Hess’ carbon offset deal

You have to give it to Bharrat Jagdeo. He has been trying to “sell” Guyana’s rainforest since the early 2000s going around the world saying if you don’t buy our trees they may have to be chopped down.

No one took him on. He was a prophet before his time.

Fast forward to December 2022 and the surprise announcement that Hess Corporation, partner in the Stabroek Block and an oil trader since 1933, would be paying the government of Guyana some US$750M in carbon credits over a ten-year span (part retroactive) to preserve its forest and thereby offset its own emissions. It is on the face of it a win-win arrangement. A windfall for Guyana while Hess looks like it’s doing its part to save the planet.

Of course it’s not that simple. The credibility of the carbon offset concept is based on three factors. The first is one of permanence. What certainty does a corporation have that the rainforest or marshlands it is “paying for” will be preserved in perpetuity? Let’s say the project is poorly managed, trees are cut down through illegal logging and the targeted number of new trees are not replanted. Perhaps at some point a government simply reneges on the agreement in order to develop its country for its people based on its sovereign right.

The second is really the moral hazard of such arrangements. Polluters can in theory continue to pollute, making no changes to their own practices. It places no responsibility on corporations other than to cut a cheque. Sponsor a solar project in a developing country and keep on spewing tons of your own carbon indeed even increasing emissions as corporations need to do to satisfy shareholders. It’s as decadent and ethically bankrupt as the pre-reformation Catholic Church selling indulgences to the wealthy so they can spend less time in purgatory.

Then there is the issue of how such projects are measured. How do we precisely measure the preservation of the rainforest? And consider also that those doing the measurements are often companies invested in the concept’s success.

Saving the best for last there is the issue of additionality: How easy is it to ensure that the emissions reductions wouldn’t have happened without the offset project? A nine-month investigation by the Guardian, the German Die Zeit and non-profit SourceMaterial, concluded that 90% of rainforest schemes formulated by industry leader Verra “are likely to be `phantom credits’ and “do not represent genuine carbon reductions.”

A particular example of this in the USA is the

Hawk Mountain Sanctuary in Western Pennsylvania which partnered with JP Morgan Chase for the latter to buy 96,000 carbon credits as part of preserving the sanctuary. Even individuals could buy a couple of carbon credits for roughly US$15 per ton so they could offset activity such as taking a plane flight or driving a gas guzzling SUV. In its project document the sanctuary claimed that without the offsets the area would be subject to highly aggressive deforestation including clear cutting.

The problem was the sanctuary was already a sanctuary and has been since the 1930s. In other words there was never going to be any deforestation even without the carbon offsets. As its director of conservation science Laurie Goodrich admitted: “We’d still be managing the land the same way”. In nearby Bethlehem, Pennsylvania, Chevron and the Disney Corporation paid the municipality to preserve 22,000 acres of forest surrounding its reservoirs. This was despite only 70 acres having been cut down in the previous 20 years.

So we come to Guyana. What is the assumed deforestation that Hess is paying to preserve were the scheme not in place? The statistical engineering to arrive at that is complex but what we do know is that historically even without carbon credits Guyana’s deforestation rate has been very low. From 2001 to 2021, Guyana lost 230k hectares of tree cover, equivalent to 1.2% and 150Mt of CO₂ emissions. Compare that to Brazil which over the same period lost 12% of its rainforest cover, or 63M hectares - an area larger than France. Not only that, the nature of our forests with mixed tree species means clear cutting is not practiced. In fact 86% of the deforestation occurs due to mining activities. With all the tax breaks and other concessions handed out to this sector by the PPP/C since coming into office, are they genuinely serious about preserving the rainforests?

As for the permanence of the deal Guyana is in a highly fluid state economically. Growing fast on the back of oil it will need more land to house and feed a likely expanding population. The government’s vision of a deep water harbour connected to Brazil via a highway will open up interior areas for economic activity. This will inevitably mean cutting down rainforest. How certain is Hess that this US$750M payment is worth anything more than the paper it is written on? And does it really

matter? Dr Thomas Singh, Director of the University of Guyana GREEN Institute wrote a letter soon after the agreement adverting to the possibility that this agreement could be seen as constituting `greenwashing’ to aid Hess’ international image.

There are some other issues of concern with the project unique to Guyana including opening a whole new area of contention over the portion of the payments to Amerindian communities and how this figure was arrived at, along with the Amerindian Peoples Association’s claims of lack of true consultations with the communities. It needs to be noted that this is in the context of the PPP/C’s penchant for controlling the country’s indigenous people: one recalls in 2014, Nigel Dharamlall, then the Permanent Secretary of the Amerindian Affairs Ministry threatening to bar access to his office and withhold stipends from Amerindian leaders; and President Ramotar telling a young Amerindian from Aishalton: “You don’t know anything about Jagdeo; if he been here, he might have slap you, cause you stupid”.

Does Mr Hess therefore understand that his company’s payments are being used if not directly to buy votes in the interior but certainly to fortify the current government’s popularity among a valuable voting demographic? It would seem despite his good intentions he is interfering in Guyana’s delicate democracy - an ecosystem that needs to be handled as sensitively as the rainforest. Furthermore this payment just adds to the pile of revenue not coming from taxpayers and thereby weakens the social contract between citizens and an accountable government.

This may be clumsy naivete on Mr Hess’ part or perhaps his money is literally on maintaining the PPP/C in office, as they are the administration more amenable to accelerated oil production?

US$750M is nothing to sniff at and Guyana is still in the third world mindset of having its hand out. So of course we will take it, thank you very much. But let us not fool ourselves that this will do much to save the planet.