An Un-Conventional Approach: Ecuador's Yasuní-ITT Initiative is in Discord with the UNFCCC

Author:Ryan Haddad
Position:J.D. Candidate, May 2012, at American University Washington College of Law
Pages:15-18
 
CONTENT
15WINTER 2012
AN UN-CONVENTIONAL APPROACH: ECUADORS
YASUNÍ-ITT INITIATIVE IS IN DISCORD WITH THE
UNFCCC
by Ryan Haddad*
THE YASUNÍ RAIN FOREST
Dubbed the “cradle of the Amazon,1 and covering more
than 2.4 million acres in the Amazon River Basin,2
Ecuador’s Yasuní National Forest is perhaps the most
biodiverse place on Earth.3 Almost 200 species of mammal,
560 fish species, 300 reptile and amphibian species and close
to 600 different types of birds can be found within the parks
parameters.4 In just 2.5 acres of the park can be found as many
tree species as in the U.S. and Canada combined.5 In addition
to its ecological diversity, Yasuní supports several tribes of
indigenous people,6 which remain voluntarily isolated in the
forest.7 In 1989, the United Nations Education, Scientific and
Cultural Organization (“UNESCO”) designated Yasuní Forest as a
Biosphere Reserve.8
However, the Yasuní’s ecology is being threatened by the
recent discovery of petroleum under the park. In the past several
years, nearly 900 million barrels of crude oil –worth billions of
dollars – has been discovered.9 For Ecuador, a country badly
in need of money as one-third of the population lives below the
poverty,10 oil companies and consumers will be only too happy
to provide this money if drilling is allowed to go forward.11
However, if Ecuador follows the conventional path of petroleum
development, much of Yasuní will be degraded, deforested,
and destroyed.12
THE YASUNÍ-ITT INITIATIVE
An unconventional alternative has emerged. Speaking to
the United Nations conference on climate change on September
24, 2007,13 Ecuadorian President Rafael Cor rea outlined the
so-called Yasuní -ITT Initiative, which would leave nearly one
trillion barrels of heavy crude oil in the ground beneath Yasuní.14
In exchange for sacrificing billions of dollars worth of oil, and
providing the corresponding environmental benefits, Ecuador
seeks “fair compensation” from the international community15
to the tune of $3.6 billion16 –which equals approximately one-
half of the estimated revenue lost by not drilling.17 By foregoing
exploitation of the Yasuní oil, the initiative would protect the
forest and its inhabitants from potential development and conse-
quently devastating degradation of the park and its resources.18
The initiative also claims to prevent the emission of 407 million
metric tons of carbon dioxide (“CO2”) from the avoided extrac-
tion and burning of the fossil fuel, and an additional 800 million
metric tons of CO2 from the precluded deforestation as well as
reforestation effort that Ecuador will promote nationally.19
Under the Yasuní-ITT Initiative, Ecuador would gain its
desired portion of lost revenues from other countries, non-gov-
ernmental organizations, environmental groups, and others,20 in
increments of $350 million annually over 10 years.21 The funds
would then be placed in the Yasuní-ITT Trust Fund, adminis-
tered by the Multi-Partner Trust Fund Office (“MPTF Office”)
of the United Nations Development Programme (“UNDP”),22
and would be used to help Ecuador promote and develop
renewable energy projects, transportation systems, programs to
eliminate poverty, and equitable access to health care and educa-
tion.23 Those who contribute to the trust will be issued Yasuní
Guarantee Certificates (“CGYs”) equivalent to the face value of
contributions.24 CGY’s are essentially state bonds recognized by
the government of Ecuador.25 If Ecuador breaches its promise,
the CGY’s would then be redeemable, entitling the holders to
reimbursement by the Ecuadorian government the face value of
the CGY in U.S. dollars.26 The CGY’s will not accrue interest.27
INTERNATIONAL SUPPORT
The Yasuní-ITT Initiative (“Initiative”) has garnered tepid
support from international dignitaries, including UN Secretary
General Ban Ki-Moon, Nobel Laureates Muhammad Yunus,
Desmond Tutu and others, as well as actors Leonardo DiCaprio
and Edward Norton.28 The initiative has also received the
unanimous official support of the German Parliament, as well
as the backing of the European Union, other international orga-
nizations, and various indigenous organizations and ecological
groups in Ecuador. 29
“This innovative concept to combat global warming strikes
at the root of the problem by preventing the release of CO2 in
the first place,” Ban Ki-Moon said in a 2011 joint press confer-
ence with President Correa. 30 “I look forward to seeing what
more Ecuador will do to build on the climate change momentum
generated by last year’s conference in Cancun.”31
The reason for the Initiative’s wide-ranging support is not
difficult to explain. Yasuní National Park poses a sympathetic
figure: an aesthetic and biological wonder. Proponents of the
Initiative emphasize that it would have the duplicative effect of
reducing both fossil fuel consumption and the destruction of a
vast carbon sink.32 In turn, this would allow the sequestering
millions of tons of carbon dioxide,33 mitigating other greenhouse
*Ryan Haddad is a J.D. Candidate, May 2012, at American University Washington
College of Law.
