Climate Change and Fossil Fuel Extraction – A Chance for Guyana to Demonstrate Global Leadership?

-Part 3: Regaining Our Global Leadership

Guyana needs national leadership to step up in this time of gut-wrenching health, financial, political and social challenges. We have to face up to potentially existential short and long-term decisions that will define our well-being today and over the decades to come. If we do this right, we will achieve unparalleled global leadership as we harness our new-found oil cash to continue to build a low-carbon and green economy.

In the short term, we are negotiating with foreign companies about oil production, while addressing a significant national deficit and the need to rebuild an economy waylaid by a pandemic, torrential rains and rising seas, political friction, judicial contention and racial tension. While oil companies come to the table with their woes about depressed oil prices, lower windfall profits and declining investor confidence, Guyana has to find a way to finance our way out of its economic situation, and in circumstances where we are no longer “poor” by lending institution definition.

We face fundamental decisions about the Guyana we want to create for our children and grandchildren. Do we want to follow a pathway towards a ‘brown’ economy - based upon oil and oil-dependent industries? This can bring wealth (of a kind) but risks investing ourselves into a pathway that may be on the decline with the rise of renewable energy, and the creation of a social, economic and environmental plight similar to that faced by Trinidad, and unmitigated economic and political dependence on oil similar to Venezuela. Or, do we want to continue on the pathway of a low-carbon and green economy - promoted by both political parties in the recent past. Even as Guyana has made the sovereign decision to exploit its oil resources, pursuing a low-carbon and green economy would require using the proceeds of oil to sustainably manage our resources, diversify our economy and promote greener, happier, healthier lifestyles.

For us to have a low-carbon and green economy, oil must not be at the centre of economic development. Empirical evidence shows that no developing country with the conditions that we have in Guyana has been able to successfully grow in a healthy and sustainable manner when their economies revolve around oil. We must remain focussed on developing a low-carbon and green economy, while organising the oil sector around such an economy.

One avenue to be considered at this time is to require Oil Companies to pay to play. As Guyana recommits and renews its efforts to become a low-carbon and green economy, it should engage with these

Companies to ensure that they are fully aligned with the country’s national interest. We can build on the experiences of those who have trod this path. The most cited example of how a country has used its oil resources to green its economy and establish global leadership in addressing climate change is Norway, a country that has built up its “green image” on a platform of social welfare, strong institutions, commitment to democracy and the rule of law, and its decision to create a “Trillion Dollar Baby” – its sovereign wealth fund, to manage and regulate the cash obtained from oil. While Guyana does not have the same suite of circumstances, we can chart our own path by using the lessons learned by Norway, in combination with our unique natural and human assets and show proof of concept right in our own territory. And we can build beyond Norway’s model by actively including Oil Companies in this enterprise.

Earlier in this series we highlighted the strong connection that Guyanese feel for our natural ecosystems, and the steps that have been taken to prepare ( through REDD+ and FLEGT) the country institutionally to benefit financially from the conservation and sustainable management of its forest ecosystems. Guyana became a global climate change leader, establishing its green credentials with its high forest cover and low deforestation rates, commitment to renewable energy, and strong emphasis on green, low-carbon investments to grow our economy.

Last week we emphasised the distractions facing the global community causing a decline or stagnation of interest in paying for ecosystem services at all, much less at the scale required to shift national policy. That said, we do acknowledge that the green bond market - where companies are required, or choose, to invest money in projects that promote the ‘green’ economy - has shown resilience and growth. Meanwhile, Guyana’s revenue earnings from the extractive sectors will soon cause Guyana to grow out of its status as a lowGDP and lower middle-income (poor) developing country.

It is precisely the combination of these factors - pride in our natural heritage, the systems (e.g. REDD+) set up to capture benefits from ecosystem services, and the cash from oil and gas - that gives Guyana the chance to leapfrog into unparalleled global climate leadership by demonstrating a fully domestic climate response mechanism to address the climate crisis, enable nature-based sustainable development, and extract benefits (e.g. through a carbon tax as proposed by UG’s GREEN Institute or from the green bond market) from the oil sector.

In the global marketplace, the incentives offered for good climate practice favours the buyers, middlemen and those involved in the transaction, rather than the producer or citizens of the countries that provide these services. From the burgeoning local oil and gas industry we see a chance for the Guyanese People, the rights holders of our natural patrimony, to take control of their destiny and foster sustainable economic growth that includes conservation and sustainable management of natural resources, improvement in social equity, poverty alleviation and job creation. Through the wise use of the fixedterm revenues from the extraction of nonrenewable hydrocarbon resources, we can achieve growth and behavioural change for a truly low-carbon and green economy future. If we build out from a solid base of nature-centred economy to incorporate the oil and gas sector, we can avoid the resource curse found in developing countries that pursue oil-centred economic development.

Guyana’s climate response mechanism must include strong structural, management and financial frameworks. Structurally, the roles and interests of the various actors must be clearly identified and supported. This includes the role of the State to set the rules and policies, of rights holders to be enabled to manage and negotiate for themselves, and of the producers (oil companies) of carbon to transparently participate in the scheme. The management system must include a robust means to monitor and report performance, and to sustainably manage the ecosystem services which forms the basic asset for Guyana’s climate response mechanism. And finally the financial framework must include the means to account for and internalise fully the costs of maintaining a carbon negative economy, demonstrate long term financial and overall sustainability, and reduce the chances for the carbon producing sector of the economy (the oil sector) free- riding on Guyana’s “green image”. Many of these systems have been put in place through REDD+ to create a nature- based economy already. This should be built on.

Unless forced by shareholders or regulation, it is highly unlikely that carbon producing businesses, such as oil companies, will voluntarily take steps to eliminate their ecological footprint (climatic effects of oil production) in the place in which they operate. In Guyana these Companies are already masking their impact on Guyana’s ecological footprint because of our oversized amount of ecosystem services - Guyana currently has a biocapacity (the services produced by the environment needed to sustain human and animal life) of over 66 hectares per person, compared to just 2.8 in Venezuela and 1.6 in Trinidad. These oil companies also may start promoting themselves as contributing to a low-carbon and green Guyana, with the likelihood that their own ecological footprint is not measured or published.

Paying to Play and reducing free-riding will provide some compensation for the damage to Guyana ecological footprint