Ecuador Country Climate and Development Report

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Table of Contents

• Abbreviations 5
• Acknowledgments 7
• Executive Summary 8
• 1. The Impact of Climate Change on Ecuador's Developmental Priorities 13
• 1.1. Despite competitive advantages, Ecuador is struggling to reach its full potential and achieve stable, long‑term growth 13
• 1.2. Climate change and natural hazards are expected to have large impacts on Ecuador’s economy and population, especially through the agriculture and transport sectors 15
• 1.2.1. Climate change is expected to exacerbate the hazards threatening Ecuador’s transport network, causing significant disruptions in access and economic activity 18
• 1.2.2. Agricultural losses concentrated in certain crops and areas will have heterogeneous impacts on production and poverty 19
• 1.3. Absent adaptation measures, hydropower production could be significantly reduced due to hydrological variability, threatening Ecuador’s energy security 21
• 1.4. Global decarbonization efforts threaten Ecuador’s oil and agriculture exports while opening a potential opportunity for the mining sector 22
• 1.5. Reducing Ecuador’s GHG emissions will require a determined focus on limiting deforestation and decarbonizing transport and energy 23
• 1.5.1. The transport sector, because of the increased use of fossil fuels and inefficient subsidies, has had the most rapid increase in emissions 24
• 1.5.2. The energy sector has succeeded in slowing emissions from electricity generation, particularly through hydropower, although it remains a substantial emitter, and oil and gas production continues to produce high fugitive emissions 26
• 1.5.3. LULUCF is one of the largest emitters because of significant and increasing deforestation, caused especially by inefficient agricultural expansion 26
• 2. Country Climate Commitments, Policies, and Capacity 28
• 2.1. Ecuador’s development objectives are well aligned with climate action, and the country has made institutional progress 28
• 2.2. Ecuador’s climate action strategy and commitments face several institutional and financial shortcomings 29
• 2.3. Green private finance is needed to achieve climate objectives, yet private sector investments continue to face significant barriers 31
• 3. Climate Policies, Development Implications, and Economic Impacts 33
• 3.1. A more resilient and low‑carbon development is needed 33
• 3.2. Adaptation policies need to complement Ecuador’s development priorities 35
• 3.2.1. Modernizing Ecuador’s agricultural sector will facilitate its resilience against climate shocks, prioritizing crop and producer‑specific climate‑smart agriculture and productive interventions 35
• 3.2.2. Improving the resilience of Ecuador’s roads is a cost‑effective way to avoid disruptions to economic activity 39
• 3.2.3. Infrastructure adaptations can improve hydropower resilience but should be complemented with enhanced planning, considering climate risks and the urgency for diversification with other types of non‑hydro renewable energy 41
• 3.2.4. The combined effect of multiple adaptation investments could offset most of the impacts of climate change and protect the economy and the most vulnerable 42
• 3.3. Managing oil resources in the face of transition risks and planning for alternatives, such as mining, could present an opportunity for the country if social and environmental concerns are solved 44
• 3.4. Transitioning to low‑carbon development requires an integrated multisectoral approach that takes into account the energy, transport, and land use sectors 46
• 3.4.1. Low‑carbon development will require the expansion of policies that protect and restore forests by combining strategies from conservation, forestry, and agriculture 47
• 3.4.2. Significant decarbonization of the energy and transport sectors is possible without negative macroeconomic consequences in the long term and with potential resilience benefits 51
• 3.5. Improving the capacity of the state and the private sector to deploy the required investments and implement the needed changes 61
• 4. Selected Development and Climate Priorities 64
• References 73
• 5. Appendix 78
• 5.1. Summary of biophysical modeling and climate impact channels 78
• 5.2. Computable general equilibrium and microsimulation modeling of Ecuador’s CCDR 79
• Inclusion of the sectoral roadmaps into the model 81
• The microsimulation model to estimate poverty impacts 81
• 5.3. Coastal impacts and policies 84
• 5.3.1. As the region with the most economic activity, densest population, and unique natural hazards, the coast of Ecuador experiences uniquely high impacts 84
• 5.3.2. Addressing governance issues is important for the resilience of blue economy sectors, particularly fishing 86
• 5.4. Summary of the long‑term NDC and net‑zero pathways using the ELENA model 87
• 5.5. Annexed background notes 88