World Bank’s Guyana oil outlook inconsistent with supporting climate change action

World Bank’s Guyana oil outlook inconsistent with supporting climate change action – UK NGO

Jul 16, 2021 News

Kaieteur News – According to a July 14 article by Bretton Woods, the World Bank’s first Systematic Country Diagnostic (SCD) for Guyana, has been met with doubt by various proponents of the Guyana civil society. The document posits that despite the urgent need to transition to a low-carbon global economy, the country will experience a substantial windfall from its new offshore oil development. According to the document, the development could see Guyana’s per capita GDP rise to $16,900 by 2030, more than 2.5 times its current size.

According to the article, this comes on the heel of research published in September 2020 which showed that the World Bank and IMF have routinely over-estimated future revenues from new oil and gas discoveries over the past two decades, resulting in a ‘presource curse’ in many countries characterised by a severe mismatch between policies and actual revenues.

Despite the Bank ostensibly supporting all countries to achieve global climate goals, through its newly released Climate Change Action Plan for 2021-25, the Bank’s projection – which is purported to frame engagement with Guyana over the next five years – flies in the face of positive action for climate change. The Bank previously backed Guyana’s offshore oil development through a combination of development policy and technical assistance. This was met with widespread criticism from both national and international civil society as they effectively served to ignore increased calls to abandon new oil and gas extraction projects.

Bretton Woods noted that in the World Bank’s Net Zero Report released in May, even the historically conservative International Energy Agency noted that limiting average global temperature increase to 1.5°C compared to the pre-industrial period would necessitate “no new oil and gas being approved for development.”

The Bank’s projection is also at odds with analysis of Guyana’s oil prospects produced by the US-based Institute for Energy Economics and Financial Analysis (IEEFA) published in October 2020. In contrast to the Bank, IEEFA found, “that oil revenues won’t cover Guyana’s annual budget deficit over the next three years and meet its pledge to build a Sovereign Wealth Fund. This will lead to a shortfall of $482 million in the first three years.”

Even with a predicted improvement in the following two years, IEEFA notes, “the aggregate five-year annual cash deficit still is likely to be $160 million,” with the following period looking highly uncertain: “the outlook for the oil and gas industry is largely negative. New, long-term global market and political forces have created a permanent oversupply of oil and gas, low prices and new competitors that will keep markets unstable.”

The article further highlights that the World Bank’s strong support for oil-based growth in Guyana is also counterproductive in light of the country’s severe vulnerability to the physical risks posed by climate change, even as the development pathway it endorses means these impacts will be more severe. Ironically, the SCD fully acknowledges these risks, noting, “fiscal risks emanating from climate and natural disasters could derail…growth and development efforts; necessitating targeted public investment to build resilience. Coastal flooding is an especially serious risk, as much of Guyana’s population and economic activity—especially agriculture—is concentrated in low-lying areas along the Atlantic coast.”

Melinda Janki, a Guyanese International lawyer, has been quoted by the article as saying “Joseph Stiglitz and Lord Stern, two former World Bank economists, say renewable energy offers better economic returns. The International Energy Agency says no new fossil fuel projects. Yet country director, Tahseen Sayed, and the World Bank team are pushing Guyana to transition to oil and to go from a carbon sink to a 3.87-gigaton carbon bomb disaster. The Executive Directors must stop this lunacy before the country team destroys Guyana and the entire planet.”