16 SUSTAINABLE DEVELOPMENT LAW & POLICY
gas emissions, and precluding the resultant environmental degra-
dation caused by crude oil production. 34
Commentators have argued that such compensated moratoria
present a more cost-effective way to address emissions from fossil
fuel consumption, deforestation, and biological conservation in
developing countries.35 Others note that this reduction of carbon
dioxide emissions and preservation of the national forest will posi-
tion Ecuador as a major contributor to emission reduction targets
under the construct of Kyoto Protocol to the United Nations
Framework Convention on Climate Change (“UNFCCC”).36
Broadly, it has been proffered that the Yasuní -ITT Initiative
acknowledges a globally-shared stake in the preservation of
natural treasures like Yasuní and a cor responding shared respon-
sibility to help developing countries preserve them.37 In this way,
the Yasuní -ITT Initiative represents a new tool for sustainable
development and environmental conservation: the compensated
moratorium.38 As of December 2011, $116 million had been
contributed to the Yasuní fund.39 The Yasuní-ITT Initiative would
serve as an unprecedented paradigm shift and could potentially
serve as a dry run for further, similar arrangements. Proponents
for this concept have identified opportunities for other compen-
sated moratoria in Bolivia, Brazil, Colombia, the Congo, the
Dominican Republic, Indonesia, Madagascar, Malaysia, Papua
New Guinea, Peru, the Philippines, and Venezuela.40
THE TRUTH ABOUT THE YASUNÍ -ITT INITIATIVE
Despite this support and potential, the international com-
munity would be best served to let the Initiative expire without
implementation. Ecuador’s precarious recent political history
notwithstanding–the country had seven presidents and two
constitutions between 1996 and 200641–the Yasuní -ITT
Initiative runs against in the best interests of the international
community because, as presently constructed, it is wrought with
factual and logical inconsistencies, false promise, and redun-
dancy. The Initiative claims unclear and overstated net impacts
on greenhouse gas emissions and assigns staggering fiscal costs
to marginal impacts on oil consumption. More importantly, sup-
port for the Yasuní -ITT Initiative would have a dire precedential
impact, setting counter-productive compensation calculations
for conservation actions.
THE PROBLEMS OF THE INITIATIVES COMPENSATED
MORATORIUM REGIME
The first, obvious, impact of Yasuní-ITT Initiative ratifica-
tion is that it sets a precedent that the world’s developed nations
are ready and willing to pay the ransom when the planet’s natural
wonders are held hostage. Other developing countries would be
sure to follow Ecuador’s lead, secure in the knowledge that the
international community is willing to bargain for the safety and
well-being of their ecological crown jewels.
This ransoming aside, the Initiative’s compensation struc-
ture, which ties remuneration to the opportunity costs associated
with leaving petroleum in the ground, is logically flawed, short-
sighted, and dangerous. The Initiative in its current terms is a
compensated moratorium, not a conservation action, which has
the effect of calculating Ecuador’s compensation in terms of the
market value of the foregone industrial activity, rather than the
environmental benefit derived.
