Suriname on the Global Map

Not only Oil & Gas

eyesonsuriname

Amsterdam, 23 August 2023 — An effort by Suriname to secure payment for its own forest cover – with a potential assist from recently discovered offshore oil and gas – is well on its way. The country is currently sizzling and we’re not only talking about the outside temperature.

Transition finance is a growing part of bank lending and a strategy increasingly used by multibillion-dollar investment funds. Yet there is little agreement on what a transition finance strategy should involve. How can an oil discovery help Suriname start trading what is called sovereign carbon ?.

Suriname has an area of 163,870 km2 and a population of just under 600,000. With more than 15.25 million ha of dense forest cover or 93% of its total area, Suriname is one of the most forested countries in the world.

[[ An undisclosed but approximately 40 000 Illegal Brazilian goldminers are currently unaccounted for and digging for gold in the country, destroying and poisoning the fragile and valuable environment.

The country of Suriname, has had no or very limited impact on global markets since it gained independence from the Netherlands in 1975.

But before it has provided more industrialised countries a valuable service for free. First of all: almost all of the imported bauxite by the Aluminum Company of the U.S. of A. during WWII was exported by Suriname.

Most of the warplanes were actually built with these raw-materials from Suriname. This tiny unknown country on the North Eastern coast of South America thus helping the allies to win the war.

Suriname is the world’s most densely forested country.

No question anymore and officials have argued for years that it should be paid for the carbon reduction its rainforests provide.

” Now, we have plans to attract more finance for environmental conservation – of course with the help from, of all things, our recent offshore oil discoveries “, Mr. Marciano Dasai, Minister of Spatial Planning and Environment in Paramaribo, told eyesonsuriname in his air-conditioned office.

The plan, of course, is still under development, but hopes for very good progress are equally very high.

Government consultants and other advisers in the conservation business, said they hoped the country’s new requirements for fossil fuel exporters could help preserve Suriname’s rainforest.

That could also help kick-start an international carbon market, created by the 2015 Paris Agreement, that has struggled to gain traction.

Suriname announced its first offering of sovereign carbon credits, together with London-based investment bank BancTrust and ITMO Ltd, a private company that structures and trades in these instruments.

The plan relies on a system for global carbon accounting created in the UN’s 2015 Paris Agreement.

Under that system, countries can trade sovereign units of emissions, called internationally transferred mitigation outcomes (ITMOs), and count these towards their carbon-cutting goals, so-called nationally determined contributions (NDCs).

With this initial issuance, Suriname is offering 1.5mn ITMOs, each corresponding to one tonne of carbon dioxide (or equivalent emissions of other greenhouse gases) reduced beyond a business-as-usual trajectory.

The ITMOs issuance is backward-looking — this “vintage” refers to emissions reduced in the year 2021. The reduction was achieved mainly through improved performance in tackling deforestation and forest degradation.

” Backers hope that, if the ITMOs market grows, countries will treat their NDCs like bank accounts, and ITMOs like money “, one banker and advisor to the government told us.

If a country overspends its carbon budget, it can offset by purchasing ITMOs.

Countries that conserve their forests or cut emissions ahead of schedule can sell ITMOs to recoup some of the value of those carbon savings.

” It’s a proposal for a kind of global cap-and-trade programme, which could redistribute resources from more to less industrialised nations. But there is no “cap” enforcing carbon limits on polluting countries, and voluntary demand for such credits remains low ” Mr. Dasai said.

The market for ITMO trades has got off to a slow start, with just about 70 bilateral deals signed as of December 2023, according to data from S&P Global and the UN.

That’s where Suriname’s oil is coming in.

Oil discoveries create fresh opportunities. Since 2019, nine deepwater fields have been discovered off the coast of Suriname, according to energy consultancy Wood Mackenzie, bringing discovered resources to more than 2.4bn barrels of oil and liquids and more than 12.5tn cubic feet of gas. By comparison, the figures for the US were 48.3bn barrels and 691tn cubic feet, respectively, as of the end of 2022.

This presents an opportunity to jump-start demand for Suriname’s sovereign carbon credits, according to one of the directors of the Coalition for Rainforest Nations, a non-profit advising Suriname in these questions.

The idea, he said, was to require all companies operating in Suriname to purchase ITMOs offsetting their in-country emissions.

” This would include major industries such as gold, bauxite, and – crucially, given the anticipated boom in this sector – oil and gas. Suriname’s minister of the environment”, Marciano Dasai, told eyesonsuriname in an exclusive interview. That the mechanism was still under development – a version of such a plan could be brought to parliament for a vote this autumn, he confirmed – and that it would be essential for it not to deter investment.

“We don’t have a lot of companies or investors knowing details about possibilities of Suriname,” he said and “we’re dependent on those few companies for our income . So we have to look at this very carefully, in order to still give them incentives to stay investing in Suriname.”

However, he said, if only local companies paid into such a scheme, “it would not be enough to help us. So we are dependent on foreign companies. Companies from outside. International companies if you know what I mean”, he added.

The immediate Future remains somewhat Cloudy.

There are obstacles and a variety of social-economical worries. Non-profit Carbon Market Watch institutions and organisations, all agree upon the fact and say that the ITMOs schedule sets so few requirements for countries to participate that you get these units that can vary greatly in terms of their actual environmental integrity.

An even more fundamental problem remains after setting aside worries over a moral compass and integrity, is how to generate demand for such a scheme.

The current plan relies on countries’ sticking to their NDCs, and buying ITMOs to cover the pollution they cannot cut domestically.

But absent enforcement, there is little reason to think they would volunteer to offset emissions at a significant scale through such a scheme.

Serious sceptics have also asked, why would it be cheaper, or more politically palatable, for countries to buy carbon credits from a rainforest country, rather than cutting emissions at home?

And if it is, does that some companies like ITMO, suggest it is being priced too cheaply? “At the end of the day, there’s no real effective way to create compliance,” executives in Paramaribo say.

However, it is argued, some companies like ITMO are more likely to generate demand than other types of carbon credits, since they are verified by the UN, based on verified past emissions rather than hypothetical future ones, and sovereign-scale, rather than cobbled together from individual projects. Dasai, for his part, did not seem convinced that the climate funds that have eluded Suriname would now materialise. But he hopes the country’s recent windfall could give it a foothold.

“We are following this mechanism in which we can receive climate finance through carbon credits. OK, we’re doing that, but it’s still not working,” Mr. Dasai said of the country’s most recent and very exciting experience. “Now, we not only have oil and gas. But also our carbon credits .”

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