The Environmental Protection Agency (EPA) is being urged to implement a carbon tax on the crude oil currently being extracted in the offshore Stabroek Block by ExxonMobil’s subsidiary Esso Exploration and Production Guyana Ltd (EEPGL) which could earn Guyana billions annually.
The University of Guyana’s GREEN Institute (UGGI) submitted a proposal to the EPA last Friday for the introduction of an upstream carbon tax to reduce pollution, and in particular carbon dioxide (CO2) emissions, associated with the crude oil now being extracted by EEPGL. Since oil production began in December up to May, Exxon flared over nine billion cubic feet of natural gas, equivalent to the loss of 4,642 hectares of forest. This would be valued at US$24 million based on the carbon price of US$5 per tonne under Guyana’s forest protection pact with Norway, according to calculations. The UGGI proposal foresees a much higher carbon price.
“Such a tax, which is a fundamentally a measure to reduce pollution, is entirely consistent with the provisions of Section 4 (4) (a) of the Environmental Protection Act and also with the Production Sharing Agreement that was signed with EEPGL,” UGGI said in a statement.
It highlighted that while there is an emerging consensus that pricing carbon is essential for climate stabilisation, there is particular enthusiasm for the use of a carbon tax to achieve the stated objective of the Paris Agreement on Climate Change, to hold “the increase in the global average temperature to well below 2°C above pre-industrial levels and [pursue] efforts to limit the temperature increase to 1.5°C above pre-industrial levels.”
UGGI further pointed out that ExxonMobil supports the carbon tax as a serious emissions reduction strategy, which was attested to by its donation of US$1 million to support a carbon tax policy proposed by former US secretaries of state James Baker and George Schultz.
“In submitting the UGGI Policy Brief titled “Towards a Green Petro-State: A Carbon Tax at the Wellhead in Guyana as a Measure to Reduce Pollution” – written by Dr Thomas B Singh and Dr Timothy Liang, respectively Director and Visiting Research Fellow of the UGGI – it was emphasised that there were two principles, one physical and one economic, behind the UGGI upstream carbon tax proposal. The physical principle holds that a unit of fossil fuel will emit the same amount of carbon wherever and whenever it is burned. The economic principle that justifies the use of upstream carbon taxes is known as the “irrelevance of who pays” a tax on economic decisions, and it says that the incidence of a tax (i.e. who ‘really’ pays the tax) is unrelated to the point of collection of the tax. As such, an upstream carbon tax in Guyana will achieve the same emissions reduction results as a tax imposed at (say) the pump in the United States,” the statement explained.
It said that though the upstream carbon tax proposal is not merely about revenues, Singh and Liang have pointed out that with a carbon tax of US$40/ tonne of CO2, Guyana stands to earn US$3.4 billion annually if natural gas flaring was assumed to be 15 million cubic feet per day; and US$1.4 billion per annum rising to US$4.7 billion per annum by 2025 as oil production itself increases.
The UGGI Policy Brief has said that the revenues raised from the carbon tax could be used to achieve Guyana’s energy-related Nationally Determined Contributions made under the Paris Agreement.
“As a country that has been known for its high forest cover and low deforestation rates, and for the carbon sequestration services that its rainforests have been providing to the world, the proposed upstream carbon tax will help to resolve what has hitherto been seen as a deep paradox as it works with oil supermajors to extract fossil fuels. The UGGI even expects that the introduction of an upstream carbon tax in Guyana would provide a useful nudge to other stalled efforts to reduce global emissions by putting a price on carbon,” the statement said.
It added that persons wishing to find out more about the UGGI proposal are invited to submit their inquiries to greeninstitute@uog.edu.gy.
