Monthly Archives: May 2016

Are Citizenship by Investment programmes sustainable?

Alicia Nicholls

The International Monetary Fund (IMF) in its end of mission press release following its recently concluded Article IV Consultation mission in St. Kitts & Nevis highlighted that strong construction activity, driven in part by large real estate projects funded under the island’s Citizenship by Investment (CBI) programme, had contributed significantly to the island’s five percent economic growth in 2015. Although the Article IV report itself has not been made available, the end of mission press release noted as follows:

“The outlook for 2016 is positive, but remains dominated by developments in CBI inflows. Growth is expected to moderate to 3.5 percent in 2016 and 3 percent, on average, over the medium term, reflecting a tapering of construction activity associated with a potential slowdown in the pace of new CBI applications, given the increased competition from new CBI programs [emphases are this Author’s].”

Two main things are clear from this paragraph and indeed from the entire press release. Firstly, St. Kitts & Nevis’ CBI programme, which has been in existence since 1984 and was the first of its kind, has contributed significantly to the island’s recent macroeconomic performance at a time when some Caribbean countries are still seeing sluggish GDP growth. Secondly, the IMF has concerns about the sustainability of this  CBI-led growth. This is reflected in the lower GDP growth rate projected for 2016 and for the medium term. It raises the question of how sustainable a role can CBI programmes play in fostering growth and development in the host country.

Citizenship by investment programmes or jus pecuniae (economic citizenship) remain a controversial topic in the Caribbean. Despite this,  given the high level of indebtedness of many Caribbean countries, the need for economic diversification, the fickle nature of foreign direct investment inflows and limited access to concessional borrowing, Caribbean countries are increasingly considering their attractiveness. In January this year, St. Lucia recently joined four other Caribbean countries (Antigua & Barbuda, Dominica, Grenada and St. Kitts & Nevis) as the fifth Caribbean state currently operating a CBI programme. Each of these programmes differs in terms of fees, types of qualifying investment and admission and other qualification criteria.

If managed well, CBI programmes can be an important source of targeted foreign direct investment and other foreign exchange inflows. They can also be alternative means of financing infrastructure projects which might be otherwise unattractive to most private investors. As an example, the Government of Dominica recently announced that its West Bridge project under the Roseau Enhancement Project will be financed through its CBI programme. Without private sector-led involvement, such projects would require use of government’s tax coffers, borrowing or public-private partnerships. Construction activity pursuant to these projects, where provided for, contributes to economic activity and generates employment. High Net Worth Individuals (HNWIs) and their families  also bring with them expertise, contacts and know-how to the businesses which they establish. CBI programmes can to some extent contribute to poverty reduction by creating employment and creating infrastructure in rural communities.

Growing global demand for Second Passports

There is also no disputing that global demand for second passports is increasing. Contrary to popular belief, this demand is not fuelled in the main by nefarious purposes but by HNWIs either fleeing political or economic instability in their home countries or seeking the greater mobility a less restrictive passport could bring. Caribbean passports, for example, rank among some of the least restrictive passports outside those of metropolitan countries.

A growing and increasingly mobile Chinese, Russian, Middle Eastern and African HNW class, and continued instability in the Middle East, are two of the major developments to watch. Turning to this hemisphere, Fortune reports  that 2015 was the third straight year in which a record number of US citizens renounced their US citizenship. Besides the onerous reporting requirements under the Foreign Account Tax Compliance Act (FATCA), the main factor is that under US law,  American citizens or resident aliens living or travelling outside the  US are mandated to file taxes in the US in the same way as those resident in the US. Moreover, if media reports are to be believed, that number may jump depending on the outcome of the presidential election this fall! It is therefore no surprise that citizenship planning is a multibillion dollar global industry.

