GUYANA'S GREAT CARBON-BASED HOPE

C O N F I D E N T I A L GEORGETOWN 000367 INFO EC CARICOM COLLECTIVE PRIORITY DEPT OF COMMERCE WASHINGTON DC PRIORITY DEPT OF AGRICULTURE WASHINGTON DC PRIORITY DEPT OF ENERGY WASHINGTON DC PRIORITY SIPDIS STATE FOR OES BRASILIA FOR ESTH OFFICER E.O. 12958: DECL: 07/08/2019 TAGS: CARICOM EAGR ECON ENRG SUBJECT: GUYANA'S GREAT CARBON-BASED HOPE REF: A. GEORGETOWN 364 ¶B. EMAIL: BAKEWELLRA TO SES-CR Classified By: Charge d'Affaires, a.i. Karen L. Williams for reasons 1. 4(b) and (d) ¶1. (C) SUMMARY: President Jagdeo recently launched a Low Carbon Development Strategy (LCDS) which he hopes will transform Guyana,s economy, conserve its forests and contribute to the global effort of reducing climate-changing carbon emissions. The strategy,s feasibility hinges on UN climate negotiations (slated for December in Copenhagen) yielding a global agreement on a carbon market. Contacts throughout Guyana,s diplomatic, development and conservation communities express near uniform concern with the strategy,s financial projections, proposed governance and treatment of stakeholders, as well as the GoG,s capacity to execute. The term-limited Jagdeo sees the LCDS as his legacy and will push this strategy at all opportunities. END SUMMARY. LCDS IN A NUTSHELL -------------- 2.(U) Guyana,s LCDS is a plan to channel forest conservation payments into human capital development and strategic investments in low-carbon economic sectors like business process outsourcing, hydropower, aquaculture and other high-value, export-oriented agriculture. The LCDS was drafted by the GoG with support from McKinsey & Company and the Clinton Foundation. It argues that since Guyana,s most &economically rational8 use of its forests is to clear cut them, mine underlying minerals and develop agriculture, abstaining from these actions requires compensation at least as remunerative. A previous GoG-sponsored McKinsey & Company study estimates the &economic value to the nation8 (EVN) of this &economically rational8 development at approximately US580 million per annum over 60 years. The LCDS projects payments from donor countries, combined with income from an eventual carbon market mechanism, compensating the country at and eventually above the EVN over coming decades. Full text of the LCDS is available at www.lcds.gov.gy. 3.(U) While the Kyoto Protocol,s Clean Development Mechanism provides a means for developed countries to fund reforestation projects in developing countries, no provision exists to incent conservation of standing forests. A proposed solution to this problem is REDD ) Reducing Emissions from Deforestation and Forest Degradation. REDD seeks to compensate developing forested countries for the market value of climate stabilizing services their forests provide. It is the core payment mechanism the GoG envisions for making the LCDS work. LCDS FINANCING & SPENDING -------------- 4.(SBU) The GoG projects that payments of hundreds of millions of USD per annum from donor countries, combined with increasingly greater income from a REDD market mechanism, will by 2020 yield Guyana the EVN, US580 million annually. Contacts expressed uniform opinion that the EVN is unrealistically high, probably an &opening bid8 by the GoG in hopes of maximizing transitional payments from donor countries. Many contacts also noted that if Guyana had the ability to earn hundreds of millions of USD per annum through its timber and mining industries, it would already have done so. 5.(SBU) The GoG expects the Government of Norway (GoN) to make transitional payments up to US60 million through its International Climate and Forest Initiative (ICFI) to jumpstart the LCDS, but the GoN has not committed any amount. Regarding specific investment plans envisioned by the LCDS, Post notes that contacts widely criticize the choice of a hydroelectric station at Amalia Falls as a GoG priority. Contacts believe a simpler, more rapidly deliverable renewable energy project, such as a photovoltaic array or a wind turbine farm near Georgetown, would serve Guyana better, particularly in building the confidence of donors and REDD market participants in the GoG,s capacity to execute low-carbon investments. CONSULTATIVE PROCESS & AMERINDIAN PARTICIPATION -------------- -- 6.(SBU) The GoG has initiated a three-month consultative process that seeks to win the support of Amerindian communities, the forestry and mining industries, conservation organizations and other effected stakeholders. Cracks are already appearing in the GoG,s poorly laid foundation for this consultative process. A contact who recently participated in three consultative meetings in Amerindian communities reports there was widespread misunderstanding about the LCDS and some fear about potential loss of rights among indigenous groups; both the misunderstanding and the fear were unresolved by the consultative meetings. The strategy,s greatest threat is failing to integrate the forestry and mining concessionaires, since their lack of participation would result in more deforestation rather than less. Potential international donors like the World Bank and GON stress that a fair consultative process with Amerindian communities is a non-negotiable precondition of their participation. 7.(SBU) The LCDS features an &opt-in8 for Amerindian communities wishing to participate in the REDD mechanism. A contact with significant experience with local indigenous groups warns that this opt-in appears to defer to Amerindian sovereignty, but is risky for two reasons. First, since approximately 20 percent of Guyana,s forested lands are Amerindian territory, the LCDS,s actual effectiveness would be compromised by excluding Amerindian forests. Second, any forested land outside of the REDD mechanism would be susceptible to &leakage8, whereby unlicensed logging operators seek out unprotected timber and secure its harvest through informal deals with local tribal leaders. INTERNATIONAL PERSPECTIVE -------------- 8.(SBU) Contacts having experience with REDD issues believe that a confluence of events and circumstances elevates Guyana,s REDD-focused LCDS among the international community,s best options for establishing a working model of forest conservation countering climate change: Guyana,s proportionally large forest estate; its low rate of deforestation; its relatively uncomplicated domestic political environment; Jagdeo,s demonstrated commitment to REDD and LCDS; the widespread local perception that climate change is a threat due to the country,s low-lying coastal population; and GON,s apparent determination to deliver a functioning REDD project at Copenhagen. 9.(C) Contacts in Guyana's conservation, development and diplomatic communities shared near unanimous skepticism about Jagdeo's commitment to a fair consultative process; many opined that it is only cosmetic, a hallmark of Jagdeo,s approach to appeasing donor concerns. These same contacts expressed concern about LCDS governance and the GoG's capacity to execute this ambitious strategy. There is near consensus among contacts that the proposed bureaucratic structure, which consists of three new agencies answerable only to the President, is typical of Jagdeo,s tendency to centralize operational and budgetary decision-making. Many contacts expect Jagdeo to talk the talk about independent financial oversight, but resist a genuinely independent financing authority. All contacts believe it will strain the GOG,s already limited capacity to execute complex projects. The GoN perceives &huge capacity problems8 in the GoG, as well as an apparent lack of political will to undertake necessary reforms and accept donor conditionalities and advice. Post shares each of these concerns. COMMENT -------------- 10.(C) From a domestic political perspective, Jagdeo is angling to make the LCDS his signature issue and legacy -- all climate negotiations involving Guyana will feature this strategy. The LCDS presents opportunities for expanding U.S. investment in high-value agricultural products, renewable energy technologies, telelcommunications and business process outsourcing. Should the U.S. decide to become involved in the LCDS, firm conditionalities ensuring transparency and accountability in financial management and project execution would be imperative. END COMMENT Williams