Climate change poses serious risks to development in LAC

Already, 340 extreme weather events between 2007-2012 have caused nearly 8,000 fatalities, affected more than 37 million people, and cost the Region’s economies more than US$32 billion. Mindful of the risks, many countries have started taking steps to address climate change, and the Inter-American Development Bank (IDB) has stepped up its support for development activities related to those efforts.

To structure its support, the IDB approved an Integrated Climate Change Mitigation and Adaptation Strategy in 2011. The strategy outlined five courses of action: develop instruments to mainstream climate change in IDB operations, strengthen the knowledge base for clients and staff, expand lending and technical assistance in key sectors, strengthen institutional frameworks, and scale up investments, addressing financing gaps and leveraging private sector investments.

The 26 member countries of the IDB, though they account for 7.8% of global GDP and 8.4% of the population, contribute 9.1% of the global greenhouse gas (GHG) emissions. Energy (including transportation), agriculture, land use change and forestry are the major sources of emissions. Country policies in the Region have increasingly included climate change issues. Through their policy actions, LAC countries appear committed to low-carbon energy, reductions in emissions from road transport, and forest conservation and reductions in deforestation.

Climate Change and the IDB: Building Resilience and Reducing Emissions, an evaluation by the Office of Evaluation and Oversight (OVE), assesses the IDB’s efforts and results in pursuing this strategy. The evaluation analyzes and reviews lending and knowledge activities that the IDB has supported from 2004-2013 in energy, transport, agriculture and natural resources, and disaster risk management, to assess the extent to which those operations contribute to either building climate resilience (adaptation) or reducing GHG emissions (mitigation).

Mitigation and adaptation loans and grants by sector and areas (original approved amounts)

Source: OVE calculations, based on IDB Corporate Database.

The IDB has made progress on achieving the objectives of its strategy, but it has more to do

While corporate, sector, and country-level strategies have begun to address climate change issues, these efforts have been uneven and rarely provide the depth of treatment needed to establish a clear vision. The organization of the IDB is evolving in ways that mainstream climate change, build technical skills, and produce knowledge products. Lending and technical support in areas related to climate change has grown, though the IDB does not yet have an effective system to track those activities. Recently, private sector engagement has also increased, as have efforts to strengthen governments’ institutional structures.

Addressing climate risks and building resilience is a challenge for the IDB

The IDB and countries in the Region have only begun to think through the issues involved in climate adaptation. Attention to adaptation in the energy and transport sectors, in particular, is very recent. The IDB’s strategic focus in disaster risk management and agriculture and natural resources is highly relevant to adaptation; about 40% of this work focuses on increasing the income and adaptability of the rural poor and another 37% focuses on strengthening weather and water monitoring to improve resource management. This work is relatively recent, however, and few results have been reported. IDB financing of disaster risk management activities is generally well aligned with country vulnerability levels, but climate risk assessment which is key to adaptation, has been very limited.

Adaptation loans and grants projects by sector and areas (original approved amounts)

Source: OVE calculations, based on IDB Corporate Database.

OVE finds a number of areas where the IDB can build on its progress

First, while the 2011 strategy has helped set priorities, the IDB has yet to define a clear comparative advantage in climate change. Second, mainstreaming instruments should be more widely developed and applied, particularly climate risk screening tools and climate risk assessments, and efforts couldbe expanded to measure GHG emissions in infrastructure activities. Third, IDB’s organizational structure needs to ensure strong cross-sector collaboration and knowledge sharing. Fourth, as of yet there are no systems to prioritize or assess the effectiveness of knowledge generation activities or to identify and track lending needs related to climate change. Fifth, although the IDB’s policy-based lending can be used to strengthen institutions, many loans do not appear to reflect a long-term commitment of governments or promote deep policy reforms. Finally, private sector leverage is still limited, and continued efforts to mobilize external resources and scale up successful efforts will be important.