The Paris Agreement requires concrete action that is increasingly urgent and far-reaching, and this transformation requires significant financial investments by governments, businesses, and civil society. A group of multilateral development banks (MDBs) has just published its annual report on climate finance which provides details on US$43 billion of approvals in for developing countries. These projects are intended to reduce greenhouse gas emissions to curb global warming and promote greater resilience to the most damaging impacts of global warming. Although the USD43 billion seems like a considerable volume, we know that a fairer and more sustainable development requires more; that is why this financing aims to have a multiplier and transformative effect.
This year, only in Latin America and the Caribbean, the MDBs invested nearly US$8.8 billion in transport, agriculture, forestry, water and sanitation, and energy, among other sectors. The IDB Group contributed 60% or US$5 billion distributed as follows: 70% to mitigate climate change, creating value by investing in clean energy, improving transportation and forest conservation; and the other 30% to offset the effects of more frequent and severe droughts, floods, sea-level rise, and other climate change with increasingly serious impact. Undoubtedly, the region faces high costs in terms of human lives, physical assets, and finance which translates into high vulnerability to the climate crisis. In Guatemala, Honduras, and El Salvador alone, about 3.5 million people go hungry due to the prolonged drought. The lack of rain brought about losses of 80 to 100% of the corn and bean crop, the basis of the locals´ diet. This exacerbates the conditions of poverty in a country like Guatemala, where today half of the children suffer from chronic malnutrition.
What can we do to face the climate crisis? The following projects approved by the IDB Group in 2018 are underway:
- The Mexican federal government spent US$30 million to promote energy efficiency in its 2,260 buildings that consume 355 GWh of electricity per year. In addition to the physical efficiency measures, training will be given for program planning, execution, and monitoring. It is critical to dispel the perception of risk, prove the feasibility of new technologies, and demonstrate the value of investing in energy efficiency.
- In Mexico, Bolivia and the Dominican Republic, the IDB approved more than US$1 billion in the energy sector to facilitate the use of renewable sources and promote energy savings. These changes in policies and regulations are fundamental.
- The Quito Metro, a flagship project of sustainable urban mobility at a cost of over US$2 billion, will serve 2.5 million city dwellers who take more than 6 million trips a day. Although two-thirds of those trips are by public transport, the city is concerned with congested roads at rush hour and the rapid increase of cars in circulation. The project aims to reduce travel time and cost, congestion, greenhouse gases, noise, and pollution. The Metro is expected to open this year.
- More than US$ 380 million were approved for agriculture, livestock, reforestation, and natural resources conservation programs for Brazil, Colombia, Haiti, Mexico, the Dominican Republic, Peru, Suriname, and Uruguay. In the Dominican Republic, US$150 million are dedicated to increase the productivity and income of small producers with the adoption of better technologies and greater environmental sustainability, including higher forest cover over degraded watersheds. One-third of the Dominican population lives in rural areas where the agricultural sector is the main source of employment.
- The Caribbean is being impacted by more frequent hurricanes, sea-level rise, the disappearance of coral reefs, drought, and floods. Communities and infrastructure located mainly in coastal areas stand to lose; economic losses are mounting. For Jamaica, where nine storms hit the country during the last 20 years and cost US$ 2 billion, the IDB approved a program for comprehensive risk management with an innovative instrument which provides financial insurance for the national treasury. Over the last two years, the IDB supported this climate-related financial risk management with more than US$700 million in three other countries: The Bahamas, Suriname, and Argentina.
- Agriculture is a key component of Suriname’s economic base and changing rain patterns are reducing its productivity. An IDB program seeks to improve irrigation and drainage by supporting activities such as national and district plans, strengthening of water governance, and improved hydro-meteorological information.
These projects signal that managing development in a changing climate involves different actors and sectors and needs considerable financing. Thus, climate finance is crucial to promote more ambitious and sustainable projects that help achieve the Paris Agreement’s vision of a zero-carbon world by the end of the century.
You may download the joint MDB report on climate finance 2018, and can find more information here on IDB’s recent projects that contribute climate finance to the region.