Undoubtedly, the deal signed on Friday by the Guyana Government with Hess Corporation is a signal development that will not only bring lucrative returns to the country but also underlines the monetisation potential of carbon in standing forests.
For years the international community has struggled to deliver a viable carbon credits trading system that would have allowed countries like Guyana to gain monetarily from its standing forests, to incentivise protection of these assets and promote afforestation. The Kyoto Protocol of 1997 is a prime example of a well-meaning agreement that has failed to deliver for Guyana and other developing countries.
The Architecture for REDD+ Transactions (ART) has now delivered an opening that has been consummated by Guyana and Hess. ART develops and administers standardised procedures for crediting emission reductions and removals from national and large sub-national REDD+ programmes.
Were Guyana not benefitting from robust oil revenues, the Hess payment would have been a monumental sum which would have constituted grounds for the limiting of extraction of carbon fuels.
However, as is likely the case, the bonanza that Guyana’s oil is fuelling for Hess has convinced the American company to purchase carbon credits here to meet its international commitments to offset its fossil fuels footprint.
Important points were posited about this Hess transaction by Dr Thomas Singh, Director of the University of Guyana GREEN Institute in a letter in Saturday’s Stabroek News. He raised the question of `additionality’, the gold standard that underpins whether these agreements effectively result in reduced emissions and deforestation. Dr Singh also adverted to the possibility that this agreement could be seen as constituting `greenwashing’ to aid Hess’ international image. In the case of the oil industry, greenwashing typically occurs when a company attempts to emphasize sustainable aspects of its operations to overshadow environmentally damaging practices.
Dr Singh referenced remarks by UN Secretary General, Antonio Guterres at the launch of the report of the High-Level Expert Group on Net-Zero Commitments, to the effect that “The report slams greenwashing – misleading the public to believe that a company or entity is doing more to protect the environment than it is… We must have zero tolerance for net-zero greenwashing … Using bogus ‘net-zero’ pledges to cover up massive fossil fuel expansion is reprehensible. It is rank deception … The absence of standards, regulations and rigor in voluntary carbon market credits is deeply concerning. Shadow markets for carbon credits cannot undermine genuine emission reduction efforts, including in the short term.”
The ART market which is now managing Guyana’s carbon credits would fall into the Secretary General’s category of shadow markets. Absent from Friday’s announcements in Georgetown was any information on recompense to ART for its services.
Dr Singh made a number of points which could be seen as speaking to the credibility of the ART carbon credits mechanism.
He noted that the same organisation, Winrock International, which has designed Guyana’s Measurement, Reporting and Verification (MRV) system of accounting for “past emissions from forests as well as emissions reductions achieved through REDD (Reducing emissions from deforestation and forest degradation) programs,” is the same organisation that “hosts the secretariat of the Architecture for REDD+ Transactions (ART),” whose standard known as “The REDD+ Environmental Excellence Standard (TREES)” was used to certify that Guyana’s “High Forest Low Deforestation (HFLD)” credits meet the criteria it has established for putting them on sale on the voluntary carbon market as potential offsets to activities that generate positive emissions.
This would raise obvious concerns about Winrock being in a conflict of interest position.
Dr Singh also said that there is much debate on whether these HFLD credits really satisfy the criteria of “additionality” and even “permanence” that are applied by other carbon certifying standards, such as the Gold Standard. As recently as July 2022, he said that the S&P Global Commodity Insights reported that the Gold Standard does not certify avoided deforestation credits at all – either regular REDD+ projects or HLFD projects.
He reported Sarah Leugers, Chief Strategy Officer, Gold Standard as saying that “While we underscore the importance of preserving standing forests and continue to explore credible ways to incentivize the conservation of nature, Gold Standard’s position has always been that the challenges around uncertainty for avoided deforestation projects make them unsuitable for carbon crediting and a risk to the integrity of the voluntary carbon market… HFLD projects rely on a projected increase in deforestation rate to make the case of their additionality. This poses an additional layer of uncertainty to that of other REDD+ projects; that is, the deforestation baseline is not only counterfactual, but it is also based on large assumptions rather than on historical, quantifiable trends.”
Dr Singh also noted that a significant concern is that the issuance of HFLD credits, especially in large amounts, would cause the price of even high quality carbon credits to fall, thereby making the interventions that really create additionality in the sequestration of Carbon emissions to become less viable financially.
In the vortex of enormous revenue flows from oil which will increase exponentially when at least three other platforms begin producing by the middle of the decade, Guyana cannot be oblivious to its responsibilities to restrain climate change across a number of fronts. These include ensuring that its standing forests are not used by carbon polluters to artificially spruce up their image.
The real litmus test of whether these carbon credits are “high quality” as proclaimed by Hess’s President, John Hess, who has rarely been able to contain his euphoria over the rapacious oil deal that was forced upon this country, is who else subscribes to the remaining 70% of carbon credits under the ART arrangement.
ExxonMobil which is laughing all the way to the bank on this deal has made some noise about becoming a part of the ART arrangement. However the value and credibility of the ART scheme would really rise if companies outside of Guyana’s oil operations with measurable needs to lower emissions come forward.
In the meanwhile, the country will no doubt welcome the payments by Hess and monitor the government to ensure that 15% of proceeds do actually go to indigenous communities in a Free, Prior and Informed Consent process and the remainder to climate mitigation efforts enshrined in the country’s Low Carbon Development Strategy.
