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THE CARIBBEAN
Resilience to face climate change
Lucien Chauvin
11/27/2017
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Caribbean leaders hope they can find a silver lining in the destruction caused on many islands during this year’s hurricane season.

Two hurricanes, Irma and María, pummeled the Caribbean in September, leaving behind death and destruction on island nations already saddled by high debt and reliant on tourist dollars that are now scarce.

Among the hardest hit were Dominica and the twin-island nation of Antigua and Barbuda. Damage on Dominica could reach as high as 200 percent of the country’s gross domestic product (GDP), while in Antigua and Barbuda could be close to 20 percent, according to estimates from the World Bank.  

Antigua and Barbuda Prime Minister Gaston Browne said his nation could borrow money for reconstruction, but this would only create long-term problems.

“We have made enormous gains in the last three years to reduce our debt down from 102 percent of GDP to 75 percent. The initial borrowing [for reconstruction] is going to push this back up to 85 percent, so the gains made will have been eroded,” he said to Latinamerica Press in a telephone interview.

The Caribbean Community (CARICOM), which groups together 15 countries, and international agencies are looking at ways to rebuild that will not only make countries more resilient to climate change, but also keep them from falling into future economic traps.

Grenada Prime Minister Keith Mitchell, currently head of Caricom, has been clear since the storms hit that business as usual is not possible. He said on the sidelines of the annual meeting of the World Bank in mid-October that governments and multilaterals needed to find creative solutions.

“This is not just about resilience for homes, coasts and infrastructure. It is about transforming energy and other sectors, and also it is about prospering from sustainability,” said Mitchel, who estimated that damages from the hurricanes in nine countries could eventually reach $10 billion.

Among the proposals under discussion are changing the region’s energy matrix to focus renewable sources of electricity production, particularly the use of solar and wind power. Antigua and Barbuda is a prime example, with the country spending close to 15 percent of GDP annually on fuel imports, compared to an average of 8.6 percent in the Caribbean region, according to the Inter-American Development Bank.

Browne said his government wants to make Barbuda, where nearly all infrastructure and homes were wiped out by Hurricane Irma, into the first climate resilient island.

“Within the next 12 months we expect Barbuda to become the only totally green island on the planet that will be powered exclusively by alternative energy,” he said.

Antigua and Barbuda should have around 15MW in installed renewable capacity by the end of next year.

Opportunity for renewable energy
Roy Torbert, one of the leaders of the energy program at the US-based Rocky Mountain Institute (RMI), said the disaster provides opportunities.

“We need to think of an entirely new system, from generation to distribution. If rebuilding does not emphasize resilience we could be in the same spot in a few years and that is a harrowing situation to envision,” he said.

While the price tag to move toward renewables is hefty, it is not as daunting when all components are considered. It would cost around $3 billion to transition nine countries completely to renewables over the coming 20 years, according to the RMI. Savings during the same period would be around $1 billion.

Leaders across the region are also keen on moving ahead now on a few ideas coming out of the World Bank and United Nations concerning ways to lower debt and develop better coverage in the case of disaster.

The World Bank is putting together plans that would allow countries with high climate risk and high debt — basically the definition of Caribbean island nations — to work on debt reduction tied to resilience initiatives.

The plan would let creditors to forgo claims in exchange for investments in resilience, with a focus on infrastructure and environmental programs, such a reforestation and shoreline defense.

Caribbean governments have jumped on the idea.

“This is not only feasible, but we are formally supporting it,” Jamaican Finance Minister Audley Shaw said.

“There are many projects for resilience, including watershed protection and land reclamation. It is something that really needs to be ramped up, because many of the Caribbean countries are heavily indebted and at the same time they need to protect their environment,” Shaw added.

He said Jamaica was working on projects for hillside reforestation as a way to controlling the impacts of heavy rains. He said that if Jamaica invests $10 million in reforestation to build resilience, for example, it could then turn to creditors and present the work, obtaining a reduction in it debt. 

Insurance plans
Countries are also interested in working with the World Bank and other agencies on insurance plans, including parametric insurance policies and catastrophe bonds.

Parametric operations, unlike other insurance policies, are based on the parameters of the disaster, allowing money to be disbursed faster. It uses wind speed and rainfall, instead of an inspection, to release money.

A region-wide parametric insurance plan, CCRIF-SPC, already operates and includes 17 countries, but it is small and the payouts, while important, are low. Caribbean leaders would like international agencies to get more involved to help increase the pool.

Camillo Gonsalves, economic planning minister for Saint Vincent and the Grenadines, said CCRIF is important because it gets cash to governments quickly, but he would like it to be reinforced.

“While it disburses funds quickly, it needs more money. Our countries don’t have the fiscal space to make greater contributions to the CCRIF,” he said.

Caribbean countries would also like the World Bank to work on a regional catastrophe (cat) bond that would be used in case of disaster. A cat bond was in place in Mexico and helped free up funds quickly after the recent earthquake. Catastrophe bonds, like the CCRIF mechanism, are parametric in nature.

Prime Minister Brown said a cat bond is an option.  “We need to find innovative ways to increase coverage without increasing the premium too much for the countries,” he said.

The World Bank will launch the first region-wide parametric cat bond with the countries that form the Pacific Alliance, Chile, Colombia, Mexico and Peru, in 2018. It will be linked to earthquakes, but could serve as a model for the Caribbean. —Latinamerica Press.


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Antigua and Barbuda were among the hardest hit by hurricane Irma, leaving massive losses. /CARICOM
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