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
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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
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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