2021 Update of the First Nationally Determined Contribution of Barbados

Article 4, paragraph 6, of the Paris Agreement, or by the following strategies and plans: policies and measures as components of ● Support for research and development of renewable energy and energy storage technologies appropriate for nationally determined contributions where SIDS, in particular ocean energy in line with the national strategy to develop its blue economy. paragraph 1(b) above is not applicable, Parties to ● A deliberate focus on using distributed generation (e.g. household solar photovoltaics) to provide modern provide other relevant information energy access and build resilience (adaptation co-benefits) for low-income households, with an initial target of retrofitting 3,000 low-income homes with solar PV by 2030 under the Roofs to Reefs Program. As one of the most densely populated countries in the world (669 people/km2) and one of the most water scarce (< 305 m3 of renewable freshwater per capita per year), and facing a predicted, climate change induced, 15-30% reduction in rainfall, Barbados’ race to completely decarbonize its economy must be accompanied by strategies to enhance food and water security and protect vital coastal ecosystems. To this end, the government of Barbados will, inter alia: ● Implement a new Water Protection and Land Use Policy (2020) designed to help protect groundwater aquifers, coastal coral reefs, mangroves and seagrass beds, with particular focus on reduction of nutrient loads into coastal waters using nature-based solutions. 18 BARBADOS 2021 UPDATE OF THE FIRST NATIONALLY DETERMINED CONTRIBUTION ● Implement a new Water Reuse Policy (2018) to allow reclaimed water to be used for irrigation and groundwater recharge. It is anticipated that Barbados will invest over US$150 million dollars between 2021 and 2024 to upgrade its municipal wastewater treatment systems and build out a reclaimed water distribution network, in an effort to build climate resilience in its agricultural and water sectors. Barbados already has one of the best solid waste landfilling diversion rates (69%) in the region despite the lack of economies of scale (inherent to a small island) for recycling industries. In an effort to build a more circular economy, and as a component of the Integrated Resources and Resilience Plan (IRRP) for the energy sector, Barbados will seek to recover energy from waste and will construct and operate an EFW facility (~ 8-15 MW) by 2025. d. Target relative to the reference indicator, 2025 expressed numerically, for example in percentage ● 20% reduction relative to business-as-usual emissions in 2025 without international support (unconditional). or amount of reduction ● 35% reduction relative to the business-as-usual emissions in 2025 conditional upon international support. 2030 ● 35% reduction relative to business-as-usual emissions in 2030 without international support (unconditional). ● 70% reduction relative to business-as-usual emissions in 2030 conditional upon international support. e. Information on sources of data used in For the preparation of Barbados’ 2021 NDC update, the 2013 Greenhouse Gas Inventory (GHGI) was significantly quantifying the reference point(s) updated, improving historical activity data and methodologies especially in the energy and waste sectors. This update improved the completeness and accuracy of the estimates that are the base of Barbados’ ambition. This new 2021 NDC update GHGI was used as the basis of the emissions and removals projections to 2030 which were also significantly updated from the previous included in the 2015 NDC. The sources of GHG emissions data are: 1. GHG Inventory 2000-2010 prepared by the Ministry of Environment and National Beautification (MENB). 2. 2015 NDC spreadsheets. 3. Updated activity data information for the period 2011-2020, including: i) energy balances 2008-2020 prepared by Ministry of Energy; ii) residues deposited in landfills; iii) updated GDP and population; iv) waste stream data 2010-2020 prepared by Sanitation Service Authority; v) other information. 4. Updated BaU projections based on new forecasts of energy production, GDP, population, residues produced. f. Information on the circumstances under which Barbados may update the reference indicator under 1.d to account for significant changes (such as changes in Gross the Party may update the values of the reference Domestic Product (GDP) projections or any technical errors identified) at the point of its next NDC submission, to be indicators prepared in 2024 in accordance with its obligations under the Paris Agreement. The Government of Barbados is introducing a number of measures to significantly increase economic resilience of its small island economy. If successful, these structural changes in the economy will be reflected in a second NDC. 19 BARBADOS 2021 UPDATE OF THE FIRST NATIONALLY DETERMINED CONTRIBUTION A further adjustment may need to be made in the second NDC to reflect exogenous growth in population. A government initiative, launched in May 2021, aimed at attracting highly trained workers, may by 2030 significantly increase the population (est. >25%, from 290,000 to 370,000). 2. Time frames and/or periods for implementation a. Time frame and/or period for implementation, 2021-2030 including start and end date, consistent with any further relevant decision adopted by the CMA; b. Whether it is a single-year or multi-year target, Multi-year targets for 2025 and 2030 respectively. as applicable. 3. Scope and coverage a. General description of the target; 1. It is the goal of the Government of Barbados to achieve an economy-wide reduction in gross GHG emissions of 70% by 2030. 