Sustainability issues

While it is unlikely that global demand for second passports will abate anytime soon, there are concerns about the sustainability of these programmes not just because of the inherent reputational risks to the host countries if applicants are not thoroughly vetted, the implications for loss of visa-free access with third states, but also the security implications in the context of the free movement of persons as envisioned under the CARICOM Single Market and Economy. For example, St. Kitts & Nevis had to revamp its programme after the US and Canada raised concerns. The latter revoked visa-free access  to Kittitian nationals. I have touched on these issues in previous articles so my main focus here is on issues of economic development.

Like all inflows, CBI  revenue inflows are not guaranteed and could leave a country in the lurch if there is a sudden drop in inflows due to competition from other CBI programmes globally. It is a concern that the IMF rightly raised  in its Article IV end of mission press release in regards to St. Kitts & Nevis. Even so, market and size constraints mean there is only so much real estate and tourism construction activity which can take place in a small country at once, and concerns have been raised that increased demand for luxury real estate could drive up the general price of real estate, making it unaffordable to ordinary persons.

The CBI programmes in the Caribbean are direct citizenship programmes, which means that once all fees are paid and due diligence requirements met, a qualifying investor is granted citizenship on the basis of a one-time qualifying investment and is not required to be resident in the country for any period of time prior to applying for citizenship or afterwards. A slight exception is that under Antigua & Barbuda’s CBI programme  an investor may lose citizenship if he fails to spend at least 5 days in Antigua & Barbuda during the period of five calendar years after having obtained citizenship. Five days out of a possible 1,826 days is hardly any time and only applies after citizenship is obtained.

This may be contrasted with residence-to-citizenship programmes, such as the US’ EB-5 programme, which require a period of residency before an investor may apply for citizenship. The lack of a residency requirement means there is no incentive for the investor to reside in the new country of citizenship or contribute through expenditure, tax paying or otherwise once he receives citizenship.

Some countries seek to address this by establishing a relationship with their new citizens. In this article on the Government of Dominica’s website, the Prime Minister of Dominica is reported to have visited and addressed several new citizens of Dominica in Europe, Asia, Dubai and the Arab Emirates and “impressed upon them the importance of their contributions for the development and modernization of [their] country.”

Another option could be to do like Malta did and introduce a one-year residency requirement. A drawback is that this would increase the waiting time for the potential investor, making such a programme less competitive.  While one could argue that this has not hurt Malta which is currently  ranked as the top global residency and citizenship programme on Henley & Partners’ Global Residence and Citizenship Programs 2016 report, I believe that its  visa-free access to 168 countries, including EU citizenship, offsets any negative fall-out from having a residency requirement.

Conclusion

To go to the heart of the question posed in this article,  CBI programmes have their benefits. The revenue  inflows and the economic activity generated make the macroeconomic fundamentals of a country look good. However, they should not be relied on exclusively as an engine of inclusive growth and sustainable development.

Careful planning is needed to ensure that investment under CBI programmes is steered towards targeted growth areas and sectors which can boost economic diversification and growth. To some extent we are already seeing this being done. CBI-funded projects in St. Kitts & Nevis are adding to the appeal of the island’s tourism product. St. Lucia is using its programme in order to develop its luxury tourism and real estate sectors. However, this should be done in a sustainable way in order to boost development and at the same time having a minimal adverse human and environmental impact.

The IMF has also made a very interesting suggestion in its above-mentioned press release that the categories for qualifying investments under the Citizenship by Investment regulations be broadened to include renewable energy, education and health. This merits consideration by policy makers. However, promoting investment in these sectors would require more marketing as their profitability for investors may not be immediately apparent.

The IMF also recommended the need for a prudent framework that “would help build resilience to a sudden stop in CBI inflows, and facilitate the accumulation of fiscal buffers necessary to address natural disaster shocks and absorb unforeseen financing needs if tax performance disappoints after a slowdown in CBI inflows”. The Fund also emphasised that a Growth and Resilience Fund using savings from the CBI programme should be established which could be used as a contingency buffer in the case of natural disasters.

