Highly exposed to the effects of climate change and to the degradation of natural resources, Colombia is strengthening its climate policy, considering a green growth strategy, particularly since the 2014-2018 National Development Plan. Nevertheless, the country's dependence on raw material exports and its strong integration into international financial markets generate monetary, financial and commercial vulnerabilities. 

AFD is supporting Colombia in its efforts to tackle climate change through the GEMMES Colombia project, which is part of the third climate policy loan since 2018. The GEMMES programme, by integrating the impact of climate change into its forecasts, is developing a general theoretical model on the one hand, and national models applied to concrete cases and adapted to the characteristics of each country on the other, including the GEMMES Colombia model. 

About GEMMES: AFD and Macroeconomic Modelling Tools for the Ecological Transition

The GEMMES Colombia project, which is fully in line with AFD's commitment to strong sustainability, aims to :

• Highlight potential fragilities in the Colombian economy through a better understanding of the interactions between fiscal, monetary and trade policies and the country's NDC objectives;
• Identify the opportunities generated by the energy transition in Colombia: structural changes and financing methods under the best possible conditions;
• Quantifying the macroeconomic impact of NDC-related investments, particularly in the financial and tax sectors;
• Promoting public policy dialogue on Colombia's energy transition:

- Providing a decision-making tool for decision-makers on climate policies, with a view to limiting the consequences identified without compromising the implementation of Colombia's NDC objectives;

- By promoting the appropriation and sustainability of the GEMMES modelling tool within the partner institutions.

Read also: Diego Guevara: "We cannot develop sustainably if we lack the resources"

In addition to its specific transdisciplinary approach, which makes this project one of the few to integrate the notion of strong sustainability, the originality of GEMMES lies in its consideration of macro-financial imbalances and the impact of the low-carbon transition on all elements of the balance of payments.

Moreover, GEMMES Colombia is part of a partnership initiative that is organised around two phases:

• The first phase is based on the development of the model and the macroeconomic analysis of the Colombian NDC trajectory, in partnership with the National Planning Department (DNP) and the Ministry of Finance (MHCP) supported by AFD's modelling teams.
• The second is intended to ensure the sustainability of the project after the end of the support, with the analysis by the National University of Bogota (UNAL) of the interactions between trade, fiscal and monetary policies and the NDC trajectory, as well as the training of students in sustainable development through the Catedra course as well as in the GEMMES methodological approach.

The first results of the project have been presented at the virtual congress "Conexión DNP: transfiriendo conocimiento para innovar" on 2 and 3 December 2021. The project partners expressed their satisfaction, with the MHCP showing a particular interest in modelling after a year of remote work due to the Covid-19 pandemic.A university course on sustainable development (Catedra), partly based on the results of the GEMMES Colombia project, was launched on 7 March 2022 at UNAL to raise awareness of the issue.

In March 2022, a university course on sustainable development (Catedra), partly based on the results of the GEMMES Colombia project, was launched at UNAL. As a continuation of this initiative, a second course on the modelling of ecological transitions in the Global South was given in 2023.

The GEMMES Colombia model, enriched by academic expertise and integrated into decision-making processes through Colombian ministries, has become a key tool for public policy dialogue. These exchanges continue thanks to the GEMMES Strategic Committee, composed of the Ministry of Finance and Public Credit (MHCP), the National Planning Department (DNP), the Ministry of Mines and Energy (MME) and the Banco de la República.

 

At the request of the Colombian authorities, GEMMES was added to the MHCP macroeconomic models in 2023 and was coupled to the Energyscope energy model, an energy assessment and planning tool. Ownership of the model continued in 2024 with executive training on the use of the model provided to MHCP officials.

The research resulted in a collective book published in June 2024, presenting the scientific findings and policy recommendations from the GEMMES Colombia project: Modelling low-carbon transitions in Colombia: Macrofinancial opportunities and risks project. This work also led to the launch of a new project: the creation of a serious game to support multi-stakeholder dialogue around the NDC in Colombia.

Watch the replay of the GEMMES Colombia book launch (in Spanish)

The GEMMES Colombia model, by developing scenarios on fossil fuel exports and alternative policies for the 2023-2050 period, as well as financing scenarios of the NDC trajectory, contributes to informing decision-makers in their political strategy to fight global warming. The model also allowed the National Planning Department (DNP) to analyze the consequences of economic shocks such as the loss of the country’s investment quality, the reduction of coal exports or the bankruptcy of Evergrande in China.

The conclusion is clear: a diversification of the production structure and a transformation of public finances are essential if Colombia is to meet the challenges of a global low-carbon transition and ensure its own energy transition. The GEMMES model highlights the importance of using a combination of private investment and public green bonds to finance Colombia's climate ambition. 

Download the publications related to GEMMES Colombia: 

• Can Colombia cope with a global low-carbon transition? (June 2023)
• Low-carbon transition and global macroeconomic vulnerabilites: A multidimensional approach in tracing vulnerabilities and its application in the case of Colombia (July 2023)
• Modelling low-carbon transitions in Colombia: Macrofinancial opportunities and risks (July 2024) 

Contact:  

• Antoine Godin, economist at AFD, head of the Macroeconomic Modelling Unit

Contacto:  

• Antoine Godin, economista, responsable de la célula de modelización macroeconómica GEMMES, AFD

Addressing persistent inequalities in income and other dimensions of wellbeing is a key policy objective of the Sustainable Development Goal 10. Multilateral and bilateral donor agencies have been directing their efforts towards promoting good governance, human and economic development, fighting hunger and reducing inequality. 