By framing Yasuní compensation in the market value of
the oil foregone, the international community is establishing a
disincentive to other nations for foregoing less economical, but
equally environmentally degrading activities. For instance, there
would be significantly less incentive for a country like Algeria to
forego possibly dangerous shale gas hydraulic fracturing activi-
ties because the price of natural gas has fallen and natural gas is
less profitable per unit than crude oil.42 In addition, small-scale
projects with far-reaching environmental impacts would not be
compensated to the same degree as large-scale projects with
relatively smaller environmental impacts.
Even if the Initiative were to adopt a compensation framework
that takes into account environmental benefits, the asserted impact
of the Initiative is vastly inflated. First, regarding the issue of leak-
age, it has been argued that, by leaving almost a trillion barrels of
oil in the ground, the Initiative will reduce total greenhouse gas
emissions globally.43 However, it has been noted elsewhere that
the Initiative cannot be expected to provide the GHG-avoidance
windfall it purports to, particularly in the short-term.44
The decision to forego oil supply will do nothing for demand,
meaning the net emissions in the immediate future are unlikely to
be impacted.45 The Initiative’s claim to reduce global emissions
is dependent on various assumptions about world oil supply
and consumption.46 Burning the 846 million barrels of heavy
crude oil in the ITT oilfield would produce 407 million tons of
CO2 emissions.47 However, If Ecuador reduces oil production
through the Initiative, another producer in South America or the
Middle East could very well pump more oil to make up for the
shortfall,48 or the demand might be met by expanded shale gas
production in the United States, eroding the net climate benefits.
Likewise, accounting for forest preservation at Yasuní is
fraught with a lack of clarity. Forestry accounts for 2.3% of
GDP in Ecuador49 and provides employment for 8.4% of the
economically active population.50 It is more likely than not that
foregoing timber production in Yasuní will lead to a reallocation
of the deforestation to another region in Ecuador to meet these
established demands.
Though the terms of the Initiative refer to the possibility
of generating carbon offset credits under the Kyoto Protocol,51
the Initiative’s inherent uncertainty disqualifies the Yasuní-ITT
Initiative under the Kyoto Protocol and most other rules.52
THE DEATH OF AUTONOMOUS CONSERVATION EFFORTS IN
THE DEVELOPING WORLD
In the past, countries have tended to be more inclined to
exercise governments’ police powers and forego environmen-
tally risky action when there is an existing or apparent threat to
the environment and public interest (i.e. the current moratorium
on high-volume hydraulic fracturing in New York state).53 By
monetizing moratoria, any progress towards such autonomous,
unsubsidized moratoria and reform in relation to degradation
and GHG emission would be reversed or irreparably stunted.
17WINTER 2012
In recognition of the need for individualized, domestic envi-
ronmental operation within a common framework, the UNFCCC
acknowledges the “common but differentiated responsibili-
ties”54 of member parties to curb environmental degradation
and greenhouse gas emissions.55 While the UNFCCC prescribes
benchmark targets for reductions in greenhouse gas emissions
and a framework for environment conservation, administration
is ultimately left to the member nations to determine the mecha-
nisms by which compliance will be achieved.56 The UNFCCC
assigns responsibility to sovereign nations to protect against
actions that will cause damage beyond national jurisdiction.57
The Yasuní-ITT Initiative’s compensated moratorium model
breaks the bounds of the UNFCCC, establishing a regime in which
each individual domestic environmental issue becomes a common
operational burden for all member parties. In this way, such com-
pensated moratoria could actually have the effect of encouraging
more aggressive exploration and exploitation of natural resources
in the developing world. In a regime where a developing nation
could see an influx of capital if a pending action would have the
extensive impact of environmental degradation, nations might be
inclined to overstate risks, inflate surveying results, and pour extra
development resources into vulnerable regions, in hope that the
international community might buy them out.
REDUNDANCY IN LIGHT OF REDD+
Though an argument can be made that the Initiative is a
necessary measure to avoid deforestation, the Yasuní-ITT Initiative
is redundant because there is already a mechanism being insti-
tuted to compensate nations for preserving their forests.
