A series on globalisation as it affects Guyana - By Dr Clive Thomas
The LCDS and the commercialisation of forest-carbon services
Posted February 14th. 2010
Last week I was careful to point out that any serious assessment of the LCDS and the Memorandum of Understanding (MoU) between the Government of Guyana and the Government of the Kingdom of Norway needs to be situated in the broader context of the global negotiations on climate change. Although at this stage both the LCDS and the MOU are running as a bilateral programme, the LCDS has been intentionally framed to be part of a global multilateral arrangement. From its very first iteration (draft) the LCDS acknowledged this in a statement on page 13 of the first draft: “to actually generate these funds over the long term, the forestry sector must be included within the global carbon trading system.”
Recap
Because the LCDS should be framed in the context of global negotiations, I began my column last week by indicating that as the process unfolds these negotiations have faced multiple challenges. Of these I characterized what I termed as six “basic contradictions,” one or more of which would at every stage of the negotiations erupt, undermining and disrupting the process. So far I have addressed five of these. And in this week’s column I will begin by addressing the sixth.
To recap, the five basic contradictions considered last week are: 1) the rich countries versus poor countries divide; 2) the cleavage between the principal historic polluters and the principal current ones; 3) the humongous technological and economic challenges facing all countries because of the situation that, at present and for the foreseeable future, carbon-based atmospheric polluting energy is unquestionably the cheapest source of energy; 4) the still unresolved nature of the on-going global financial and economic crisis, the worst since the Great Depression; and 5) the staggering amount of populist political scepticism in the USA about the scientific claims of climate change and global warming, and especially whether this is significantly due to human activity.
Sixth contradiction
The sixth contradiction is in some ways the most complex of them all and perhaps the one most specifically linked to the LCDS. This one arises from the fact that, over the course of modern history, and in particular the present age of liberalisation and globalization, there has been a sustained trajectory in the direction of commercialising, marketizing and commodifying innumerable aspects of nature and facets of life. From this perspective, the atmosphere, or as Eric Phillips has eloquently put it in his much earlier comment on the LCDS “the very air we breathe,” is expected to become another ‘product’ to be traded (that is bought and sold) in private capitalist markets. This is an explosive possibility, with lots of downside risks for the poor and the powerless, as is always the case, when unfettered private capitalist markets control the ownership, production and distribution of essential goods and services.
To the multitude of NGOs, environmental activists, humanists, and indeed progressives generally, without whose energy and dedication we perhaps would never have been made as aware as we now are of the horrific dangers of climate change and global warming until it was too late, this is a most dreadful scenario. As keepers of the global conscience on these matters, their push-back against market excesses contradicts the seemingly inexorable drive of globalization to subsume all issues, threats and dangers to market-based solutions. As we saw in the quote above the LCDS has envisioned this from the very outset.
Contribution of forests
Specifically, the LCDS is situated at the front and centre of this contradiction. First, it sees Guyana’s pristine forests as part of the contribution tropical forests can make to solving the problems of climate change and global warming. As the LCDS indicates, typically tropical deforestation occurs because it is profitable to cut down trees and this action releases carbon to the atmosphere. In Guyana this occurs mainly because of logging and mining. Human settlement and its essential requirements (housing, recreation, transport, fuel, etc) also play a role. The basic idea, however, is that since forests contribute to environmental/atmospheric stability, they will be voluntarily reduced in exchange for compensatory forest carbon payments. In Guyana’s case this would be based on “avoided deforestation,” that is, keeping the forests standing. For readers to fully understand this process requires an appreciation of how the contribution of “avoided deforestation” can be measured, monitored, reported and verified.
Readers should note here that in addition to leaving forests standing, it is possible to plant trees on unforested land or reforest land previously under forest to achieve the same objective of receiving compensatory forest carbon payments. The current estimate is that tropical rainforests may contain as much as one-quarter of the total carbon in our environment. This makes it an essential component for any feasible solution to the global climate problems. In other words tropical rainforests constitute a very important function as a potential carbon-sink. The processes that occur as forests absorb CO2, counteracts carbon emissions elsewhere, thus strengthening the fight against global warming.
