A great idea from a small country
The Yasuni Initiative – a thrown down glove from Ecuador
Ecuador, a Latin American country named after proximity to equator, comes with a unique initiative. “We will leave the rain forest and oil reserves unexploited if you pay for it.” Ecuador is offering to abandon plans for exploitation of vast oil reserves estimated to be about 846 millions of barrels under its largest rain forest national park Yasuni. The country expects to be paid half of oil revenues from the expected profit in exchange. So far this is an unprecedented offer. This developing country brings new insight into discussions on a new climate treaty, which is supposed to replace the Kyoto Protocol. Will this offer prove viable and feasible? Is there a chance to use this example in other countries too?
Social and environmental effects of oil exploitation in Ecuador Amazonia which started in 1967 are tragic and the outlook of this part of Ecuador is very bleak. An old, large wheeled, battered Mercedes bus is ploughing through dusty road in a scorching countryside, which in places resembles either semi-desert, savanna or grazing fields. This is a place where rain forest was thirty years ago. We’re standing next to the oil well n.1 which is not far from town Lago Agriatico. This is a landmark, where Texaco Company started oil production in Ecuador, forty years ago.
Texaco toxico
Ecuador has suffered quite significant climate changes. Glaciers in Andes are the main source of potable water for the most densely populated region of ecosystem called “paramo” which is a mountain countryside covered by resilient grasses and low bush. It has been proven that the glaciers are melting and drinking water has become scarce and problematic to obtain. The area around town and port Guayaquil will suffer flooding no matter how little the sea level rises. Quick deforestation of Amazonia due to oil exploitation and an advancement of “civilization” into formerly scarcely populated areas bring undesired effects such as rising temperatures which in turn result in countryside with predominant savanna under further threat of desertification. Main reasons behind Yasuni initiative are economical and social. The Ecuador economy dependent on oil production needs changing. Oil production generates between 35 to 45 % of Ecuador income. Most of these revenues are eaten up by huge state debt, which was created by unstable governments during the period of so called “cowboy economy” based mainly on exploitation of non-renewable resources. The oil reserves are estimated to last for about 20 to 30 years. The oil production has already peaked, reached the breaking point and started to decline. The first drop in production by 5,6% was in 2007, the decline in old oil fields was much bigger (about 30%) but has been compensated by exploitation in deeper areas of Amazonian forest. So the country desperately needs a new economical model.
“The first oil well was opened in 1967” explains Mr. Luis Yanza, president of the organization called Frente de Defensa de la Amazonia (Friends of Amazonian defense) which has been fighting uneven battle against supranational oil company. The Texaco company was at that time awarded a concession to more than one million hectares of tropical forest, which at that time was inhabited by 75 000 indigenous people. A new pipeline through Andes was constructed soon and it connected Ecuador’s Amazonian region with port Esmeraldas. Texaco during its production exported 220 trillion barrels of oil and built 339 oil wells. It also built roads, refineries, pumping stations and pipelines. The new infrastructure and job possibilities brought to Oriente poor citizens from Pacific coast and Andes and so the indigenous people became minority. Texaco Company left this region after 23 years in 1990. It left behind the biggest ecological catastrophe in South America, about thirty times larger than the infamous Exxon Valdez disaster in 1989. There are more than six hundred sludge pits with highly toxic water contaminated with residues of oil, salts and heavy metals such as arsenic, lead and mercury. The total amount of liquid is estimated to be 64 million liters of oil and 76 billion liters of poisoned water. These sludge pits are not secured against rain storms and the only mean of protection is an unsophisticated drain pipe. Locals are therefore exposed to contaminated water which is used as drinking water by people and animals as well as for irrigation. The occurrence of cancer is three and half the average in the capital city. Oil contamination has so far caused, according to experts, death of 1400 people.
