During his address to the United Nations this year, President Irfaan Ali said that carbon was trading at US$10 per tonne in voluntary carbon markets. He contrasted this with the position of the International Monetary Fund which said that the price should be seven times this sum.
Last year, Vice President Bharrat Jagdeo reported that Guyana had entered into a deal to sell carbon credits at a baseline price of US$10 per tonne. It was said that the country stands to gain more if the price rises. It was announced a few days ago that Guyana had entered into a deal of US$750m with the oil company Hess for the sale of carbon credits. This is by far the largest such deal which Guyana has ever secured, surpassing the US$250M over five years with Norway.
But the deal with Hess is for ten years which means that the average earnings for oil-rich Guyana would be a mere US$75M per annum, chicken feed when compared to the brag that by the end of the decade Guyana will be earning more than US$1B in oil revenues. Immediately following the announcement the cheerleaders of the PPPC Government were at it. The Private Sector Commission and one Association of Trade Unions applauded the deal, before they have even read the fine print.
In fact, the Government is yet to say just what price they are locking in the sale of the carbon credits. If the price is US$10 per tonne, then this deal is far worse than Production Sharing Agreement (PSA) signed between ExxonMobil, CNOOC and Hess. In fact, the Government with typical lack of transparency did not state at what price it was hedging these credits. But the cheerleaders do not appear too worried about this. This deal represents a bonanza for Hess, and can end up being far more lucrative than the PSA which gives the oil companies rights over the Stabroek Block. Hess can buy our carbon credits at $10 per tonne, hold it for years and then sell it on the markets for as high as US$70.
Guyana would still obtain US$750M over ten years but Hess could profit by six times this amount. This means that if Hess sells back these carbon credits it can earn as much as US$4.5B over ten years. No wonder we are now learning that Exxon may be seeking to also buy carbon credits for Guyana. The oil companies are lining up to profit off Guyana. But do not tell this to Vice President Bharrat Jagdeo. As far as he is concerned, Guyana will struggle to obtain multilateral financing for climate adaptation. As such he says the sale of carbon credits can be used to help the country fight climate change.
He should have been telling this to President Ali who has been going around the world castigating the developed countries for not meeting their climate financing obligations of raising US$100B per annum agreed long before COP 26. The reason why Guyana will struggle to obtain climate financing is because Guyana is soon to graduate to a high-income country and will become ineligible for climate adaptation funds. But Guyana will also become ineligible soon for concessionary financing from the international financial institutions and governments. Already the European Union has signaled that the higher Guyana’s Gross Domestic Product increases, the less will be the EU’s assistance to the country.
This is all the more reason why the cheerleaders instead of applauding the agreement which Guyana signed for carbon credit sales, should be insisting that the Vice President renegotiate the Production Sharing Agreement. Not only is it considered one of the worst deals ever gotten by a country for its oil wealth but it comes with the loss of concessional financing and aid, something that the PPPC Governments have been weaned on. The carbon credit deal appears to be a far worse deal than the oil agreement. Not only has the country not been told at what price the credits will be sold, but it appears that like the agreement with Norway, Guyana will get a fixed sum over a ten year period regardless of how high the price of carbon rises in the carbon trading markets, Guyana estimates that the carbon which its forest stores each year is worth between US$40B to US$ 54B. Yet, its first agreement in the sale of carbon credits is worth an average of US$75M. Not billions but millions. And our visionary Private Sector Commission sees this deal as a cause for cheering. Without even asking at what price is the carbon locked in. (The views expressed in this article are those of the author and do not necessarily reflect the opinions and beliefs of this newspaper and its affiliates.)
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