There is a specific initiative under the United Nations Framework Convention on Climate Change (UNFCCC) dedicated to framing the role of forests in the global climate change negotiations. That is, the Reduced Emissions from Deforestation and forest Degradation (REDD) programme. As readers are aware from previous columns the UNFCCC is a mechanism for bringing atmospheric concentrations of greenhouse gases under control so as to achieve the target of reducing global temperature increase to less than 2° celsius above pre-industrialization levels. Drawn up in 1992 it came into force in 1994 and has 192 signatory parties. The Kyoto Protocol, which has also been discussed before in this column was agreed to in 1997 and is expected to last until 2012. The recent Copenhagen Climate Change Conference was designed to produce a replacement agreement. Simply put, REDD was designed to provide payments in return for the effective preservation of existing forests. REDD-plus goes beyond that to embrace issues of sustainable forest management, the conservation of existing carbon stocks in the forests and their enhancement.
Next week I will continue the assessment of the LCDS from this point.
Context: the LCDS and contradictions in global climate change negotiations
Posted February 7th. 2010
I trust that readers who have been following my rather extended discussion on lessons to be learnt from the failed Copenhagen Climate Change Conference will agree that a careful assessment of the LCDS and the Memorandum of Understanding (MOU) between the Government of Guyana and the Government of the Kingdom of Norway must be located in the broader context of global negotiations to complete an agreement on climate change and global warming. As we shall see the negotiations envisage a key role for forests in an efficient solution!
Global climate negotiations face multiple challenges. As regards the LCDS/MOU six challenges stand out above all others. Indeed they constitute such serious separations, cleavages, and conflicts in the process of negotiations that they might well be classed as ‘basic contradictions.’ At every stage of the negotiations one or more of these contradictions erupt, undermining and disrupting the process, which is why I believe the Copenhagen summit ultimately failed.
Rich v poor countries
The first of these contradictions is the rich countries versus poor countries divide in the negotiations. This is based on several intractable considerations. To begin with poor countries as a rule, especially the LDCs and SIDS, contribute trivial quantities of greenhouse gas emissions, especially CO2, to the atmosphere. Yet problems of climate change and global warming (for example, sea level rise, desertification, and other catastrophic events) disproportionately pose the greatest dangers to poor nations. At the same time, these countries lack the resources/institutional/scientific and technological capacity to devise on their own, efficient low-carbon development paths and appropriate adaptation and mitigation actions.
Affecting this situation is the further consideration that the grouping of poor countries has become much differentiated since the signing of the Kyoto Protocol. Perhaps, the main differentiation has been the rise of what are now termed as the ‘large emerging economies’ such as Brazil, China, India and Indonesia. These large emerging economies are at present among the largest current polluters of the atmosphere. Readers would recall that I had hinted at the obsolete nature of the traditional distinction in the Kyoto Protocol between Annex I and non-Annex I countries. There the former is confined to the rich industrialized countries and the former socialist bloc. And, the latter refers to all other nations, including the major current polluters in the emerging economies mentioned above, as well as poor developing countries.
Historic v current polluters
The second basic contradiction is based on the divide between historic and current polluters. This distinction raises fundamental issues of fairness, justice, and burden-sharing in addressing the global climate problem. As I have pointed out before in this series, the problem of greenhouse gases is one of both stock and flow. The overwhelming source of the threat to the world’s climate comes from the historically accumulated stock of greenhouse gases already in the atmosphere. While current flows are very critical they do not constitute the fundamental source of the problem.
Importantly, while burden-sharing remains a key consideration, the current major polluters are equally concerned that nothing is done to impede their rapid economic growth. They have strictly resisted what they see as “the risk of rich countries efforts to impose targets and standards on all countries, only after they have already mercilessly polluted Planet Earth for the benefit of their own peoples.” This has led to stout resistance on their part, to globally imposed monitoring, reporting and verification (MRV) of individual countries’ commitments and pledges to attain targets of greenhouse gas emissions reductions. As readers are aware, this was a central point of difference between the United States and China at the Copenhagen summit.