2. The 2021 NDC update reflects a significant increase in ambition and enhancement of the 2015 NDC. With the 2021 update, Barbados makes a conditional contribution for an emissions reduction in the electricity sector of 95% by 2030. The economy-wide 2015 NDC contribution was conditional on international support in its entirety. Complementary to the conditional contribution, Barbados makes an unconditional contribution for the electricity sector of an emissions reduction of 50% by 2030. 3. The 2021 NDC update presents a further enhanced conditional contribution with the Roofs to Reefs Program (R2RP). R2RP is a holistic, integrated public investment program founded on principles of sustainable development and climate change resilience. The aim is to improve the social and environmental circumstances for all Barbadians: improving living conditions and terrestrial and marine ecosystems, making us more resilient to the impacts of the worsening climate crisis and related natural disasters, while increasing the ability to recover quickly from disasters. b. Sectors, gases, categories and pools covered by Gases included: the nationally determined contribution, including, • Carbon dioxide (CO2) as applicable, consistent with IPCC guidelines; • Methane (CH4) • Nitrous Oxide (N20) • HFCs • SF6 IPCC Sectors included: ● Energy sector, including transport ● IPPU ● Agriculture ● LULUCF 20 BARBADOS 2021 UPDATE OF THE FIRST NATIONALLY DETERMINED CONTRIBUTION ● Waste c. How the Party has taken into consideration In pursuit of the objectives of: the UNFCCC and its Paris Agreement, the 2030 Sustainable Development Goals and the paragraphs 31(c) and (d) of decision 1/CP.21; Caribbean Community (C-SERMS) Energy Policy agreement, Barbados in its first NDC opted to submit an economy-wide nationally determined contribution. The Government of Barbados wishes to affirm its commitment to the Kigali Amendment to the Montreal Protocol (2018). In preparing the NDC update, the scope of the coverage of the NDC has been extended to all categories of anthropogenic emissions in line with paragraph 31(c) by conducting a complete update of the historical energy and waste sectors emissions, as well as improvements in other sectors. Barbados’ GHG inventory remains to be completed, with remaining estimated gaps due to lack of baseline information. Barbados recognizes this fact and is committed to improving the completeness and accuracy of the GHG inventory for the next update of the NDC. While data management remains a challenge, over time data gaps are being closed. Support from international partners continues to be needed for both. With such support, efforts will be made to: update the GHG Inventory as part of the Third National Communication and create a MRV tracking system, thus enabling Barbados’ participation in international carbon markets. d. Mitigation co-benefits resulting from Parties’ The Roofs 2 Reefs Programme has been specifically designed to strengthen resilience and adaptation capacity, as well as adaptation actions and/or economic make a mitigation contribution. diversification plans, including description of See 1 (c). specific projects, measures and initiatives of Parties’ adaptation actions and/or economic diversification plans. 4. Planning process a. Information on the planning processes that the Between March 2020 and April 2021, an extensive stakeholder consultation process was conducted on the basis of a Party undertook to prepare its NDC and, if detailed engagement plan. The engagement plan identified relevant stakeholders from across civil society, science, the available, on the Party’s implementation plans, private sector and government ministries. including, as appropriate: Two rounds of dialogues were held involving close to one hundred participants. The first dialogue focused on i. Domestic institutional arrangements, public identification of problem statements and policies and measures. The second dialogue was concerned with validation of participation and engagement with local the technical work and prioritization of measures for inclusion in the NDC update. To enable broad participation by sector communities and indigenous peoples, in a gender- experts, more than 10 meetings were held. As a result of the pandemic meetings took place virtually. responsive manner; ii. Contextual matters, including, inter alia, as The COVID-19pandemic has put tremendous strain on the people and Government of Barbados. The virtual collapse in appropriate: international tourism, which accounts for 40 percent of (direct and indirect) GDP, continues to depress economic activity. The adverse fiscal and GDP impact of the pandemic has been significant. While the government achieved the targeted 21 BARBADOS 2021 UPDATE OF THE FIRST NATIONALLY DETERMINED CONTRIBUTION primary balance surplus equivalent to 6% of GDP for the fiscal year 2019/20, the current account deficit increased to 6.2% and real economic activity contracted by some 18% during 2020 and 3% in the first quarter of 2021. With a global economic recession extending well into 2021, the outlook is negative. In light of the slow recovery of international tourism, the Central Bank anticipates an equally slow recovery in economic activity for 2021, with growth in the order of 1-3%. COVID-related spending exceeded US$80 million in 2020 as the country has successfully (to date) managed to contain the spread of the virus and seeks to vaccinate its citizens. This economic setback has made it even more imperative that Barbados