Besides these very timely suggestions, it would be useful if Caribbean countries released more data about the operation of their programmes. For example, periodic impact assessments should be done on the operation of the programmes and made publicly available, highlighting their contributions, challenges and whether they have met their targets. Such an exercise would not only assist policy makers in their policy planning but also show the public that CBI programmes are not a cloak used by unsavoury characters to conceal their illegal activity but are a policy tool to assist in development. I would also add that countries should continuously evaluate and monitor, and where necessary, revise their due diligence frameworks, to ensure the integrity of their programmes.

Alicia Nicholls, B.Sc., M.Sc., LL.B. is a trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.

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CARICOM countries continue fight against bank de-risking

Alicia Nicholls

The countries of the Caribbean Community (CARICOM) are continuing their fight against bank de-risking practices which are resulting in the restriction, threat of, or outright termination of correspondent banking relations with banks and wire transfer providers in the Caribbean region.

Onerous global and national regulatory requirements (such as anti-money laundering and combating the financing of terrorism standards), burdensome compliance costs and the stringent sanctions for breach of these regulations are increasingly leading banks in metropolitan countries, particularly in the United States, to de-risk, that is, avoid risk by discontinuing business with whole classes of customers without taking into account their levels of risk, as opposed to managing and mitigating risk. While other countries are also experiencing this disquieting phenomenon, the Caribbean appears to be the most affected region according to a World Bank survey conducted last year.

There are a number of other factors influencing de-risking decisions. Besides risk and reward considerations, added to the mix is the growing perception of the Caribbean as a “risky” place for financial transactions. The unwarranted attacks against legitimate offshore financial centres in the Caribbean in the wake of the Panama Papers scandal will no doubt unfortunately add fuel to the fire. The net result is an increasing unwillingness of international banks to continue correspondent banking relationships with banks and wire transfer providers in the region.

Belize has been the hardest hit so far by bank de-risking, but other Caribbean countries are also being affected. In the International Monetary Fund (IMF)’s Caribbean Corner publication of September 2015, it was reported that “[a]lready at least 10 banks in the region in five countries have (as of June 2015) lost all or some of their CBRs, including two central banks.” This number has grown.

At the meeting of the Financial Stability Board in Tokyo in March this year, Barbados’ Central Bank Governor, Dr. Delisle Worrell, reporting in his capacity as co-Chair of the Financial Stability Board’s Regional Consultative Group for the Americas, highlighted that eight correspondent banking relationships in Barbados’ international business sector have already been severed. He further warned that the lack of correspondent banking services could lead individuals to utilise unregulated channels, thereby limiting transparency and adding further risk to international transactions.

The loss of correspondent banking relationships disrupts the processing of financial instruments, such as credit card transactions and cheques,  needed for trade, investment, tourism and remittance flows, and would effectively de-link regional economies from the international financial system. It also has humanitarian and poverty eradication consequences as well. Remittances are the “bread and butter” for many poor families who depend on earnings made by breadwinners abroad. In light of the serious threat posed to the region’s economic, financial and social stability by de-risking, CARICOM heads of government took the decision to raise the issue not just bilaterally but in multilateral fora.In March Caribbean countries sought the Organisation of American States’ support.

Last week, Prime Minister of St. Kitts & Nevis, Dr. Timothy Harris took the lead during an important consultation with officials from the US State and Treasury Departments in Washington DC raised the serious impact de-risking was having on regional economies. The issue was also raised at the recently concluded Ninth UK-Caribbean Forum. The Ministers noted at paragraph 9 of the Communique:

The Caribbean therefore called on the UK to continue to work with international
partners to address this global phenomenon, and to encourage banks which
provide correspondent banking services, and regulatory authorities, to take
into account the efforts being made by Caribbean countries and financial
institutions to implement international regulations and to mitigate risks.

The full communique from that meeting may be viewed here.

The Caribbean Association of Banks has also been playing a critical role in lobbying efforts. At the Association’s recently held CEO Forum on May 3rd, parties came together “to explore potential solutions and develop a set of actions in response to this threat”. According to the press release, the Forum “discussed and agreed” on the following possible solutions:  the establishment of a clearing institution in the US, alternative Payment Methods and alternative Correspondent Banking Relationships. The forum also established a six member committee to advance these recommendations. The full press release from the CAB’s CEO Forum may be viewed here.

