IDB Supports Chile to Accelerate the Transition to a Carbon-Neutral and Resilient Economy

The Inter-American Development Bank (IDB) approved a loan of $100 million to support Chile’s transition to a carbon-neutral and resilient economy.

The program will finance policies and regulations and accelerate climate planning in strategic sectors and at all levels of government, strengthening the institutional framework related to environmental and climate management, and encouraging public and private investments that are carbon-neutral and resilient.

The operation was approved by the IDB’s Board of Executive Directors under the modality of a Programmatic Policy-based Loan.

The Chilean population will benefit from the program through improved public policies related to climate change, which will reduce pollution levels and increase infrastructure resilience. In particular, it will support the most vulnerable sectors of the population, who tend to be the most affected by climate change.

It will also benefit public sector officials at national, regional, and municipal levels, who will gain capacity to manage climate action in their respective areas of responsibility. Meanwhile, private sector companies will have new economic instruments and incentives for investment decision-making.

In Chile, climate action is a government policy that includes, among other instruments, a Long-Term Climate Strategy and a Framework Law on Climate Change. However, the country faces challenges in achieving its carbon neutrality and resilience goals and must overcome several factors that limit compliance with its climate commitments and objectives.

To address these challenges the program includes a set of policy measures in priority areas.

In climate planning, it promotes, among other things, accelerating the update of the National Adaptation Plan to Climate Change and the Nationally Determined Contribution, among others.

Additionally, to strengthen climate and environmental institutions, it includes the law that creates the Biodiversity and Protected Areas Service and the National Protected Areas System.

The IDB loan of $100 million has a repayment period of 20 years, a grace period of 5.5 years, and an interest rate based on SOFR.