rapidly implement the transition to indigenous sources of renewable energy to save foreign exchange and create critical fiscal space to invest in building further resilience in other sectors. a. National circumstances, such as geography, Barbados is a Small Island Developing State facing significant development challenges, exacerbated during the COVID-19 climate, economy, sustainable development, and pandemic. International tourism contributes up to 40% to GDP. poverty eradication; Barbados is committed to the principles of sustainable development and in 1994 hosted the first UN Global Conference on the Sustainable Development of SIDS, which resulted in the Barbados Programme of Action. In addition to its commitment to achieve the 17 SDGs, Barbados is committed to achieving full and meaningful gender equality. The country now has its first female Prime Minister and its second female Governor General, who is also likely to be its last. Barbados will complete the next phase of achieving political maturity, since becoming independent from the United Kingdom in 1966, by becoming a republic in 2021. b. Best practices and experience related to the The NDC update shows a strong alignment with national development priorities, laid out in the 2021 Physical preparation of the NDC; Development Plan and the programmatic approach to mitigation and adaptation, as evidenced by the Roofs 2 Reefs Programme (see 3.a.3). Despite the pandemic, the Barbados NDC update was prepared with broad stakeholder consultation. c. Other contextual aspirations and priorities • Technology: Barbados wishes to leapfrog to a low-carbon economy and use innovative, clean technologies, including acknowledged when joining the Paris Agreement; digitalization. However, due to the relative size of economy and population, Barbados is disadvantaged and a technology purchaser only at present. • Barbados aspires to be a centre of excellence for R&D in renewable energy technologies. At present, due to economies of scale, the unit cost for renewable energy and EV technologies, for example, is higher than in the OECD. • It needs to be borne in mind that when it comes to SIDS, one size doesn’t fit all. Regional projects, designed to attract funding while reducing donor transaction costs, often fail to account for the different stages of development, physical attributes, and cultures. Founded on a belief that small is simple, one solution won’t necessarily fit all. Whereas, in order to attract funding bundling may be necessary, it needs to allow for an individualized approach. 22 BARBADOS 2021 UPDATE OF THE FIRST NATIONALLY DETERMINED CONTRIBUTION • Capacity building: There is a need for further strengthening of institutions in order to be able to pursue opportunities, including in training and capacity building. SIDS are structurally disadvantaged in this regard due to their size. Barbados faces real constraints in human capacity to cope with climate change and other systemic shocks. • Financing: Barbados as a small island developing state has been less effective in attracting blended finance. The hurdles to accessing the Green Climate Fund remain high. This is only in part due to limited capacity. • There is now more than ever a need for concessionary finance and grants, especially for adaptation. Few blended finance modalities are available for resilience building and adaptation. A false dichotomy exists between development and resilience. The 50/50 split in climate finance in the Paris Agreement is not adequate, nor is it currently being delivered. • Barbados wishes to reduce its reliance on forex for investment in the transformation to a low-carbon economy. However, a high cost of local capital continues to constrain the feasibility of renewable energy investments. • Barbados is actively identifying opportunities to access both grant and loan financing for specific climate change activities. b. Specific information applicable to Parties, Barbados is not party to an agreement to act jointly under Article 4 of the Paris Agreement. including regional economic integration organizations and their member States, that have reached an agreement to act jointly under Article 4, paragraph 2, of the Paris Agreement, including the Parties that agreed to act jointly and the terms of the agreement, in accordance with Article 4, paragraphs 16–18, of the Paris Agreement; c. How the Party’s preparation of its NDC has been In line with Barbados political commitment to the 1.5 degrees objective of the Paris Agreement, this NDC update is informed by the outcomes of the global stocktake, significantly more ambitious than the 2015 NDC in terms of the conditional commitment to a fossil fuel-free electricity in accordance with Article 4, paragraph 9, of the sector by 2030, combined with the significantly enhanced resilience of its people and economy. Paris Agreement; Barbados is on the frontline of the climate crisis. The difficulties faced by all nations are exacerbated because of the small geographical area and exposure. The development impacts from extreme weather events, sea level rise, and droughts and flooding undermine Barbados’s development. Yet, Barbados and other SIDS are among those least responsible for climate change. Barbados, therefore, pursues an ambitious mitigation pathway, noting all countries need to play their part. Adaptation and resilience building will continue to be a significant focus for Barbados, and other SIDS, as its continued existence depends on both mitigation and adaptation. 