Raising the bar for private sector climate action

Andrew
Holness

Tuesday, October 08, 2019

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Prime Minister Andrew Holness' statement to the Green Climate Fund Private Investment for Climate Conference luncheon in the Republic of Korea on Monday, October 7, 2019.

 

For a small island developing country like Jamaica, climate change is not an academic issue.

With hotter temperatures, coastal encroachment, shorter and more intense periods of rainfall, longer and more intense periods of drought, and more frequent and destructive hurricanes, climate change is our daily reality. For us, climate change spells disaster.

The physical damage and human suffering visited upon countries like The Bahamas, Dominica and Antigua and Barbuda is well told. The fiscal and economic damage, however ,is not as well known. Climate-related shocks whether sharp and swift hurricanes or lingering and debilitating droughts have a long-term effect particularly on economic growth trajectory and the public debt of small developing states and least developed countries.

The problem is compounded by the fact that small island developing states, notwithstanding that by virtue of size, are the least cause of the problem. By virtue of our geography, we are among the most vulnerable countries to the effects of climate change, but we are also, by virtue of the state of development of our economy and public institutions, among the least able to respond.

Small developing states and least developed countries are already saddled with high debt, and struggle with low growth, weak public institutions and undeveloped private sectors which constrain effective policy response to mitigate and adapt to climate change.

Within the last decade, Jamaica engaged a fiscal responsibility programme which reduced our debt from as high as 149 per cent of GDP seven years ago to 95 per cent of GDP currently, and we are on track to attain our 60 per cent debt to GDP target by 2026. We recognise however, that just one weather event could wipe out not just infrastructure and livelihoods, but many years of austerity and sacrifice to achieve sustainable debt levels. Climate change was not only making us physically vulnerable, but also fiscally vulnerable. We therefore had to treat climate change-related shocks as a major macro-fiscal risk.

If weather events are going to become more severe, then we needed to build resilient and climate-smart infrastructure and mobilise public and private resources to support the effort.

So, we have taken a holistic view at new, viable and sustainable pre- and post-disaster arrangements for managing financial risks from disasters. We have developed a broad framework for disaster risk management, including a National Disaster Risk Financing Policy that provides for financial risk protection, including budgetary contingency funds and State-contingent debt instruments such as catastrophe bonds, and catastrophe-linked insurance.

We have also established a contingency fund the National Catastrophic Disaster Reserve Fund and have started to build up a strong fiscal buffer; while improving insurance of public assets and incorporating disaster risk analysis in public sector investments and overall development planning.

Recognising the critical role that ministers of finance play in addressing and preparing for the climate crisis nationally, regionally and globally, Jamaica has joined the Finance Ministers Coalition for Climate Action to ensure continued knowledge exchange and best practices in planning concrete, effective policy and tax measures to climate-proof our economy.

I am equally pleased to announce we have obtained approval by the Green Climate Fund for readiness support to create the first Caribbean Green Bond Listing, which will undoubtedly place us as the Caribbean country of choice to conduct climate-smart and sustainable business.

We recognise that the Government's budget will not be enough in ensure a strong local response to building resilience. However, we also recognise that Government has a key role to play as market maker and regulator in mobilising, incentivising and partnering with private sector financing in areas of strategic climate action.

The Government of Jamaica has targeted the energy sector as an area in which it can use its role as market maker and regulator to stimulate private sector financing and participation in low carbon, green energy solutions.

Last April, for the first time, Jamaicans were given the opportunity to purchase shares in the IPO of the largest wind energy facility in the English-speaking Caribbean, Wigton Windfarm Limited which has a capacity of 63.2MW and was built by the Government to help diversify Jamaica's energy mix. Last week, I officially opened what is also the largest solar energy project in the English-speaking Caribbean. This outstanding initiative brought together international and Jamaican firms to finance, develop and operate a 37 MW solar farm delivering the cheapest renewable generated electricity to the grid; and the company is now already seeking to expand.

Today, with these examples, Jamaica has achieved 17 per cent of renewable energy generation. This places us already in a position close to achieving our original target of 20 per cent of renewable energy by 2030 and has injected the right confidence to raise our ambition for our next Nationally Determined Contribution (NDC) and step up our long-term and comprehensive energy transformation.

Moreover, it has set an example and generated interest in our local capital markets to finance green projects and initiatives, not only because it makes sense business wise, but because is the right thing to do. Jamaica will be increasing its renewable footprint in energy and I have challenged our public utility and our public utility regulator to achieve 50 per cent of our electricity generated by renewables by 2030.

We have also identified transportation and water as additional areas in which the Government will mobilise and partner with private sector finance to achieve carbon reduction and disaster resiliency while at the same time creating valuable economic opportunities.

Even as we aggressively pursue our national Natural Disaster Fiscal Strategy, we have not neglected the commitments reflected in our current NDC under Paris Agreement, which already commits us to reducing emissions well in line with the IPCC 1.5 Special Report; but to realistically achieve this global warming limit the international community must recognise that a transformation in the global financial system is necessary to provide the right financing for vulnerable countries.

At the recently held United Nations Climate Action Summit, and as a co-lead for the Climate Finance and Carbon Pricing track, I made the point that we urgently need to transform the global financial system. What does this mean?

It is now clear that the low carbon transformation necessary to curb emissions and stop global warming needs to reorient economies towards the required investment, employment and redistribution of financial resources and opportunities that are essential to avoid its worst impacts.

Jamaica actively advocated and will continue to advocate increased and enhanced access to climate finance from both public and private sector sources. In the Caribbean, we need concessional financing, credit-enhancement instruments and the right insurance mechanisms to provide the type of blended financing necessary to match private sector funding.

The next era of investment is about resilience and adaptation. In the face of dire warnings and fearsome extreme events, the push to invest in climate solutions may sound to many in the private sector like a plea for charity. But the financial sector must recognise that investing in adaptation now is imperative from the perspective of risk management, but it is also perhaps the biggest investment opportunity of this generation.

In Jamaica we will continue working to strengthen our economy and ensure better fiscal management, because that is our first line of defence.

We will continue to be global advocates for the increased mobilisation of public and private finance for mitigation and adaptation, and we reiterate our support for a successful replenishment of the Green Climate Fund, which is today the most important institution that channels climate finance to developing countries; and we will continue playing our role of regulator and market maker to attract more private sector investment into the green economy.

Ladies and gentlemen, I am grateful for the opportunity to be here today and I would like to encourage you to come, visit and invest in Jamaica.

Jamaica, as of today, has the best investment environment in the Caribbean.

 


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