BRIDGETOWN, Barbados, CMC—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 of building resilience in the region are 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, which 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. 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."
Despite the challenges, Georgieva 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. While Caribbean countries contribute only a fraction of global greenhouse gas emissions, the economic case for a renewable energy future is compelling.
She said that many Caribbean economies are currently 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 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.
"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."
Georgieva said achieving a fair, equitable green energy transition will require well-calibrated policies, particularly given the region’s high level of indebtedness.
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, including electricity pricing agreements, is critical.
"Moreover, enhancing regional coordination can help achieve economies of scale in renewable projects. The Eastern Caribbean Central Bank’s Renewable Energy Infrastructure Investment Facility illustrates the potential scope for pooling resources and aggregating projects across countries, allowing the creation of 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 are 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."
Georgieva said the regional and international private sector 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. Barbados’ debt for climate swap is a great example of an innovative approach to creating space for green investment.
"At the IMF, we are committed to supporting you in your efforts to achieve this green transition.
First, our surveillance and capacity development activities can help Caribbean countries establish sound macroeconomic foundations and support the design and implementation of sustainable and equitable climate and green energy transition policies."
Georgieva said the Caribbean Regional Technical Assistance Center (CARTAC) is one such resource, offering capacity building and policy advice in these areas. This highlights the critical need to adequately fund CARTAC activities.
"However, additional financing from existing and new development partners will be needed to close CARTAC’s current financing gap. We can count on your advocacy with development partners to sustain CARTAC’s essential work."
She said the IMF provides 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 10 billion dollars, roughly 10 percent of which was provided to Jamaica and Barbados. Also, our lending supports 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 future," she added.
The Forum is a joint initiative of the Barbados government and the IMF. A government statement said that presentations and panel discussions will cover 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.
Conclusion
In conclusion, the IMF managing director emphasized the urgent need for the Caribbean region to transition to renewable energy and adapt to the challenges posed by climate change. She highlighted the economic benefits of this transition, including increased energy security, reduced reliance on fossil fuels, and creation of new jobs.
FAQs
Q: What is the estimated cost of building resilience in the Caribbean region over the next two decades?
A: The estimated cost is US$100 billion.
Q: Who will provide the bulk of the investment for the green energy transition?
A: The regional and international private sector.
Q: What are some innovative financial instruments that can help de-risk green energy investments?
A: Green bonds, blended finance, and guarantees and insurance mechanisms.
Q: What is the IMF’s role in supporting the green energy transition in the Caribbean region?
A: The IMF provides affordable long-term catalytic financing and technical assistance through its surveillance and capacity development activities.
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