Latin America and the Caribbean face the triple challenges of COVID, biodiversity loss, and climate change. The region is one of the most affected by the pandemic, facing an economic contraction of 7.4%. Today, we are in the warmest year and the warmest decade humanity has seen. We have seen hurricanes Eta and Iota devastated the lives of more than three million people in Central America.
Expanding infrastructure and agriculture increases habitat and species loss, with climate change directly threatening species-rich coral reefs and forests. Sustainable recovery offers an opportunity to address all these challenges as we are sitting amid a unique opportunity for transformative change. Taking advantage of this opportunity will require whole-of-government and long-term thinking. But such thinking will bring more benefits than costs and ensure that the region is not, yet again, left behind the rest of the world.
Long-term decarbonization strategies can deliver on Paris Agreement objectives
The Paris Agreement and Agenda 2030 call for transversal and long-term thinking to respond to people’s critical needs. The Paris Agreement looks to ensure both long-term consideration of adaptation and resilience and achieve net-zero by 2050. Agenda 2030 and the Sustainable Development Goals set clear targets to achieve by 2030 through an integrated approach cutting across energy, transport, water, and land use. Both the Paris Agreement and the Sustainable Development Goals implicitly need long-term and whole-of-government thinking.
For example, Costa Rica’s decarbonization plan delivers on Paris and SDG commitments while cutting across the whole government, including actions to enhance biodiversity conservation. Barbados’ Roof to Reef plan cuts across housing, water, and biodiversity to deliver a long-term resilience solution for the country. Costa Rica and Barbados are planning beyond a single government’s timeline and are driving the agenda of transformational change from the cabinet.
The kinds of transformational decarbonization and resilience changes described in the SDGs and the Paris Agreement will bring net benefits to countries. Decarbonizing the regional economy will mean a net 15 million new jobs. Decarbonization in Costa Rica brings US$41 billion in net benefits to the country by 2050.
Already renewable energy generation is cheaper than fossil fuel generation. We also have a substantial number of tools that can increase resilience. Investments in innovative mechanisms such as targeted cash transfers to vulnerable communities can help enhance resilience to future shocks. But this is not all.
Adopting renewable energy and electromobility will lead to health benefits including less contamination in cities and reduced time lost and stress in traffic jams. Integrated development planning that considers biodiversity will also allow us to maximize the ecosystem services that arise from natural capital, ensuring the long-term health of agricultural systems, tourism jobs, and the resilience and mitigation functions of nature-based solutions.
A green, inclusive and resilient recovery makes sense from an economic perspective
The last reason for emphasizing the connections between COVID recovery, climate, and biodiversity is to ensure that the region and its people are not left behind. Forward-thinking fossil fuel companies are already viewing their future as renewable energy companies. Innovative technologies – such as green hydrogen and batteries – will change the face of energy, transport, and logistics.
Sadly, the developed world is trying to avoid stranded assets by shifting out of date technologies such as coal, oil, and gas generation plants and combustion engine factories to the developing world. Investors will judge future projects by return on investment and their ability to address sustainability risks. These risks will come in the form of physical climate and disaster risks and as technology, market, and policy shifts transform business contexts creating transition risks. It will be essential to avoid investments today that may become stranded assets in the future – for example, coal-fired plants that cannot produce energy at competitive prices.
New private sector financing opportunities will appear through sustainable investing taxonomies and sustainability-themed bonds, and insurance companies are fleeing higher risk sectors, including coal, oil, and gas. Finally, new job creation opportunities will appear based on renewable energy, electromobility, and nature-based solutions that together will make cities more livable and make peoples’ lives better.
What is the IDB doing from the climate change perspective to help countries achieve a sustainable and inclusive post-Covid 19 recovery in LAC?
Our new Climate Change Action Plan 2021-2025 (CCAP) integrates the sustainable recovery perspective. The Plan lays out a relevant approach to further incorporate climate change and sustainability into the IDB Group’s work to have a lasting impact as the region attempts to build back more sustainably.
Moreover, it presents many of these opportunities as menus for countries’ action. Some Latin American countries are already showing the way. Costa Rica leads on decarbonization, Chile on sovereign green bonds, Barbados on resilience and adaptation, Colombia on biodiversity in cities, Brazil and Mexico on sustainable infrastructure and sustainable finance. The plan shows how the region can respond to the COVID disaster and positively drive the climate and biodiversity agendas. The action plan also describes how we use concessional finance to drive changes in public and private investment and mobilize private capital for transformation.
While the pandemic is still raging in the region, countries in LAC must begin to plan their recovery strategies considering climate change and biodiversity goals. At the IDB, the CCAP is a tool to guide the Bank’s support to countries for securing a sustainable and inclusive development and maintaining an ambitious climate action.
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Photo: Graham Watkins