The oil digging hasn’t ceased yet. There are 20 oil mining companies operating in this region, including the state owned Petro Ecuador. All together they produce more than 300 000 barrels of oil per day. Only 2% of income comes back to Amazonian region Oriente, which is paradoxically the poorest region in the country. The hopes for new jobs among many immigrants haven’t materialized, since the oil industry employs only 10% inhabitants of this region. Immigrants have been allocated land along roads built by mining companies in pristine rain forest. They started plantations and cleared forest even further to obtain grazing land so within a scope of one generation the area of Ecuador rain forest lost one quarter of its area. Central Oriente region has thus become relatively densely populated agricultural and industrial region with hot and dry climate.
We’ve asked president of Friends of Amazonian defense: „How do you see the future of this region? “. His reply was very pessimistic: „There won’t be any people from Sekyoa tribe left, most members of Cofana tribe will disappear too, and there will not be any oil. The only thing left will be poor, abandoned and destroyed countryside.
Ecuador in Copenhagen
The standing of Latin American countries during the climate negotiations at UN summit in Copenhagen was clear. The rich North should solve its climate debt by lowering emissions of greenhouse gases and offering subsidies to poorer nations. It is a clear and understandable demand, considering the fact that the countries in Latin American region produce only 5% of main greenhouse gas – carbon dioxide. Some Latin-American countries such as Brazil, Costa Rica or Guyana came to Copenhagen with a proposal to abandon tropical forest exploitation. This would help to preserve biodiversity and prevent release of carbon captured in wood. So called REDD Mechanism (Reducing emissions from deforestation and forest degradation), which has become widely discussed component in carbon trade credits could be part of the new global climate treaty. Unfortunately there are also many opponents to this initiative(see the box). In fact REDD can’t help to reduce carbon emissions.
The negotiations in Copenhagen this December failed. The next opportunity for the world leaders opens up at UN summit in November this year in Mexican Cancun. The only operative tool left from the Kyoto protocol, still available to developing countries, is so called CDM (Clean Development Mechanism) which enables investments into alternative energy projects, mainly Hydro Power Stations.
REDD as a hope for forest and economies of developing countries
We’re well aware of the key role deforestation and forest degradation plays in reduction of green house gases (REDD - Reducing emissions from deforestation and forest degradation) ...and the need to provide positive motivation through implementation of a mechanism..., which would enable mobilization of financial resources from developed countries“ as is written and so „acknowledged“ in a new legally non-binding climatic treaty organized by OSN in Copenhagen. Scientific studies show that deforestation causes about 20 to 25% of CO2 emissions produced by human activities. To implement mechanism REDD into the „carbon market“is one of the main achievements of the Copenhagen conference. REDD is not a part of Kyoto protocol, which still remains in effect. The REDD principle is based on the fact, that still standing trees should be of higher value than the cut down ones. There are supporters and opponents to the REDD, which sees forest ecosystems as a CO2 storage and there is even REDD+ which includes principles of nature protection and sustainable management of forest ecosystems. Its upporters could be found among politicians from third world countries, who see this as a potentially important source of income. Nature protection activists are not so single minded. „Will the developed countries provide financial support for developing countries to stop deforestation and cut down on CO2 emissions or will the REDD just create space for large supranational companies to continue emitting CO2 while supporting forest projects in developing countries?“ Those are questions which Roman Czebiniak from Greenpeace asks. Even more controversial are reforestation projects where other than original species of trees are planted and mono cultural plantation created. The effectiveness of REDD will no doubt depend on how the system is set up.
How could REDD help Yasuni Project? Commencement of oil mining would no doubt lead to full scale degradation of primary forest. The consequent emission of CO2 would be caused by two processes, deforestation and mining. REDD could become a tool how to find economic motivation to keep the forest intact. Today, there is an existing parallel between not logging and obtaining carbon credits for it. Maybe, there is a chance to add „not to mine“and still make profit on it. Let’s remain hopeful. The initiative by Ecuador is unique in contrast to the existing REDD initiative which has been requested by dozens of developing countries. The question remains, if we’re really able to set the system up to reduce CO2 in the atmosphere.
