WASHINGTON, CMC -The Bahamas is taking daring steps to rework its electrical energy sector and construct resilience to local weather change. Modernizing electrical energy grids and growing the shares of photo voltaic power and liquified pure gasoline (LNG) in electrical energy manufacturing can yield vital macroeconomic advantages in The Bahamas.
Over the medium time period, such transformations might scale back fossil gas imports, lower the nation’s vulnerability to risky world gas costs, considerably scale back CO2 emissions, and considerably enhance nationwide output (finally growing long-run progress potential from 1.5 p.c to 2 p.c).
These intriguing findings have been based mostly on the IMF’s new Renewable Power Stability of Funds instrument, which estimates the impression of a shift within the mixture of power manufacturing on a rustic’s transactions with the remainder of the world.
An formidable power transformation
For years, Bahamians have suffered from frequent energy outages. Their reliance on imported fossil fuels—one of many highest within the Caribbean—for electrical energy era leaves customers and companies susceptible to excessive and risky power costs.
To deal with these hardships, the federal government introduced plans in June 2024 to spend money on a contemporary electrical energy transmission and distribution infrastructure in partnership with the non-public sector and improve the share of renewable power in its electrical energy era combine. Particularly, the federal government is profiting from the abundance and depth of photo voltaic power accessible to The Bahamas all 12 months spherical by growing the share of photo voltaic power to 30 p.c by 2030.
Investing in photo voltaic additionally minimizes the hostile environmental impression and logistical challenges related to different types of power. A small share of electrical energy will nonetheless be produced utilizing diesel, however a lot can be changed with cleaner LNG.
Whereas a metamorphosis of this magnitude will be costly, the federal government’s partnerships with non-public energy producers and traders will help The Bahamas obtain its mitigation objectives.
The transition to a greener electrical energy combine whereas assembly rising electrical energy demand requires multi-year investments, that are anticipated to be financed by the non-public sector. Nonetheless, fastidiously managing fiscal dangers can be essential to keep away from including to the federal government’s already excessive public debt.
Investing in resilience
Sadly, even with these investments, the specter of local weather change is right here to remain. IMF evaluation means that rising sea ranges might place as much as 41 p.c of the land in The Bahamas and 22 p.c of its inhabitants beneath sea stage by the tip of this century. Furthermore, the nation is positioned inside the Atlantic hurricane belt, leaving it at excessive danger of hurricane injury.
Left unaddressed, extra extreme pure disasters and slow-moving impacts from local weather change might scale back The Bahamas’ nationwide output by as much as 11 p.c by 2100, with extra vital losses within the islands whose economies rely most on hospitality and actual property.
Given these dangers, investing in The Bahamas’ capability to adapt to local weather change and protect its pure capital might improve nationwide output by as much as 9 p.c over the long run, together with via sustainable tourism.
Constructing resilience to local weather change would require diversifying away from susceptible actions and endeavor investments to guard bodily belongings and pure capital (for instance, breakwater building, coral reef and mangrove safety, and seashore nourishment packages).
Investing in local weather resilience will be costly, with financing wants exceeding these of the power transformation. Happily, the continuing electrical energy sector reform, if executed efficiently, can function a blueprint for international locations to companion with non-public companies to finance local weather adaptation.
Furthermore, revolutionary financing options, together with refinancing costly debt with cheaper funding, might free extra public sources to protect the nation’s pure habitats. The non-public sector will be important in financing local weather resilience, working with the general public sector, and supporting the worldwide neighborhood (together with grants).
By working collectively, this trio of companions will help small states like The Bahamas safe a affluent future for his or her residents and defend their pure magnificence and capital for future generations.
*Zamid Aligishiev and Shane Lowe are economists within the IMF’s Western Hemisphere Division, whereas Beatriz Garcia-Nunes is a analysis analyst within the IMF’s Western Hemisphere Division.
