Policy wonk digest: Paying Ecuador to keep its rainforest

As a developing nation with rich oil deposits in environmentally important areas Ecuador faces a dilemma:

  • exploit the oil, screw the rainforest, but get richer as a result or
  • leave the oil in the ground to protect the environment.

Taking the environmental route is harder for Ecuador than developed nations because the oil money would make meaningful differences to Ecuador’s population: they could become more educated, healthier, there could be better roads to encourage more tourists helping Ecuador get richer again…

Ecuador has proposed a kind of solution to this dilemma for a specific part of Amazonian rainforest in Yasuni National Park which has proven oil deposits. The idea is that the ‘international community’ pay Ecuador 50% of the value of the oil reserves in exchange for a commitment never to exploit the oil.

It’s a pretty interesting idea. There’s good arguments that the benefits of the existing rainforest – biodiversity and around 410 million tons of C02 foregone – accrue internationally rather than to Ecuador specifically. There’s also an argument that it’s easier for developed countries to pay the cost of non-exploitation, rather than to ask Ecuador to bear this burden. It’s also an idea that has potential broader implications, especially in the absence of a functioning international carbon price.

Where’s this proposal at?

This proposal has been kicking around in Ecuador since about 2007. A significant amount of commitments from international donors were raised – up to $336 million. But few of the donors made good on their commitments. Citing this, the Ecuadorian government formally folded the initiative concluding it wasn’t going to work because of Western hypocrisy, not willing to put its money where its environmental mouth is. It’s also fair to level accusations of hypocrisy at Ecuador itself though: while negotiating the initiative Ecuador was also securing extraction contracts with Chinese sources for the same area.

The initiative isn’t quite dead. Ecuador has a direct democracy law. If 5% of the population signs on to a call for a referendum then that referendum can be binding. The campaign for this referendum is currently all over the papers here. The big issue is currently a complex process for verifying signatures.

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