Technology and cost
The third basic contradiction is that all participants in the negotiation process have tended to downplay the tremendous technological challenges and huge up-front economic costs involved in a worldwide shift to a low carbon development path. To my mind it is unquestionably true that at present and for the foreseeable future, overall carbon-based energy is technologically the cheapest source of energy available. This holds true for both rich and poor countries. Switching to a low carbon development path involves humongous economic costs and financial outlays at the outset.
While it might be conceded that it is possible for some rich countries to summon up the political will to undertake this switch, I believe as a rule that if all rich countries do not agree to act together simultaneously, none of them will follow through on unilateral pledges. The poor countries are so locked in to a carbon energy-dependent path as the fastest, cheapest and most technically feasible path for their continued economic growth, and the domestic pressures of poverty they face are so intense, that I cannot foresee a switch on their part, except as we shall see, in circumstances like the LCDS, where rich countries pay them to offset their own continued greenhouse gas emissions. As we shall see next week this raises a range of issues, including ethical ones. For the time being we consider issues of cost as they recur in two further basic contradictions.
US climate change pessismism
Fourth, the current global economic environment works against efforts to deal with the global climate problem. While there are some early signs of recovery from the worst global economic crisis since the Great Depression, all global economies still remain vulnerable. Government stimulus packages, although essential to avert economic disaster are now coming under intense criticism from opposition parties in almost all the rich nations even as employment growth has not kept pace with the early signs of recovery. In this atmosphere, governments taking a lead on climate change challenges have become less likely. Indeed in the United States, which remains key to a replacement agreement for the Kyoto Protocol President Obama will open a deluge of further criticism if this matter comes up for governmental action any time soon.
The fifth contradiction is that while globally it may be fair to claim that overwhelmingly the anthropogenic threat of climate change and global warming is considered as urgent and real, in the USA there is deep scepticism. There are very strong populist political challenges to claims of global warming and that this has been due to man-made causes. To the extent that this position continues to hold, no US President will be able to take a lead within the existing United Nations Framework Convention on Climate change. Proof of this is seen in President Osama’s State of the Union address where he posed climate issues solely in terms of US competitiveness in an increasingly green global environment. Absolutely no reference was made to the scientific basis of the global climate crisis.
The Copenhagen Accord and private markets
Posted January 31st. 2010
Solution or source of global climate change
In this week’s column I shall wrap up the discussion over the past few weeks of the key lessons that should be learnt from the recent Copenhagen climate summit. This will lead into a discussion of carbon trading, carbon finance, offsetting and related matters, which lie at the heart of the LCDS and the Memorandum of Understanding (MOU) between the Government of Guyana and the Government of the Kingdom of Norway that I am in the process of evaluating.
Annex 1, non-Annex 1 parties
As I have previously pointed out in these columns the Copenhagen Accord does not indicate specific targets of greenhouse gases reductions for participating countries. To that extent, therefore, it does not spell out specific actions designed to achieve global temperature increases of less than two degrees celsius below the pre-industrialization levels. The accord also does not specify or put in place a replacement treaty for the Kyoto Protocol, signed in 1997 and set to expire in 2012. However, the accord does specify the obligations of what are termed as “Annex 1 and non-Annex 1 Parties” in the Kyoto Protocol. Under the Kyoto Protocol, the Annex 1 Parties are basically the developed industrialized countries and the so-called “emerging market economies” of Central and Eastern Europe. The non-Annex 1 Parties refer to the rest of the world (that is, the developing countries including emerging market economies in the South, like Brazil, China, and India).
