Climate change is part of our daily lives, and its impacts become more evident each year. So, what can we do? How do we respond to this challenge?
Climate Change in the Dominican Republic: How do we adapt to the obvious?
Adapting to the impacts of climate change, strengthening the resilience of the population, its economy, infrastructure, and territory is complex and costly.
According to the Climate Shock Vulnerability Index, 30% of the Dominican population is highly vulnerable to extreme weather events, a situation that is increasing over time. It is estimated that the cost of damages caused by hydrometeorological events is 0.69% of GDP per year.
In addition to these direct damages, there are interruptions to economic activity. According to an analysis by the Central Bank, after the passage of an atmospheric phenomenon, the economy undergoes a 15-month recovery process, during which economic losses amount to approximately US$1.1 billion, equivalent to 1.5% of GDP. It is expected that the occurrence and intensity of these events will increase with global warming.
Can climate change make us more productive and competitive?
From an optimistic standpoint, and far from being a panacea, the main measures to mitigate climate change could help increase productivity and competitiveness by fostering sustained economic growth in the medium and long term. The reason? The use of more efficient technologies, which allow for reductions in operating costs in various economic sectors, offsetting the initial investments required to deploy new technologies.
For example, although globally, electricity generation from renewable energy is cheaper and ensures stable costs, the Dominican electricity generation matrix still depends on fossil fuels by 84% (compared to an average of 50% in Latin America and the Caribbean). This dependence puts the country at a disadvantage compared to the vast majority of countries in the region, where the share of renewable energy sources is much higher.
The Dominican government, with the support of the IDB Group, is working on a comprehensive solution, combining efforts at all levels and connecting all sectors and territories to national planning, while articulating the efforts of the public sector with private sector initiatives.
Energy and Transportation as Model Sectors for Holistic Solutions
It is promising that the Dominican Republic is already seeking comprehensive solutions in two key sectors: energy (mitigation) and transportation (adaptation). In these two sectors, as in others, the IDB Group accompanies the country by mobilizing its three windows (IDB, IDB Invest, and IDB Lab) and facilitating its various financial instruments and technical assistance to promote an ambitious set of regulatory framework reforms and institutional capacities, and supporting strategic public and private investments, with the aim of reducing the economic damages and losses caused by climate-related disasters.
To achieve this, it incorporates adaptation measures to climate change and contributes to boosting productivity and competitiveness of the economy through efficiency gains derived from its increasing decarbonization.
Mitigation through the transition of the energy matrix and supply efficiency
One of the country’s major challenges is that renewable energies represent only 15% of its electricity matrix (compared to 60% participation in Latin America and the Caribbean). Thus, the costs of electricity supply are highly linked to fossil fuel prices, and although total coverage in service has been achieved, there are 36% losses at the end of 2023. This means that more than a third of the energy traded by distribution companies does not reach users or is not billed.
In this context, IDB’s support focuses on supporting clean energy generation, closing coal plants, expanding supply and distribution, and promoting electromobility.
Clean energy generation. With IDB Invest, we have just structured the largest financing in the Caribbean to contribute to achieving the goal of 30% renewable energy by 2030. We also support the electrification of Isla Saona with a 100% renewable energy micro-grid, promoting the decarbonization strategy of the isolated electric system of Punta Cana – Macao, with the financing of a solar power plant with a battery storage system.
Another project is our support for the Implementation Regulation of the Renewable Energy Development Incentive Law and its Special Regimes, which establishes competitive bidding processes for renewable energy in the Wholesale Electricity Market.
Closing coal plants. With the IDB window, we are leading the preparation of the Investment Plan for concessional financing from the Climate Investment Fund – CIF – ACT to accelerate the closure of coal-fired power plants.
Supply and distribution, expansion. With the IDB window, we are promoting a safer and more efficient energy supply with a US$155 million program, which allows reducing interruptions and technical losses by half, through the expansion of substations and distribution networks. In parallel, and in collaboration with JICA, we are financing the implementation of the first energy efficiency program, which will reach half of the country’s public lighting, generating savings from energy consumption reduction that will recover the investment of US$75 million in a four-year period.
Electromobility. From the IDB Group, we are supporting the development of the National Electromobility Strategy. With IDB Invest, we are financing the first electric station with 28 state-of-the-art chargers powered by solar energy, unique in the region. With the IDB, together with a donation of 3 million euros from the European Union, we are promoting the implementation of an electromobility pilot project, the first public electric transport route in the country, to optimize mobility for both residents and tourists to and within the Colonial City. This pilot will have the capacity to transport 31,000 people monthly. Finally, with IDB Lab, we support a public-private program for the exchange of combustion motorcycles for electric ones in-home delivery services. The private sector has scaled the program to 2,000 units in the Greater Santo Domingo area and aims to expand it nationwide.
Adaptation through climate-resilient transportation
One of the major challenges of transportation infrastructure is its vulnerability and the social and economic cost of interruptions caused by the loss of connection after hydrometeorological events; more than 1,000 bridges and roads had to be rebuilt between 2016 and 2022, representing US$700 million in damages that impacted the country’s productivity.
In this context, IDB’s support focuses on supporting the generation of hydrometeorological data and investment in resilient infrastructure.
Hydrometeorological data. With the IDB, we support the improvement of generation, management, and access to hydrometeorological data to improve extreme weather forecasting, design resilient infrastructure, and design climate change adaptation policies.
Prioritization of resilient public investment. The Blue Spot Analysis methodology, developed by the IDB, prioritizes resilient public investment in roads and bridges. The “Climate Resilience of Bridge Infrastructure” program (200M USD) will reduce annual damages and losses by US$50 million over 30 years and provide access to services for 2.4 million people.
Resilient infrastructure. With the rehabilitation of Puerto Manzanillo financed by the IDB, the country will have a new terminal designed with climate resilience parameters. This port reduces logistics costs for exporters by 25% and reduces transport time to the US by one day. We are also financing the improvement of rural roads and bridges that ensure access to services for 10,000 small producers and more than 3,000,000 rural inhabitants.
Regulations with climate resilience requirements. With the IDB, we support the update of regulations for the design, construction, and maintenance of highways, rural roads, and bridges that incorporate technical standards of resilience.
Towards the 2024 Annual Meeting
The 2024 Annual Meetings of the Boards of Governors of the Inter-American Development Bank (IDB) and IDB Invest will take place in Punta Cana, Dominican Republic, from March 6 to 10, 2024. The Boards of Governors are the highest authority responsible for the governance of the IDB and IDB Invest. Most are ministers of finance, ministers of the economy, or central bank presidents of their countries. During the event, economic and financial leaders from the 48 member countries of the IDB will discuss the challenges and opportunities for development in Latin America and the Caribbean.
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