23 BARBADOS 2021 UPDATE OF THE FIRST NATIONALLY DETERMINED CONTRIBUTION Since the 1994 Barbados Programme of Action, the unique challenges faced by SIDS and the need for support by the international community have been recognized by the United Nations system. The SAMOA Pathway adopted in 2014 showed however that more action is needed. In this context, Barbados reaffirms its support for the 2018 Samoa Declaration on Climate Change in the Context of Sustainable Development for SIDS made by AOSIS. 3 Scaled up financial resources are needed and the balance of finance between mitigation and adaptation anchored in Art. 9.4 of the Paris Agreement needs to be honoured. Barbados, therefore, welcomes the aims of the Updated Strategic Plan of the Green Climate Fund for a 50:50 balance between mitigation and adaptation over time and for a floor of 50% of the adaptation allocation for SIDS, amongst others. Barbados is an active member of the V20 Vulnerable Economies Forum, where Finance Ministers of the Climate Vulnerable Forum meet to discuss strategies to reduce systemic economic vulnerabilities of their countries to climate change. d. Each Party with an NDC under Article 4 of the Paris Agreement that consists of adaptation action and/or economic diversification plans resulting in mitigation co-benefits consistent with

Article 4, paragraph 7, of the Paris Agreement to submit information on: i. How the economic and social N/A consequences of response measures have been considered in developing the NDC; ii. Specific projects, measures and The Ministry of Environment and National Beautification will prepare a Third National Communication, incorporating a activities to be implemented to fully updated GHG Inventory, as well as an Adaptation Communication / National Adaptation Plan. contribute to mitigation co-benefits, including information on adaptation The Roofs 2 Reefs Programme framework is focused on increasing resilience and operationalizes the Physical plans that also yield mitigation co- Development Plan. Its objectives are: benefits, which may cover, but are not ● to make low- and middle-income homes more resilient to extreme weather events and their impacts, such as limited to, key sectors, such as energy, possible loss of access to electricity and potable water distribution systems; resources, water resources, coastal ● to increase freshwater storage capacity and water use efficiency and reduce emissions through the deployment resources, human settlements and urban of distributed renewable energy generation; planning, agriculture and forestry; and ● to decrease land-based sources of marine pollution through more sustainable land use practices; economic diversification actions, which ● to make critical utility, water and sanitation and road infrastructure climate resilient; and, may cover, but are not limited to, sectors 3 Available at https://sustainabledevelopment.un.org/content/documents/21091CC_Declaration.pdf 24 BARBADOS 2021 UPDATE OF THE FIRST NATIONALLY DETERMINED CONTRIBUTION such as manufacturing and industry, ● to restore vulnerable coral reef ecosystems, particularly on the west and south coasts of the island. energy and mining, transport and communication, construction, tourism, real estate, agriculture and fisheries. 5. Assumptions and methodological approaches, including those for estimating and accounting for anthropogenic greenhouse gas emissions and, as appropriate, removals a. Assumptions and methodological approaches The 2021 NDC update GHGI is based on the 2006 IPCC Guidelines methodologies. It covers the period 2008-2020. used for accounting for anthropogenic greenhouse gas emissions and removals Global Warming Potentials (GWP) are based on IPCC AR5. corresponding to the Party’s nationally determined contribution, consistent with decision The recommendations on accounting (accountability) contained in Annex II to Decision 4/CMA.1 shall be used for the 1/CP.21, paragraph 31, and accounting guidance accounting of anthropogenic emissions and removals. adopted by the CMA; b. Assumptions and methodological approaches The methodology used for the estimation of the potential of the mitigation measures is the same applied in the 2021 used for accounting for the implementation of NDC update GHGI to ensure the consistency in the results. policies and measures or strategies in the nationally determined contribution; The BaU scenario has been estimated as follows: ● Energy sector: The Integrated Resource & Resilience Plan for Barbados (IRRP) energy demand forecast (reference scenario) and share of fossil fuels in energy production (scenario 3) were used to estimate the BaU scenario. ● Other fuel consumption (industry, transport and commercial): The BaU scenario is estimated based on the GDP forecast. ● IPPU: The BaU scenario for cement production is based on the GDP forecast. The BaU scenario for F-gases is based on the population forecast. ● Waste: The BaU scenario is based on per capita residues production and population growth (landfills) and based on the GDP forecast (industrial wastewaters). c. If applicable, information on how the Party will N/A take into account existing methods and guidance The 2021 NDC update is based on the 2006 IPCC Guidelines. under the Convention to account for See 5(a). anthropogenic emissions and removals, in accordance with Article 4, paragraph 14, of the Paris Agreement, as appropriate; d. IPCC methodologies and metrics used for The 2006 IPCC Guidelines were used to prepare the 2021 NDC update GHGI from which 2008 base year emissions data estimating anthropogenic greenhouse gas were obtained. emissions and removals; 25 BARBADOS 2021 UPDATE OF THE FIRST NATIONALLY DETERMINED CONTRIBUTION