12. Jamaica—The Transformation Towards Sustainability of an Island Economy Under Austerity Measures

Sustainable, low-carbon transformation is an elusive project in Jamaica (see Makhijani et al. 2013; UNFCCC 2015; GRICCE 2017). Political, social, technological, geophysical, and economic conditions are inauspicious to sustainable, low-carbon system transformation. Suitable policies to achieve sustainable and low-carbon growth are effectively inhibited by (carbon) lock-ins (Charvis & Heron 2016). For example, the decision to construct the Freedom Highway from Kingston to the Northern part of the Islands inhibits the development of the railway system, as provisions were made to avoid direct competition with the toll-collecting highway (Williams 2016). The country’s high dependence on fossil fuels in terms of GDP/energy ratio and in almost all of its human activities is paradigmatic. Carbon lock-ins in Jamaica have limited the effectiveness of energy policies as stipulated by the National Energy Policy (2009–2030), the Addendum on Energy Conservation and Efficiency (2008–2022), the updated version of the National Energy Conservation and Efficiency Policy 2010–2030, and the Vision 2030 Jamaica (National Development Plan). These policies aim to promote energy conservation and efficiency. Such carbon lock-ins are complemented by an inability in effectively addressing the shortcomings of renewable energies, such as the intermittency of wind energy (Reynolds 2016; Willie & Morgan 2016)

Often labelled as a ‘hostage’ to oil, Jamaica’s oil imports exceeded the value of its total exported goods by 118 percent in 2010 (Ahmed 2017). Imported oil provides approximately 95 percent of the country’s primary energy services and accounts for over 90 percent of electricity production (MSET 2017), making Jamaica highly vulnerable to oil price volatility. Serious implications for the balance of payments, inflation, business competitiveness, and household poverty can be connected to Jamaica’s energy insecurity. Exacerbating Jamaica’s energy insecurity further, is its high energy intensity and high inefficiency in the use of energy resources. Due to the central role of the bauxite and alumina industries, Jamaica consumes an average of 4,800 kWh per US$1,000 of GDP, which is very high compared to other Latin American and Caribbean countries (MSET 2017). Electricity losses on the grid are high, at 22.3 percent, of which 10 percent are technical and the rest are from theft and illegal connections (MSET 2017). In addition, as Al Binger (2011) highlights, Jamaica wastes more than half of the available energy from imported fuels.

The transport sector of Jamaica is the largest consumer of petroleum, accounting for 42 percent of total petroleum consumption in 2008 (Binger 2011). Still, with the relatively expensive toll fees of the highway to sustain its operations, the Jamaican government cannot reopen its passenger train service, which may undermine the operations of the national highway. As the officials of the Jamaican Railway Corporation highlighted during an interview (Hernandez 2016), railway services are unable to compete with other modes of transport, because of high maintenance costs and the lack of investment in infrastructure. In addition, ambitious and eventually radical efforts are needed to allow the shift to a carbon-neutral transportation sector. However, with the country’s electricity mainly being generated through oil-fired steam, combustion gas turbines, and combined cycle and diesel (Binder 2011), even the modernization of the railway system, which will be mainly powered through electricity, is expected to significantly contribute to Jamaica’s de-carbonization. Therefore, the transport sector in Jamaica will remain a major source of carbon emissions in the long-term.

As a small island state in the Caribbean, Jamaica is confronted by additional social, economic and environmental challenges typical to remote island economies (see Tisdell 2009). A major challenge is the interface between policies and an economy with limited competition. Due to scale economies, governments of small island economies tend to resort more often to regulation to control prices as business companies and industries seek higher revenues in a non-competitive market (Tisdell 2009). However, the political connections of company owners and managers as well as the low bargaining leverage of governments against multinational companies will more likely limit the effect of the ‘political will’ on regulating the market.

The high prices of commodities are also attributed to Jamaica’s relatively high transportation costs, as the energy for transportation is provided almost solely by finite fossil fuels (Bedward & Simpson 2016). The limited number of inter-island transport options (McCalla 2016), as well as low frequency of transport connections in Jamaica, are responsible for the demand-supply imbalance following a situation where trade growth has outpaced the availability of transport services, leading to distorted signals about the demand for commodities (see Russell 2017). The carbon lock-in of Jamaica’s economy sustains high transportation costs, as moving away from a carbon-intensive is inhibited by a complex set of other factors such as institutional barriers and high transition costs.

