Waiting for Godot? The Case for Climate Change Adaptation and Mitigation in Small Island States

WaitingforGodot?TheCaseforClimateChangeAdaptationandMitigationinSmallIslandStates SerhanCevik WP/22/179 2022 SEP ©2022InternationalMonetaryFundWP/22/179 IMFWorkingPaper EuropeanDepartment WaitingforGodot? TheCaseforClimateChangeAdaptationandMitigationinSmallIslandStatesPreparedbySerhanCevik* AuthorizedfordistributionbyAlfredoCuevas September2022 IMFWorkingPapersdescriberesearchinprogressbytheauthor(s)andarepublishedtoelicitcommentsandtoencouragedebate.TheviewsexpressedinIMFWorkingPapersarethoseoftheauthor(s)anddonotnecessarilyrepresenttheviewsoftheIMF,itsExecutiveBoard,orIMFmanagement. Abstract Globalwarmingisthemostsignificantthreattoecosystemsandpeople’shealthandlivingstandards,especiallyinsmallislandstatesintheCaribbeanandelsewhere.Thispapercontributestothedebatebyanalyzingdifferentoptionstoscaleupclimatechangemitigationandadaptation.Inparticular,theempiricalanalysisindicatesthatincreasingenergyefficiencyandreducingtheuseoffossilfuelinelectricitygenerationcouldleadtoasignificantreductionincarbonemissions,whileinvestinginphysicalandfinancialresiliencewouldyieldlong-runbenefits.Fromarisk-rewardperspective,theadvantagesofreducingtherisksassociatedwithclimatechangeandthehealthbenefitsfromhigherenvironmentalqualityclearlyoutweighthepotentialcostofclimatechangemitigationandadaptationintheshortrun.Theadditionalrevenuegeneratedbyenvironmentaltaxescouldbeusedtocompensatethemostvulnerablehouseholds,buildingamultilayeredsafetynet,andstrengtheningstructuralresilience. JELClassificationNumbers: O40;O44;Q40;Q48;Q51;Q54;Q58;H23 Keywords: Climatechange;decarbanization;energyefficiency;mitigation;adaptation;carbontax;greenfinancing Author’sE-MailAddress: scevik@imf.org *TheauthorwouldliketothankAntoineArnoud,BasBakker,SimonBlack,EdgarBuckley,Chen,EmiliaMagdalenaJurzyk,DianeKostroch,ChengHoonLim,EmanueleMassetti,AnnapurnaMitra,NatalijaNovta,JoannaSwirszcz,TessyVasquez,NateVernon,andAnkeWeberfortheirinsightfulcommentsandsuggestions. I.INTRODUCTION Globalwarmingisthemostsignificantthreattoecosystemsandpeople’shealthandlivingstandardsinthecomingdecades.Theglobalaveragesurfacetemperaturehasalreadyincreasedbyabout1.1degreesCelsius(°C)comparedwiththepreindustrialaverage,escalatingthefrequencyandseverityofextremeweathereventsandcontributingtheriseinsealevels(Figure1).Furthermore,climatechangeistrulyaglobalphenomenon,withweathershiftsalreadyaffecting85percentoftheworld’spopulation(Callaghanandothers,2021;IPCC,2021). Projectionsshowthatmorerapidandintenseclimatechangewillincreasetheriskofheatwaves,wildfires,droughts,flooding,andseverestormsandinflictgreaterharmontheenvironment,lives,andlivelihoods.Ifgreenhousegas(GHG)emissionscontinueincreasingatthecurrentrate—theso-calledRepresentativeConcentrationPathway8.5(RCP8.5)scenario,globalwarmingisprojectedtoreach4-6°Cby2100,anunprecedentedshiftwithgreaterprobabilityoflargerandirreversibleenvironmentalchangesunseeninmillionsofyears(Hansenandothers,2013). ClimatechangeposesanexistentialthreattotheCaribbean,aregionoflow-lyingislandsandcaysspreadovertheAtlanticHurricaneBelt.RecentresearchbytheWorldBankestimatesthatclimate-relatedeventswillpushmorethan132millionpeopleintoextremepovertyby2030(Jafinoandothers,2020).Iftheworld’sclimateisnotstabilizedoverthenextdecade,thesocioeconomiccostsofclimatechangewillbemorethanthreetimeslargerthanifcountriesactnow,andconsequentlythreatenthesurvivalofhumanity(SandersonandO’Neill,2020;Bhattacharyaandothers,2021).However,smallislandstatesintheCaribbeanaredisproportionallymoreexposedandvulnerabletoclimatechangeandnaturaldisastersduetoitslocationwithintheAtlanticHurricaneBelt.Forexample,thecostsofHurricaneIvanforGrenadain2004amountedto148percentofGDPandthoseofHurricaneMariaforDominicain2017reached260percentofGDP,reflectingboththeintensityandrangeofdamageofextremehurricanesandtherelativelysmallsizeoftheseeconomies.Caribbeancountriesarethusconsideredhighlyvulnerabletoclimatechange,accordingtothelatestND-GAINIndex,whichassessescountriesinrelationtovulnerabilityandresiliencetoclimatechange(Figure2). Figure1.ClimateChangeandWeatherAnomalies GlobalTemperatureAnomalies GlobalTemperatureAnomalies(2018-2019comparedwith1951-1980average) (DegreesCelsius,deviationfromtrend) 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 -0.2 -0.4 -0.6 188018901900191019201930194019501960197019801990200020102020 Source:NOAA;author’scalculations. TheCaribbeanfacessomeofthehighestdisasterriskintheworld,andtheseareprojectedtointensifyastheclimatechanges.Withoutsubstantialeffortstomitigateclimatechangeacrosstheworld,theCaribbeanisprojectedtoexperiencesignificantwarmingoverthenextcentury,againstthebaselineconditionsundertheRCP8.5high-emissionpathway.Increasesinannualmaximumandminimumtemperaturesareexpectedtobelargerthantheriseinaveragetemperature,whichwillputgreaterpressuresonhumanhealth,livelihoods,andecosystems. Caribbeancountriesarehighlyexposedtohurricanesandflooding,withhurricanesappearingtohavegreaterintensityandincreasingnumberoffloodingevents,whicharecausingcoastlineerosion.InthecaseofTheBahamas