The aggregation of GHG emissions has been estimated using the 100-year time-horizon global warming potential values from the IPCC Fifth Assessment Report (AR5). See 5 (a). e. Sector-, category- or activity-specific assumptions, methodologies and approaches consistent with IPCC guidance, as appropriate, including, as applicable: i. Approach to addressing emissions and No allowance was made for natural disturbances in this NDC update. subsequent removals from natural disturbances on managed lands; ii. Approach used to account for Harvested wood products are not included in this NDC update. emissions and removals from harvested wood products; iii. Approach used to address the effects The forest age-class structure is not considered in this NDC update. of age-class structure in forests; f. Other assumptions and methodological approaches used for understanding the nationally determined contribution and, if applicable, estimating corresponding emissions and removals, including: i. How the reference indicators, See 5.a and 5.b. baseline(s) and/or reference level(s), including, where applicable, sector-, category- or activity specific reference levels, are constructed, including, for example, key parameters, assumptions, definitions, methodologies, data sources and models used; ii. For Parties with nationally determined N/A contributions that contain non greenhouse-gas components, information on assumptions and methodological approaches used in relation to those components, as applicable; 26 BARBADOS 2021 UPDATE OF THE FIRST NATIONALLY DETERMINED CONTRIBUTION iii. For climate forcers included in N/A nationally determined contributions not covered by IPCC guidelines, information on how the climate forcers are estimated; iv. Further technical information, as N/A necessary; g. The intention to use voluntary cooperation Barbados is committed to contributing to discussions on international cooperation through Article 6 of the Paris under Article 6 of the Paris Agreement, if Agreement. applicable. Barbados continues to support the supplementarity position of AOSIS, that seeks to limit the use of market mechanisms to less than actual domestic effort. Double counting shall be avoided to preserve the environmental integrity of such a market. The Government of Barbados will put forward legislation that specifies that all emission reduction or removal units (carbon credits) belong to the Crown, unless otherwise specified. Barbados will allow for the sale of up to 50% of any certified carbon credits generated between the period 2020 and 2030. 6. How the Party considers that its NDC is fair and ambitious in light of its national circumstances a. How the Party considers that its NDC is fair and Barbados as a small island developing state bears little historical responsibility for the climate crisis. ambitious in the light of its national circumstances; The 2021 NDC update is considerably more ambitious than the 2015 Barbados NDC. In doing so, Barbados is accelerating b. Fairness considerations, including reflecting on its decoupling of economic development from emissions growth. Emissions per capita in 2030 of 2.3 tCO 2e per capita, equity; down from 7.7 t in 2008, will be substantially below the global average. See section 1(f) and 4(c) above. A significant enhancement of the NDC update is the introduction of an unconditional contribution, alongside the enhanced ambition of the conditional contribution. One dimension of fairness that is not ordinarily considered is the impact of projected population growth, yet this growth is required to strengthen the economic resilience of Barbados. See section 1 (f) above. c. How the Party has addressed Article 4, This NDC update represents a significant enhancement on the 2015 Barbados NDC. paragraph 3, of the Paris Agreement; d. How the Party has addressed Article 4, See 6.b paragraph 4, of the Paris Agreement; 27 BARBADOS 2021 UPDATE OF THE FIRST NATIONALLY DETERMINED CONTRIBUTION e. How the Party has addressed Article 4, Barbados has prepared this NDC update following the ICTU guidance adopted by UNFCCC Decision 4/CMA.1 to provide paragraph 6, of the Paris Agreement. information to facilitate clarity, transparency and understanding. 7. How the NDC contributes towards achieving the objectives of the Convention as set out in its Article 2 a. How the NDC contributes towards achieving the Barbados is committed to the objectives of the Convention and its Paris Agreement. objective of the Convention as set out in its Article 2; 7.a. Barbados’ contribution helps avoid dangerous anthropogenic interference in the climate system and goes beyond b. How the NDC contributes towards Article 2, its historical and equitable responsibility. paragraph 1(a), and Article 4, paragraph 1, of the Paris Agreement. 7.b. This NDC significantly contributes to the long-term global goal of Art. 2.1 (a) and Art.4.1. by achieving a fossil fuel- free energy sector by 2030, conditional on international investment and support. Barbados wishes to refer to Article 8.1 of the Paris Agreement, recognizing the importance that Parties should give to averting, minimizing and addressing loss and damage associated with the adverse effects of climate change, including extreme weather events and slow onset events. Without more ambitious global mitigation, Barbados will experience increased economic and non-economic loss and damage. Barbados cannot adapt to some emissions pathways and is noting with concern the conclusions of the 2021 NDC synthesis report FCCC/PA/CMA/2021/2. 