Asking new, developing producers like Guyana to leave its oil resources in the ground or to produce some of it at a slow pace is not the answer to achieving a decarbonized world. The key lies in putting a tax or price on carbon and eliminating fossil fuel subsidies says President of the new oil producing South American country, Dr. Irfaan Ali.
Mr. Ali made these comments last week at the launch of the expanded Low Carbon Development Strategy (LCDS-2030). During his address, the Head of State said it is not fair for some countries to be asked to halt production or any new exploration while global powerhouses continue to grow their supply base.
He articulated that basic fairness is required while adding that this means the oil industry, and its US$3-4 trillion of annual revenue, should not just be for the benefit of incumbent oil producers, particularly when those nations are already very wealthy. He said therefore that expecting developing economies to leave their oil in the ground really means “protecting the monopoly-like situation of existing producers so that they can maximize their income from oil and gas.”
Expounding further the President said, “…it would be perverse if the market was protected for them and them alone.”
Mr. Ali added, “No responsible government should volunteer that its people stay poor so that richer countries can have their market protected. Putting faith in solutions that expect this to happen is irresponsible and ultimately damages the prospects of climate success.”
Since 2009, Mr. Ali said Guyana has supported two main policies to drive global decarbonization. He said, “First of all, there should be a global price on carbon, levied on the consumption of oil and gas. This is the way to incentivize both the investment in lower carbon replacements for fossil fuel-based electricity and transportation – such as renewable energy and electric vehicles – while at the same time managing the global low carbon transition through incentivizing progressively lower-carbon sources of fossil fuels.”
The second main policy he said, is that subsidies for fossil fuel production should be removed. Upon noting this, Ali recalled that in 2019, 50 of the largest economies in the world – which account for 80% of global greenhouse gas emission – increased their support for fossil fuel production by 30%. Most of this was in developed countries, which are already the incumbents benefiting most from the trillions of dollars in the oil and gas market, the Guyanese leader stated.
He said the Government of Guyana, therefore, supports calls for the elimination of such fossil fuel subsidies, especially in Organisation for Economic Co-operation and Development (OECD) countries where the subsidies are the most distorting, destabilize prices, and do nothing to reduce the carbon intensity of the world’s economy.
Combined, he categorically stated that these two policies can create a much fairer marketplace for oil and gas that is compatible with achieving the goals of the Paris Climate Agreement.