Greening the Economy – Challenges and Opportunities for Guyana

May 06, 2012 News

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By Mark Bynoe, PhD

Two decades after the United Nations Conference on Environment and

Development (UNCED) that brought us the three multilateral environmental agreements in the United Nations Framework Convention on Climate Change (UNFCCC), United Nations Convention to Combat Desertification (UNCCD) and United Nations Convention on Biodiversity (UNCBD), the concept of the Green Economy is once again entering the lexicon of policymakers, technocrats and academics as we prepare for the United Nations Conference on Sustainable Development (UNCSD) (also known as Rio +20).
But what is a Green Economy and what is its relevance for Guyana?
According to the World Resources Institute (2011), a Green Economy can be viewed as an alternative vision for economic growth and development. It emphasises the generation of growth and improvement in people’s lives in ways consistent with sustainable development. Additionally, it promotes the pursuance of a triple dividend: advancing and sustaining economic, environmental and social well-being, and reinforces the broader sustainable development principles, i.e., allowing current generations to meet their needs without compromising the ability of future generations to meet their own needs.
Unfortunately, the development imperatives for small, open economies like Guyana are still largely based on economic indicators, such as the expansion in gross domestic product (GDP) and foreign currency reserves held, and improvements in the purchasing power parity (PPP).

While these are necessary ingredients for advancing a country’s well-being, they are insufficient for the sustained growth that will help in promoting inter- and intra-generational equity. Furthermore, these economic indicators often come at high, significant and irreversible social, environmental and economic costs, such as extreme poverty levels that are still reportedly above 30% in Guyana (World Bank, 2010). There is clearly, therefore, the need for a new economic paradigm for a small, open developing economy like Guyana, with substantial natural resources, limited human capital and high fossil fuel costs estimated at US$0.31/kwh.
But the persistence of poverty and environmental degradation (associated mainly with, but not exclusive to, mining and inadequate coastal zone management) can be traced to a series of market and institutional failures that make the prevailing economic model pursued far less effective than it otherwise would be in advancing sustainable development goals.
These market and institutional failures are well known to economists, but little progress has been made to address them. For example, there are insufficient mechanisms to ensure that polluters pay the full cost for their polluting actions. There are “missing markets” – meaning that markets do not systematically account for the inherent value of services provided by nature, like water filtration or coastal protection.
A “market economy” alone, therefore, cannot provide public goods, like efficient electricity grids, sanitation or public transportation. And economic policy is often shaped by those who wield power, with strong vested interests, and rarely captures the voice and perspectives of those most at risk.
It is mainly because of the foregoing that the Green Economy concept remains so attractive for a country like Guyana, with vast renewable energy resources potential (inclusive of solar, wind, thermal and hydropower). The attractiveness of this proposition is that: (i) it offers Guyana an opportunity for energy security, (ii) it reduces the cost of doing business in Guyana thus encouraging more foreign investment in a country ranked 114 out of 182 in the Doing Business Survey of 2011 (World Bank, 2012) and making exports more competitive (This is particularly important for a country which ranks 109 out of 142 countries in the 2011 – 2012 Global Competitiveness Index) on the world market, (iii) it allows for more foreign exchange to be earned, (iv) it reduces foreign exchange leakage, where it was estimated that the cost for importing fossil fuel in 2008 was 43% of Guyana’s GDP (GEA, 2012), (v) there is more downstream processing of its raw materials, thus creating more employment, and (vi) it improves the country’s fiscal position.
It should be obvious to all that the funds which are “lost” through importation of fossil fuel or due to substantial line losses can be directed towards pursuing Guyana’s push to achieve and surpass the Millennium Development Goals (MDGs), as well as improve the social and physical infrastructure, all aimed at enhancing the country’s sustainable development thrust.
Critical for transforming Guyana’s economy, therefore, towards a more sustainable low-carbon pathway, even though the country emits less than 0.001% of the global greenhouse gas (GHG), would be to ensure that its income and employment expansions are driven by both public and private investments through an enhancement in the business environment (World Bank, 2012), reform the policy environment (Klass, 2010) and incentivise areas for fuel efficiency and investment in renewable energy resources.
While not seeking to be prescriptive, some of the important questions to be asked in the context of Guyana are:
•    How to broaden and execute its bold low-carbon development strategy (LCDS) that must include, potentially, making ‘every building a power station’ by maximising their energy efficiency and potential to generate renewable electricity. With the major energy provider estimating line losses in excess of 40%, this amounts to US$48.40 (priced at US$121 of Brent Crude in April 2012) on every barrel of fuel! With energy being one of the three main inputs into the manufacturing process, this reduces the attractiveness of Guyana as a place to do business, increases the country’s emissions level and reduces the price competitiveness of its exported products.
•    How to create, train and retain a ‘carbon army’ of workers to provide the human resources for an environmental reconstruction programme, when the country still suffers from high levels of emigration estimated at above 70% of University graduates (World Bank, 2010).
•    How to create the right policy environment and economic incentives to drive efficiency and bring alternative fuels to market. This can make available more funding for the LCDS and safety nets to those vulnerable to higher fuel prices via raising carbon taxes and revenue from carbon trading.
•    How to regulate the domestic financial system to ensure that the creation of money at low rates of interest is consistent with democratic aims, financial stability, social justice and environmental sustainability. In parallel, the challenges remain on how to prevent inflation, tighter controls on lending and on the generation of credit.
The challenges and opportunities for Guyana in pursuit of a green economy objective are many. Clearly, there are roles for both the public and private sectors, with a major tenet being enhanced energy and resource efficiency, while simultaneously preventing the loss of biodiversity and ecosystem services. These investments need to be catalyzed and supported by targeted public expenditure, policy reforms and regulation changes. This development path should maintain, enhance and, where necessary, rebuild natural capital as a critical economic asset and source of public benefits, especially for poor people whose livelihoods and security depend strongly on nature.

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