Under the accord Annex 1 Parties of the Kyoto Protocol are committed to implement individually or jointly, quantified economy-wide emissions targets for 2020 as specified in submissions in the format given in Appendix 1 of the document to the Secretariat of the United Nations Framework Convention of Climate Change (UNFCCC) by today (January 31, 2010). Non-Annex 1 Parties are to submit to the UNFCCC by the same date mitigation actions they propose to take. The submissions on emissions reductions by Annex 1 Parties are to be measured, reported, and verified on the basis of rigorous transparent indicators based entirely on internationally agreed-to guidelines. Non-Annex 1 Parties are permitted to rely on domestic measurement, monitoring, reporting, and verification. These should be submitted through “national communications with international consultation and analysis” every two years.
Based on the traditional (Kyoto Protocol) distinction between Annex 1 and non-Annex 1 Parties, we find today that there are more than fifty non-Annex 1 countries with a higher per capita national income than bottom-tier Annex 1 countries! This erosion of the traditional distinction between developed and developing countries, is one of the principal reasons why not only the Copenhagen climate summit has failed, but the future of global climate change and global warming negotiations continues to look so bleak.
Under the Copenhagen Accord the least developed countries (LDCs) and the small island developing states (SIDS) are exempted from mandatory emissions reduction targets but it is hoped (expected) that they may undertake voluntary actions, with or without the support of other countries. However, if there is support from other countries they would be subject to stringent monitoring, review, and verification. Thus these exemptions, which it is presumed, arises because of their poverty and minuscule or trivial contribution to greenhouse gas emissions, disappears if they receive assistance to pursue a low carbon development path, as under the LCDS.
Private markets
One further lesson to be drawn from the Copenhagen climate summit is that, although the accord is the product of a political deal brokered by governments, it clearly and unambiguously legitimizes a leading role for the private sector and private markets in finding solutions to the problems of climate change and global warming. Although the global climate problem is largely the product of the private-for-profit plunder of the earth’s resources with no regard to environmental preservation, this same sector is seen as essential to a long-run global solution. In the accord this is to be achieved in several ways.
First, all parties to the accord have agreed to establish “positive incentives to encourage flows of financial resources and technology transfer from rich to poor countries.” Further, in order to promote cost-effectiveness it was agreed to utilize the mechanism of private markets as much as possible. Second, predictable and adequate funding is to be provided for emissions reduction as well as reduced deforestation and adaptation. The financial targets indicated are 1) that Annex 1 Parties are to provide US$30 billion of additional resources between this year and 2012 for “balanced” adaptation and mitigation actions and 2) US$100 billion annually by 2020, from both public and private sources; 3) the crucial role of REDD and REDD plus and their implied financing has been endorsed in principle; and, 4) long term funding is expected to come from a wide variety of sources: bilateral, multilateral, public, private as well as any other alternative sources.
This explicit endorsement of a strong future role for private finance, private markets and the private sector leads directly to consideration of the sources of private carbon finance. This is expected to come mainly from carbon trading in private self-regulated carbon markets and the role of “emissions offsetting” in all this. Readers are no doubt fully aware that the LCDS is premised on the evolution of carbon trading in private markets and the sale of Guyana’s pristine forests as emissions offsets to CO2 spewed into the atmosphere by rich polluting countries. I shall be continuing the discussion along these lines next week.
In conclusion let me make a final observation on lessons to be learnt from the Copenhagen climate summit. At the end of the Copenhagen Accord there is a commitment to evaluate the way it is being implemented by 2015. A key intention of this evaluation is to strengthen the long-term orientation of the accord and therefore the need for continued and sustained global cooperation, particularly in light of possible future scientific results concerning climate change and global warming, including a reduction of the temperature target to 1.5 degrees Celsius.
More lessons from the Copenhagen failure
Posted January 17th. 2010
Last week I started to identify, in no particular order of importance, those vital lessons that should be learnt from the recent United Nations Framework Conference on Climate Change held in Copenhagen, Denmark, which are needed for a careful evaluation of the LCDS and the Memorandum of Understanding (MOU) between the Government of Guyana and the Government of the Kingdom of Norway. So far I have highlighted three lessons.
