A review of the Low Carbon Development Strategy

Introduction
To all Guyanese, from Cabinet to Canal # 1, the announcement that the people of Guyana are willing to act in placing our rainforests under “globally-verified forest and other land use governance standards and transparent, accountable deployment of forest payments” must have come as a great surprise, if not a shock. Under what the government calls a Low Carbon Development Strategy (LCDS), the economy will take a new direction in which national development and combating climate change are complementary and not competing objectives. The strategy is premised on Guyana receiving huge annual sums from the international community for preserving its forests, sums in excess of what we now pay in taxes and also in the amounts of debt relief we have received in recent years. If the principle is accepted, not here in Guyana but in Copenhagen in December of this year when the United Nations convenes a conference to decide a replacement for the international treaty on the environment called the Kyoto Protocol, and if the strategy is properly implemented by Guyana, the LCDS can have a transformative effect on the country. It would be like the country discovering oil or gold from a non-exhaustible source, to last in perpetuity – economic nirvana. These are major ifs that have hardly been mentioned in all the exchanges witnessed so far in the public debate in Guyana.
Business Page will review the LCDS and engage in a reasoned assessment of the strategy, its perceived benefits, its practicability, weaknesses and chances of success. I will start by setting out and reproducing extensively from the Office of the President’s LCDS Draft for Consultation and its accompanying glossy Frequently Asked Questions, also described as a ‘Draft for Consultation.’ This will be followed by a discussion of the advantages and benefits to Guyana of the strategy, a critique of it and conclude with this columnist’s own views and recommendations. The series will try to avoid the unquestioning, simplistic and naïve attitude of those who are captivated by romantic notions about our forests or taken in by the consultations and commitments by President Jagdeo. Equally, it will avoid the dismissive reaction of those who decide that the messenger (President Jagdeo) could not in any circumstances deliver a good message. We will consider too whether and what the Plan B is or ought to be if Copenhagen does not accept or undertake to finance the fundamental assumptions and effect of the LCDS.

Background
Guyana is fortunate that it is one of the world’s last remaining rainforests with almost 80% of our territory still in its pristine state. This pleasant situation is the result of a combination of factors including the nature of our forests that does not allow for the extensive felling of trees, the preservation of the forests by our First People, mostly strong forest management by the regulator going back to fifty years and more, and the objection to the practices by some operators that generated the collective abhorrence of Guyanese of the exploitative practices of some of the recent entrants into the forestry sector.

According to the consultation document, Guyana’s pristine forests are its most valuable asset – the majority of its 15 million hectare (58,000 square miles) rainforest being suitable for timber extraction and post-harvest agriculture and estimated to contain significant mineral deposits below its surface. International Consultants, McKinsey & Company, appointed under a contract of which no Guyanese knew until recently, estimates the value of this forest – known as Economic Value to the Nation or EVN – to be the equivalent of an annual payment of US$580 million. According to the Office of the President, generating this EVN, while economically rational for Guyana, would have significant negative consequences for the world. The deforestation that would accompany this development path would reduce the critical environmental services that Guyana’s forests provide to the world – such as bio-diversity, water regulation and carbon sequestration. The draft states that conservative valuations of the Economic Value to the World (EVW) provided by Guyana’s forests suggest that, left standing, they contribute US$40 billion to the global economy each year.

Essentially the LCDS is arguing that since the world benefits by US$40 billion dollars per year from the conservation of our forests, and since to Guyana the annual worth of the forest in economic terms is US$580 million, then the world must pay us that sum. Unfortunately the basis on which the Office of the President has come up with these numbers is only summarised in the consultation draft. A more serious review of those numbers requires those studies being made available to those with the necessary skills to analyse such technical analysis, modelling techniques and econometrics.
Self-interest

But economics is only one of the reasons why Guyana should be willing to play its part in the preservation of its rainforest. Self-interest is another. We are dangerously vulnerable to and conscious of deteriorating and irreversible weather patterns placing us among the high-risk countries threatened by climate change. Much of the population and economic activity in Guyana exist at or below sea-level, and according to the draft, in-land flooding represents a significant and growing risk to investors. Major floods in 2005 were reported to have caused damage equivalent to 60 per cent of GDP.

