- IMF managing director Kristalina Georgieva’s opening remarks at the 2024 high-level Caribbean Forum
Climate change poses an acute threat to the Caribbean. Sea levels are rising, and natural disasters are becoming more frequent and intense – as hurricane Beryl reminded us. A rapid global transition to renewable energy is essential to mitigate some of these climate challenges.
Yet, achieving this transition is a complex journey. It requires substantial upfront investments and well-designed incentives, while balancing competing priorities for development and resilience. All at a time of limited fiscal space.
Despite the challenges, I firmly believe the region has a tremendous opportunity. The Caribbean economies showed incredible resilience through the pandemic and its aftermath. Now is the time to seize the opportunity provided by global developments to plan and coordinate a green energy transition that fosters inclusive, sustainable, and resilient growth across the region. With its abundant sunshine, strong winds, and geothermal potential, the Caribbean can be a global leader in this transition and an example for the rest of the world.
The benefits of this shift to green energy are profound. While Caribbean nations contribute only a fraction of global greenhouse gas emissions, the economic case for a renewable energy future is compelling.
Currently, many Caribbean economies are highly dependent on costly and volatile oil imports, which widen economic imbalances, expose them to the fluctuations of global commodity markets, and amplify inequality. The energy infrastructure is aging and often inefficient, with high operational costs. This hampers reliability, and also limits the capacity to meet growing energy demand. Transitioning to renewables – the cost of which has steadily declined – would reduce these vulnerabilities and enhance energy security. And that would make your economies more efficient, resilient, and competitive while fostering long-term growth.
For fossil fuel-producing countries in the region, the path forward will entail careful management of fiscal revenues, labor transitions, and other structural shifts. At the same time, this is an opportunity to diversify into the green energy sectors of the future, such as green petrochemicals and green hydrogen.
Achieving a fair, equitable green energy transition will require well-calibrated policies, particularly given the high level of indebtedness in the region. Key steps include further building robust macroeconomic frameworks, prudent fiscal management, mobilizing revenue sources to create the fiscal space needed for part of the green investments, and phasing out fossil fuel subsidies.
Formulating well-designed incentives and strengthened regulatory frameworks is critical, including electricity pricing agreements.
Moreover, enhancing regional coordination can help achieve economies of scale in renewable projects. The Eastern Caribbean Central Bank’s Renewable Energy Infrastructure Investment Facility illustrates the potential scope for pooling resources and aggregating projects across countries, allowing to create the scale needed to attract major private investors.
Of course, the financial resources required for this transition are substantial, and Caribbean governments alone cannot bear this burden. Indeed, the costs for resilience building in the Caribbean region is estimated at a staggering US$100 billion over the next two decades. This is the moment to leverage innovative financial instruments such as Guyana’s sale of carbon credits.
The private sector, both regional and international, will have to provide the bulk of the investment. Innovative financial instruments, such as green bonds, blended finance, and guarantees and insurance mechanisms, can de-risk green energy investments and unlock the private finance required to bridge the investment gap. Barbados’ debt for climate swap is a great example of an innovative approach for creating space for green investment.
At the IMF, we are committed to supporting you in your efforts to achieve this green transition.
First, our surveillance and capacity development activities can help Caribbean countries put in place sound macroeconomic foundations and support the design and implementation of sustainable and equitable climate and green energy transition policies.
The Caribbean Regional Technical Assistance Centre – CARTAC – is one such resource. It offers capacity building and policy advice in these areas. This highlights a critical need to adequately fund CARTAC activities. However, additional financing will be needed from existing and new development partners to close CARTAC’s current financing gap. I hope we can count on your advocacy with development partners to sustain CARTAC’s essential work.
Second, we are providing affordable long-term catalytic financing. Our Resilience and Sustainability Facility is designed to support countries vulnerable to climate change.
So far, the IMF has approved 20 of these arrangements with total commitments of nearly $10 billion, roughly 10 percent of which was provided to Jamaica and Barbados. Also, our lending is supporting important economic and politically challenging reforms, for example in Suriname through the Extended Fund Facility.
And third, through our Domestic Resource Mobilization initiative – developed jointly with the World Bank – we aim to help countries strengthen their local revenue bases and develop innovative funding sources.
We stand with you in realizing this vision of a greener, more resilient Caribbean. Today’s Forum is an invaluable opportunity to explore practical steps and forge partnerships for the road ahead.
I am thrilled that the IMF, in partnership with the government of Barbados and its visionary prime minister Mia Mottley, has brought together such a diverse group of experts and leaders. Together, let us embrace the challenge – and the opportunity – of the green energy transition.
I look forward to hearing your ideas.
