Technological and financial development as drivers of Latin America's energy transition

Transitioning to clean energy is a challenge for Latin American countries whose socio-economic realities require economic development and environmental sustainability to be carefully balanced. To drive this energy transition, it is essential that funding and technological innovation align with local contexts. This study aims to assess the implementation of the energy transition in Latin America from 2015 to 2020. To do this a performance indicator is developed that uses Data Envelopment Analysis (DEA) and employs data on areas such as patents and financial development as inputs. Subsequently, a Fractional Regression Model (FRM) is used to explore the socio-economic factors influencing this performance and examine its determinants. The results demonstrate significant variations in energy transition outcomes across the sample, with Brazil and Peru consistently achieving maximum DEA scores. Financial development was found to attract capital for the energy transition, with Brazil leading in the Financial Markets Development Index during the period studied. High population density was found to negatively impact energy transition across all FRM model specifications. Negative correlations between gross fixed capital formation and the level of energy transition suggest that there is lower investment in renewable energy in countries with less efficient transitions. Additionally, investment in R&D was only positively and statistically significant in efficient countries. • The widely differing performances of the Latin American nations in pursuing the energy transition. • The negative influence of high population density on the energy transition. • The negative relation between capital formation and energy transition effectiveness. • The positive correlation between R&D investment and energy transition is found only in efficient countries.