ECONOMIC AND CLIMATE VOLATILITY: INNOVATION AND RESILIENCE FOR ISLAND STATES
The 2017 Atlantic hurricane season was one of the worst on record. Three category 5 storms ploughed through the Caribbean leaving damage and destruction in its wake. Our islands in the Caribbean are so small, that when we sustain a direct hit by a major storm, catastrophic damage can result.
Hurricane Maria caused loss and damage equivalent to 226% of our GDP. In the BVI it was 300%. Most of our countries in the Caribbean are classified as upper middle income or high income. This results in our exclusion from grant and concessional financing where the measure applied is on a GDP per capita basis. We have long argued that because of the peculiar vulnerabilities of small island developing states a vulnerability index must be developed and used as the yardstick to determine our access to finance.
Any country suffering damage on the scale just indicated would have severe challenges to make a speedy recovery. After Tropical Storm Erika caused losses to Dominica of 90% of GDP in 2015, we resolved then to build back better. The infrastructure that we built, in large part withstood the wrath of Hurricane Maria. After surveying the destruction caused to homes, schools, public infrastructure, businesses and the economy by Maria, we realised that a paradigm shift was necessary. We resolved to make Dominica the world’s first climate resilient nation, incorporating the building of resilience in all sectors of our society. Economic, social and structural.
Our experience has taught us that there are essentially three pillars to building a climate resilient nation.
First, we need to ensure that when the next hurricane strikes our communities are safe and can survive if cut off. That demands resilient shelters, clinics and schools. We have learned that you can build to withstand a category 5 storm.
It is sometimes thought that the solution is to grow all of your own food. However, experience has taught us that you can easily lose most of your crops when a hurricane rips through. In our first few weeks after hurricane Maria we were compelled to buy food from abroad and air-drop it to some communities. Climate resiliency also requires protocols to help ensure safety and preserve law and order.
The second pillar to building a climate resilient nation is having a resilient core network so that we can bounce back quickly. This is not just about strong buildings, bridges and roads. It is about resilient systems.
If our homes are standing but there is no power;
or if there is power but no water;
water but no food,
food but no law and order;
we are still lost.
We need resilient transport systems, energy sources , agriculture stores and communications networks. Energy is an area of much interest. It is currently fashionable to argue that every home should be their own solar or wind power station. But in our case the hurricane smashed solar panels and towers were lost.
And we have also learned that schools ideally should not be used as shelters. This restricts the ability to return students to school in the quickest possible time, because of delays in rehousing displaced families. Climate resiliency means having adequate stores of critical medicines, food and water.
The economics of everyone being their own power station as opposed to sharing a climate resilient grid is not obviously correct. Resiliency options may be about undergrounding the grid and developing fully backed up supply where that is too expensive.
There is not one solution that fits all topography. Solutions must be studied and be evidence-based.
We are lucky that we have geothermal and hydroelectric capacity and after careful study we aim to have almost 100% of our energy supplied by renewable sources in three years. This will come through an undergrounded grid to the main population centres. The resilient core network needs to be integrated and smart. It makes sense to underground ICT and power together; and to prioritise resiliency of the roads from farmers to markets.
The usual government structures do not lend themselves to the degree of planning, integration and speed required to build systemic resiliency.
Our institutional response has been the establishment of the Climate Resilience Agency of Dominica, CREAD, that will plan, coordinate and oversee the building of the first climate resilient nation over the next four years. We launched the agency on March 9th of this year and are currently engaged in sourcing the right staff complement for it.
The third pillar is waterproofing our economy, so that income flow has least disruption. A resilient agricultural system is not about the fault line of self-sufficiency, but what you grow. For instance, tubers survived the storm. But how do you get produce to market after a hurricane and how do you ensure that agricultural workers can get to their farms?
We have already delivered new seeds to 1450 farmers and the World Bank board agreed on April 12th to assist with a new scheme to build a resilient agricultural sector.
Our tourism and fisheries infrastructure must be climate resilient. We have restored 90% trails and tourism sites and our AID Bank is providing easy credit to help hotels make the necessary investments. Some have reopened. Much still has to be done.
We have revised our building codes but the challenge is in ensuring that the least well-off in our communities live in safer places. We have already rebuilt the roofs on 600 homes but we need to resettle whole communities and build a further 5000 affordable climate resilient homes.
We have so far provided emergency employment. The long term, task in waterproofing the economy is to shift employment towards those areas least dependent on physical infrastructure. These are the skills-based professions and wirelessly delivered services. It requires substantial longer-term investment in education and training.
Each of these three pillars involves considerable expense.
It is fashionable in some quarters to think that climate related damage or the cost of mitigation and resiliency can be met through financial innovation.
People tell us that insurance is the solution. But the simple fact is that there is no tolerable, commercial, insurance premium that would insure against the prospect of losing 226% of GDP in a few hours, with the increasing frequency and correlation with other disasters.
The mechanism of insurance payouts is good. An emergency is declared and a payout is made. We received a payout of $19m from the Caribbean Catastrophe Risk Insurance Facility, CCRIF, only two weeks after Maria struck. On the other hand monies pledged in the immediate aftermath of storm Erika in 2015 have still to be drawn down. The CCRIF payout was crucial to funding emergency supplies of food and water. But it represented less than 2% of the loss and damage we suffered.
We need to scale down what we need after a disaster, by building greater resiliency. But the world needs as a matter of urgency to scale up finance, for climate mitigation and adaptation and funding resiliency, but a special mechanism must also be developed to assist small states to access that financing on a timely basis.
New funds must marry quick insurance pay out mechanisms with another feature of some successful insurance markets - which is where who pays premiums and how they are assessed, acts as a disincentive to the behaviour that creates the risk in the first place. Perhaps the premiums for climate damage insurance, should be paid by those putting excessive carbon into the atmosphere. This way, emitters not only contribute to the wider costs of their emissions, through carbon pricing or levies, but they are incentivised to change their behaviour to reduce premiums, thereby reducing the risk to the rest of us.
Ladies and gentlemen *Our agenda is clear and mapped out.*
We are developing and setting out our plan to be the first climate resilient nation and we have embarked on the journey.
The question remains, is the rest of the world prepared to play its part?
In the current system, those who reap the financial benefits from the emissions of green house gasses are not those who carry the costs.
As a result, there is an underinvestment in limiting climate change, mitigating its costs and reducing climate related damage. That is no longer a viable situation.
The time for talk, conventions and declarations is over.
The time for action is now.