Two loan agreements signed for sustainable energy and climate change projects
BRIDGETOWN – During an official visit to Barbados, Inter-American Development Bank President, Luis Alberto Moreno, today signed two loan agreements totalling US$40 million to support initiatives that will bring significant economic benefits to the Caribbean island through sustainable energy and more effective coastal zone management.
“The IDB is firmly committed to a strong partnership with Barbados,” Moreno said after signing the agreements with Prime Minister Freundel Stuart. “This visit is an opportunity for the IDB to reaffirm its support for Barbados and to discuss how we can continue to respond effectively to the country’s development needs.”
Conscious of the drain on foreign exchange, the Government of Barbados is aiming to reduce the island’s heavy dependence on imported fossil fuels over the next 10 to 15 years by at least 30%. The broad-based strategy involves encouraging consumers to be more efficient in their energy use and, simultaneously, promoting greater use of alternative sources of energy.
A US$10 million loan signed today will go towards establishing an Energy Smart Fund to help consumers, both households and businesses, to acquire and install renewable energy technologies such as solar panels for power generation that will be connected to the grid, more efficient air conditioning units and efficient lighting systems. The Fund will also develop financial instruments and provide technical assistance to remove major barriers to investment in these technologies.
Last year, a US$45 million loan was made available to support the comprehensive process of establishing a Sustainable Energy Framework, including the preparation of policy and legislation that will promote renewable energies and energy efficiency in all sectors of the economy. Supporting technical assistance grants of US$3 million were also approved, including a US$ 1 million for pilot projects.
According to IDB calculations, savings to be generated by the Smart Fund and other initiatives under Barbados’ Sustainable Energy Framework are expected to total at least US$283 million over the next 10 to 15 years, reducing CO2 emissions by more than 4.5 million tons Over the same period It will be one of the largest reductions in fossil fuel consumption ever achieved in Latin America and the Caribbean. Barbados spent US$252 million on oil imports in 2009, the equivalent of 7% of gross domestic product or the amount spent annually on education.
The second loan of US$30 million goes to support a Coastal Risk Assessment and Management Programme which will help improve the generation and management of coastal risk data, build additional infrastructure to control shoreline erosion, improve Barbados’ resilience to climate change and other hazards, and also improve public access to beaches.
“The coastal zone is one of Barbados’ main economic assets because it supports the country’s crucial tourism industry, yet coastal hazard risk is high and climate change may further increase that risk,” Moreno said. “We are building on many years of cooperation with the Government of Barbados which have already generated important results, including the popular boardwalk that has provided better public access to beaches and both stabilized and boosted business along the shoreline.”
Both loans are for a 25-year term, with a 5 year grace period from the date of signature, and carry a variable interest rate based on Libor (currently 1.14%).
The current five-year IDB Country Strategy with Barbados lists sustainable energy, coastal zone management and climate change adaptation, water and education as four priority areas for IDB financing between 2009 and 2013. Both loans signed today support the strategy, as do projects to improve the management and distribution of water by the Barbados Water Authority, and to enhance technical and vocational training and education on the island.
The IDB’s current portfolio in Barbados includes 11 loans totalling US$180 million and 15 technical cooperation grants totalling US$7.1 million. IDB financing is also supporting projects in housing, business competitiveness, public sector modernization, and agricultural health.