Climate Action in Latin America and the Caribbean

The World Bank’s Country Climate and Development Reports (CCDRs) are core diagnostic tools that analyze and provide recommendations on how countries can achieve their development goals and increase resilience by responding to the challenges posed by climate change.  The 2024 CCDR for Dominica, Grenada, Saint Lucia and St. Vincent and the Grenadines is available here.

These four countries of the 11-member Organization of Eastern Caribbean States (OECS), are eligible for concessional International Development Association (IDA) financing in support of their development objectives. In light of Caribbean countries’ inherent vulnerabilities, the impact of climate change on their development cannot be overstated.

Interlinked Challenges

Common challenges, summarized below, deeply influence these countries’ efforts to realize their development goals and respond to climate change.

1.       They are Small Island Developing States (SIDS), which makes their development pathways particularly vulnerable to external shocks.

2.       They are highly exposed to natural hazards and climate change, which directly affect a large portion of the land, assets, and population. Moreover, the high exposure to external macroeconomic shocks makes the management of natural disaster shocks even more difficult. 

3.       Due to overly expansive fiscal policies during economic booms, these countries have high public debt levels and little fiscal buffer to cushion their economies during downturns.  

4.       Poverty in these countries, as is the case across the OECS countries analyzed in this report, remains high, with official poverty rates of up to 30 percent, increasing the vulnerability of the population to shocks. 

5.       They exhibit gaps in human capital development, which worsened during the pandemic and could be further negatively impacted by climate change. 

Taken together, these challenges mean that these countries face the very real risk that climate change will deepen existing physical, economic, and social vulnerabilities.  

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Commitments to Mitigation and Adaptation

All four countries have prioritized resilience and adaptation in their national climate and sustainable development objectives, setting greenhouse gas (GHG) reduction targets in their Nationally Determined Contributions (NDCs). Key priorities for adaptation and climate resilience include improved water management, climate-proofing agriculture (including fisheries), and supporting coastal systems through nature-based solutions (NBS). National climate policies, strategies, and planning instruments, along with NDCs, emphasize enhancing disaster risk reduction, addressing loss and damage related to climate change.

The four countries can strengthen resilience, reduce economic vulnerabilities, and support climate commitments by transitioning away from fossil fuels and improving waste management. Energy, transport, and waste are the largest contributors to emissions, and governments have identified them as priority mitigation sectors.

Key Components of the CCDR

Despite strong commitments to climate action, the legal, regulatory, and institutional frameworks for climate action remain in their early stages. To assist these countries in meeting their climate action goals, this Country Climate and Development Report (CCDR) focuses on several key areas:

1.        Challenges of Climate Change: Presents evidence showing how climate change may exacerbate the physical, social, and economic challenges these countries face, highlighting the urgent need for action.

2.        Investment Estimates: Provides estimates of investments needed for adaptation to natural hazards, ranging between 1% and 11% of discounted GDP annually over a 15 to 25-year period. The report notes that while the needs are large, the potential risk reduction and associated co-benefits are also substantial.

3.        Balancing Resilience and Debt Sustainability: Explores the trade-offs between building resilience and ensuring debt sustainability by linking investment costs to broader fiscal and growth considerations within a robust macroeconomic framework.

4.        Key Actions for Adaptation: Identifies actions that focus on building climate resilience while promoting a more sustainable development path. It recommends focusing investments on a “resilient core” approach to maximize the impact and efficiency of those investments.

Regional Collaboration for Climate Action

This CCDR covers multiple countries rather than focusing on a single nation, offering both country-level recommendations and areas for regional collaboration. Regional cooperation could reduce costs, generate economies of scale, and address capacity constraints at the national level. 

Recommended Regional Actions Across Three Categories:

Knowledge

1.        Invest in information systems for agriculture and marine resources to track climate change impacts and baseline coastal ecosystem mapping.

2.        Establish regional training centers for renewable energy and energy efficiency transition.

3.        Strengthen governments' capacity for emergency preparedness and response.

4.        Develop a knowledge base on green bonds and Public-Private Partnerships (PPP) models to mobilize private sector involvement in climate finance and infrastructure development.

Investments

1.        Build resilience in fisheries and coastal tourism sectors, improving food security and economic resilience.

2.        Reduce barriers to adopting renewable energy (RE) and energy efficiency (EE) by enhancing regulatory frameworks and incentivizing battery storage investments.

3.        Scale up EE measures in public buildings and develop regional EE equipment markets.

4.        Transition to electric mobility to reduce foreign fossil fuel dependence, lower local pollution, and cut carbon emissions.

5.        Invest in waste management and wastewater treatment systems to preserve water quality, protect marine ecosystems, and curtail methane emissions.

3. Institutions

1.        Coordinate regional e-mobility development (vehicles, ferries, cruise ships) to achieve economies of scale and improve inter-island transport networks.

2.        Strengthen regional emergency preparedness and response capabilities through investment in legal frameworks, personnel, and technology.

3.        Address climate-related migration by incorporating provisions within regional free movement arrangements to manage displacement and migration flows.

4.        Develop a sustainable finance market, promoting the issuance of green and blue bonds, and harmonize investment codes regionally to attract climate finance.

This CCDR serves as an entry point for dialogue on addressing the multiple challenges facing these four OECS countries to ensure a climate-resilient development path. Implementing policies that support these goals is critical, offering economic benefits, increased productivity, and the conservation of natural capital in the OECS region.