Climate Change and Caribbean Economies presented at Training Workshop: Climate Change Challenges and Opportunities in Macroeconomic Policies Dr. Justin Ram Director, Economics Department
what are we thinking when we speak about climate change? An increase in global average temperature Change in patterns and amounts of precipitation Reduction in ice and snow cover, as well as permafrost An increase in sea levels An increase the acidity of the oceans An increase the frequency, intensity, and/or duration of extreme events A shift ecosystem characteristics Increase threats to human health
Why focus on Climate Change?
..what are the models saying about temperature change?
..what are the models saying about global sea level rise?
..the main culprit behind climate change The use of fossil fuels for energy is the dominant contributor to climate change, accounting for around 60 per cent of total global greenhouse gas emissions. At the same time energy is linked and can assist with most major challenges in the world today, employment and income generation, agricultural production, access and reliability of water given the water intensive nature of electricity.
climate change is critically important to us because of our vulnerability CDB study (2011) revealed that SIDS, micro-states and the Caribbean are more vulnerable than other larger country groupings due to their inherent dependence on mineral exports, high level of export concentration and exposure to environmental hazards such as CC. Specific Vulnerabilities: Peripherality and Energy Export Concentration Destination Quality of Insertion Environmental We need to DECIDE we should strive to be Dynamic, Export- Oriented, Competitive, Inclusive, Diverse and Environmentally resilient.
and what are the implications of climate change? Increase in frequency and intensity of storm surge and extreme rainfall will cause damage to economic infrastructure from flooding and erosion and negatively impact coastal settlements. Sea level rise will lead to increased inundation, increased erosion, loss of wetlands, loss of ecosystems, and displacement of coastal communities Higher temperature will increase spread of vector diseases. Adverse agricultural impact due to warmer weather from high temperature will cause soil aridity, lead to proliferation of pests and diseases, and put pressure on water resources for water for irrigation purposes. Beach erosion and coral bleaching, could negatively affect livelihoods e.g. reduction in fish population and reduced value as tourist destination.
another representation of the implications of climate change How climate change affects key economic sectors in the region through their natural resource base Issue or resource vulnerable to climate change Freshwater availability Degradation of marine and coastal ecosystems Potential effect of climate change Reduced precipitation; increased evaporation and saline intrusion from sea-level rise. Sea-level rise and changes in sea temperature can affect important ecosystems such as mangroves, fishing grounds, and coral reefs. Sectors at greatest risk Economic relevance Water resources, agriculture, and forestry. Tourism, agriculture, and forestry Water supply is expected to be a bottleneck for economic activity and serious health concern. Most tourism activities are located in the coastal zone. Significant capital investment assets and infrastructure could be affected. Coastal flooding Sea level rise will result in flooding of lowlying coastal areas. Climate Climate change may increase extreme events such as precipitation intensity, tropical storms, or droughts. Tourism, agriculture, and forestry Multisectoral Most tourism activities are located in the coastal zone. Significant capital investment assets and infrastructure could be affected. The cost of hurricanes and other natural disasters in the Caribbean region, estimated at several hundred million dollars during the last decade, may increase.