First, the achievement of virtual unanimity among the 193 nations present at the summit on the scientific specification of the environmental dilemma Planet Earth presently faces. This is truly important as there are sections of global opinion, particularly in the United States, which still dispute whether 1) climate change and global warming are occurring, and 2) if they are occurring, whether they can be attributed to human activity. Second, despite the gravity of the environmental dilemma all countries face as they seek to negotiate a global solution, nations are by choice or force of circumstance still proceeding on the principle of seeking maximum benefits for themselves, while yielding minimal national concessions. The protection of national interest guides negotiations rather than a genuinely cooperative and collective approach to global problem solving. Third, with this approach power and influence effectively determine outcomes more than cooperation and reasoning.
More lessons
A fourth lesson, which should be added to these is that, regrettably, the poor countries are seen by the major powers as important to the process in so far as they can contribute to a reduction in CO2 emissions by pursuing a low carbon path (which rich countries themselves are not doing) or carbon sequestration (as in the case of Guyana through forest protection). This attitude reinforces the gross asymmetry created by the environmental dilemma. That is, climate change and global warming will have the most disastrous consequences on poor countries. They, however, have the least resources, technology or capacity to mitigate or adapt to the negative global affects on their populations. Solving the global climate crisis therefore, involves fundamental issues of fairness and global justice.
Associated with this lesson is the implicit, if not explicit, recognition at the Copenhagen summit by participants that unless rich countries fundamentally alter their patterns of domestic production, exports and consumption (including imports), the target of a less than a 2 degree Celsius average increase in global temperature over pre-industrialisation levels will never be achieved. Current life-styles in rich countries are very dependent on the utilization of fossil fuels ? the main source of CO2 emissions in the global atmosphere. In this sense, therefore, what Norway does to reduce CO2 from all its economic activities as listed above, is far more important than what offsetting contributions Norway can buy from Guyana so that it could continue with its business as usual way of producing humongous contributions to CO2 emissions through its fossil fuels exports. Later, I shall discuss in greater detail the issue of offsetting and thus the net effect of Norway’s reduction of CO2 emissions, which contributes to remedying the global temperature crisis.
Climate debt owed to poor countries
A fifth lesson is that, when we consider the present levels of CO2 emissions in the atmosphere, we find that the accumulated stock is disproportionately greater than the net additions to that stock (flow). This means that all the historic polluters, without exception, owe the poor nations a huge ‘climate debt.’ This ‘climate debt’ was not adequately acknowledged at the Copenhagen summit, signalling a major conceptual and strategic failing on the part of poor countries, despite their numbers to get this point of view fully integrated into the conference proceedings.
The basic reason for their failing is that the rich countries were able to shift the discourse away from the ‘climate debt’ and onto the pledges and promises they were making to provide funding for poor countries to engage in adaptation and mitigation strategies to cope with the effects of climate change and global warming. They assured that these would be added to pledges committed to REDD and REDD plus programmes for poor nations with significant forest covers. These promises of funding clearly blunted efforts to position the climate debt, which rich nations owe to poor ones, at the front and centre of international negotiations on what contributions rich and poor nations should make towards resolving the global climate crisis.
Hijacking the climate talks from the UN
The sixth lesson to be considered in this week’s column follows directly from the one just considered. In addition to the non-acknowledgement of the climate debt, the rich countries were able to manoeuvre two further financial manipulations. One has been the mis-attribution of promised/committed official development assistance (ODA) to poor countries and their pledged funding in pursuit of the United Nations Millennium Development Goals (MDGs) with the promises now being made to provide climate funding.
Regular readers of these columns would recall that in my earlier analysis of the CARIFORUM-European Union (EU), Economic Partnership Agreement (EPA) I pointed out that the EU had proposed a large funding programme of Aid-for-Trade (AfT) to all developing countries in an effort to kick-start the bogged-down World Trade Organization’s negotiations at the time of the Hong Kong Ministerial Conference of the WTO (2005). Years later, these already promised Aid-for-Trade funds to the WTO re-appeared as the carrot to encourage the African, Caribbean and Pacific (ACP) grouping of countries to sign on to the EPAs. In other words the AfT was morphed into EPA funding. This is a dishonest practice, which rich countries have been pursuing for the past half-a-century, and more particularly the European ones.
