Looking back over the IDB’s last 15 years of improving lives in Latin America and the Caribbean, our support to Costa Rica’s National Decarbonization Plan stands out as a framework for the future. The IDB’s collaboration with the Government of Costa Rica shows how development institutions can effectively promote synergies between advancing countries’ sectorial development priorities and an alignment with the decarbonization objective that countries set as part of the Paris Agreement.
What does decarbonization at a country level mean? Decarbonizing means reducing carbon emissions from fossil fuels, deforestation, and industrial processes to near-zero levels; and using reforestation and restoration of other high-carbon ecosystems to balance the remaining emissions.
Experts agree that a net-zero carbon economy is technically doable, is required to contain the climate crisis, and, if done right, can come with net economic benefits. In a world shaped by the pandemic, a key reason to embrace a net-zero carbon economy is that it can create jobs: 15 million net new jobs by 2030 in the case of Latin America and the Caribbean, according to a recent study by the IDB and ILO.
To reap these benefits, each country will need to design their own decarbonization strategy, tailored to their local socioeconomic context and development priorities. Relying on broad social dialogue and stakeholder consultations is key to ensure that the transition to a net-zero carbon economy advances sectorial development goals and creates opportunities for reducing socioeconomic inequality.
The IDB has supported the Government of Costa Rica in its goal to decarbonize in many ways – taken together, they paint a picture of the roles that development banks can play. Back in 2018, we started an academic collaboration with the University of Costa Rica, focused on using analytical tools to assess technical roadmaps to net-zero emissions in the energy, transport and buildings sectors.
Later that year, at the request of the Government, we financed local and international experts to compile existing knowledge, including IDB sector knowledge, and policy plans in energy, transport, buildings, urban and rural land use policy, waste management, agriculture, livestock and forestry. The aim was to better understand the aggregate impact of existing policies on greenhouse gas emissions, and how sectoral plans could be extended over time to collectively reach the net-zero goal.
Costa Rica’s Ministry of Environment and Energy used these and other inputs to discuss with other ministries, civil society, and the private sector, and together they produced the National Decarbonization Plan launched by the President of the Republic in February, 2019. This transversal collaboration – across ministries, between major stakeholder groups, and even internally within the IDB to provide support throughout the process – is one of the hallmarks of a strong decarbonization plan.
The Plan offers a country-wide strategy to get to net-zero emissions by 2050. It now serves as a basis for the development plans of many line ministries and is a key input to the efforts of the Ministries of Planning and Finance to coordinate intersectoral public policy in the country. Importantly, it provides a systematic and cohesive framework with more than 70 targets from 35 different government agencies and line ministries to be implemented by 2023. These include regulatory actions (e.g. establish the rules on how the electricity price in electric vehicle charging stations can be set), investments (notably to enable public transit), and studies (e.g. assess options to fund an updated payment for ecosystem services scheme). In effect, the plan transforms the lofty decarbonization goal into a set of short-term, workable and practical steps to be taken by each sector.
The plan also assists Costa Rica’s development partners to provide focused support where it is most impactful. For instance, it formed the basis for an IDB policy-based loan that combined IDB expertise in energy, transport, land-use and climate governance, and was co-funded with the French Development Agency. The two banks lent money to the government at preferential rates to help implement the regulatory part of the Plan.
More generally, the Plan allows development banks to support operations in various sectors to advance the country’s decarbonization goal, thus contributing to aligning their operations with the Paris Agreement goals. Finally, the Plan guides technical cooperation activities provided by the IDB and other development partners, including for instance the evaluation of the costs and benefits of the plan (which will be published this year); the definition of new business models to facilitate the uptake of electric buses and the adoption of climate-smart agriculture practices by the private sector; and the formulation of a comprehensive investment plan to prioritize public interventions and identify opportunities for the private sector.
None of this would have been possible without the leadership of the Government of Costa Rica, which is showing that creating a decarbonization plan is possible and can advance development priorities aligned with achieving the objectives of the Paris Agreement. Our collaboration with the Government has taught us what success can look like and offers ideas and models that are valuable for other countries interested in decarbonization.
Development banks can play an important role in these processes: collaborations with local academic institutions can improve and tailor the models that inform the policy debate around climate strategies. They are able to convene diverse groups of stakeholders to forge synergies between decarbonization and sectoral development priorities (as the IDB is doing in Chile and Peru).
Lastly, development banks can also support the design of decarbonization plans by funding technical studies and support the process of co-construction across government and across stakeholders to build a granular plan that lays out immediate steps in terms of regulatory and institutional reforms, investments, and studies to fill knowledge gaps and ultimately enable carbon-free prosperity. From there, it becomes much easier to prioritize and implement the reforms, investments and technical cooperation needed to achieve each country’s decarbonization objectives. Let’s get to work!
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