Alicia Nicholls, B.Sc., M.Sc., LL.B. is a trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.

Race for the White House and US-Caribbean Relations

Alicia Nicholls

US presidential election campaigns are keenly followed in the Caribbean not just for the riveting debates and endless intrigue, but for the important consequences which any change in US domestic and foreign policy will portend for the region. The US is not just the largest trading partner for many Caribbean countries and a valued ally. It is a major tourism source market and is also home to a large and growing Caribbean diaspora.

As of writing, the US presidential race has narrowed down to billionaire business mogul Donald Trump as the presumptive nominee for the Republicans. Former Secretary of State, Hillary Clinton, appears to be mathematically on track to securing the Democratic nomination, despite a continued spirited fight by Vermont senator, Bernie Sanders.

More so  than in any other election season in recent memory, trade policy has been a hot button topic in both the Democratic and Republican presidential primaries. Echoing sentiments long held by some Americans who are fed up with what they see as America getting a raw deal from free trade, the talking points of the presidential candidates have adopted a more protectionist and anti-trade tone than has been seen in recent election cycles. Strong criticisms are being leveled at the recently signed but not yet ratified Trans-Pacific Partnership Agreement with Pacific-Rim countries, as well as the longstanding tri-nation North American Free Trade Area (NAFTA) with Canada and Mexico.

Feeding into the populist, anti-establishment anger, candidates of both major parties have raised concern about the US’ large trade deficits with Mexico and China, the offshoring of US companies to countries with lower labour and production costs, and the consequential loss of American manufacturing jobs. The presumptive Republican nominee, known for his hardline positions on immigration and trade, colourfully equated the US’ deficit with China to rape.

As small island developing states, Caribbean countries have long posited that trade must be fair, foster sustainable development, and not be to the detriment of the local jobs and industries. However, the current tone of the US presidential campaign equates fair trade with trade which supports only US interests. It is maybe fortunate for the region that the Caribbean has not featured in any of the foreign policy discussions or debates during either the Democratic or Republican Primaries, although discussions around tax havens in light of the Panama Papers will have implications for the offshore financial centres in the Region. Anti-immigration rhetoric on the Republic side, while aimed primarily at the anti-immigration lobby’s favourite “villains” like Mexican and Muslim immigrants, could have implications for Caribbean migration to the US as well.

It would be naïve to think that any country would put another’s ahead of the needs of its own people. However, the current “America first” rhetoric raises issues of the future of unilateral preferential arrangements like the Caribbean Basin Initiative which provide beneficiary countries duty-free access to the US market for most originating goods, without the beneficiary country having to confer reciprocal access to US originating goods. Seventeen Caribbean countries and dependencies currently benefit from such status. Perhaps one saving grace is that the programme is seen to be a benefit to the US and the region has a trade deficit with the US. According to the Report to Congress released in December 2015, “[t]he value of U.S. exports to CBERA beneficiary countries grew 2.5 percent in 2014, exceeding the growth rate for total global U.S. exports, which grew 2.1 percent”.

The anti-trade, “America first” message which pervades the current US presidential election campaign brings into question whether there will be any resolution in sight to the long-running US-Caribbean rum dispute. Caribbean rum producing countries have long raised concerns about subsidies given by the US federal government to rum producers in its territories, namely Puerto Rico and the US Virgin Islands. The cover-over programme allows tax revenues raised by the Federal Government from the excise tax on both local and foreign produced rums to be transferred to the “location of production”, that is, the Puerto Rico and US Virgin Islands. The treasuries of both territories depend heavily on these subsidies for revenue to support investments in infrastructure, education and health and it is no surprise that both territories have increased rum production in order to increase their share of these revenues.

