The LCDS: transformation or continuation?

Jan 19, 2014 AFC Column, Features / Columnists

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Guyana’s Low Carbon Development Strategy (LCDS) was unveiled almost five years ago amidst much fanfare. Those seeking enlightenment beyond the well-prepared public presentations on this novel arrangement were immediately confronted by a dense alphabet soup of new-speak that blanketed further layers of information. Somewhere within the GRIF, REDD+, EVN, OCC, MRV, UNFCCC, FCPF, lay the details of this innovative strategy that would transform Guyana’s economy, preserve our precious rainforest, and earn some cash on the side – a lot of cash.
With no particular track record of concern on matters environmental, the PPP-C Government’s new green posture would have been hard to understand without the cash in the equation. Today, this cash is in jeopardy and there is no sign that the Guyana economy is transitioning into the exotic new model advertised at the launching of the LCDS. There is, instead, a gloomy perception among most Guyanese, that our vast interior is being quietly reassigned to various entities and individuals at the whim of the current Government.
So what really is Guyana’s role in the global war on climate change and how does this benefit the average Guyanese?
The International effort to curb human interference with our climate systems is driven largely by the 1994 United Nations Framework Convention on Climate Change (UNFCCC), with its stated objective of stabilizing greenhouse gas concentrations in the atmosphere. This objective was given its teeth by the Kyoto Protocols of 1997 which secured commitments from developed countries to reduce greenhouse gas emissions.
Signatories were required to set binding targets by which they would reduce their greenhouse gas emissions over successive commitment periods. The Kyoto Protocols came into force in 2005 after a sufficient amount of governments had finally ratified their commitments. The first commitment period covered the years 2008 to 2012 and the next runs from 2013 to 2020.
At every stage, the convention and its ensuing meetings have recognized and noted the role played by the developed countries, as opposed to developing countries, in the detrimental increases of greenhouse gases released into the atmosphere. The onus has therefore been placed on these so-called Annex 1 countries to do the most to cut these emissions at home, as well as to fund climate change activities in developing countries.
Of interest to Guyana was the fact that the Kyoto architecture allowed some flexibility in how developed countries meet their targets. Countries falling short of their reduction targets at home would be permitted to offset these shortfalls by funding activities abroad, particularly in developing countries, that resulted in greenhouse gas abatement. The underlying principle is that it doesn’t really matter where in the world the emissions are cut, as long as they are removed from the planet’s atmosphere.
Given that trees produce oxygen from carbon dioxide (a greenhouse gas) thereby reducing atmospheric carbon dioxide levels, it follows that deforestation will result in increased levels of greenhouse gases in the atmosphere. These increases can be calculated based on measured deforestation. Given also that much deforestation is the result of economic activity, developing countries with large rainforests could reasonably expect to be compensated for curtailing economic activities to avoid deforestation.
The problem here in Guyana was that our deforestation levels were actually so low that we showed no net loss of forest cover between 1990 and 2005. The concept of reduced deforestation could therefore not have been applied to Guyana, since there was no measurable deforestation to begin with. In other words, Guyana has historically played a role in fighting climate change by avoiding deforestation until now. There is not much more we can do, except find a way to get paid for this.
So Guyana hired the consulting firm McKinsey & Company to produce a report showing that Guyana could earn as much as US$580 million per year if it slashed some of its rainforest in favour of agricultural and other economic activities. The report estimated the resulting rate of deforestation at about 4.3% per year. It also suggested that there were mounting pressures on Guyana to go this route. Developing countries would therefore be helping to reduce atmospheric greenhouse gases by paying Guyana not to utilize its rainforest in this manner.
The Kingdom of Norway was the first, and only country so far, to cough up. This large exporter of oil and natural gas has committed up to US$250 million over a five-year period under Guyana’s LCDS program. Most intelligent Guyanese would have seen this for what it was – an attempt by the Jagdeo Government to squeeze some cash out of a rich oil-producing country, anxious to remain on the right side of the climate change battle. Most patriotic Guyanese would have swallowed hard and gone along with the plan.
But that plan has become problematic for us. The cash is not flowing as expected. The Norwegians are sticking to the fine print and are only making payments based on verified performance. The Guyana REDD+ Investment Fund (GRIF), into which these payments are deposited, is proving to be a lot safer than the PPP-C government had reckoned. The GRIF is managed by the World Bank and monies can only be disbursed for approved projects after assessment by external partner agencies (IDB & UNDP).
So far the Norwegians have deposited approximately US$70 million into the fund. An additional US$45 million in payments for reduced emissions in 2012 appears to have been withheld pending verification of Guyana’s deforestation levels. This amount could be reduced by as much as half, due to an increase in deforestation during that period, beyond the agreed upon levels. If the trend persists, Guyana could end up receiving much less than the anticipated US$250 million by the end of the deal.
Apart from exceeding its deforestation targets, Guyana also seems to be experiencing difficulties with its projects. One of the first LCDS projects budgeted for in 2010, was the Amaila Falls access road. This project never received the blessing of the IDB and was subsequently funded by the Government. We all know what happened next. Similarly, the fibre optic cable listed as an LCDS project in the 2011 budget, was not approved by the partner agencies, and ended up being funded by the Chinese. This project, headed by none other than the President’s son, has also been plagued with problems and has already missed its December 2013 completion date, with no clear end in sight.
Also popping up in the 2011 budget estimates was the Government of Guyana’s equity investment in the Amaila Falls project. This also did not receive the blessing of the IDB, since the project was aborted before its economic assessment was completed. This may well have been a blessing in disguise, as there may not have been enough cash in the GRIF to cover it.
Rather prudently, the AFC has deferred budgetary approval for LCDS projects, pending approvals from the partner agencies. This is not at all unreasonable, given our experience with the Amaila Falls access road and the fibre optic cable. The AFC has repeatedly made it clear that once the LCDS partner agencies approve the release of funds from the GRIF, it will support budgetary appropriations for those projects.
This approach is clearly not understood by the Multi-Stakeholder Steering Committee of the LCDS which, for the past two years, has issued press releases decrying the “budget cuts” and the effects these will have on the execution of LCDS projects. Press releases on the status of the fund might be more appropriate in future.
The AFC remains supportive of all efforts aimed at reducing global greenhouse gas emissions, and the creation of a mechanism by which developing nations such as Guyana can benefit financially from contributions to the fight against climate change through, past and future, sustainable management of their rainforests. However, as the LCDS approaches its fifth year of existence, our party remains unimpressed with the slow progress of this much touted development strategy.

 

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