Can carbon trading break the Caribbean free of fossil fuels?

Source: John Fialka, E&E reporter • Posted: Thursday, August 18, 2016

To the tourists who support most of their economies, the sunny and wind-swept cluster of 15 island nations that constitute the Caribbean Community — often referred to as CARICOM — might seem like a renewable energy paradise, but the opposite is closer to the truth. This year, island governments and business groups have begun to explore carbon emissions trading and other ways to reduce the heavy and costly burdens of the region’s fossil fuel reliance.

“It’s an idea that’s in its infancy, but it’s exciting,” explained Hugh Sealy, a lead negotiator for small island nations in international climate talks and U.N.-appointed consultant to island states looking for ways to develop and use market-based trading mechanisms that nations approved in Paris late last year.

Recently Sealy, an environmental health expert who teaches at St. George’s University in Grenada, brought 10 members of CARICOM business groups together and found one of them, from the country of Trinidad and Tobago, already exploring new trading possibilities opened by the Paris talks.

The two-island nation, the richest in CARICOM, is perhaps the biggest example of the Caribbean’s dirty energy problems. Its huge but largely unregulated natural gas and oil industries have given it the second-highest per-capita fossil fuel emissions in the world. According to World Bank statistics, it is second only to the oil-rich Middle Eastern nation of Qatar.

Trinidad and Tobago is exploring ways to stop venting methane and other greenhouse gas emissions into the atmosphere by involving U.S. oil companies and others in so-called offset trades. The trades would provide credits for lowering verified sources of emissions. Backers of the proposal believe that engineering studies will show that cutting Trinidad-Tobago emissions could generate some of the cheapest available credits in the world.

Most of the other CARICOM nations, according to Sealy, find themselves addicted to diesel and other oil imports to keep their electricity and transportation systems running.

“The cost of that can be anywhere between 10 and 25 percent of a nation’s GDP, depending on the price of fuel, so it’s an enormous constraint on their ability to mitigate climate change,” Sealy explained.

Battling oil loans and entrenched interests

One complicating factor for cutting oil imports is Venezuela, which has had a history of providing cut-rate loans to keep island nations importing its oil. That has loaded many of them with years of debts that they would have to repay before they could afford to switch to cheaper, cleaner forms of generating electricity.

A second complication is that island homeowners and businesses pay an average of around 30 cents per kilowatt-hour of electricity, among the highest prices in the world.

“That is roughly triple what residents of a U.S. city would pay,” noted Roy Torbert, manager of island projects for two groups, the Rocky Mountain Institute and the Carbon War Room, that are trying to help the governments of island nations shift to renewable energy sources for electricity.

A third factor that Torbert confronts is that most island utilities are unregulated and seem most worried that they will lose their electricity monopolies when and if islands shift away from renewables.

“They have an immediate interest to fight against renewables, but in the long run, many of them are forward-thinking,” he added.

Torbert and his groups are helping one island government utility, on Saint Lucia, build a 3-megawatt solar array whose prices will be competitive with oil-based electricity. But the array will provide about 1 or 2 percent of the power the island needs. Unlike some other islands, Saint Lucia is volcanic, and energy development companies are exploring ways it might generate geothermal electricity. The possibility could emerge sometime in the next decade, or not, depending on the quality and quantity of the steam it produces.

For the foreseeable future, however, Saint Lucia will have to rely on mostly oil and some solar to keep its electric grid running.

“For many years, people have been promised renewable energy. They’re highly knowledgeable about it, but they’ve struggled. It’s difficult when there are no [emissions] regulations to create regulatory certainty,” explained Torbert.

‘We are on the front lines’

Putting a price on carbon emissions is another idea that has entered discussions in oil- and gas-rich Trinidad and Tobago, which is the largest exporter of ammonia made from natural gas in the world.

But its immediate plan is to try and attract help from the United States for an emissions trading scheme. One version of it would create a market that includes 15 Caribbean nations and the U.S. Bureau of Land Management, a branch of the Interior Department that manages oil and gas production on public lands.

Gary Clyne, a consultant to the Energy Chamber of Trinidad and Tobago, submitted a $4.2 million proposal to BLM, asking it to finance a study of how the trading might work.

“BLM has probably around 100,000 producing wells. It’s the perfect agency to include in our boundaries. A boundary can be wherever you define it,” Clyne explained.

He estimates that cutting emissions in Trinidad and Tobago, where they are so plentiful, could be as much as 40 percent cheaper than cutting oil and gas emissions on public lands in the United States. One of the theories of carbon trading is that greenhouse gases eliminated anywhere in the world have the same impact on mitigating climate change, he noted.

“We’re on the front lines when it comes to climate change,” Clyne added, pointing out that, overall, island nations produce a tiny fraction of the globe’s emissions but have the most to lose from sea-level rise and more violent weather. “We are doing everything we possibly can to make this work.”

Clyne submitted his proposal to BLM on Earth Day, April 22. Asked about its status, BLM spokeswoman Kimberly Brubeck said the agency is aware of the proposal and is reviewing it.