Like most small island countries, Jamaica has consistent trade deficits of around 20 percent of their GDP (Bank of Jamaica 2017). As of 2016, Jamaica had a negative trade balance of 3.55 billion USD in net imports (OEC 2017). Because trade accounts for around 50 percent of the GDP of Jamaica, lower demand of its bauxite used for aluminum production abroad will lead to significant losses in income. In addition, Jamaica is highly dependent on the United States as their main trading partner (52 percent of total trade), which undermines the resilience of the Jamaican economy. Related to these trade deficits, the negative capital flow in Jamaica is not only a sign of negative expectations with regards to economic growth, it also puts pressure on the economy. The −44.90 million USD capital flows in the second quarter of 2017 (−81.50 million USD in the first quarter of 2017) (Bank of Jamaica 2017) demonstrate the relative weakness of the Jamaican capital market and reflect the poor investment environment in the country, which further hamper economic development, as investors are reluctant to provide capital for operations and research & development.

Jamaica’s trade deficits and negative capital flow are directly linked to the country’s dependence on foreign aid and loans as well as on remittances from their citizens working abroad. Jamaica is one of the most indebted countries. It spends twice as much on debt repayment (1.2 billion USD) as it does on education and health combined (600 million USD) (Dearden 2013). Although Jamaica has repaid a total of 19.8 billion USD for its 18.5 billion USD debt, it still owes 7.8 billion USD as a result of high interest payments. In addition, Jamaica’s debt is inhibiting income growth in Jamaica, due to austerity measures imposed by international lenders. For example, in exchange for an IMF loan of 1 billion USD in 2013, four years of austerity are responsible for a 20 percent real-term cut in wages (Dearden 2013). Huge debt has been a constant burden for Jamaica for four decades, where the economy has effectively not grown since 1990. Natural disasters, such as Hurricane Sandy in 2012, have further increased indebtedness, as Jamaica seeks foreign aid and loans for its rebook.

To summarize, Jamaica seems to be trapped by carbon lock-ins and the resulting unfavorable economic conditions undermining the country’s attractiveness to foreign investors. While the tourism sector remains vibrant, partly due to austerity measures, Jamaica is lagging in improving infrastructure in non-tourist areas, further inhibiting economic growth (Durrant 2016). Although its energy demand is almost solely covered by imported fossil fuels, the country’s efforts to expand the use of renewables are effectively hindered by the tendency of fossil fuel energy systems to be cheaper, better understood, and perceived as easier to employ.

A major factor that reinforces Jamaica’s carbon lock-in is the behavior of the society as a whole (see Binger 2011). Carbon lock-ins are deeply embedded in the consumption behavior of the majority of the Jamaican population. Jamaica is confronted with a high-consumption society, in which the consumption of commodities (e.g., household appliances and motor vehicles) is hardly driven by efficiency considerations. While the Jamaican government has already initiated discussions aiming at giving energy efficiency and renewable energy more important roles in the country’s energy system (Wood 2016), it has been lagging, due to gaps in the kind of policy that aims to effectively raise awareness of the connections between lifestyle and energy use (Binger 2011). Moreover, because political attention tends to be given to renewables, the country fails to address the improvement of energy efficiency, because of the inherent belief that savings in energy costs will mainly come from the deployment of renewable energy options.

Functioning institutions are necessary for the successful deployment of sustainable energy, and ineffective institutions are a critical barrier to its growth (Knight 2016). While small island countries tend to have a high need of regulation leading to a higher share of public sector employees in total employment, Jamaica’s public sector is relatively small, hinting at capacity deficits in providing services to citizens. As of July 2017, the public sector accounts for 59,400 employees, which is 4.88 percent of the total 1,216,200 employed labor force in Jamaica (SIJ 2017). For comparative purposes, Nordic countries Denmark, Norway and Sweden have higher public-sector employment levels, reaching nearly or over 30 percent of total employment between 2009 and 2013. The United Kingdom and Barbados have, respectively, 23.5 percent and 22.03 percent of its total labor force working in the public sector (see OECD 2011). The public sectors of Caribbean countries the Bahamas and the Dominican Republic employ 33.7 percent (2009) and 12.8 percent (2013) of the total labor force respectively.