The second manipulation is that although climate change and global warming are being negotiated under the United Nations framework, where poor countries because of their numbers have some scope to influence the process it can be seen that, there are ill-disguised efforts underway to have the World Bank emerge as the institution for administering rich countries’ climate funding. Given the past tortured history of relations between the World Bank and poor countries, some of the more discerning developing nations are making it known that they would prefer the United Nations to create its own financial mechanism for administering all climate funding provided under the United Nations Framework Convention for Climate Change.
There remain several other lessons to be learnt. I shall consider more of these next week.
The LCDS through the lens of the Copenhagen summit
Posted January 10th. 2010
As I have pointed out earlier, the Memorandum of Understanding (MOU) between the Government of Guyana and the Government of the Kingdom of Norway and its associated Joint Concept Note are best evaluated in the context of the outcomes of the recent United Nations Copenhagen Conference on Climate Change and global warming. Indeed the MOU has incorporated the provision that its terms would be adjusted by the parties in light of any future agreed terms arising from the United Nations Framework Conference on Climate Change (UNFCCC).
At the recent Copenhagen conference to which 193 nations along with other delegates attended there was the expected mixture of sincere environmentalists concerned about the future of Planet Earth, manipulators, fraudsters, NGOs, firms and organisations hustling consultancies and outright propagandists. Even the United States Republican Party sent Congressional members to make the case that climate change and global warming are part of an international liberal conspiracy to deceive the world and set the stage for their hidden agendas. This volatile admixture of sincerity of purpose, sleight-of-hand environmental accounting and downright fraud has produced several important lessons regarding the way forward in addressing the environmental problematique, which presently confronts the global community. For the remainder of this article and next week’s I shall highlight those lessons that have a bearing on my evaluation of the LCDS and the MOU along with its associated Joint Concept Note.
Lessons to be learnt
The first lesson is that, despite the many diversions at the conference, a rare clarity has been achieved in arriving at a succinct, scientific-based consensus among nations on specifying the problem humankind faces and the yardstick for measuring progress in addressing it. Simply put both the metric and measuring rod have been adopted from the Nobel prize-winning United Nations 2007 Report. There are five key elements to this consensus. First, the conference accepted the scientific conclusion that the main greenhouse gas responsible for climate change and global warning is carbon dioxide CO2. Second, it was also accepted that the targeted average global temperature rise, which the world can accommodate is an increase of less than 2 degrees Celsius (3.6 degrees Fahrenheit) when compared to the average pre-industrialization global temperature level. Third, it was agreed that the actual average global increase so far has been 0.75 degrees Celsius (1.35 degrees Fahrenheit) when compared to the global pre-industrialization average. Fourth, it was agreed that based on the heroic assumption national pledges already made to reduce CO2 emissions will all be kept; Planet Earth is already on track to see a 3.9 degrees Celsius increase, on average, when compared to the pre-industrialization level. Fifth, there was consensus that the most vulnerable regions worldwide are the least developed countries (LDCs), the small island developing states (SIDS), and the continent of Africa. Significantly, these three regions had expressed a preference for a lower target of a 1.5 degrees rise in average global temperature above the pre-industrialization level to be on the safe side.
At this stage it is important for readers to note that this yardstick for progress has been set at the global level. Reduced CO2 emissions in one part of the world, if countered by a greater increase of CO2 emissions in another part does not signify progress in dealing with the global problem. In other words, as a global problem there can be no unique regional solution because Planet Earth has a single unified atmosphere.