The Yasuni Initiative
Ecuador is coming with a brand new idea. „We’re willing to abandon oil mining of 846 million barrels of oil in the National Park Yasuni. This will prevent 407 million tons of carbon dioxide, (which is more than annual emission output of France) from being released into the Earth‘s atmosphere. It will also help to preserve one of the most diversified ecosystems and at the same time to protect tribes which have chosen to stay in isolation. Economical mechanisms, which are part of this initiative, will also support preservation of another 39 protected areas in Ecuador, social-development projects in health care, education and employment. These projects will help to start new economy independent on income from oil by investments into renewable energy projects. These secondary measures should help to reduce carbon dioxide, estimated to reach up to 1 trillion tons in 30 years, even further. Ecuador is, in return, asking from the international community a „compensation“of up to 50% of revenues, estimated to be generated by oil mining in this region. This amounts to 7, 2 billions American dollars, which should be, according the plan, deposited into a special fund in the next 13 years. The fund’s interests should help to transform the Ecuador’s economy and diversify its income, which today comes predominantly from oil.
The Ecuador’s government finally agreed to this initiative, drafted by several nonprofit organizations, last year in May after lengthy discussions lasting since the year 2007. Minister of Foreign Affairs and Minister of Environment, together with a team of negotiators, were promptly dispatched to Germany to discuss the Yasuni initiative. The result of this trip was an unprecedented statement from German government stipulating support to this idea and offering to donate, as the first government in the world, 50 million USD each year for a period of 13 years.
Yasuni National Park - a “hot spot” of variety in nature
We’re standing on the bank of Napo River which is a gateway to the pearl of Amazonia – National Park Yasuni and an optimistic Anita Rivas, mayor of town Coca, is describing her vision of future for this region. She sees it in Eco-tourism, support of traditional crafts and nature protection.
National Park and biosphere reservation Yasuni lies in the northern part of Ecuador’s Amazonia on the border with Peru and Colombia. Scientists have identified Yasuni as one of the most diversified ecosystems on Earth. The number of plants and species found in one hectare of its tropical forest equals to the sum of all Northern American species. Size of this national park is 9620 km2 which is nearly the size of Southern Moravia district and is inhabited by approximately 9800 people. They are indigenous people and some aren’t in contact with the outside world. They are hunters and gatherers, who grow yucca, bananas, citrus fruits and other forest fruits.
Activities of oil mining companies have been threatening forest ecosystems and the lifestyle of local indigenous communities for a long time. Recently, there has been a discovery of large oil deposits in the eastern part of park which are estimated to hold up to 900 million barrels of oil and some “more optimistic” estimates are as much as double this figure. Commencement of oil extraction in the park would be truly catastrophic.
“What will happen when our children grow up? Where will they live? Our rivers are calm and there is food, medicines and all other necessities for our life. What will happen if the oil mining companies destroy the rest of what belongs to us?” This is a part of an open letter sent to president Correo in June 2005 by Waorani people inhabiting most of the park interior.
The economics behind The Yasuni Initiative.
The special fund created for Yasuni project should accumulate 7.2 billion USD over a period of 13 years. This sum is a rough estimation of income from oil found in the new deposits if the price of oil stays around 60 USD per barrel. The sum of 7.2 billion USD is also, according to the authors of the Yasuni initiative, a price of carbon credits needed for 407 million tons of CO2 if they were released into the atmosphere and carbon credits were subsequently sold on emission markets in Europe (calculated with price of 17.66USD per ton).
Who should the investors be?
Ecuador expects the main investors to be mainly developed countries. The Yasuni initiative mentions “budgets” for 27 developed countries, so for example the USA would provide 204 million USD, Germany 46 million USD and the Czech Republic 2.05 million USD per year. There is also provision for international, non-government organizations and individuals to subsidize this project. These subsidies would partially be in form of donations and investments connected to the carbon market. The „Yasuni Guarantee Certificate“ would be issued as a non-interest obligation.
