Strenghtening Climate Action in the Dominican Republic

As part of the Latin American and Caribbean Climate Week 2022 (LACCW 2022), governments, official development assistance partners, civil society and private actors in the region are coming together to work towards a greener, more resilient and inclusive recovery. Let's take a look at the different forms of support the AFD group is providing to the Dominican private sector. 

Working to build the Dominican private sector's capacity to combat climate change 

The Dominican Republic was ranked the 50th most vulnerable country to climate change in 2021. The northeast of the country is frequently affected by floods, storms and mudslides, while the northwest faces steadily increasing temperatures and prolonged droughts, affecting agricultural production. To make matters worse, the island of Hispaniola is at the center of the hurricane belt, and is frequently hit by storms.

The erosion of beaches is also very strong at certain points along the coast. All these climatic phenomena will be further exacerbated by the effects of climate change, becoming both more intense and more frequent. 

With the support of Expertise France in the framework of the AdaptAction Program, which the Dominican Republic joined in 2017, the National Council for Climate Change and the Clean Development Mechanism (CNCCMDL), the Ministry of Environment and Natural Resources (MIMARENA), the Ministry of Economy, Planning and Development (MEPyD), organized a training event in 2021 on the theme "Climate and Business". Using concrete examples, specific to the Dominican Republic, more than 500  participants (mostly from the private sector) were briefed about the physical and transitional risks facing businesses under the current climatic conditions, and encouraged to think about the benefits of theoretical frameworks and methodologies that prioritize climate action. 

Directing private investment towards adapting the Dominican territory to the effects of climate change

Private sector financing has a key role to play in enabling effective adaptation in the Dominican Republic. As part of the AdaptAction program, participants identified and analyzed the key factors enabling private sector investment in climate adaptation, as well as the obstacles that must be overcome. 

With the support of the MexiCo2 consulting firm, Dominican authorities and private sector representatives identified 32 concrete measures to catalyze private sector financing for climate adaptation. The action plan emphasizes the need for greater private sector training, awareness building and capacity building. 

This diagnosis has made it possible to recognize the voluntary carbon market (VCM) as a potential opportunity to meet the financing needs of greenhouse gas (GHG) emission reduction and carbon sequestration projects. These recommendations aim to facilitate access to existing resources in this market for projects with co-benefits in key sectors such as agriculture, transportation, buildings and waste. As a first step towards opening up the Dominican Republic to VCM, the first Foro Dominicano de Carbono brought together more than 450 participants from the region in April 2022 to raise awareness about how VCM works.

Supporting a low-carbon development path in the Dominican Republic through private secvtor lending.

Other financial tools exist within AFD to green private investments. Through loans, investment grants and technical assistance, the Sunref green finance label helps its partners in the Dominican banking sector, such as BanReserva, a leading Dominican and Latin American bank recognized internationally for its commitment to sustainable finance, to seize financing opportunities for sustainable investments. The label also supports private sector companies to acquire better equipment, achieve cost savings and increase competitiveness. 

Although the Dominican Republic is a low emitter of GHG globally (less than 0.1% of global emissions), total energy demand is steadily increasing and controlling the country's GHG emissions is a real problem. Since 2020, the country has committed to reducing its GHG emissions by 27 % by 2030 compared to 2010 levels.

In 2017, Proparco financed the development, construction and operation of a 52 MW Pecasa wind farm in the province of Monte Cristi, in the northwest of the Dominican Republic, near the Haitian border, one of the country's windiest regions. This project, which consisted of the installation and commissioning of 25 Gamesa 2.1 MW turbines, was built and operated by Akuo Energy, a leading French company in the renewable energy sector. 

The Pecasa project has made it possible to increase the supply of electricity in the Dominican Republic while helping to combat climate change as well as reducing the country's dependence on fossil fuels. By providing approximately 160 GWh of energy each year, the project contributes to meeting the Dominican Republic's rapidly growing electricity demand, of more than 5 % per year, while reducing constraints related to the quality and reliability of supply. It is estimated that the project will reduce 78,000 tCO2 per year, for a total of 1.67 MtCO2 avoided over the life of the project. 

See also : The private sector's role in preserving biodiversity.

Since then, Proparco has decided to steadily  increase its support to the development of renewable energy in the country. Thus, Proparco has approved financing for a 104 MW wind power plant in the north of the country in 2019. and has been mandated to structure the debt for two solar photovoltaic projects representing 140 MW in 2021 and a project for four biogas plants with a capacity of 9.6 MW in 2022. 

Proparco stands out for its ability to provide project financing with maturities of up to 20 years, which are contingent on the project's needs and the possibility of fixing the interest rate over the entire term of the loan. It is also reputed for its ability to mobilize different financial tools such as senior or subordinated debt, equity or guarantees, and to implement technical assistance programs. 

The Dominican Republic's renewable energy sector is dynamic and enjoys strong support from the government, which plans to increase the share of renewables in the energy matrix to 30 % by 2030 (which is currently 15%), and to reduce the country's CO2 emissions by 27 % between 2021 and 2030. 

In this context, Proparco has developed close relationships with a multitude of leading public and private actors operating in the Dominican electricity sector. At the end of June 2022, Proparco's Regional Office in Santo Domingo had a projected portfolio of renewable energy projects in the Dominican Republic representing more than 400 MW and was in preliminary discussions on upstream projects representing more than 700 MW of green energy over the 2022-2024 period.