Promoting Climate Change Action in Latin America and the Caribbean

Challenge

As the Latin America and Caribbean (LAC) region battles the health and economic crises caused by COVID-19, many countries suffer additional impacts from the rapidly changing climate. Heat extremes and changing precipitation patterns are already adversely affecting urban areas, agricultural productivity, hydrological regimes, and biodiversity, with impacts on the Amazon rainforest particularly pronounced and devastating. Ocean acidification, sea level rise, tropical cyclones, and temperature changes are expected to negatively impact coastal livelihoods, tourism, health, and food and water security, particularly in Small Island Developing States (SIDS) in the Caribbean. For many Andean cities, melting glaciers represent the loss of a major source of the fresh water currently used for consumption, irrigation, and hydroelectric power and contribute to rising sea levels. Climate change, coming on top of the nonclimate stressors that currently limit poverty reduction, job creation, and shared prosperity, poses an additional burden for development.

The COVID-19 pandemic and the climate crises magnify underlying inequities and negatively affect income distribution, poverty, and country revenues. Every year, on average, between 150,000 and 2.1 million people are pushed into extreme poverty because of natural disasters in the region. By 2030, climate change could push 3 million people a year into extreme poverty. Food and nutrition security could be severely impacted, with projected reductions of around 20 percent of crop yields for beans and maize in Central America and the Caribbean. In cities, the poorest neighborhoods are often the most exposed and vulnerable to flooding. The 160 million people without access to a safely managed water supply and the 350 million without access to safe sanitation are highly vulnerable to increases in vector-borne diseases. These economic impacts also translate at the macroeconomic and fiscal levels. For example, in 2018, Argentina lost an estimated $1.5 billion in tax revenue, mostly due to reduced export tax revenues after a severe drought in 2017. These fiscal risks increase public debts, reduce long-term growth, and hamper response to climate-related crises. As these countries recover from COVID, they need support in making the investments that can spur job creation now, lay the foundations for medium- and long- term growth and competitiveness in a climate-changing world, and avoid locking into sectors in ways that leave them uncompetitive or with stranded assets.

Approach

To help the LAC region countries meet the pressing demands of a changing climate, the World Bank Group supports countries in delivering on their NDCs and emphasizes the need to mainstream climate actions into lending operations and high-impact areas, including clean energy, green transport, forest restoration, marine conservation, climate-smart agriculture, and urban resilience; other efforts mobilize the private sector to expand climate investments in developing countries. Within LAC, the Bank continues to provide technical and financial support geared toward scaling up climate change mitigation and adaptation actions and leveraging co-benefits. On mitigation, countries utilize sector actions, including energy, waste, transport, forestry, agriculture, and sustainable use of resources in urban area. Adaptation offers myriad opportunities to enhance resilience to climate change impacts through (i) natural disaster preparedness; (ii) enhanced technologies and sector capacities to mitigate risks of extreme weather and hydrology change in agriculture, forestry, fisheries, transport, and energy; and (iii) new financial products to boost resilience.

Specific examples from the past 18 months of the Bank’s climate investments in the region include the following:

