Guyana inks historic US$750M deal to sell “high-quality” carbon credits to Hess Corp
– US$112M to be injected into Indigenous communities
– 1st payment of US$75M expected by Dec 15
In a historic move, the Guyana Government on Friday signed a multi-year agreement for the sale of high-quality carbon credits to United States energy major, Hess Corporation, to the tune of a whopping US$750 million – a significant portion of which will be injected into the development of Indigenous communities across the country.
This deal comes on the heels of Guyana being the first country to receive certification of over 33 million carbon credits by the Architecture for REDD+ Transactions (ART) on December 1, 2022. That issuance of the REDD+ jurisdictional carbon credits paved the way for Friday’s signing of the sale agreement by Hess Corp Chief Executive Officer, John Hess, and Permanent Secretary of the Office of the President, Abena Moore, at State House.
Addressing stakeholders at the packed Baridi Benab, President Dr Irfaan Ali pointed out that Guyana continues to take the lead globally on the forest and carbon credit fronts.
The Head of State disclosed that this historic agreement will see Hess Corp, which is one of the partners operating in the Stabroek Block offshore Guyana, buying 2.5 million credits per year for the period 2016 and 2032, valuing US$750 million.
However, it was explained that while the deal is for a 10-year period, that is, 2022 to 2032, the Government was able to negotiate, as part of the sale agreement, for the oil major to also purchase some 12.5 million carbon credits from the period 2016 to 2020 – referred to as “legacy credit”.
President Ali pointed out that during the period when the People’s Progressive Party/Civic was out of office, Guyana’s credentials on climate change and the forest that were gained worldwide previously were lost.
“Today, we have shown that the opportunity existed even then because in this agreement that we signed [on Friday], 12.5 million credit is what is termed ‘legacy credit’. We have been able to go back to 2016 and 2020 – the period we were out of Government – and get the legacy credit sold between 2016 and 2020,” the Guyanese leader stated.
However, Vice President Bharrat Jagdeo, who initiated the 2009 US$250 million deal with Norway for Guyana to preserve its forest and also led negotiations with Hess Corp, went on to give a breakdown of the earnings Guyana will get from this sale agreement.
Regarding the 12.5 million legacy credits, he explained that Hess will be paying a minimum of $15 per tonne, thus raking up the total to about US$187 million.
According to Jagdeo, it is anticipated that this amount will be paid in full within the next 18 months. However, a first instalment of the legacy credit payment, to the tune of US$75 million, is expected by December 15, 2022.
Indigenous communities to benefit
VP Jagdeo further disclosed that of the US$187 million earned from the legacy credit, some US$28 million will go towards Indigenous communities.
“We made a commitment that 15 per cent of all of the proceeds from any sale of forest carbon will go to Amerindian communities. We had a discussion at the NTC (National Toshaos Council) and we agreed that all of the communities, forested and non-forested Amerindian communities, will benefit in an equitable manner and they will decide on the distribution,” the Vice President stated.
This was in response to concerns raised by certain sections about the benefits to this grouping of people from such agreements.
But the VP stressed that “…the Amerindian communities from this deal alone with Hess will benefit from about US$112 million. That’s a lot of money… You show me a country or a party where you can raise US$112 million for the Amerindian community and we will go with your proposal.”
Moreover, Jagdeo outlined too that for the period 2021 to 2025 in the Hess deal, Guyana’s carbon credit would be sold for $20 per tonne, thus earning the country another $250 million; while another $312 million is expected during the 2025 to 2030 period when the credit would be sold at $25 per tonne.
He explained that these figures are the minimum earnings and could be increased in the future if the global market prices for the sale of carbon credit change. In such an event, Guyana stands to benefit from 60 per cent of that increased price.
Unlike, the arrangements with the Norway deal, payments from this Hess agreement go directly into the Treasury as revenue but will be placed in a separate account for auditing and parliamentary accountability purposes as well as to allow for easy access to financing.
The 33.7 million credits being sold to Hess Corp is just 30 per cent of the carbon sink contained in Guyana’s vast forest cover. The country’s more than 18 million hectares of forests are estimated to store approximately 20 billion tonnes of carbon dioxide equivalent. The remaining 70 per cent of carbon credit will be put on the market for future sale agreements.
VP Jagdeo further posited that this first sale agreement will make Hess Corp one of the top private sector funders of climate action in the world.
In fact, John Hess in his remarks said that this carbon credit sale agreement is in keeping with his company’s efforts to lower carbon emissions as well as its commitment to achieving net-zero.
“Many companies, many countries make pledges about net-zero. We are actually showing action. The country of Guyana is showing action and steps to make 2050 net-zero a reality. The world faces a dual challenge of reaching net-zero by 2050, while growing the global energy supply by about 20 per cent over the next 20 years. Governments, businesses and civil society must work together on cost effective policies to meet this dual challenge,” Hess stressed.
In this regard, President Ali stated that Guyana remains steadfast in bringing awareness and the understanding globally of the economic wealth and value of Guyana’s biodiversity, ecological services, environmental services, and of course, its forests. He contended that the total value of Guyana’s pristine forests must be monetised, and that his Government is willing to work with every partner on this front.
“We are committed to playing our part in this global environment. We are committed in playing our part in climate change, in providing energy security and we are equally committed in the social and economic transformation of our country and our people. And to do this, we are committed to the oil and gas sector, ensuring that we optimise the totality of benefit in this sector and bring to fuel the transformation that is required for our country. In doing so, we know how important time is,” Ali asserted.
A carbon credit is a tradable permit or certificate that allows the holder of the credit the right to emit a stated tonnage of carbon dioxide or an equivalent of another greenhouse gas. Countries and companies that exceed their permitted limits can purchase carbon credits from nations that have low emissions such as Guyana. (Vahnu Manikchand)