Climate Change and the Economy
growth is positive in most BMCs but remains inadequate to improve social outcomes Sources: BMCs, CDB preliminary estimates
and fiscal manoeuvrability is constrained by high debt burdens: in part due to disaster recovery Debt/GDP Change in Debt/GDP ratio Ratio 2015 BMC 2011 2012 2013 2014 2015 BAR 10.5 6.5 13.6 4.8 4.0 131 JAM -1.5 4.8-5.7-4.0-10.9 125 GRE 9.1 2.1 1.0-3.0-2.5 104 ANT 4.8-6.0 8.0-0.9 8.3 103 BZE 0.0 10.4-1.3-2.0 3.2 80 DOM 5.0 6.3 2.7 0.4 4.7 79 SVG -3.9-4.8 1.7 4.2-2.9 76 SLU -0.2 4.6 2.0-0.9 1.2 75 BAH 0.7 4.9 5.7 7.7 0.2 70 SKN -7.7-14.4-36.5-21.8-14.9 64 SUR -1.2-3.0-5.7-2.0 15.9 50 GUY -6.7 9.1-1.1-6.2-3.2 49 TT -0.7 0.5 8.4 2.5 6.1 46 HAI -5.5 4.7 4.9 5.2-0.2 26 Sources: IMF, CDB estimates
High incidence and impact of natural disasters SOURCE: EM-DAT Disaster Database, www.em-dat.be, Université Catholique de Louvain, Brussels, Belgium
Average impact of CC, by peril type
Rating Impact of tropical cyclones
.some debt growth transmission channels Onerous debt service payments can substitute muchneeded social and productive capital expenditures High debt can increase cost of new borrowing due to perceptions of market risk. (Indeed standard and poor s estimates that climate change could increase the negative rating impact by about 20% or 0.3 notches compared to a no climate change scenario)
.some debt growth transmission channels cont d Reduced fiscal space for counter-cyclical spending which could prolong crisis Importantly this could severely limit countries ability to respond to natural hazards Contributes to loss in investor confidence and adversely impacts private sector investment.
recent global developments COP 21 Achievements. 175 countries sign Paris deal. Commitment by countries to strengthen climate actions every 5 years Adaptation, resilience and response as central in helping vulnerable groups. Includes better early warning systems and providing extreme weather insurance to 400mn more people in vulnerable countries by 2020. The setting of a long term goal of achieving net zero emissions which implies a phasing out of fossil fuels. Indeed intention is to have renewables make up 78% of new power generation investment by 2030 in major economies. Improved transparency and to ensure commitments are met The continuation of climate financing beyond US100bn promised to 2020 to emerging and developing countries to deliver economic and governance reforms. Financing MDBs including the CDB, Adaptation Fund, Green Climate Fund, GEF, Clinton Climate Initiative, Carbon War Room,
COP 21 implications: renewables and EE will be a key component in the regional response to CC Put energy security/sustainability as a central theme in development planning Strengthen institutional capacity in key line ministries and utilities. Transparency and accountability are key. Institutions must be well managed. Focus on energy efficiency in buildings and other infrastructure (eg St. Lucia street light project), transportation etc. to boost savings. Research current trends. Keep abreast of developments in the region and beyond and take note of what investors are prepared to finance. Regional approaches could yield opportunities. Strengthen mechanisms, incentives to encourage the private sector to invest in renewables. Lobby to include vulnerability as a factor to access concessional resources.
.how has CDB been assisting the region Work is on-going to strengthen the vulnerability index used in the determination of the use of its soft resources. Some possibilities are the inclusion of social and structural vulnerabilities. Risk of harm = vulnerability resilience The mainstreaming of environmental concerns in the CSPs. Consideration of environmental impacts in our policy based operations, and energy sector PBLs which explicitly supported the strengthening of renewable energy in the energy mix. The building of resilience in the Bank s capital projects, eg to withstand a 1 in 50 or 100 year event depending on costs. Use of EIB CALC funds to improve cost-efficiency in projects that have strong adaptation components
.how has CDB been assisting the region cont d The establishment of an EE/RE Unit and associated funds. EE/RE components of lines of credit to strengthen use in the private sector. First stand alone RE/EE capital project for St. Lucia CDB becoming an accredited intermediary re climate funds. Pilot project in Dominica to promote use of EE in small businesses
Thank You
Oil prices 120 Oil prices (US$ per barrel) 100 80 60 40 20 0
Average Tariffs in the Caribbean Average Retail Tariff (c/kwh) Antigua & Barbuda 0.43 Bahamas 0.37 Barbados 0.29 Belize 0.27 BVI 0.39 Cayman 0.38 Dominica 0.43 Grenada 0.37 Jamaica 0.31 Montserrat 0.51 St Kitts 0.32 St Lucia 0.36 Trinidad 0.08