Between 2025 and 2050, Ecuador requires an annual investment of 3.5 percent of GDP to mitigate and adapt to climate change
Quito, September 19, 2024 - A robust climate policy program would enable Ecuador to boost economic growth and reduce poverty, according to the World Bank Group's Country Climate and Development Report (CCDR), released today.
The report stresses that climate action and economic progress can go hand in hand. Climate mitigation and adaptation actions, driven by a combination of private sector dynamism and well-targeted public investments, could contribute to Ecuador's economy, putting the country on a path to sustainable growth.
“Climate challenges can be successfully addressed by combining institutional, macroeconomic and sectoral policies that combine climate and development priorities,” said Issam Abousleiman, World Bank director for Bolivia, Chile, Ecuador and Peru. “Ecuador can achieve resilient, low-carbon development through these efforts, but urgent action is needed,” he said.
Between 2025 and 2050, the country must invest USD 3.7 billion (or 3.5 percent of GDP) annually in climate mitigation and adaptation activities, mainly in the transport, energy and agricultural sectors. These measures could significantly help protect Ecuador from the physical impacts of climate change and even offset the cost of the associated investments. Additionally, structural reforms, particularly in those three sectors, are essential for attracting private sector investment and creating a stable macroeconomic environment. The recent strengthening of the regulatory framework for public-private partnerships (PPPs) is a step in the right direction, as it can help attract capital to implement climate mitigation and adaptation activities for critical infrastructure. The report also highlights the importance of developing local capital markets and green financial instruments to finance climate action.
“Investment in institutional capacity, coordination and improvement of the public administration is essential for climate action, creating an enabling environment for private investment, which can drive the economic diversification and resilience the country needs. The private sector can play a key role in energy transition,” said Manuel Reyes Retana, International Finance Corporation (IFC) regional director for South America.
If the country does not act, the report estimates that the increased frequency and magnitude of extreme weather events will have serious impacts on the economy and the well-being of the Ecuadorian population, potentially reducing GDP per capita by nearly 4 percentage points.
Ecuador's rich natural wealth offers a unique advantage. Commodities from legal and responsible mining and deforestation-free agriculture can boost Ecuador's economy, increasing its productivity and bolstering resilience against climate shocks.
The report also underscores the importance of creating an enabling environment to attract increased private investment in renewable energy. Well-designed hydropower infrastructure complemented by investment in solar and wind power would help diversify electricity generation, ensuring energy security and lower emissions.
The country needs to carefully manage its oil resources by investing in diversification and resilience in the face of transition risks and by planning for high-potential alternatives, such as tourism.
The Country Climate and Development Reports (CCDR)
The World Bank Group’s Country Climate and Development Reports (CCDRs) are a core diagnostic that integrates climate change and development. They help countries prioritize the most impactful actions that can reduce greenhouse gas (GHG) emissions and boost adaptation and resilience, while delivering on broader development goals. CCDRs build on data and rigorous research and identify main pathways to reduce GHG emissions and climate vulnerabilities, including the costs and challenges as well as benefits and opportunities from doing so. The reports suggest concrete, priority actions to support the low-carbon, resilient transition. As public documents, CCDRs aim to inform governments, citizens, the private sector and development partners and enable engagements with the development and climate agenda. CCDRs feed into other core Bank Group diagnostics, country engagements and operations, and help attract funding and direct financing for high-impact climate action.
Download the complete report.
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