Financing for investments to advance energy transition critical – Finance Minister tells IMF Forum

– as Guyana continues to showcase LCDS

The Government of Guyana has been aggressively implementing its development agenda along a low carbon development path, with its Low Carbon Development Strategy (LCDS) taking centre stage globally over the past years and prior.
Last week, Finance and the Public Service Minister Dr Ashni Singh attended the International Monetary Fund’s (IMF’s) 2024 High-Level Caribbean Forum on Managing the Green Transition, where Guyana’s innovative approach to managing its forests was alluded to.

The forum brought together Government Ministers, Regional Central Bank Governors, private sector and other stakeholders, the IMF Managing Director and senior IMF officials to discuss the Green Energy Transition (GET), which entails reducing the world’s reliance on fossil fuels by shifting to a renewable energy mix while using existing energy more efficiently.
As part of the forum, Dr Singh participated in a panel discussion under the theme “Taking Stock of the Macroeconomic Implications of the Green Energy Transition”, and he used that opportunity to remind the forum that the Caribbean Region accounts for only 0.2 per cent of global greenhouse gases, but is disproportionately and highly exposed to climate change and natural disasters.
He reiterated that the Caribbean Region is seven times more at risk of facing a natural disaster than the larger United States; is twice as prone to natural disasters as other small states elsewhere; and that natural disasters impose a disproportionate extent of damage; for instance, one hurricane can impose damage of more than 200 per cent of Gross Domestic Product (GDP).
Dr Singh also pointed to the critical issue in the energy transition — access to financing, both for private and public sector investments, to advance this transition.
He therefore called on the multilateral community to do more to increase the volume of financing available for public and private investments in the energy transition, and to reduce the cost of these investments, including through the use of derisking instruments.
IMF’s Managing Director Kristalina Georgieva, during her opening remarks at the forum, cautioned that climate change poses an acute threat to the Caribbean; and she indicated that sea levels are rising, and natural disasters are becoming more frequent and intense as she detailed how Hurricane Beryl had recently ravished several Caribbean islands. She thus pointed out that a rapid global transition to renewable energy is essential to mitigate some of these climate challenges.
The IMF official has, however, posited that despite the challenges, she firmly believes the Caribbean Region has tremendous opportunity, with the economies of states showing incredible resilience through the pandemic and its aftermath.
“Now is the time to seize the opportunity provided by global developments to plan and coordinate a green energy transition that fosters inclusive, sustainable, and resilient growth across the region,” she advised.
At this point, Georgieva pointed to the substantial financial resources required for this transition, as she indicated that Caribbean governments alone cannot bear the burden, with the cost for resilience-building in the Caribbean region estimated at a staggering US$100 billion over the next two decades.
“This is the moment to leverage innovative financial instruments such as Guyana’s sale of carbon credits,” she then advised the forum as she alluded to Guyana’s recent ambitious and innovative approach to garner funds for the country by using its forests.
Minister Singh has also held bilateral discussions with the IMF’s Managing Director, wherein he updated her on recent economic developments in Guyana, and the very favourable economic prospects of the country looking ahead.
Guyana has outlined a second-generation Low Carbon Development Strategy (LCDS) as a successor to its first LCDS, which aims to reduce the country’s reliance on heavy fuel oil and transition to cleaner, more affordable energy sources, as well as mobilise resources from domestic assets.
Under the first LCDS, the global climate services provided by Guyana’s standing forests were mobilised to generate revenue for the country; in this instance, under a US$250 million bilateral partnership with the Kingdom of Norway.
On December 1, 2022, the Architecture for REDD+ Transactions announced the issuance of US$33.47 million TREES credit to Guyana for the five years from 2016 to 2020.
The Architecture for REDD+ Transactions (ART) is a global initiative that seeks to incentivize the reduction of emissions from deforestation and forest degradation (REDD), as well as restore forests and protect intact forests.
Subsequently, Government entered into an agreement in which Hess Corporation purchased approximately one- third of Guyana’s credits. The agreement sets out that, from 2016 to 2030, Hess will buy 2.5 million credits per year for a total of 37.5 million credits for a minimum payment of US$750 million, to be paid to Guyana between 2022 and 2032.
Also, on February 28 this year, Guyana announced the issuance of the world’s first carbon credits eligible for use by airlines in Phase 1 of CORSIA – the United Nations’ International Civil Aviation Organization’s (ICAO’s) global emissions reduction programme. The credits issued were for Guyana’s 2021 performance in sustaining one of the world’s highest levels of tropical forest coverage, and one of the world’s lowest deforestation rates. A total of 7.14 million credits were issued by the Architecture for REDD+ Transactions (ART) for conformance with ART’s “TREES” standard.