• Opportunities to address climate and COVID-19 vulnerabilities through health measures for key populations. The source of increased greenhouse gas (GHG) emissions and contributors to climate change also pose health risks that could compound COVID-19 impacts. Empirical findings note that air pollution, which contributes to climate change, can worsen the impact of COVID-19 by increasing its transmission, making individuals more susceptible to infection, and worsening the severity of the disease. In addition, approaches to addressing the health risks from COVID-19 and other viruses can be leveraged to combat vector- or water-borne illnesses as well, which are exacerbated by climate-induced shocks like natural disasters and floods.
• Support for natural disaster response is leveraged to promote climate-responsive recovery. In November 2020, two major hurricanes, Eta and Iota, hit Central America in quick succession, resulting in widespread destruction, interrupting basic services, and impeding recovery, all compounded by the COVID-19 pandemic. Emergency response operations included immediate recovery necessities coupled with improvements to infrastructure and institutional capacity to support medium-term climate resilience. This approach supports the World Bank’s priority of building back better following emergencies, including both the COVID-19 pandemic and natural disasters.
• Land-use change and agriculture account for 42 percent of emissions from LAC and are critical sectors for economic stability and growth in the region. Opportunities exist to improve productivity in these sectors by maximizing the use of degraded areas and more consistently and holistically planning and enforcing land use. These efforts will result in economic and employment opportunities for sustainable development as well as reducing emissions. LAC countries are implementing first-of-their-kind programs to reduce emissions from forests at a large scale through investments in green jobs and improved land use and productivity.
• By integrating use of information and communication technologies (ICTs) with climate change policies, countries can set forward-looking courses while working to meet national development and poverty-reduction goals. ICTs can help drive down GHG emissions by improving efficiency in networks and equipment and, at the same time, by monitoring weather events and informing the population about impeding climate-induced disasters, ICTs help the region’s countries adapt to observed and anticipated climate change impacts.
• The COVID-19 pandemic has reinforced the countries’ need to maintain a focus on long-term development goals and to continue economic transformation through inclusive and sustainable recovery. The COVID-19 crisis presents opportunities for countries to “rebuild better,” in greener, more sustainable and resilient ways. Sustainable management of forests and low carbon energy transition can create jobs quickly and can generate long-term benefits by reducing water scarcity and flood damage, lowering carbon emissions, and increasing agricultural productivity and food security.

Results

The Bank supports multiple approaches to climate action extending across all sectors. The following examples highlight ways climate has been mainstreamed into Bank-financed operations over the past 18 months: 

• Some health operations designed to respond to COVID-19 incorporate measures to support health emergencies more broadly and to prepare systems for the health impacts that follow climate-induced shocks. For example, a project in Peru under the COVID-19 Strategic Preparedness and Response Program supports the country in strengthening its emergency health response, including to both COVID-19 and the vector- and water-borne illnesses that follow natural disasters or floods. The project  incorporates environmental health indicators in its health surveillance program and shares epidemiological and climate indicators with relevant agencies, including those responsible for disaster risk management, to prepare for service delivery following floods, natural disasters, or other climate-induced events. The project also supports trainings and analyses to understand the links between climate change and health outcomes to improve the systems needed to address expected impacts on human health and well-being.
• Natural disaster recovery approaches integrate near- and medium-term measures to improve resilience to impacts from future climate-induced shocks. Two emergency recovery projects in Nicaragua and Honduras support those countries in responding to and rebuilding from Hurricanes Eta and Iota, which devastated the area over 18 days in November 2020. These operations include measures for rapid response and recovery of basic services, the absence of which could result in long-lasting impacts on poverty and human health. Beyond immediate needs, the projects also integrated measures to improve the countries’ resilience to future natural disasters or climate-shocks such as floods or heatwaves. Infrastructure improvements to ensure buildings can withstand storms and floods and institutional strengthening — including criticality analysis, improved technical or design standards, and preventative maintenance programs — will help reduce vulnerability to future adverse natural disasters and climate shocks.  
• Five countries in LAC are investing in improvements to productive sectors and land-use planning to access over $210 million in results-based payments for reduced emissions from use of forests and other lands. Eighteen countries in LAC are engaging with the Forest Carbon Partnership Facility (FCPF) to reduce emissions from forests with the aim of engaging in results-based or market transactions (otherwise known as REDD+). Four countries - Chile, Costa Rica, the Dominican Republic, and Guatemala - have developed their programs to the stage where they are entering into first-of-their kind jurisdictional results-based agreements for emission reductions from forests. Colombia is engaging with the BioCarbon Fund Initiative for Sustainable Forest Landscapes (ISFL) for the same purpose but as well as for land-use more broadly, including emissions from agriculture and livestock. Communities, Indigenous populations, producers, farmers, civil society, government, and private sector actors are participating in and will benefit from these programs. Benefits will be derived primarily through actions that reduce emissions from forests and land use, including improved policies and enforcement; investments in production and restoration, which will result in green jobs; improvements in ecosystem services; and increased production and yields. Results-based payments will be distributed among these stakeholders in ways that reinvest in successful approaches and increase resources available for sustainable development.
• Bank-financed operations to support adoption of digital tools and strengthen critical telecommunications infrastructure are improving the region’s resilience and ability to adapt to and recover from climate-related natural disasters and emergencies. For example, in Haiti, a significant part of the Digital Acceleration Project financing (and more specifically infrastructure to be financed) was designed to incorporate climate and disaster resilient features wherever practicable to support the country’s transition toward improved, economy-wide digitization. The project was designed with a climate resilience and adaptation lens, identifying country-wide digitization as a key driver of improved resilience and adaptation through improved access to basic services and public assistance in times of emergency.
• COVID-19 financial response in LAC supports these countries’ policies and actions in response to the health crisis and, further, supports households and firms, finances the response, and builds foundations for early, sustainable recovery. For example, recognizing the pandemic has brought demand and supply shocks to the Mexican economy, with deep impacts on firms, employment, and households, as well as health and human life consequences, the Bank supported a US$750 million budget operation to Mexico focusing on strengthening policies, institutions, and investments to rebuild better through reforms geared toward greater resilience to climate change shocks while still contributing to a stronger and better medium-term recovery program to enable environmental sustainability and urban resilience. Similarly, to aid Jamaica’s COVID-19 response, the Bank built on the analytical and advisory services supporting the modeling work informing its revised Nationally Determined Contribution (NDC), to help the country maintain its strong focus on protecting poor and vulnerable people and supporting sustainable business growth and job creation while strengthening its climate change policies and institutions for resilient and sustainable recovery.

