 33. Eligible offsets are those certified under the Clean Development Mechanism (CDM), as well as carbon credits generated by projects approved by independent standards such as Verified Carbon Standard (VCS), Gold Standard, Biocarbono, Cercarbono, ColCX and GHG Clean Projects.

← 34. RENARE began operating in October 2022 but was out of service between August 2022 and June 2024.

← 35. In the context of carbon markets, there is environmental integrity if the transfer of carbon credits leads to GHG emissions that are not higher than if such a transfer did not happen (Wetterberg, Ellis and Schneider, 2024[119]).

← 36. For example, in Bogotá, the rate ranged from 1.2% to 3.7% of the vehicle’s value in 2025.

← 37. In 2019, Colombia abolished the import quotas and tariffs for EVs, reduced the sales tax rate to 5% (compared to the standard rate of 19%) and lowered the vehicle tax rate to a maximum 1% of the vehicle’s commercial value. Other non-fiscal incentives include access to limited traffic areas and discounted mandatory insurance and technical inspections.

← 38. A corporate income tax surcharge of 5%, 10% or 15% applies depending on international resource prices. These increments apply on top of the base rate of 35%.

← 39. Royalties are calculated as a percentage of production, valued at international prices, and converted to Colombian pesos. Royalty rates vary with the type of mineral and increase with the amounts extracted.

← 40. The Colombian Green Taxonomy (TVC) is a classification system designed to guide the classification of economic activities and assets that substantially contribute to national environmental objectives. It was developed under the leadership of the Financial Market Supervisor (SFC) with the Ministry of Finance and Public Credit (MHCP), in co‑ordination with the Ministry of Environment and Sustainable Development (MinAmbiente), the National Planning Department (DNP), the National Statistics Department (DANE). Together, these five authorities constitute the governance structure of the TVC.

← 41. Statement based on data from LSEG and CPI, and own analysis of company reports.

← 42. Institutional investors are a diverse set of financial sector actors, including pension funds, sovereign wealth funds, insurance companies, asset managers and endowments, among others.

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