One of the obvious consequences of climate change which only a handful of eccentrics are still prepared to dispute, is that sea levels will rise and more than likely at a faster rate than had been originally predicted. For example, researchers applying the possible scenarios outlined by the Intergovernmental Panel on Climate Change (IPCC) found that in 2100 sea levels would be 0.5-1.4m above 1990 levels, much greater than the 9-88cm forecast made by the IPCC itself in its Third Assessment Report, published in 2001. That would be devastating to coastlanders who would have to abandon everything and move scores of miles inland (or out).

The discussion draft notes the increasing global recognition that protecting forests is essential to the fight against climate change – forestry causes about 17% of global greenhouse gas emissions. Adding that the movement from recognising the need for action to actual action continues to be too slow, the discussion draft promotes the LCDS as seeking to provide insights on how to stimulate the creation of a low-deforestation, low-carbon, climate-resilient economy.
Epiphany
Even by his own admission President Jagdeo is a new convert to climate change and global warming and it was only as recently as December 2008 that he seems to have recognised the importance of these issues to Guyana. He has moved fast since then. In February 2009, he and the Prime Minister of Norway, Jens Stoltenberg, announced a partnership agreement designed to support a low-carbon strategy that includes employment and investment-creation opportunities in Guyana and sustained efforts to avoid deforestation and forest degradation. The consultation draft refers to a joint statement by the Guyana President and the Norwegian Prime Minister, but that statement has not been released to the public and I could not find it in the website reference in the consultation draft. There hardly seems any compelling reason for that statement not being available on the LCDS website and made available to the public-sector dominated LCDS Steering Committee.

In fact, given the implications for the country of the adoption of the strategy, it would be useful for the several documents referred to in the consultation draft to be made available to the nation. That will contribute enormously to an informed public and meaningful discussion. As we shall see many of the actions to be taken under the strategy would require substantial concessions and valuable incentives which will have to come either from the money received under the international arrangement or from taxation.

The four phases
of the LCDS
The proposed LCDS will be introduced in four phases beginning in 2009 and continuing indefinitely. The following are the four phases and the intended Payments to Guyana.
Phase 1 (2009) – No sum indicated but the document refers to interim payments to launch the LCDS and funding for Monitoring, Reporting and Verification (MRV).
Phase 2 (2010 – 2012) – US$60M to US$350M for capacity building, human capital development and the investment required to build a low carbon economy.
Phase 3 (2012 – 2020) – US$350M to US$580M annually for essentially the same purposes in Phase 2 and for payments to avoid deforestation and climate change adaptation.

Phase 4 (2020 and onwards) – Greater than US$580M providing incentives at or above the Economic Value to Guyana.

What the
strategy will do
The strategy comes perhaps midway in the National Competitiveness Strategy, promoted by the government as the centrepiece of its medium-term strategy and praised by the private sector for its inclusivity.

The NCS prioritises the modernisation of the four sectors on which our economy has relied for centuries – sugar, rice, forestry, and mining – and identifies five additional sectors with the greatest opportunities for new growth and diversification: nontraditional agriculture, aquaculture, manufacturing, business process outsourcing/information technology, and tourism.

The LCDS has more than just subtle differences with the NCS but these the private sector has so far ignored, at least publicly. Under the LCDS Guyana will:

Invest in strategic low-carbon economic infrastructure, such as a hydro plant at Amaila Falls; improved access to unused, non-forested land; and improved fibre optic bandwidth to facilitate the development of low-carbon business activities.

Nurture  investment in high-potential low-carbon sectors, such as fruits and vegetables, aquaculture, and sustainable forestry and wood processing.

Invest  in other low-carbon business development opportunities such as business process outsourcing and ecotourism.

Expand  access to services and new economic opportunity for indigenous peoples through improved social services (including health and education), low-carbon energy sources, clean water and employment which does not threaten the forest.

Improve  services to the broader Guyana citizenry, including improving and expanding job prospects, promoting private sector entrepreneurship, and improving social services with a particular focus on health and education.
Undertakings

To win support for the LCDS, the government is prepared to offer a number of undertakings to enhance operational efficiency, transparency and accountability for the execution of the LCDS. The principal new organisational units and systems include an Office of Climate Change (to coordinate all climate-related activities for the nation), a Low Carbon Strategy Project Management Office (to drive major low-carbon programme priorities), and a Guyana Low-Carbon Finance Authority (to manage forest payments and related investment flows into the country and promote investment efficiency to the benefit of Guyana’s economy). The first two of these will operate within the Office of the President.

And as mentioned in paragraph one, the government says it is prepared to subject the rainforests to globally-verified forest and other land use governance standards and transparent, accountable deployment of forest payments.