-calls for increased cost of carbon credits
While pointing out that the world is currently faced with an energy crisis with no end in the near future, Guyana’s President Irfaan Ali told the 77th session of the United Nations General Assembly that fossil fuels are a necessary means of energy while the world transitions to more sustainable means.
The Guyanese leader, in a wide ranging address at the UN headquarters in New York, said that as of 2019, almost 10% of the world’s population did not have access to electricity and that power generated by fossil fuels increased by 178% from 2000. He added that electricity generated from coal also increased by 173% from 2000.
He told world leaders that based on the recent information from the United States Energy Information Administration, coal-fired electricity generation is expected to be a key energy component as a result of several factors, which includes a drop in the share of natural gas and rising oil prices.
“While all of this is occurring, the global energy demand is projected to increase by 47% in the next 30 years. According to the IEA [International Energy Agency], global electricity demand grew by 6% in 2021 and is projected to grow by 2.4% in 2022, of which only 50% is expected to be met from renewables. As such, the other 50% would have to be met from non-renewable energy sources,” Ali said.
The Guyanese head of state added that analysis by the IEA indicates that getting on the path to net zero emissions by 2050 would require a threefold increase of investments in clean energy transition. That investment is pegged at about US$4 trillion by 2030.
Ali noted that the important question of realistically striking a balance between achieving net zero emissions and meeting energy demands is one that world leaders need to act on. He said that the conversations surrounding that must be practical, comprehensive and fact-based.
“We all recognize that adjustments must be made to save our planet but how will we craft this adjustment considering the energy and food crisis, which are also critical and ensure the inequality and inaccess do not widen,” he questioned.
Ali also used his platform to advocate for new entrants, like Guyana, into the fossil fuel industry should not be penalized or treated unfairly as the world moves away from that sector.
“In this energy transition, fossil fuel remains necessary. In this context, we are convinced that new entrants like Guyana must be part of this balanced approach. Even as a new entrant Guyana proposed, at COP26, the removal of subsidies from fossil fuel production and advocated the need for a strong global carbon price.
“We, however, do not believe that new entrants should be punished by removing access to financing and increasing costs of financing. This in effect will protect an existing monopoly, drive up the cost of investment and deliver a higher price product,” Ali warned.
Guyana currently has a reserve of more than 11 billion barrels of oil equivalent. The only operator producing oil in Guyana is ExxonMobil which is operating in the Stabroek Block. Oil production started at the end of 2019 and has been rapidly ramping up ever since as both Exxon and the government seek to capitalise on the fossil fuel industry.
Climate crisis and increased carbon price
Like energy, President Ali said that the world is also experiencing a climate crisis and called for urgent action. He said that time and time again world leaders have reneged on their commitments to the environment, pointing to the COP26 pledge of no more coal-fired power plants – a promise that has not been kept.
The President also called out leaders of the developed nations for their failure to honour the financial obligation to meet adaptation and mitigation targets.
“The analysis shows the costs of adaptation are most likely to be higher than the predicted range of US$140-300 billion annually by 2030 and US$280-500 billion annually by 2050 for developing nations. In 2019 US$79.6 billion was allocated to developing nations for planning and carrying out mitigation and adaptation measures. The gap between predicted adaptation costs and existing public adaptation financial flows is generally growing and ranges from five to 10 times more.
“The paltry US%100 billion pledge and a failure to meet it must be viewed in the context of the likely costs of climate action for mitigation, adaptation and addressing loss and damage. It is not enough,” Ali said.
Ali said as the world looks to COP27 in a few months, more should be done to ensure that the climate crisis is adequately addressed.
On the note of COP27, Ali also used his platform to market Guyana as a carbon sink while calling for better prices for carbon credits. He told the Assembly that Guyana’s forest is the size of England and stores 19.5 gigatons of carbon. He also informed that the deforestation rate of less than 0.05% and that government intends to continue the sustainable management of the forests as a key national and global good.
“Having already achieved net zero, we are working steadfastly in our transition from a 2020 status of 95% dependence on heavy fuel oil and diesel to an energy mix which includes hydropower, solar, wind and natural gas from which more than 500 megawatts of new generating capacity will come on stream. Of [the 500 megawatts], 87% of this generated energy will be from clean and renewable sources,” Ali informed.
Advocating for a better pricing system for carbon credits, Ali said that the adoption of broad rules on carbon markets in Glasgow, Scotland has the potential to unlock critical resources for forest rich countries. He noted that forested countries like Guyana can potentially earn billions of dollars through the voluntary carbon markets.
“…the current approximate price is US$10 per tonne [of carbon] on a voluntary market. Whereas according to an IMF report the price should be closer to US$70 per tonne. COP27 must make progress in refining the rules for the implementation of Article Six of the Paris Agreement and make decisions that will increase the price of carbon traded in voluntary carbon markets,” he said.
Guyana alone stores about 19.5 billion tonnes of carbon in its forests, which is estimated to be valued at US$40 billion to US$54 billion annually.
As part of the revised LCDS 2030, launched by President Ali in October last year, the government is targeting over US$300 million in carbon credits earnings per annum.
The LCDS 2030 sets out an updated vision for how the government intends to drive the transformation of the country, highlighting the finances that can be accrued for its under 1% deforestation. The LCDS 30 document outlines how Guyana can earn payments. “Earning payments as Guyana moves towards a market mechanism will involve: (i) integrating with the market standard; (ii) generating credits in accordance with that standard; (iii) marketing Guyana’s credits to potential buyers,” it states.
Appendices 1 and 2 of the document describe credit generation and the methodology for calculating those credits, but says “in sum, Guyana will receive credits for (i) any reductions in deforestation against the previous five-year average (starting with 2016-2020 as the reference period); (ii) restoration of deforested or degraded forest; (iii) the long-term storage of carbon in Guyana’s standing forest, providing that Guyana’s deforestation rate does not increase significantly above historic averages.”
To generate the credits, “Guyana will submit an annual report, which will then be independently verified and certified to ART-TREES. At the same time, Guyana has submitted a Safeguards Information Report (SOI) highlighting continued adherence to agreed social and environmental safeguards. Reporting on progress/ adherence to safeguards on an annual basis will be a part of ART Monitoring Reports.
Once the credits are certified, the document said that the ART-TREES Secretariat will record them on the publicly accessible ART registry, from which point they will be available for purchase by governments or companies with high emissions which they want to offset.
And when the credits are available for sale, these can be sold on the market, either directly by Guyana or through brokers.
Carbon credits are referred to as “hall passes” greenhouse gas emissions. Forests serve as carbon sinks and with approximately 85% of its landmass covered in forests coupled with a low deforestation rate, Guyana is looking to further market its carbon absorption capabilities through the ART-TREES [Architecture for The REDD+ Environmental Excellence Standard] registry.
Under the ART-TREES programme, Guyana is expected to have between 8 and 10 million carbon credits on the market annually but in this first instance, there will be approximately 35 million credits up for sale by September 2022.
This is so because of an accumulation of credits from 2016 to date.
Earlier in the year, the government was seeking proposals to market the carbon credits. The deadline for submission of those proposals was March 14.
The government was hoping to start putting credits on sale from August of this year but there has not been any word as to whether this has materialized.