Explanations as to the relatively small public sector in Jamaica are often linked to the country’s constant exposure to rigid austerity measures through its high debt. As the public sector is unable to compete with the private sector in the labor market for hiring employees with the needed technical expertise, the technical competence of Jamaican public sector’s employees is often questioned, inhibiting trust in state institutions. With the fast pace of technological advancement, regulatory bodies tend to struggle to catch up with regulatory provisions to ensure that other society priorities are not undermined. While the public sector is still perceived as a source of stable jobs, it is often the first affected by austerity measures imposed by creditors (e.g. hiring freeze).

In addition, some experts argue that a small public sector is partly responsible for the relatively low salary of private sector employees (see Malley & Moutous 1996; Algan et al. 2002; Burdett 2012). Nobel laureate in economics, Christopher Pissarides (2000), argues that the public sector competes with the private sector in attracting the best workers through so-called ‘crowding out.’ A small public sector like that in Jamaica cannot compete with the private sector. In addition, a larger public sector that can offer higher wages will most likely provide workers in the private sector more leverage when bargaining around salaries and additional benefits. Therefore, the public sector also influences the level of income in the private sector.

Sustainable low carbon transformation needs a public sector that is significantly capable of dedicating resources, for example, to address complex energy issues that are intertwined with other policy goals. Although government officials need to horizontally and vertically coordinate with colleagues from other government agencies and ministries, they will more likely find it difficult to collaborate in the context of competition for limited public resources following impositions of austerity. For example, sustainable, low-carbon transformation requires the exchange of updated information necessary for sustainable energy planning. The entanglement of various aspects of energy sector governance will bear witness to the cross-cutting of competencies of a vast array of agencies and government structures, which may lead to a lack of clarity about final decisions in the energy sector or unnecessarily prolong or complicate permitting processes. Such a long and complicated permit process may further hinder the entry of renewable energy technologies. Due to their wide-ranging and often cross-sectoral responsibilities, many government officials lack the detailed knowledge of sustainable energy technologies, their economic and financial requirements, and alternative mechanisms for their effective support.

Like many developing countries, Jamaica connotes climate change with vulnerability. As a small island developing state, Jamaica is particularly vulnerable to the impacts of climate change. Jamaica’s economic development is at risk, because its major economic sectors such as tourism, agriculture, forestry and water are climate-sensitive (UNFCCC 2015). As such, like in the Philippines, political discourse and narratives on climate change in Jamaica evolve mainly around adaptation and seldom around mitigation. Nevertheless, Jamaica has announced that it intends to play its part in reducing GHG emissions through ‘no regrets’ emission measures (UNFCCC 2015). Emission reduction is also mainly framed from the perspective of energy security, as Jamaica seeks to resolve risks and threats to its energy supply system.

Jamaica became the 143^rd country to ratify the Paris Climate Agreement on April 11, 2017 when the Minister without Portfolio of the Ministry of Economic Growth and Job Creation officially presented the instrument of ratification at the National Climate Change Conversation organized by the Ministry’s Climate Change division (UNDP 2017). With Jamaica’s ratification of the Paris Agreement, the INDCs have been adopted as NDCs, Jamaica will revise and update its NDCs by 2020 and will continue to update every 5 years thereafter.

The ratification was expected, because the agreement is aligned with Jamaica’s existing domestic policies. Climate change has been ‘mainstreamed’ in Jamaica’s policy-making, which will integrate mitigation and adaptation in present and future policies. Jamaica’s National Development Plan, Vision 2030, which is the country’s long-term, sustainable development program recognizes the need for a healthy, natural environment. Other key policies that support the ratification and implementation are the Second National Communication (2011), the Climate Change Policy Framework (2013) and the National Energy Policy 2009–2030 (2009). A major element of Jamaica’s climate policy is, as mentioned, climate change adaptation. Jamaica has developed a Strategic Program for Climate Resilience (SPCR), as part of the Pilot Program for Climate Resilience (PPCR), to decrease Jamaica’s vulnerability to the effects of climate change.