28 BARBADOS 2021 UPDATE OF THE FIRST NATIONALLY DETERMINED CONTRIBUTION Fair and ambitious This section sets out how the contribution is considered to be fair and ambitious in light of the country’s national circumstances and the objective of the Paris Agreement. A number of parameters to enable this assessment will be provided. The stated ambition of the Government of Barbados is fully aligned with Barbados‘ fair share of global mitigation in view of the objectives articulated in Article 2 of the Paris Agreement on Climate Change. Barbados’ conditional mitigation contribution reduces 2030 emissions by 70% below the projected 2030 emissions. This contribution is significantly greater than Barbados’ national historical and equitable obligation to preventing dangerous anthropogenic climate change. Taken in the context of the COVID-19 pandemic and resulting economic crisis, this bold and courageous commitment shows that increasing resilience of the economy, society and ecology is necessary and possible. The 2021 NDC update is considerably more ambitious than the 2015 Barbados NDC. In doing so, Barbados is accelerating its decoupling of economic development from emissions growth. Emissions per capita in 2030 of 2.3 tCO2e per capita, down from 7.7 t in 2008, will be substantially below the current global average. This 2021 NDC update puts Barbados firmly onto a 1.5 degrees pathway. This enhanced mitigation contribution is consistent with IPCC scenarios RCP2.6 and SSP1. It is equitable and aligned with a 1.5 degrees Celsius low emissions development pathway calculated using the Climate Equity Reference project tool.

Article 4.19 of the Paris Agreement calls on all Parties to formulate and communicate a long-term low greenhouse gas emission development strategy (LEDS, also known as Long-Term Strategies (LTS)). As the conditional contribution contained in this 2021 NDC update achieves some 70% emissions reductions, the government anticipates that the second NDC to be submitted in 2025 will include a net zero target, as such overriding the need for a mid-century LTS. Planning process NDC update stakeholder engagement The NDC update builds significantly on wide-ranging expert advice received during two rounds of consultations. Between March 2020 and April 2021, an extensive stakeholder consultation process was conducted on the basis of a detailed engagement plan. The engagement plan identified relevant stakeholders from across civil society, science, the private sector, development partners and government ministries. Two rounds of dialogues were held involving close to 100 participants. The first dialogue focused on identification of problem statements and policies and measures across three thematic sessions: Energy and transport/agriculture, waste and water resources/coastal zone and disaster risk management and tourism. The second dialogue was concerned with validation of the technical work and prioritization of measures for inclusion in the NDC update. To enable broad participation by sector experts, more than ten meetings were held, including with stakeholders from the tourism sector and with the Barbados Climate 29 BARBADOS 2021 UPDATE OF THE FIRST NATIONALLY DETERMINED CONTRIBUTION Finance Working Group, focusing on the issue of green recovery. As a result of the COVID-19 pandemic meetings took place virtually. Means of Implementation Technology Barbados wishes to leapfrog to a low-carbon economy and use innovative, clean technologies, including digitalization. However, due to the relative size of economy and population, Barbados is disadvantaged and a technology purchaser only. Barbados aspires to be a centre of excellence for R&D in renewable energy technologies. At present, due to economies of scale, the unit cost for renewable energy and EV technologies, for example, is higher than in the OECD. Capacity building There is a need for further strengthening of institutions in order to be able to pursue opportunities, including in training and capacity building. SIDS are structurally disadvantaged in this regard due to their size. Barbados faces real constraints in human capacity to cope with climate change and other systemic shocks. The Capacity Building Initiative for Transparency (CBIT) project under development by the Government, with IDB´s support, will seek to strengthen Barbados technical and institutional capacity, to meet the requirement of Article 13 of the Paris Agreement on Climate Change. Barbados has built an initial foundation on the issue of transparency through the national communications process. It is, however, clear that there is a need to build further capacity to meet the enhanced international requirements of transparency. Barbados needs additional resources and enhanced capacity building in order to be able to meet these requirements. This project will allow Barbados to receive resources to address data issues, build capacity for the development and update of greenhouse inventories, establish a robust MRV systems, enhance collaboration between Ministries, agencies and the private sector, and improve knowledge in transparency and the Paris Agreement. Financing Macro-economic context Barbados has a significantly reduced fiscal space, reflected in a high debt-to-GDP ratio, exacerbated by the pandemic. This significantly constrains Barbados ability to borrow. As a Small Island Developing State, While Barbados continues to seek to attract finance, including blended finance, the cost of capital for climate investment projects remains high. Barbados is, therefore, actively identifying opportunities to access grant financing for specific climate change activities. To open up the fiscal space, innovative