The man­ag­ing di­rec­tor of the In­ter­na­tion­al Mon­e­tary Fund (IMF), Kristali­na Georgie­va, said Tues­day that cli­mate change pos­es an acute threat to the Caribbean and that the costs for re­silience build­ing in the re­gion is es­ti­mat­ed at a stag­ger­ing US$100 bil­lion over the next two decades.

Ad­dress­ing the open­ing of the three-day Caribbean High-Lev­el Fo­rum on Man­ag­ing the En­er­gy Tran­si­tion, she said that the green en­er­gy tran­si­tion is one of the most press­ing is­sues for the world and the Caribbean.

She told the cer­e­mo­ny that has brought to­geth­er gov­ern­ment min­is­ters, re­gion­al cen­tral bank gov­er­nors, pri­vate sec­tor stake­hold­ers, aca­d­e­mics, and mem­bers of civ­il so­ci­ety that sea lev­els are ris­ing, and nat­ur­al dis­as­ters are be­com­ing more fre­quent and in­tense, as Hur­ri­cane Beryl in Ju­ly re­mind­ed the glob­al com­mu­ni­ty.

“A rapid glob­al tran­si­tion to re­new­able en­er­gy is es­sen­tial to mit­i­gate some of these cli­mate chal­lenges. Yet, achiev­ing this tran­si­tion is a com­plex jour­ney,” she not­ed. “It re­quires sub­stan­tial up­front in­vest­ments and well-de­signed in­cen­tives, while bal­anc­ing com­pet­ing pri­or­i­ties for de­vel­op­ment and re­silience. All at a time of lim­it­ed fis­cal space.”

Georgie­va said de­spite the chal­lenges, she firm­ly be­lieves the Caribbean re­gion has a tremen­dous op­por­tu­ni­ty.

“The Caribbean economies showed in­cred­i­ble re­silience through the (COVID-19) pan­dem­ic and its af­ter­math. Now is the time to seize the op­por­tu­ni­ty pro­vid­ed by glob­al de­vel­op­ments to plan and co­or­di­nate a green en­er­gy tran­si­tion that fos­ters in­clu­sive, sus­tain­able, and re­silient growth across the re­gion.

“With its abun­dant sun­shine, strong winds, and ge­ot­her­mal po­ten­tial, the Caribbean can be a glob­al leader in this tran­si­tion and an ex­am­ple for the rest of the world.”

Georgie­va said the ben­e­fits of this shift to green en­er­gy are pro­found and that while Caribbean coun­tries con­tribute on­ly a frac­tion of glob­al green­house gas emis­sions, the eco­nom­ic case for a re­new­able en­er­gy fu­ture is com­pelling.

She said cur­rent­ly, many Caribbean economies are high­ly de­pen­dent on cost­ly and volatile oil im­ports, which widen eco­nom­ic im­bal­ances, ex­pose them to the fluc­tu­a­tions of glob­al com­mod­i­ty mar­kets, and am­pli­fy in­equal­i­ty.

“The en­er­gy in­fra­struc­ture is ag­ing and of­ten in­ef­fi­cient, with high op­er­a­tional costs. This ham­pers re­li­a­bil­i­ty, and al­so lim­its the ca­pac­i­ty to meet grow­ing en­er­gy de­mand. Tran­si­tion­ing to re­new­ables, the cost of which has steadi­ly de­clined, would re­duce these vul­ner­a­bil­i­ties and en­hance en­er­gy se­cu­ri­ty. And that would make your economies more ef­fi­cient, re­silient, and com­pet­i­tive while fos­ter­ing long-term growth,” she as­serts.

“For fos­sil fu­el-pro­duc­ing coun­tries in the re­gion, the path for­ward will en­tail care­ful man­age­ment of fis­cal rev­enues, la­bor tran­si­tions, and oth­er struc­tur­al shifts. At the same time, this is an op­por­tu­ni­ty to di­ver­si­fy in­to the green en­er­gy sec­tors of the fu­ture, such as green petro­chem­i­cals and green hy­dro­gen,” she added.

Georgie­va said achiev­ing a fair, eq­ui­table green en­er­gy tran­si­tion will re­quire well-cal­i­brat­ed poli­cies, par­tic­u­lar­ly giv­en the high lev­el of in­debt­ed­ness in the re­gion.

She said key steps in­clude fur­ther build­ing ro­bust macro­eco­nom­ic frame­works, pru­dent fis­cal man­age­ment, mo­bi­liz­ing rev­enue sources to cre­ate the fis­cal space need­ed for part of the green in­vest­ments, and phas­ing out fos­sil fu­el sub­si­dies.

The IMF man­ag­ing di­rec­tor said for­mu­lat­ing well-de­signed in­cen­tives and strength­ened reg­u­la­to­ry frame­works is crit­i­cal, in­clud­ing elec­tric­i­ty pric­ing agree­ments.