However, Caribbean rum producers like Barbados have argued these subsidies amount to unfair competition, by making Caribbean rums less competitive in the US market. The loss of market share not only means the loss of foreign exchange flows to cash-strapped Caribbean countries and a weaker current account position, but it also threatens jobs in the rum sector in Caribbean countries. So far there has not been any real progress on this issue and it is not pessimistic to think that this may very well go the same way as the US-Antigua Gambling case went after the US failed to comply with the World Trade Organisation’s rulings – nowhere.

An issue which is not directly trade-related but which would also have an impact on US-Caribbean trade, investment and remittance flows is that of the loss of correspondent banking relationships due to de-risking practices by US-based banks. Fears of harsh sanctions by US regulators has led several US banks to abandon the risk-based approach by avoiding risk altogether and terminate correspondent banking relationships with banks and money transfer providers in the region. It is an issue which CARICOM, in conjunction with the Caribbean Association of Banks, has been raising at the bilateral, and increasingly the hemispheric and multilateral level. Last week, St. Kitts & Nevis Prime Minister Dr. Timothy Harris led a delegation which raised the issue again with officials from the US State and Treasury Departments at a consultation in Washington DC.

Another key issue is that of climate change. Climate change is a threat to the world, but is an existential threat to the small island developing states of the Caribbean which bear the brunt of the adverse impacts. President Obama’s stance and support for tackling climate change may not be replicated by his successor. As one of the world’s largest emitters of greenhouse gases (GHG), US emission cuts and whether it ratifies the Paris Agreement will have important implications for whether the target of temperature increases of no more than 1.5 degrees or 2 degrees above pre-industrial levels is met.

Historically seen as the US’ backyard, the Caribbean has lost much of its geostrategic importance to US administrations in recent years. Conflicts in the Middle East, Africa, as well as tensions with Russia and China have occupied US foreign engagement. It has opened the door for greater engagement by the Caribbean with China which has expanded its influence in the region. However, there are issues on which the US and Caribbean still share common concerns, including issues of security, energy, combating drug and human trafficking, to name a few. At the U.S.-Caribbean-Central American Energy Summit in Washington DC, chaired by Vice President Joe Biden, the US reaffirmed its commitment to regional energy integration with the Caribbean and Central America.

There does appear to be another nugget of hope. On April 20th, H.R. 4939 – United States-Caribbean Strategic Engagement Act of 2016, a bi-partisan bill sponsored by New York Representative Eliot Engel (Democrat)  won the unanimous consent of the House Foreign Committee. The objective of the bill is “to increase engagement with the governments of the Caribbean region, the Caribbean diaspora community in the United States, and the private sector and civil society in both the United States and the Caribbean, and for other purposes”.

Though still in need of debate and approval by both Houses of Congress, the bill could be a catalyst for constructive re-engagement of US-Caribbean relations. Some of the objectives include increasing US-Caribbean diplomatic relations and economic cooperation, supporting regional economic, political and security integration efforts in the Caribbean, encouraging sustainable economic development , reducing crime and improving energy security, inter alia. Section 3 of the draft Bill provides that a multi-year strategy for US engagement with the Caribbean must be submitted no later than 180 days after the Act’s enactment. Whether this new re-engagement with the Caribbean will fit within the foreign policy agenda of the next president will have to be seen.

The US relationship with the Caribbean is a valued relationship with ties which go beyond trade. Despite these bonds, there is indeed need for deeper constructive dialogue, engagement and cooperation with the US on a number of pressing issues which have sustainable development and macroeconomic implications for the Caribbean. The Caribbean region does have supporters in the DC Beltway. These include members of the Caribbean diaspora who have ascended to positions of influence in Congress and which have been instrumental in lobbying the US government on issues of concern to the region. However, like everything else, the future tone of US-Caribbean trade relations, will depend heavily on who takes the presidential oath of office in January 2017.

Alicia Nicholls, B.Sc., M.Sc., LL.B. is a trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.

Over 170 Countries Sign the Paris Agreement: What next for SIDS?