financial instruments and clauses, such as the natural disaster clause currently included in Barbados debt instruments, are needed to tackle climate change. This provides more certainty to investor and debtor in uncertain times. Barbados is currently the world’s largest issuer of sovereign bonds with natural disaster clauses. These bonds have been trading for over a year without signs of any borrowing “cost” to the clauses. Under the Barbados version, when an independent agency makes the declaration of a natural disaster, there is an immediate 2-year suspension of debt servicing. The maturity of the instrument is then automatically extended for two years. In Barbados’ case this allows 7% of GDP to be immediately redirected to relief and 30 BARBADOS 2021 UPDATE OF THE FIRST NATIONALLY DETERMINED CONTRIBUTION reconstruction costs. These clauses should be written generally to cover other unforeseen disasters like pandemics while ensuring that the definition only stretches to rare external events. There is a need to significantly scale-up existing catastrophe-triggered financial instruments, while developing new innovative instruments that incentivize resilience building. The new instruments should address the debt burden of vulnerable developing countries. Barbados wishes to reduce its reliance on foreign exchange for investment in the transformation to a low- carbon economy. However, a high cost of local capital continues to constrain the feasibility of renewable energy investments. Adaptation and resilience Whereas Article 9.4 of the Paris Agreement states that “the provision of scaled-up financial resources should aim to achieve a balance between adaptation and mitigation, considering country-driven strategies, and the priorities and needs of developing country Parties (…)”, at present the share of adaptation finance stands at less than 20%. We further note that grants make up an estimated USD 12 billion per year only; too little to adequately leverage other investments. There is thus a significant gap between adaptation funding supply and demand. Far greater emphasis is needed on mobilizing adaptation funding. Barbados, therefore, welcomes the aims of the Updated Strategic Plan of the Green Climate Fund for a 50:50 balance between mitigation and adaptation over time and for a floor of 50% of the adaptation allocation for SIDS, amongst others. Whereas Barbados is host to the first Green Climate Fund project in the Caribbean, the hurdles to accessing the fund remain high. This is only in part due to limited capacity. There is now more than ever a need for concessionary finance and grants, especially for adaptation. Few blended finance modalities are available for resilience building and adaptation. A false dichotomy exists between development and resilience. Furthermore, it remains more difficult to attract private sector investment to adaptation projects than to mitigation, making public financing of adaptation (grants and loans) critical. One financing approach favored by Barbados is the issuance and redistribution of Special Drawing Rights. See Box. This could be done in conjunction with a multi-dimensional vulnerability index, that looks beyond per capita income thresholds, to enable Barbados and other upper-income SIDS to access concessional finance. This, amongst others, would better enable Barbados to meet its conditional contribution of this NDC. A definition of a climate vulnerable country is one facing a high probability of suffering a climate- related impact that leads to loss and damage of more than 5% of GDP within the next five years. Adopting this proposal would not require additional resources, while offering fast substantially more emergency 31 BARBADOS 2021 UPDATE OF THE FIRST NATIONALLY DETERMINED CONTRIBUTION liquidity to those in need. It will build resilience in climate vulnerable countries without adding onerously to already high debt levels. It can help diffuse the dangerous nexus between Covid 19, climate and debt. Using SDRs for climate action Special Circumstances of SIDS Middle- and upper-income countries SIDS currently receive a mere 2% of total climate finance flows. Higher most vulnerable to climate change have income SIDS in the Caribbean, such as Barbados, face particular limited access to liquidity in a disaster. additional hurdles when it comes to securing international financial Issuance and redistribution of SDRs assistance. could address this. Barbados is an active member of the V20 Vulnerable Economies Forum, Barbados seeks a recapitalization of regional development banks with SDRs where Finance Ministers of the Climate Vulnerable Forum meet to currently not used by more advanced discuss strategies to reduce systemic economic vulnerabilities of their economies. This new capital could countries to climate change. The Caribbean SIDS are among the most support resilience projects, especially indebted (upper) middle-income countries in the world, and the ratio of public private partnerships where the public debt to GDP is relatively high. The situation is exacerbated by debt sits on the private sector’s balance declining foreign direct investment (FDI) flows, high unemployment, sheet. especially among youth, and, as mentioned, slow economic growth. At Barbados supports a redistribution of the same time, Barbados due to its status as an upper income economy Special Drawing Rights (SDRs) using a is not eligible for certain types of funding, such as reduced interest loans. new classification of vulnerability to The conditionality imposed does not adequately take into account the natural disasters. The