“More­over, en­hanc­ing re­gion­al co­or­di­na­tion can help achieve economies of scale in re­new­able projects,” she not­ed. “The East­ern Caribbean Cen­tral Bank’s Re­new­able En­er­gy In­fra­struc­ture In­vest­ment Fa­cil­i­ty il­lus­trates the po­ten­tial scope for pool­ing re­sources and ag­gre­gat­ing projects across coun­tries, al­low­ing to cre­ate the scale need­ed to at­tract ma­jor pri­vate in­vestors.”

“Of course, the fi­nan­cial re­sources re­quired for this tran­si­tion are sub­stan­tial, and Caribbean gov­ern­ments alone can­not bear this bur­den. In­deed, the costs for re­silience build­ing in the Caribbean re­gion is es­ti­mat­ed at a stag­ger­ing US$100 bil­lion over the next two decades. This is the mo­ment to lever­age in­no­v­a­tive fi­nan­cial in­stru­ments such as Guyana’s sale of car­bon cred­its,” she point­ed out.

Georgie­va said the pri­vate sec­tor, both re­gion­al and in­ter­na­tion­al, will have to pro­vide the bulk of the in­vest­ment.

She said in­no­v­a­tive fi­nan­cial in­stru­ments, such as green bonds, blend­ed fi­nance, and guar­an­tees and in­sur­ance mech­a­nisms, can de-risk green en­er­gy in­vest­ments and un­lock the pri­vate fi­nance re­quired to bridge the in­vest­ment gap, adding that Bar­ba­dos’ debt for cli­mate swap is a great ex­am­ple of an in­no­v­a­tive ap­proach for cre­at­ing space for green in­vest­ment.

“At the IMF, we are com­mit­ted to sup­port­ing you in your ef­forts to achieve this green tran­si­tion,” she said.

“First, our sur­veil­lance and ca­pac­i­ty de­vel­op­ment ac­tiv­i­ties can help Caribbean coun­tries put in place sound macro­eco­nom­ic foun­da­tions and sup­port the de­sign and im­ple­men­ta­tion of sus­tain­able and eq­ui­table cli­mate and green en­er­gy tran­si­tion poli­cies,” she ex­plained.

Georgie­va said the Caribbean Re­gion­al Tech­ni­cal As­sis­tance Cen­tr (CAR­TAC) is one such re­source, of­fer­ing ca­pac­i­ty build­ing and pol­i­cy ad­vice in these ar­eas, high­light­ing a crit­i­cal need to ad­e­quate­ly fund CAR­TAC ac­tiv­i­ties.

“How­ev­er, ad­di­tion­al fi­nanc­ing will be need­ed from ex­ist­ing and new de­vel­op­ment part­ners to close CAR­TAC’s cur­rent fi­nanc­ing gap,” she point­ed out. “I hope we can count on your ad­vo­ca­cy with de­vel­op­ment part­ners to sus­tain CAR­TAC’s es­sen­tial work.”

She said the IMF is al­so pro­vid­ing af­ford­able long-term cat­alyt­ic fi­nanc­ing and that the fi­nan­cial in­sti­tu­tion’s Re­silience and Sus­tain­abil­i­ty Fa­cil­i­ty is de­signed to sup­port coun­tries vul­ner­a­ble to cli­mate change.

“So far, the IMF has ap­proved 20 of these arrange­ments with to­tal com­mit­ments of near­ly US$10 bil­lion dol­lars, rough­ly 10 per cent of which was pro­vid­ed to Ja­maica and Bar­ba­dos,” she re­port­ed. “Al­so, our lend­ing is sup­port­ing im­por­tant eco­nom­ic and po­lit­i­cal­ly chal­leng­ing re­forms, for ex­am­ple in Suri­name through the Ex­tend­ed Fund Fa­cil­i­ty.”

Georgie­va said through its Do­mes­tic Re­source Mo­bi­liza­tion ini­tia­tive, de­vel­oped joint­ly with the World Bank, the IMF aims to help coun­tries strength­en their lo­cal rev­enue bases and de­vel­op in­no­v­a­tive fund­ing sources.

“We stand with you in re­al­iz­ing this vi­sion of a green­er, more re­silient Caribbean. To­day’s Fo­rum is an in­valu­able op­por­tu­ni­ty to ex­plore prac­ti­cal steps and forge part­ner­ships for the road ahead,” she stat­ed.

The Fo­rum is a joint ini­tia­tive of the Bar­ba­dos gov­ern­ment and the IMF.

A gov­ern­ment state­ment said that there will be pre­sen­ta­tions and pan­el dis­cus­sions cov­er­ing a range of is­sues such as “Tak­ing Stock of the Macro­eco­nom­ic Im­pli­ca­tions of the Green En­er­gy Tran­si­tion”, and “Achiev­ing a Sus­tain­able and Eq­ui­table Green En­er­gy Tran­si­tion”. —BRIDGETOWN, Bar­ba­dos (CMC)