The second lesson is that, as we all know, there has been no agreement coming out of the conference to replace the Kyoto Protocol when it expires, which was what the Copenhagen summit was intended to achieve. Despite the gravity of the situation facing all nations, and the rare clarity of the summit in agreeing on a definition of the problem and what needs to be done to avert it, national interest prevailed over all other considerations. Emerging economies like Brazil, China and Russia, which had up to a decade ago championed poor countries’ concerns, deserted them at the summit. This would not have been surprising to regular readers of this column. One lesson I drew in previous articles from the global economic crisis and international efforts to respond to it, has been that since the G20 has assumed the lead role for coordinating global efforts to address the global economic crisis, the emerging nations that are members of the G20 have been as much serial violators of pledges given to poor countries as the previous rich countries grouping that makes up the G7, which held this responsibility before.
The sobering reality has been that, despite the impending global disaster, the key polluters (past and present), which contribute to climate change and global warming cannot get past the negotiating principle of seeking to maximise benefit for themselves, while yielding the least possible national concessions. This is the worst possible posture to adopt when nations are coming together to solve a global problem.
Power not reason prevailed
This leads to the third vital lesson to be drawn from the summit. The summit clearly revealed that power in its most concentrated forms (economic, political, military, geo-strategic, technology and population), not reason is what matters most in global negotiations. The course of the conference demonstrated unmistakably that the crux of the global contention on climate change and global warming centres on the United States and China. The United States is by far the world’s worst historic polluter and the second largest current polluter. China is the world’s worst current polluter. In so far as I have previously indicated the problem of CO2 emissions is both one of stock (the accumulated levels of CO2 emissions) and flow (additions to the stock) the problematique allows for very wide margins to propagandize national positions and responsibilities to address the problem.
It is clear to me at this stage that if and when China and the United States arrive at a framework agreement between themselves all other countries will fall in line. These include, on the one hand, the European Union (EU) and other rich countries like Australia, New Zealand, Japan and Canada. And, on the other hand, the multitudes of developing countries as well as emerging economies like Brazil, India and Russia. The best testimony to this is seen in what occurred at the Copenhagen conference. Despite the EU’s vocal lead and numerous pledges to cut emissions and persistent financial blandishments to poor countries for them to cooperate by agreeing to carbon sequestration measures, they did not participate in the last-minute Copenhagen Accord brokered by the USA, China, India, Brazil and South Africa. As it is now widely known, this accord it is hoped saved the conference from total failure.
The LCDS financing gap after Norway’s offer
Posted January 3rd. 2010
As we saw last week the Memorandum of Understanding (MOU) between the Government of Guyana and the Government of the Kingdom of Norway provides for two sets of conditional payments by Norway. First, US$30 million is to be paid this year (2010) to support the Guyana REDD + Investment Fund. Secondly, up to US$250 million is to be paid by 2015 based on certain conditions being met by Guyana. I shall comment on these conditionalities in the agreement later.
For now it is important for readers to appreciate that the REDD programme is part of the United Nations Framework Convention on Climate Change (UNFCC), which is the global mechanism designed to provide cooperative solutions to the problems posed by climate change and global warming. A part of this framework is the Reduced Emissions from Deforestation and Degradation (REDD) programme. REDD-plus extends the programme to incorporate “avoided deforestation.” As readers should know by now the LCDS is based on leaving Guyana’s pristine forests standing that is, its “avoided deforestation.”
Instead of challenging the promised payment of such a paltry sum over six years for so much control of Guyana’s pristine forests; and rallying national support against this pittance the President unfortunately, to say the least, boasted that this sum “is more than the combined loans and grants Guyana receives on an annual basis from the World Bank, the Inter-American Development Bank and the European Union.”
I will not spend time commenting on this negotiating miscalculation or how phoney this comparison is. Christopher Ram has already exposed the latter in his November 15 Business Page by drawing attention to the absurdity of comparing an annual payment with an amount arrived at after adding up projected annual payments over six years. It is worth spending time, however, comparing Norway’s promised payments to 2015 with those projected in the LCDS in order to arrive at some idea of the financing gap that the Draft LCDS as proposed now faces.
