The International Monetary Fund (IMF) says climate change in Latin America and the Caribbean (LAC) presents multiple challenges for the region with some countries facing challenges related to containing and reducing greenhouse gas (GHG) emissions, while others have an urgent need to build resilience to natural disasters.
It warned that without further policy action, GHG emissions in LAC will continue to grow as economic activity continues to expand.
“LAC policymakers have a variety of mitigation tools at their disposal to curb GHG emissions, including price-based mitigation policies including reduction in fossil fuel subsidies, introduction of carbon taxes, establishment of emissions trading systems and non-priced-based mitigation policies such as public investment in low-GHG emissions technologies and infrastructure, fiscal incentives and direct current public spending aimed at making low-carbon energy sources more abundant and affordable as well as supportive regulations.
“Given the large share of emissions from change in land-use practices, cost-effective Nature-based Solutions (NbS) can play an important role in LAC. A broad range of mitigation tools is likely to be needed in LAC countries, taking into account the extensive use of renewable energy in the region, societal preferences, and political economy considerations,” the IMF said.
The Washington-based financial institution said that countries should adopt the policy mixes that best suit their specific circumstances, ideally articulated as national strategies.
“On adaptation, while building resilience to natural disasters is important throughout the region, it is a priority for Caribbean and Central American economies that are highly vulnerable to the impact of climate change.”
The IMF said a comprehensive medium-term approach focused on investing in structural or physical resilience, boosting financial resilience, and enhancing post-disaster resilience would yield significant long-run benefits for countries in the Caribbean and Central America.
It said that in the LAC region as a whole, mitigation and adaptation policies will require significant upfront financing, including importantly support from the international community and the private sector.
The IMF said the transition to a post-pandemic era provides an opportunity to address a different threat to long term growth and prosperity.
It said as the international community recognizes the urgency of addressing this issue, and countries update their climate commitments in the run-up to the 26th UN Climate Change Conference of the Parties (COP26) in Glasgow next month, the appropriate policies or set of policies for individual countries will depend on the challenges and circumstances of each country and will require an in-depth analysis at the country and sectoral level.
Climate change presents both challenges and opportunities for the LAC region, the IMF said, noting that on the challenges side, physical risks arise from the high vulnerability of some of the region’s economies to the impact of climate-related phenomena such as higher temperatures, weather-related natural disasters, sea-level rise, coastal erosion, and loss of biodiversity, as well as risks related to the high reliance on climate-sensitive sectors such as tourism and agriculture.
“Such physical risks can adversely affect both aggregate supply – destruction of physical capital, dislocation of labour markets, and disruption of supply chains – and aggregate demand – reductions in consumption and investment, and disruption of trade flows -, leading to lower growth and employment and threatening fiscal sustainability and financial stability.”
It said that transition risks arise from the significant structural changes in domestic and foreign economies needed to achieve climate sustainability goals, in particular, by reducing reliance on high-GHG activities and improving land-use practices.
“If not managed properly, the global transition to a low-carbon/low-GHG economy could lead to significant economic dislocations due to sectoral shifts in employment, comparative advantage, and trade patterns with repercussions for short- and long-term growth, fiscal positions, inflation, external positions, and financial systems.
The IMF said to manage these risks, countries can take actions on two fronts, namely climate mitigation, which refers to policies that help reduce emissions of greenhouse gases and climate adaptation, which refers to efforts to adapt to the effects of climate change including through minimizing damages from climate-related natural disasters as well as adapting to the effects of economic transformations at home and abroad aimed at reducing reliance on carbon-intensive activities.
It said on the opportunities side, the transition to greener and more resilient economies could help achieve economic, social and environmental sustainability, while fostering opportunities for economic and social development in the region.
Mitigation efforts could bring substantial domestic environmental and health benefits even in the short run including reductions in air pollution mortality and morbidity, and in road fatalities. They may also yield direct economic savings such as reduced road damage and traffic congestion.
It said investment in green technologies and infrastructure could help boost growth and generate new job. Efforts to foster green innovation in the energy sector could also generate positive spillovers to the rest of the economy and reduce energy security risks.
The shift to green technologies could benefit some countries in the region due to their natural endowment of metals such as copper, nickel, cobalt and lithium, which are needed in low reenhouse-gas technologies, including renewable energies, electric cars, hydrogen and carbon capture and storage, which would benefit LAC metal producers.
Source-CMC