Alicia Nicholls

Earth Day 2016 was extra symbolic this year. On this day (April 22nd), 174 countries plus the European Union signed the Paris Agreement at a High-Level Signature Ceremony at the United Nations’ Headquarters in New York. Among the signatories were small island developing states (SIDS) from the Caribbean, the Pacific and the Indian Ocean, for whom climate change is a serious matter of survival.

The Paris Agreement, which will replace the Kyoto Protocol when it comes into force, is a landmark climate change agreement which aims to strengthen the global response to climate change. Many years in the making, the Paris Agreement was concluded and adopted at the end of intense negotiations during the United Nations Framework Convention on Climate Change’s (UNFCCC) 21st annual Conference of the Parties (COP21) held in Paris last December.

Climate change is a global problem with implications for us all. According to the United States’ National Oceanic and Atmospheric Administration (NOAA) and NASA, 2015 was the hottest year on record since the start of record keeping in 1880. If these first few months of 2016 are anything to go by, this year may shatter that record handily.

SIDS which are responsible for less than 1% of global GHG emissions, are the most vulnerable to its adverse effects. Besides sea level rise, extreme weather events have caused tremendous economic devastation and loss of human life. The Rapid Impact Assessment showed that Tropical Storm Erika cost Dominica 90% of its gross domestic product (GDP). Earlier this year, the Category 5 Severe Tropical Cyclone Winston ravaged the Pacific SIDS of Fiji, Vanuatu, Tonga and Niue. In Fiji the storm left 44 dead, destroyed over 31,000 homes and caused 1 billion USD in damage.

For SIDS, climate change is an existential threat to our economies, societies and survival, which led our states to push the “1.5 to stay alive” campaign. To keep the temperature increase to just 1.5 percent above pre-industrial levels or even 2 percent, signature of the Paris Agreement is just one step.

Signature is not the same as ratification

The turnout for the signature of the Paris Agreement is reported to be a record number for a new treaty. However, signature does not make a treaty legally binding on a signatory party unless the Treaty specifically provides for this. In the case of most treaties, like the Paris Agreement, it is only after a party has deposited its instrument of ratification (or accession, approval or accession) that it has consented to be bound by the treaty.

The ease of the domestic ratification process depends on the legal system and domestic political processes in each state. In the US, the type of international agreement determines the process. Article II, section 2 of the US Constitution requires approval of two-thirds of the US Senate for a treaty to be approved. Executive type agreements do not require congressional approval. Given the strong objection to the Paris Agreement in the Republican-controlled Congress, the US negotiators were careful to avoid any language or provisions, such as mandatory emission reduction targets, which would require Congressional approval of the agreement. However, the US has not yet ratified the Agreement and the upcoming US Presidential election this November could lead to a dramatic reversal in US policy on climate change depending on whom is elected president. No one wants a repeat of the Kyoto Protocol; the US had signed it but did not ratify and was therefore not bound by the Agreement.

According to Article 21, the Paris Agreement will enter into force 30 days after at least fifty-five parties which account for at least fifty-five percent of total global greenhouse gas emissions (GHG) have deposited instruments of ratification. As at the time of writing this article, 177 parties have signed the agreement, which represents the vast majority but not all the 195 countries which negotiated the agreement in December. Conspicuously absent from the  signatures are several major oil producing states, namely Nigeria, Saudi Arabia and Iraq. Signature will be open for one year until April 2017 so there is still time for more states to sign.

Fifteen countries have so far ratified the Agreement, three of which with declarations. It is no surprise that SIDS led the way in the number of ratifications. Those countries which ratified already are the Marshall Islands, Nauru, Tuvalu, Palau, Somalia, Palestine, Barbados, Fiji, Grenada, St. Kitts & Nevis, Samoa, Maldives, St. Lucia, Mauritius and Belize.