precise scale of a extreme vulnerability of Barbados as a SIDS. new allocation has yet to be decided. Newly issued SDRs are ordinarily Barbados welcomes scaling-up and support to regional adaptation and allocated according to IMF quotas; resilience initiatives, new and existing. But it needs to be borne in mind meaning that the entire emerging and that when it comes to SIDS, one size doesn’t fit all. Regional projects, developing world would receive less designed to attract funding while reducing donor transaction costs, than the combined quotas of the US, EU often fail to account for the different stages of development, physical and UK. A mechanism is needed to attributes, and cultures. Founded on a belief that small is simple, one redistribute new SDRs. The world’s solution won’t necessarily fit all. In order to serve the needs of Small strongest economies could lend those Island Developing States such funding may need to be pooled. SDRs to an IMF-administered Global Whereas, in order to attract funding bundling may be necessary, one Disaster Mechanism (GDM). The GDM will provide immediate, unconditional needs to allow for an individualized approach. liquidity to those countries suffering Whereas development partners encourage regional projects, project loss and damage greater than 5% of bundling and multi-country implementation, it must be borne in mind GDP, on the independent verification that the area covered by the Caribbean SIDS region is vast. Separation that a pandemic, climate or natural disaster event has occurred. and distance themselves are not the only challenges – differences in The GDM could be used to refinance geographic position, elevation, composition mean different realities on short-term debt incurred as a result of a the ground. Notwithstanding core similarities, from the perspectives of natural disaster. Such lending could be hydrogeology (water resources), climate, sea conditions, including capped at a particular multiple of IMF water depth and wave climate, biodiversity resources and cultures we quotas and on the same terms as are vastly different. We are a region marked by a willingness to learn existing lending of SDRs. Many but also scarred by attempts to force cookie cutter solutions when countries will likely be comfortable with more tailored options are required. an IMF Trust. The GDM would be fit for purpose: targeted to vulnerability, fast to deploy, substantial and affordable. 32 BARBADOS 2021 UPDATE OF THE FIRST NATIONALLY DETERMINED CONTRIBUTION Conclusion To be transformational, our approach has to be holistic and programmatic and at a scale commensurate with the challenges faced. Considering the existing budgetary and financial constraints, financing climate action in Barbados will rely in part upon new and additional sources of climate funding and increasing flows of international finance towards sustainable investment. There is also a need to apply innovative instruments and tools while the government works to ensure barriers to NDC-aligned investments are removed. The government will explore different financial instruments that do not further increase sovereign debt, such as a special purpose investment vehicle or green bond to attract finance for the implementation of the Roofs 2 Reefs Program. The significance of carbon finance as a source of funding for the Roofs 2 Reefs Programme is highlighted. The importance of the holistic approach taken towards planning, implementation and financing of the Roofs 2 Roofs Programme, is reiterated here. Further details are provided in the chapter on Adaptation and Resilience. Private finance initiatives and partnership options have specific merit. Barbados has been promoting and engaging in the areas of: • Green and blue bonds. The first private green bond was issued in August 2019 by Williams Caribbean Capital (WCC). This BBD 3 million (USD 1.5 million) bond finances solar PV assets. • Debt for Nature Swaps, Payment for Ecosystem Services (PES) schemes; • Insurance and disaster clauses; • Financing access to and rescue plans for middle income SIDS. However, as noted above, the high per capita GDP and human development index ranking bely our vulnerability. This makes access to concessional financing difficult. In some cases, Barbados has been “graduated” and does not qualify for grants; and, • Public Private Partnerships (PPPs), co-financing and blended finance. This NDC update draws on the draft Integrated Resources and Resilience Plan which outlines, among other issues, investment needs for full decarbonization of the electricity sector. The modeling used a social cost of carbon ranging from USD 80 in 2020 to USD 100 in 2030, alongside a discount rate of 2%. The government does not, however, intend to implement a carbon tax, both in light of the fact that carbon pricing is not yet widespread internationally and the locally regressive impact such a measure would have. Flexible mechanisms Barbados is committed to contributing to discussions on international cooperation through Article 6 of the Paris Agreement. Barbados continues to support the supplementarity position of AOSIS that seeks to limit the use of market mechanisms to less than actual domestic effort. Double counting shall be avoided to preserve the environmental integrity of such a market. The Government of Barbados will put forward legislation that specifies that all emission reduction or removal units (carbon credits) belong to the Crown, unless otherwise specified. Barbados will allow for the sale of up to 50% of any certified carbon credits generated between the period 2020 and 2030. 33