The increase in development funding towards inequality reduction is accompanied by a need to monitor progress on the SDG 10 but most importantly, by the need to evaluate the contribution of development towards achieving this goal. However, measuring the distributional impacts of development cooperation projects is a challenging task due to a myriad of factors, including the effects that domestic redistributive policies, the structure of labour markets and other factors, such as institutions, have on inequality. The methodology developed by Morabito et al. enables the analysis of the potential contributions of development projects on inequality by looking primarily at the extent to which they disproportionally benefit the most vulnerable through a mix of analytical tools (a scoreboard, a statistical analysis of development projects based on the Equity Tool, a fiscal incidence analysis).

This methodology has first been tested on three development projects funded by AFD in Cameroon, Colombia and Tunisia as part of the first phase of the Research Facility on Inequalities. 

 

This project was part of the first phase of the Research Facility on Inequalities, coordinated by AFD and funded by the European Commission's Directorate-General for International Partnerships over the 2017-2020 period. The first phase of the Facility has led to the conduct of 22 research projects and the publication of around 100 research papers and policy briefs.

A second phase of the research project was launched in 2022 with the aim to extend the initial phase, to further test the validity of the methodology with respect to income and other forms of inequalities and to develop the guidelines for an inequality marker.

The initial phase of the  project aimed at piloting the application of the methodology developed by the researchers on three projects funded by the AFD: 

• A programme supporting urban housing improvements in Tunisia;
• A programme focusing on capacity-building of Small- and Medium-Sized Enterprises in Cameroon;
• A budget support operation aimed at supporting a health sector reform in Colombia.

The objective was to test the methodology and evaluate the relevance of its results, and, based on these findings, to review and adjust the methodology itself.

The second phase of the project aimed:

• To develop the guidelines for an inequality marker for development cooperation ;
• To further test the methodology on four AFD and EU development programmes:
  • A programme promoting sustainable access to electricity for the unserved poor rural populations in Benin;
  • A programme improving the health and living conditions of the inhabitants of the rural district of Isingiro (Uganda) and its refugee camps;
  • A programme facilitating trade between Ethiopia and Djibouti and enabling businesses and producers, as well as the most vulnerable populations, to benefit from these improvements;
  • A programme contributing to the adaptation of the communities to climate change in Vietnam. 

The initial study identified whether programmes’ beneficiaries of the three selected interventions belonged to the bottom 40% of the wealth distribution, through a mix of analytical tools:

• First, a scoreboard that assessed whether or not inequality reduction was a central objective of development programmes; 
• Second, the Equity Tool, which helped assess the position of direct beneficiaries within the national (urban or rural) wealth distribution;
• Third, the Commitment for Equity Tool, which helped estimate the distributional impact of general or sectoral budget support.

The methodological steps of the second phase of the research project were the following:

• Refining and upgrading the inequality markers and the scoreboard to provide clear benchmarks and indicators, aligned with evaluation approaches used by the European Commission, to assess whether development interventions focus on the poorest bottom 40% individuals, households or vulnerable groups that are targeted by specific development policies;
• Extending the scope of the Equity Tool questionnaire to include questions that capture the distribution of projects beneficiaries among vulnerable groups (women, ethnic, religious minorities, etc.);
• Applying the revised methodology to the four case studies.

Results of the first phase of the project:



Overall, the results underscore the importance of considering a pro-poor targeting ex-ante when designing development cooperation interventions that explicitly (or implicitly) aim to contribute to the reduction of inequalities in partner countries. The main strength of the methodology is that it allows an assessment of the potential reach of interventions for the bottom 40 percent of the income distribution. Therefore, the information provided thanks to this methodology can be critical to fine-tune policies before they are implemented and maximize their redistributive impact.



You may find the research paper here: The distributional impacts of development cooperation projects

 

Results of the second phase of the project:



The second phase of this project resulted in :

• The elaboration of guidelines for the implementation of the methodology, which were used to develop the European Commission's Inequality Marker. The I-Marker assesses whether, and to what extent, inequality reduction is an objective of development intervention. For this purpose, a set of criteria has been developed to establish if: - I-0: Inequality reduction is not targeted; - I-1: Inequality reduction is a significant objective; - I-2: Inequality reduction is the principal objective. The I-Marker focuses on the bottom (poorest) 40% or socio-economically disadvantaged individuals, households or groups. Watch the video on the Inequality Marker for more information ;
• A report on the testing of the methodology on the four case studies (available soon).

This project highlighted the importance of identifying direct and indirect beneficiaries of the projects, but also, more broadly, of having a complete understanding of the development cooperation interventions, which are being analyzed, especially their objectives and conditionalities. 

Equally important is the involvement of key stakeholders to communicate the objectives, scope and limitations of the studies. In some cases, the inclusion of a qualitative component in the form of interviews, consultations, or eventually field missions, may be required to ensure the successful implementation and completion of studies.

Contact:

• Anda David, Research Officer, AFD

Contacto:

• Anda David, encargada de investigación, AFD