In terms of mitigation, Jamaica’s intended nationally-determined contribution (INDC) will mitigate the equivalent of 1.1 million metric tons of carbon dioxide per year by 2030 or a reduction of 7.8 percent of emissions compared to the business-as-usual (BAU) scenario of growth without policy intervention, which uses 2005 as a base year (UNFCCC 2015). However, under this BAU scenario, GHG emissions from Jamaica would increase by 37 percent by 2030, which implies a massive gap between expected emission increase and INDC under the BAU scenario. In addition, Jamaica will conditionally increase its aim to a reduction of GHG emissions of 10 percent below the BAU scenario, subject to the provision of international support. The Jamaican government aims to significantly reduce emissions growth and achieve its NDCs through a program of modernization of energy infrastructure and diversification of energy sources towards cleaner and renewable fuels (20 percent by 2030), pursuing opportunities for energy conservation and incentivizing efficiency. The Climate Change Division of the Ministry of Water, Land, Environment and Climate Change will coordinate the actions of various ministries, departments and agencies in implementing Jamaica’s INDCs.

Entry points to climate mitigation, energy security and sustainable development in Jamaica can be identified through the contextualization of policy and market instruments.

The newly elected Prime Minister Andrew Holness of the Jamaican Labour Party (JLP) has promised to reverse the hard austerity measures dictated by the International Monetary Fund (IMF). In 2010, Jamaica needed the US$1.27 billion IMF loan to support its plan to recover from mounting government debt, weak economic growth, and the effects of the global financial crisis. While the government was able to restore economic stability, these measures are often regarded as unsustainable, because the reduction of budget deficits was primarily attributed to the effect of low oil prices which allowed the government to reduce its spending on oil imports. The current low oil price gives the government a reprieve, but if Jamaica wants to have sustainable economic growth, it cannot speculate solely on global oil prices, especially because of the political crisis in Venezuela which might lead to the cancellation of the agreement providing Jamaica with cheap oil. It needs to take on the program to break the cycle of high debt (currently about 140% of GDP) and low growth, trapping Jamaica in a cycle of debt service and borrowing for decades.

The new government cannot reverse the reforms stipulated by the IMF loan. The government understands that the obstacles to Jamaica’s growth and job creation are numerous and severe. As identified by the IMF, the key problems for Jamaica are: crime, the cost and availability of credit, tax compliance costs, unreliable and expensive electricity, and a large informal economy. The IMF has also identified the need to address the large size of the public sector that has also stifled private sector dynamism and places too much emphasis on government as the engine of growth and employment.

The new government has tasked an expert panel with making recommendations to improve the fiscal standing of Jamaica. The expert panel has produced a list of possible measures. The cabinet of the government conducts a meeting to evaluate the austerity measures suggested by the panel. Furthermore, the government has tasked this panel with recommending measures to meet the following goals while meeting the austerity goals set by the International Monetary Fund:

As members of the government cabinet, participants need to evaluate the measures presented and choose which measures are to be implemented to meet these political goals. This should be done while considering the social, economic, and environmental sustainability of these specific measures. Furthermore, participants should identify possible conflict cleavages, conflict parties, issues and other negative externalities and provide “compensatory measures” (including the costs of these measures).

The participants should follow the following steps:

The second step after generating additional sources of income is to choose and evaluate measures that would implement the goals mentioned above. The expert panel have identified additional sources of funding available to developing countries under the framework of various development funds such as the climate fund or the clean development mechanism. The participants need to check Jamaica’s eligibility for this additional funding.

Participants may decide to alter a specific value. For example, in suggesting measure no. 4, a tax may be introduced with a 20 percent increase (instead of 10 percent as the expert committee suggested). This will lead to an additional 75 percent of the initial value to reflect the marginal benefits of values. In turn, the RPs and UPs will be doubled, and EDP tripled. Some measures cannot be altered or doubled (marked with *).

The three groups have produced a set of decisions as summarized by the following three figures:

Group 1 (PHMEL) was able to come up with actual budget cuts totaling 127.043 billion JMD. Adjusting this number to consider the marginal benefits, the group achieved a budget cut of a total of 106.84 billion JMD. Marginal benefit adjustment refers to some measures that were doubled (or tripled) compared to the figures given by the expert panel. Group 1 decided to double the figures of the selected austerity measures (2a, 2b, 2c, 13, 14, 16, 17, and 20). Nevertheless, a doubling the provision on increasing income tax will not lead to a doubling of the savings, because of the expected marginal benefit of factor 0.75. Both numbers are short of the required 147.5 billion JMD. In comparison, Group 2 (HVSP) achieved budget cuts of a total of 125.804 billion JMD. Interestingly, the group decided to bridge the remaining amount through additional foreign loans and grants. Group 3 (AGBPB) on the other hand achieved cuts of a total of 150.854 billion JMD, which surpasses the required 147.5 billion JMD goal. When asked how the group was able to negotiate savings with such relative ease, the group claimed they focused on the direct and indirect benefits of each austerity measure. When it became apparent that ‘harsh’ austerity measures would later yield to additional benefits, negotiations became less contested.

