OPINION: The global political economy of oil & gas and climate change

Last Updated on Tuesday, 27 February 2024, 16:49 by Denis Chabrol

By Dr. Randy Persaud, Professor Emeritus

The global political economy has historically been dogged by North-South conflicts whereby the G-North states have used their structural economic power to shape and even determine the rules of the game. Global South leaders have consistently called for institutional reforms that would ensure fairness in global governance. Change has been slow and shallow. Nowhere in the current world order is this more pronounced than in global politics of climate change. These very issues are deeply imbricated in Guyana’s rising oil & gas sector.

On day three of the recently concluded energy conference in Georgetown, Vice President Jagdeo reflected on several hot button issues on global energy and climate change. He was interviewed by Carlos Pascual, the Senior Vice President for Geopolitics & International Affairs S&P Global. The following are among the key points.

First, Guyana and the global south forested countries are of the view that an active carbon pricing regime is critical for effective governance of GHG emissions. In effect, carbon pricing is like a ‘user-pay’ system. The rationale for this is that historically, and in the contemporary period, the G-North countries have discharged significantly disproportionate GHG into the biosphere. Rich countries (US, Canada, Japan, and western Europe), with only 12% of the world’s population, have discharged 50% of CO_2, with 48% coming from the rest of the world (NYT, 11/12/2021).

Second, the removal of carbon subsidies will result in greater fuel efficiency which in turn will lead to less GHG emissions. There is a ‘fair-trade’ benefit in this as well. Fossil fuel subsidies amounted to US$ 7 trillion in 2023. Incidentally, just days ago France reneged on a COP 28 promise to reduce, and remove these subsidies, which are rife in their agricultural sector. In 2021 the EU provided US$ 199 billion in energy subsidies, $42 billion of which was for the fossil fuel sector.

Third, it is important to get rid of coal. Coal currently contributes more to global energy supply than natural gas, although it is far more destructive. Further, coal production has gone up dramatically since the Earth Summit in Brazil 1992. It has increased by 126% since 1981, compared to oil production which has increased by 51% (https://ourworldindata.org/fossil-fuels).

Fourth, reduction of demand (meaning less consumption) is imperative in the drive to meet the IPCC’s target of cutting greenhouse emissions 43% by 2030. There are staggering disparities in consumption between the G-North and G-South countries. For instance, Japan with 125 million people have about 40 million more households with air conditioning than India with 1.4 billion souls. Canada’s per capita electricity generation (2022) was 16, 602 kWh. Look at the comparative figures for some G-South countries – Brazil 3162 kWh; Guyana 1529 kWh; DRC 115 kWh; Chad 18 kWh. The average Indian owns 1.2 pairs of shoes (Statista); the average American, 12 pairs.

Fifth, the call to stop oil and gas exploration in (mostly) developing countries is unfair. This is because countries such as the UK, USA, and Canada continue to facilitate new investments in oil and gas. If a stop is instituted, the current producers will effectively have a monopoly. Canada and the United States have both increased oil and gas production significantly over the recent past, and this despite their consistent rhetoric against hydrocarbon exploration elsewhere. Oil production has more than doubled in the US since 2008, now topping 13 million bpd. Canada is likely to top 5 million bpd in 2024. In 2010 it was less than 3 million bpd (Reuters, (8/23/2023).

Sixth, Guyana is already a net zero country, and its carbon sequestration services serve as a model to many developing countries that are on the way to monetizing their forests. The LCDS is also a comprehensive development plan consistent with the UN’s SDGs 2030. Two of the notable aspects of the LCDS are the focus on hinterland development intended to dramatically improve the lives of Amerindians, and a dedicated strategy at realizing national and regional food security.

The gas to energy project will help to cut emissions by half and reduce electricity prices by fifty per cent for end users. Cooking gas prices will be significantly reduced, and exports markets will be developed for the significant excess that will remain. These developments are concrete ways in which Guyana will break out of the North-South straitjacket.

It is worth knowing that Guyana’s oil & gas sector is free of flaring. Flaring is a major contributor to black carbon and methane, both of which are destructive to human and natural ecosystems. Guyana is also ramping up its solar energy delivery. Free solar panels and other connected accessories are currently being distributed in difficult ‘off-grid’ areas in the hinterland communities. The Amalia Falls hydro-project will go out to tender soon.

Dr. Randy Persaud is Adviser, Office of the President, Guyana