Dear Editor,
Embedded in Mr. Jagdeo’s reflection on COP 28 (‘COP 28 pledge of US$400M not enough to assist impacted countries – Jagdeo’ in SN, Dec. 11, 2023) is a measure, even a policy proposal, that would address the serious concerns he expressed about climate financing, climate justice and even the achievement of net zero. Moreover, in a stroke of genius, Mr. Jagdeo in his reflection on COP 25 provided President Ali with a possible coup de grace as he heads to a meeting with the President of Venezuela with only a whisper of hope for finding common ground between the two countries. Needless to say, fossil fuels, the benefits of which can form the basis of either cooperation or conflict, take centre stage in Mr. Jagdeo’s thinking.
No doubt recalling that the very Nationally Determined Contributions (NDCs) process that forms the “heart” of the Paris Agreement is merely a “pledge and review” one, Mr. Jagdeo complained that similarly, the pledge to triple renewable energy by 2030 lacks any means of enforcement, relying instead on purely voluntary pledges. But Mr. Jagdeo correctly suggested that “We are pushing for a carbon price as an incentive to trigger a large exodus of investment away from fossil fuel into renewable energy and the incentives to invest in it.” Along with all other carbon pricing advocates, yours truly included, Mr. Jagdeo identified a carbon tax as the single measure that will lead to a ratcheting up of ambition, as against the free-riding we see in the NDC process.
So what specifically is Mr. Jagdeo thinking about?
With his usual perspicacity, Mr. Jagdeo is thinking about a Guyanese version of the carbon tax, to wit, a tax on the carbon emissions (about 0.433 tonnes) released from every barrel of oil produced in Guyana regardless of where it is combusted. Invoking the economics principle known as the “irrelevance of who pays the tax,” Mr. Jagdeo’s implicit proposal would be about both climate financing and climate justice. Using the US$50/tonne of CO2 that Mr. Jagdeo approved following a proposal that I submitted to the EPA, this so-called upstream carbon tax at the wellhead (UCTW) will yield about US$4 billion annually, directly paid to Guyana, if oil production remains at 500,000 barrels a day. It will lead to the internalisation of the price of carbon, so that the operator’s cost of production will now be approximately US$57/barrel, still allowing it to earn a handy on its investment at current prices.
Mr. Maduro could be encouraged to join Guyana in this UCTW, allowing Venezuela to retain a larger fraction of the oil rents from its production, and even more importantly, it will demonstrate in no uncertain terms that Guyana and the oil companies operating here are not “one and the same.” In other words, Mr. Jagdeo’s implicit proposal could then become the basis of a regional climate club of oil-producing countries in Latin America and the Caribbean. Mr. Jagdeo’s implicit proposal would also resonate with President Lula, who used COP 28 to express deep concern about the unilateral imposition of the carbon border adjustment mechanism (C-BAM) by the EU, and may be our best response to that measure. Similarly, the UTCW will resonate with our Caricom partners who are yet to see an act of good neighbourliness from Guyana since the massive oil discovery, provided that Mr. Jagdeo’s implicit proposal includes the establishment of a regional adaptation fund with the revenues that would be generated by the UCTW.
Rather than leave it hidden in his reflection on COP 28, Mr. Jagdeo now has to be more explicit about his proposal which, if adopted by Venezuela, Brazil, Guyana, and other LAC oil producers, would nudge the world towards pricing carbon. Otherwise, he will have to explain to himself, to President Ali, and to the people of Guyana, why he opposes it.
Yours sincerely,
Thomas B. Singh (PhD)
Director
University of Guyana GREEN
Institute& Senior Lecturer
Department of Economics
University of Guyana
