As Chile and Costa Rica prepare to co-host COP25 later this year, there are exciting signs that climate action is going mainstream across the region.
From the issuance of the first sovereign green bond in the Americas in Chile to various cities across the region acquiring electric buses, Latin America and the Caribbean is embracing an ambitious agenda to help transition to low-emission and climate-resilient economies.
This is not just about greener and cleaner policies but reigniting growth. Climate action is increasingly viewed as a potent way to boost innovation, plug the infrastructure gap, create jobs, and improve fiscal conditions – all of which are essential to achieve the sustainable development goals.
- Costa Rica and Chile are aiming to become net zero emission economies by 2050
Costa Rica was the first Latin American and Caribbean nation to announce a decarbonization plan last February to become a zero emission economy by mid-century.
The decarbonization plan focuses on 10 sectoral areas such as electric mobility and nature-based solutions to reduce emissions and transform the economy. It calls for increasing forest cover to 60% by 2030 and by mid-century ensure all buses and taxis are zero emission. Electrifying the transport sector will help to avoid the considerable health costs of pollution generated by conventional vehicles and congestion estimated at 3.8% of GDP.
This month, President Sebastian Piñera said that Chile is also aiming to be carbon neutral by 2050. The government announced plans to phase out all coal power generation by 2040 starting with the closure of 8 of the country’s 28 coal power plants by 2024. This step would reduce the share of coal in the power grid from 40% of electricity generation to 20% and will likely serve as a boost to Chile’s market for renewable energy.
To support the design of these decarbonization plans, we are working with our LAC partners to strengthen planning capacity and financing to accelerate the transition to low emission and prosperous societies. For example, in Costa Rica, we worked with various stakeholders to support the drafting process of the decarbonization plan.
- Chile issues the first sovereign green bond in the Americas
This week, Chile issued its first sovereign green bond for USD 1.4 billion. The first of its kind in the Americas, international markets reacted very positively demonstrating confidence in the Chilean offering through a historically low-interest rate (3.53%) and strong demand from investors.
The Inter-American Development Bank Group supported Chile to prepare the green bond, which will help to mobilize investment for clean transportation, protection of biodiversity and green buildings.
The Chilean finance ministry worked with several ministries with responsibility for energy, environment, agriculture, public works, and transport to prepare the Green Bond Framework and portfolio of projects demonstrating the value of inter-ministerial cooperation on climate change.
- Latin America and Caribbean finance ministers are stepping up to support boosting climate action
Chile and Finland recently led the formation of the Coalition of Finance Ministers for Climate Action with 30 countries including Costa Rica, Ecuador, Jamaica, Paraguay, the Dominican Republic, Mexico, Colombia, and Guatemala.
The coalition has endorsed the “Helsinki Principles” which includes aligning the policies of finance ministries with the Paris Agreement and factoring climate risks into economic planning.
At the IDB Group, sustainable finance is also going mainstream. In 2018, the IDB Group financed nearly USD 5 billion in climate-related activities benefiting Latin America and the Caribbean accounting for 27 percent of total IDB Group annual approvals and close to our goal of 30 percent by 2020.
- Cites across the region are leading the charge with a growing number of electric buses
Electric buses are hitting the streets of LAC cities at a dizzying speed. Santiago now has 203 electric buses, currently the largest fleet in the region. From São Paulo, Guayaquil and Medellin to Bogotá and Buenos Aires, cites are looking increasingly at this new technology.
The potential for electric buses to help tackle air pollution, reduce emissions and fossil fuel imports is impressive. LAC also has ideal conditions for electric buses to deliver emission reductions given the region’s extensive use of hydropower and potential for more solar and wind energy. The region also has the largest number of Bus Rapid Transport Systems (BRTs) worldwide with 62 in operation transporting millions of people every day.
That’s why the IDB Group is working with Argentina, Brazil, Colombia, Costa Rica, Mexico, and Paraguay to help accelerate the arrival of clean buses through technical support, financing and insurance, risk management and credit enhancement. To support clean public transport, we are also financing the first line of the elevated metro line in Bogotá and co-financing Quito’s metro system, which is nearing completion.
Next stop: Bonn, Germany
Last week LAC negotiators joined their international colleagues for the latest round of the UN climate change talks in Bonn, Germany. These discussions build on progress made in Katowice, Poland, where many LAC countries played an active role in promoting the Intergovernmental Panel on Climate Change’s report on limiting global warming to 1.5 degrees Celsius and calling for greater climate action.
With COP25 fast approaching, 2019 is a huge year for LAC’s climate action. The IDB Group is supporting our partners to implement their NDCs and design of long-term decarbonization plans that can guide decision-makers with choice of investments that will deliver multiple sustainable development outcomes.
Ahead of 2020 and the upcoming deadline to submit revised NDCs, the growing evidence of how climate action is going mainstream can inspire us to go even further. The opportunities to build more inclusive sustainable societies are there for the taking.