Due to time constraints, groups 1 and 2 were not able to discuss the other aspects of the game, such as the identification of relevant stakeholders as well as the expected co-benefits and synergies, which could have provided them with additional resources to legitimize the austerity measures or to even bargain for further budget cuts. It was difficult for them to connect austerity measures with the creation of more than 250,000 jobs while reducing its debt to 117 percent (debt to GDP ratio). A possible explanation for this difficulty is that they did not completely understand the rationale behind the ‘points.’

On the other hand, Group 3 was able to initiate the assessment of budget savings using the imposed conditions, because the group tried to understand why a specific austerity measure was too risky to implement. For example, when a measure was expected to lead to job cuts, this measure was combined with discussions about contingencies such as additional policy instruments for job creation. This linkage made contextualization possible. In addition, by identifying the ministries and other related government agencies, group 3 was able to have an overview of the required government capacity that is needed to ensure the effectiveness of the implementation of the austerity measures, while maximizing their co-benefits and minimizing the risks (Table 12.1).

The author of this book/game designer added and highlighted some game parameters that would test the negotiation behavior of the participants. As noticed by the participants (and written in the questionnaire), the need to negotiate with other stakeholders (other ministries) made decision-making very complex.

The following is a selection of observations made by the game master during the game:

Group 1

Group 2

Group 3

As identified in chapter 8, the manner in which political actors are able to align their political interests with public opinion or how they can shape public opinion is an important subject of analysis of policy-making in democratic countries. Jamaica’s “dumb” democracy is currently challenged by legitimacy deficits as implied by the downward trend of voter turnouts since 1944 (The Gleaner 2016). The perception of disconnect between politics and societal interests fuels political apathy, especially among the youth, which weakens civil society engagement. In turn, political apathy further reinforces legitimacy gaps. For example, approximately 28 percent of the votes from the eligible electorate was enough to give a two-thirds majority in the House of Representatives to the People’s National Party (PNP) in the 2011 elections. This was slightly improved in the following elections. In 2016, the Jamaica Labour Party (JLP) won the General Elections held on 25 February 2016 with 50 percent of votes (or 32 out of 63 seats) with only 47.7 percent voter turnout, which was the lowest since 1983, the year when the PNP boycotted the election.

Because many democratic countries tend to rely solely on elections as source of political mandate, input legitimacy is often taken as ‘default,’ evident and given. As such, some governments and state institutions do not see the need to build up their capacities to effectively engage and facilitate persuasive interactions. As long as their decisions are within the boundaries set by the constitution, no additional efforts are identified and implemented to build the capacities of other stakeholders to actually and effectively participate in persuasion and bargaining regimes. In Jamaica, while there is a stable democratic regime, state institutions are often overwhelmed by several lock-ins and structural impediments. For example, Jamaica’s dependence on fossil fuels and bargaining interactions that are allowed to define how the country will achieve sustainable, low-carbon transformation is not creating enough new impulses for the necessary changes.

As the ideal type of the democratic policy model suggests, the transformation process is not only dependent on the interactions between the three streams, but also on the drivers and brakes. In Jamaica’s case, carbon lock-ins have impeded stream alignments. In addition, local conditions, such as ‘brain drain’, have inhibited consensus-building, as important stakeholders have limited technical capacity to actually contribute to consensus-building.

Carbon lock-ins limit the perceived available and feasible sets of decisions (and policies) in many ways, which constrain efforts to promote sustainable, low-carbon transformation. State institutions are confronted by its low autonomy and low capacity in facilitating functional, institutional, and bargaining interactions among relevant stakeholders. The low autonomy of Jamaican institutions pertains to the multiple dependencies of these institutions on designing, implementing and monitoring policies. Jamaica’s high dependence on foreign loans and remittances, as well as the related imposed austerity measures limit the ability of Jamaican policy-makers to make independent decisions without undermining its access to future loans. Low autonomy (translated to the ‘tolerable window’) is, for example, not being determined through streams alignment, but by foreign lenders and carbon lock-ins. Therefore, existing guard-rails tend to favor non-sustainable and high-carbon policies.