Scaling Up of Climate Action

Even before the entry into force of the Agreement, countries will need to scale up their climate actions to reduce emissions. Prior to the conclusion of the Paris Agreement, most countries submitted their Intended Nationally Determined Contributions (INDCs) which set out their policies, targets and actions for contributing to the reduction of GHG emissions. In Barbados’ INDC, for example, the country intends to achieve an economy-wide reduction in GHG emissions of 44 percent compared to its business as usual (BAU) scenario by 2030. In absolute terms, this means an intended reduction of 23 percent compared to 2008 levels.

However, the just released updated UN synthesis report of all INDCs communicated by Parties by 4 April 2016, a total of 189 Parties (96% of all Parties to the UNFCCC), found that the level of ambition is still not enough to lead to an increase of less than 2 degrees above pre-industrial levels. There is the need to deepen ambitions and convert intention to concrete actions and achievements. This will require planning, political will, cooperation among all stakeholders, the implementation of legislative frameworks and systems for monitoring progress, implementation and reporting.

Of critical importance will be the level of reduction of GHG emissions  by countries, such as the US, China, India and in Europe, which account for over 50 percent of global GHG emissions. However, domestic politics within these countries could be an issue for meeting their goals. As an example, in August 2015, US President Obama and the US Environmental Protection Agency (EPA) announced the Clean Power Plan to lower US emissions by curbing carbon dioxide emissions from power plants through shifting from coal-fired power to renewable power. Some major fossil fuel producing states like West Virginia and Texas have challenged the administration’s plan and by a 5-4 decision the US Supreme Court issued a stay of the Clean Power Plan pending judicial review. Additionally, there is no guarantee that the next US president will be as committed to the climate change mitigation goals set out by the Obama administration to reduce emissions between 26 to 28 percent by 2025, which already is a modest target.

Climate Finance for Adaptation and Mitigation

SIDS require financing not just to build climate-resilient infrastructure but to transition to climate-resilient economies. One of the stated goals in the preamble of the Paris Agreement is to jointly provide USD 100 billion annually by 2020 for mitigation and adaptation, and to provide appropriate technology and capacity-building support.

Many Caribbean States have been graduated from accessing grants and concessionary loans due to their relatively high gross domestic product per capita (GDP per capita), while their high levels of indebtedness also make borrowing on international markets difficult. While several climate change finance streams are available, including funding from Multilateral Development Banks, official development assistance and dedicated funds, some SIDS Governments have raised concern  that the red tape for accessing funds is often cumbersome.

What next for SIDS?

The signature of the Paris Agreement is just but one step. Though SIDS account for less than one percent of GHG emissions, we all have our part to play in lowering emissions and contributing to a climate-friendly future. Domestically, our governments need to focus on implementing our INDC commitments and encourage the use of climate friendly technologies, including in buildings, transportation and the agriculture, tourism and manufacturing sectors. This is not a task for governments alone, but will require continued cooperation with civil society, the business community and ordinary citizens.

It also requires the continued encouragement of a shift from fossil fuels to renewable energy. In Barbados’ INDC, it was noted that energy consumption accounted for 72% of our GHG emissions in 2008, followed by the waste sector (16%). Disconcertingly, major players in the island’s solar energy industry have complained that falling oil prices have led to a decrease in solar installations. Barbados has been a leader in the solar industry, with a high level of solar water heater use which  saved the country a reported US$100 million on its fuel import bill in 2002. We cannot allow the drop in oil prices to allow us to lose sight of the necessity of shifting from fossil fuels for achieving our climate goals and preserving an environmentally-sustainable future for the next generations.

On the multilateral level, continued participation and advocacy in climate change talks are a must for SIDS governments. As I had indicated in my previous article, the Paris Agreement is an important step but its efficacy will depend on its ratification and implementation and subsequent follow-up, especially by those countries which contribute the most to GHG emissions. The future of our states, and the world, depends on it.

The full text of the Paris Agreement may be found here. Barbados’ statement at the High-level signing ceremony may be found here.

Alicia Nicholls, B.Sc., M.Sc., LL.B. is a trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.