Argentina Strengthens Climate Action and Decarbonization with IDB Support

Argentina will expand its capacity to plan and finance climate action, develop a framework for sustainable financing to ensure the private sector has the investments it needs for an enduring and inclusive transition, and stimulate the circular economy and decarbonization with a $500 million loan from the Inter-American Development Bank (IDB).

This policy-based lending operation is the first of two consecutive loans that are technically linked but financed independently. The loans aim to catalyze sustainable and resilient growth in Argentina.

The policy reforms supported by the financing are key to reducing greenhouse gas emissions in the sectors that produce 80% of them: energy, transportation, agriculture, livestock, and land-use change. The reforms will seek to decarbonize the economy and move the country closer to its goal of reducing annual CO2 emissions from 366 to 349 million metric tons by 2030.

As a result of the program, the national budget will use climate budget tagging and include an item for preserving over 4 million hectares of native and protected forests. It will also help create and register 32 projects in the new National Registry of Climate Change Mitigation Projects over the next two years.

Using the loan, Argentina plans to increase the number of renewable energy and energy efficiency projects it supports under the Green Productive Development Plan from 17 to 160 by 2024, as well as significantly expand renewable energy’s share of the national energy mix.

In terms of finance, the operation seeks stimulate green bond issues, increase the number of banks that use social and environmental risk analysis systems to make decisions about their operations, and expand the market share of mutual funds that finance activities with a significant social, environmental, climate, or governance impact.

In the area of solid waste management, the operation will galvanize recycling of urban waste, increasing volume from 0.9 million tons per day to day to 1.3 million tons per day in 2014. The program will also give a significantly larger percentage of the population access to a collection system that sorts waste.

The $500 million IDB loan has a 20-year repayment term, with a 5.5-year grace period and an interest rate based on the Secured Overnight Financing Rate (SOFR).