IMF Staff Country Reports

This Selected Issues paper explores policy options, and strategies for addressing climate change in Palau. Adaptation can be very effective at reducing the cost of sea-level rise, but it requires careful planning and a balanced mix of protection and planned retreat. In order to be effective and efficient, adaptation to climate change must be an integral part of development planning. With many competing needs, the government must carefully allocate resources across all possible uses, including adaptation to climate change, while considering the distributional effects of its programs. Palau’s conditional mitigation targets are ambitious. Palau can continue to drive investments toward renewable infrastructure and explore complementary policies. With the introduction of a new solar farm, Palau is expected to increase its renewable generation share to 20 percent in the near future. Carbon pricing can also play a role in reducing emissions, raising revenues, and driving the transition. Palau’s effective carbon price on diesel and gasoline are high compared to other island economies. With Palau’s reliance on imported goods and tourism, the global mitigation agenda may affect Palau’s economy.