Jamaica’s low capacity can be significantly attributed to its relatively small size (around 4 percent of the total labor force). This and the paradoxical public perception that the Jamaican public sector is ‘too big,’ implying legitimacy deficits, limiting its institutional capacity to address complex and intertwined issues in order to pursue sustainable, low-carbon transformation. Jamaica’s low capacity is further reinforced by ‘brain drain’, as the country lacks policy entrepreneurs with both technical expertise and knowledge of the local context. Knowledge diplomacy is therefore a huge challenge as technical and academic studies relevant to Jamaica’s sustainable, low-carbon transformation is not able to catch up with emerging necessities. As such, Jamaican policy-makers, for example, often resort to studies and reports published by international bodies with limited (local) contextual value.

In addition, the rather weak social movement or civil society working on sustainable development and environmental/climate protection in Jamaica pave way for certain (business) actors that represent the fossil fuel sector to over-proportionately influence policy entrepreneurship (also called lobbying). Nevertheless, there are several environmental NGOs such as the Nature Conservancy which helped to create the Blue and John Crow Mountain National Park for which it brokered a Debt for Nature Swap (see GRICCE 2017) that are actively engaged with international donors to support environmental and climate protection in Jamaica. However, there are significant missed opportunities that can be adequately addressed with a more empowered Jamaican civil society. The general civic discontent and political apathy of a significant part of the population are symptoms both of the low autonomy and low capacity of state institutions, which further induce limitations to any transformation process in Jamaica, as potential partners for transformation are effectively alienated and disenfranchised (see Campbell 2016).

The ideal type analysis of Jamaica’s policy model has led to some theoretical challenges. The simulation game highlighted the co-benefits of various austerity measures. The identification of these co-benefits and other synergies was made possible through the contextualization of each measure. As the positive and negative externalities of each measure were identified, it became evident that negative externalities, when properly addressed by compensatory measures, may create new values, for example for climate protection or job creation. A lesson for theory is that ‘empathy’ can be the key to any transformation process, as addressing multiple perspectives can actually expand the value of a specific measure. Nevertheless, expanding the value might require additional investment, which requires a long-term outlook.

Jamaica lacks local scholars who have the methodological and scientific expertise to produce studies that meet high academic validity standards. Because epistemic communities play a huge role in understanding the complexities of climate change and of how climate protection, energy security, and sustainable development interplay, Jamaica’s sustainable, low-carbon transformation will necessitate an unprecedented upgrade of its pool of experts. In addition, Jamaica’s pool of technical experts should not only come from government agencies, but also from independent research institutes that are able to pursue both basic and applied research without depending on either the government or the business/industry sectors.

Moreover, the capacity-building of scientific communities in Jamaica will need to find a balance between propriety and access to public goods. Through various interviews of local experts and scientists, it became apparent that Jamaican universities tend not to share information and data with other scholars (both within the same organizations and between organizations) for propriety reasons. This outlook can be attributed to the dependence of research on private funding. There is a need to address the ‘angst’ of researchers and research institutes, because a sustainable, low-carbon transformation will require more inter- and intra-disciplinary collaboration to effectively address complex issues that supersede disciplinary boundaries. As one institute produces a set of data, other institutes may be in a better position to assess the meaning and implication of these data. Another policy-oriented institute may be better at transforming the data and its assessment into policy recommendations as other contextual factors are embedded into the analysis. The Jamaican government needs to ensure access to relevant knowledge to support the maturation process and the adaption of knowledge to Jamaican specificities.

In the same manner, Jamaica needs to upgrade the capacity of its civil society to participate in consensus-building processes. Linked to this is the need to effectively address the latent disconnect between policy-making and the societal mandate. This can be done, for example, by initiating ambitious consultations on structural reforms. Effective consultations are, however, contingent on social actors that are able to formulate and advocate for various societal priorities such as environmental protection, civil rights and liberties, equity, and social innovation. Jamaica needs to improve its social capital if it wants to achieve sustainable, low-carbon transformation.