The Yasuni Fund
This special purpose fund should be administered under UNDP (The UN development program.) There is still no agreement on who the fund committee members should should be. This committee would make decisions on fund’s expenditure and investments. The members should come both from Ecuador and international institutions and they should represent government and non-government organizations. According to one of several initiatives, Ecuador should hold majority of votes but there is a disagreement whether UN should have the right to veto decisions. The final version of a contract had been drawn and was presented at the Yasuni exhibition stand at the Copenhagen summit but was withdrawn due to internal disagreements in the Ecuador team. The ministry of natural and cultural heritage María Farnanda Espinosa mentioned this issue on the 3rd of February: „Money collected for this project from Ecuador’s sources will be deposited into a national fund. “ She believes this will keep these funds separated from money collected abroad and thus will prevent international bureaucracy interference. On the other hand, it’s quite logical for the international donors to demand oversight over the fund’s investments. All investments should go into alternative energy projects such as hydro power stations and geo-thermal energy. Revenues should finance not only projects for nature preservation in Yasuni but also 39 other protected areas in Ecuador, tree-planting projects, social development projects in health care, education and employment.
Is there a chance for other countries?
Is this initiative solely for Ecuador or there is a chance to implement such models in other countries too? Authors say it is possible to use this project elsewhere, but under certain conditions. The country should belong among developing countries and investments from „the rich north“should help to start new economical model, independent on non-renewable resources. Secondly, the country should lie in the tropics with extensive natural biodiversity. Thirdly, the country should have large resources of fossil fuels in a biologically and culturally sensitive region. Such countries are for example Colombia, Congo, Madagascar and Philippines.
Where to find funding?
There are other potential financial sources, which could help to start this project. The non-binding agreement from Copenhagen needs to be transformed into legally binding contract first, to ensure a continuity of the Kyoto protocol. The current agreement contains some positive proclamations such as an agreement on the part of developing countries to invest into climate protection 30 million USD until the year 2012 and further 100 million USD till the year 2020. The prime minister of the Czech Republic Fisher promised to contribute 300 million CZK which is about 15 million USD till the year 2012. The Yasuni Initiative could serve as an example of such investments in the future.
Politics, tactics and rhetoric. Semi-green Correa.
The sky grew dark over Project Yasuni twenty days after the Copenhagen Climate Change summit ended with non-binding agreement. Ecuador president Correa called off the chief negotiator and the head of Yasuni team, minister for foreign affairs Falconi. He accused him of accepting „strange and non-acceptable“conditions. „We will not accept their conditions! Let them keep their money! “said president in his speech on 9th of January as has been reported by Reuters. He accused potential investors, among others Germany and Belgium, of dictating non-acceptable conditions and by doing so threatening the state’s sovereignty. Minister Falconi was a third minister for foreign affairs since the year 2007 when the Yasuni Project was introduced. The credibility of this initiative rapidly diminished largely due to the country’s internal disagreements.
One month later, things look bright again. February seems to be a month of resurrection for Yasuni Project. The press in Ecuador is full of information about the project and it seems to be the main topic of discussion across the country. Mr. Deago Stacey, an Ecuador’s ambassador in Vienna declared that there is no way back and Mr. President fully supports this initiative. He said: “Mr. president officially declared his government’s full support and a named it a priority of foreign policy the very day”. A new Yasuni team has been named. The heads of the team of negotiators have become Freddy Elhers, the general secretary of Andes’s community and Francisca Carrion, an ambassador with UN. Members of new technical and political teams have also been named.
European towns in support of Yasuni Project
The members of European Association of Towns associated in climate alliance together with non-profit organizations ASTM Luxembourg and The Czech Environmental Partnership Foundation have at a press conference in Vienna proclaimed their full support to Yasuni Project and asked governments of European countries to fully support the Yasuni Project.
This unique Yasuni Project is still alive and could serve as a model for others thus becoming one of the pillars for the next international climate treaty. The hope for rain forest, communities of indigenous people Waorani, Tagae and Taromenane as well as thousands of species and plants is not dying.