In the LCDS the value of Guyana’s forest to the rest of the world in terms of measurable environmental services is given as US$40 billion. This is converted to the equivalent of an annual annuity payment to Guyana by the rest of the world of US$580 million. This estimate has been provided by the McKinsey Group, Consultants to the Government of Guyana. Based on this sum the Second Draft of the LCDS now available strategises its future implementation over four distinct periods of time.
Four phases
The first phase (Phase 1) was scheduled to have been completed last year. In 2009 the LCDS was expected to receive interim payments to facilitate its launch, garner broad international support for the LCDS, and to find financing for an internationally-accepted forest monitoring, reporting and verification (MRV) system. Some of this funding was planned to be received through the World Bank, but most was expected to come from Norway. No specific sum was indicated however, in the Draft LCDS.
Phase2 covers the period 2010-2015. The financial support expected is given as US$60 million initially, rising to between US$230 – US$350 million.
This is about 40-60 per cent of the estimated economic value to the nation of US$580 million. These payments are made to avoid deforestation in Guyana, to invest in the low-carbon economy, to build capacity and promote the development of human capital.
Phase 3 covers the period 2013-20. Financial support grows from the peak of Phase 2 (US$230 – US$350 million) to arrive at the estimated economic value for the nation of US$580 million. These funds will continue to cover all that is intended for Phase 2, and provide for climate change adaptation measures as well.
Finally, Phase 4 covers the period 2020 onwards. The financial support expected in this phase is planned to be above US$580 million as the value of Guyana’s forests is considered as likely to be re-estimated in the future.
Based on these figures the financing gap to 2015 is considerable. For Year 1 (2010), I estimate the financing gap to be US$30 million. For 2011-15, I conservatively estimate the gap to be between US$180 – US$300 million annually. For the whole period to 2015 therefore, the financing gap would fall between US$970 million and US$1.5 billion dollars.
As estimated here the financing gap is the difference between commitments of financial support on offer from Norway, and those given in the Second Draft of the LCDS as an indicative plan of payments to Guyana for implementing the LCDS.
To be sure, the LCDS is premised on multi-country support so the financing gap should be provided by countries other than Norway. What is of particular concern to me is that Norway’s offer of financial support for the LCDS is not nearly as much as the value of earnings from economic activities generated in our forests, which the LCDS could potentially threaten. These include earnings from logging, non-traditional forest products (tourism, wildlife, seeds, nuts, medicines, dyes, herbs barks, etc), as well as value produced from mining.
Too big to fail
For example in a recent study I have completed for the Guyana Gold and Diamond Miners Association (GGDMA) entitled ‘Too Big to Fail: A Scoping Study of The Small and Medium Scale Gold and Diamond Mining Industry in Guyana,’ I indicated that by this year (2010) the small and medium-scale sector could be contributing about one-third of Guyana’s total export earnings. Indeed over the recent six-year period 2003-2008, export earnings from this sub-sector were in excess of one billion US dollars (US$1 billion).
The financial mechanism provided for in the MOU is based on the prior establishment in Guyana of a REDD-plus Investment Fund (GRIF). T his fund will be run by a reputable international organisation. The fund is also expected to be a multi-contributor financial mechanism. It will be designed to channel funds from all potential contributors to the LCDS, not only Norway. As stated in the Joint Concept Note attached to the MOU financing is focused on two sets of activities.
One of these is the implementation of the LCDS. And, the other is capacity building to improve REDD-plus efforts. The level of support for both is performance-based and reliant on capacity-building. The former is based on several “enabling activities,” which include consultation, organisational building and strengthening, transparency, accountability, oversight and improved governance of Guyana’s forests and REDD-plus funding. The latter depends on universally approved performance indicators related to the reduction of greenhouse gas emissions. As I shall indicate later the Joint Concept Note specifies seven enabling activities and, also goes into some detail the REDD-plus performance indicators, which would have to be met before financial support is forthcoming.