Bank Group Contribution

The World Bank deploys financing instruments, including investment project financing, development policy financing, program-for-results financing, trust funds, and grant resources to support climate actions in LAC countries. Approximately US$1.72 billion of the US$5.84 billion in lending provided in FY20 by the World Bank’s International Bank for Reconstruction and Development (IBRD) and International Development Association (IDA) has been assessed to contribute to climate adaptation and/or mitigation co-benefits. Likewise, the World Bank continues to provide thought leadership to support a suite of knowledge products and analytical work aimed at supporting the region’s countries in their climate policies and actions.

Partners

The World Bank engages with several partners to support LAC countries in addressing climate challenges, including client governments, civil society organizations, academia, the private sector, and donors. The World Bank also works closely with other multilateral development banks to monitor and track climate finance flows to client countries.

Beneficiaries

Climate change is a threat multiplier, with the potential to push millions into poverty in the coming years and undo hard-won development gains. Countries that invest to set themselves on a sustainable, inclusive, and resilient development path can unlock short-term gains — jobs and economic growth — as well as deliver longer-term benefits for their people, including decarbonization and resilience. For example, investing in resilient infrastructure helps to avoid costly repairs and minimizes the wide-ranging consequences of natural disasters for the livelihoods and well-being of the region’s people. All citizens benefit from government action on climate change, including from clean air and water, healthy oceans, resilient cities, and sustainable food and agriculture systems.

Moving Forward

Efforts needed to recover from the COVID-19 crisis and to tackle climate change are, in many cases, complementary. While good progress has been made through the Bank’s lending portfolio at large in terms of mainstreaming climate (and through enumeration of climate co-benefits), more effort is needed to rebuild back better. To this end, the World Bank’s 2021–2025 Climate Change Action Plan (CCAP), currently under development, aims to strategically broaden the scope of the Bank’s support to climate action in LAC.

Rather than solely capturing efforts to maximize climate co-benefits in pipeline operations, the CCAP will provide an overarching framework to help countries address the many barriers that hamper the successful design and implementation of climate mitigation and adaptation strategies. These include (i) capacity constraints (few countries have universities and think tanks with the tools and methods needed to design long-term decarbonization or adaptation strategies, assess the costs and benefits of such strategies, and prioritize short-term actions); (ii) coordination barriers that impede work between implementing line ministries in energy, transport, agriculture, and others and the policy and finance work of climate change institutions and ministries of economy or finance; and (iii) constraints in access to finance (many countries have requested support to navigate global climate funds and to access concessional finance). In addition, the CCAP will promote a broader engagement focused on defining country work programs to ensure climate action is targeted, to nurture high-impact and targeted sector interventions, and to complement COVID-19 recovery priorities while transitioning to low-carbon economies.