United States (US) oil giant Hess corporation made its first payment of US$75 million (or GY$15.6 billion) to Guyana as part of a new venture where Guyana receives payments for saving its forests.
This payment was announced via a statement on Vice President Dr. Bharrat Jagdeo’s official Facebook page on Tuesday.
It comes just one month after the Government of Guyana entered into an agreement with the Hess Corporation for the sale of carbon credits for a minimum of US$750 million.
The statement noted that the first payment represents US$37.5 million for 2.5 million ART-TREES credits from 2016 at a price of US$15 per tonne of carbon dioxide equivalent; and another US$37.5 million for 2.5 million ART-TREES credits from 2017 at a price of US$15/tonne of carbon dioxide equivalent.
And more money is expected soon.
“Two further payments of US$37.5 million each will be made during 2023 – one in January and one in July – bringing the total amount available for appropriation in this year’s National Budget to US$150 million,” the statement further noted.
Importantly, this means that the 2023 National Budget, which will be read by Finance Minister Dr. Ashni Singh on Monday, will be financed by both oil revenues and funds from the sale of Guyana’s carbon credits.
And it was noted that in keeping with established budgetary process enshrined in law, the Minister of Finance shall request the National Assembly to approve withdrawals from the Consolidated Fund, which shall be included in the Annual Budget Proposal.
The statement also noted that the Hess payments have been deposited in a US dollar-denominated account held by the Bank of Guyana overseas, for onward transmission to the Consolidated Fund, which will be credited with the Guyana dollar equivalent.
Based on commitments made in the Low Carbon Development Strategy (LCDS) 2030 and Resolution No. 45, adopted by the National Assembly on August 8, 2022, the National Assembly, including through its Committees, will have oversight of the investment of all national revenues received from forest climate markets and managed via the Consolidated Fund through the budgetary process.
Every payment and payment source will be communicated publicly at the point of payment, and at the point of transfer into the Consolidated Fund, when the payment value in Guyana Dollars will also be communicated.
It has been determined that 15 per cent of the proceeds will be allocated towards community/village-led programmes for Indigenous Peoples and Local Communities (IPLCs) as set out in Village Sustainability Plans or equivalent, put together by communities themselves.
The remaining 85 percent will be allocated to national priorities outlined in the LCDS 2030 including land titling efforts, improving drainage and fuelling Guyana’s transition towards more renewable energy sources.
All these transactions will be appropriately tagged with a unique identifier on the Integrated Financial Management Information System (IFMIS) within the Ministry of Finance to enable the execution of annual audits, the statement said further.
Overall, Hess is expected to pay Guyana at least US$750 million up to 2030 for carbon credits. Should prices for carbon credits increase on the international market, Guyana will be able to get more money from Hess.
For context, a carbon credit is a kind of tradeable permit or certificate that represents the removal of a certain amount of carbon dioxide from the environment. Since carbon dioxide is the principal greenhouse gas that harms the environment, it is tracked and traded like any other commodity, and hence the name carbon market.
What Guyana is hoping to do, as it did before with Norway, is sell these credits to countries or companies. This would essentially mean that the countries or companies would pay Guyana to keep its forests intact.
Countries and companies that purchase these credits hope to signal that commitment to environmental protection and, in some cases, offset their own harmful emissions.