Having identified the need to fill regulatory gaps in the
Kyoto Protocol by engaging the developing world in efforts
to attain climate change compliance,58 the 2009 Copenhagen
Accord adopted the “Reducing Emissions from Deforestation
and Degradation Plus”59 mechanism (REDD+).60 REDD+ was
spearheaded by the Coalition of Rainforest Nations,61 a group of
developing nations characterized by high percentages of tropical
rain forests that support the use of carbon credits to curb tropical
deforestation,62 of which Ecuador is a member.63
Under the REDD+ mechanism participating developed
countries are essentially compelled to compensate developing
countries for the developing nations’ actions to protect their
tropical forests as an international climate change mitigation
strategy.64 Scientists and environmentalists have widely viewed
the strategy as a way to address environmental degradation by
assigning value to intact ecosystems like rain forests and peat
swamps.65 In 2009, nine industrialized governments announced
plans to put $165 million toward the World Bank’s newly cre-
ated Forest Carbon Partnership Facility, a system that will offer
countries carbon offset credits to protect tropical forests.66
Ecuador is an active participant in REDD+.67 By 2013, it
is Ecuador’s goal to have completed the readiness stage for the
implementation of the REDD+ mechanism as required by the
UNFCCC at the national level.68 The readiness stage requires
relevant national institutions and stakeholders to take prepara-
tory measures to address biodiversity conservation, integrated
natural resource management, environmental management, and
the development of responses for adaptation and mitigation to
climate change.69 Estimates place the total funded budget for
implementation at $4,000,000.70 Ecuador also plans to reduce
deforestation by 30% before 2013.71 Though Ecuador has thus
far been excluded from the World Bank’s funding system, the
country has found other avenues of funding for its participation in
REDD+. In June 2010, the Ecuadorian government and German
national bank contracted for $10 million in non-reimbursable aid
between 2011 and 2016 for REDD+ implementation.72
Though it complies with many of the tenets of REDD+, the
Yasuní-ITT Initiative is seemingly meant to operate outside of
the mechanism.73 Ecuador’s motivation for attempting to skirt
REDD+ is simple. Under REDD+, Ecuador would be compen-
sated for protecting the Yasuní Rain Forest with carbon offset
credits. Under Yasuní-ITT, that compensation would take the
form of debt forgiveness and cash, which is more liquid than the
offset credits, and ostensibly with a much higher value than that
that of the offset credits.74
Ecuador’s participation in REDD+ is tacit approval of the
framework, while the Yasuní-ITT Initiative is a rejection of the
REDD+ compensation scheme. By allowing Ecuador to con-
tinue the Initiative, the global community will render REDD+
impotent and obsolete, and all of the progress that REDD+ rep-
resents will be struck moot.
CONCLUSION
International support for the Yasuní-ITT Initiative represents
a real, long-term threat to international sustainability efforts,
deforestation mitigation, and greenhouse gas emission compli-
ance strategies. Support for the initiative sets the ugly precedent
that the jewels of the natural world can be held hostage for ran-
som. In addition, the initiative represents a step back in terms of
autonomous efforts on the part of sovereign nations to mitigate
environmental threats. Instead, it shifts the burden of such actions
to the international community, creates a market price for preser-
vation actions that is tied to unrelated commodity markets rather
than the global benefits of conservation actions, relies heavily on
misstated impacts, and renders REDD+ moot and ineffectual.
While the international community should reject Yasuní-
ITT unilaterally, the proposal is somewhat beneficial in that it
exposes the shortcomings of REDD+ as presently constructed.
As UNFCCC continues to fill out the REDD+ mechanism, it must
create a framework that incentivizes countries like Ecuador to
“play ball.” Conservation actions are not always about the value
of the lumber or the value of the land, but what is underneath
it. Avenues must be created to take these outliers into account
under REDD+. It is imperative that UNFCCC address the gap
that exists in the compensation scheme between the carbon offset
credit value of pending conservation action and the opportunity
cost associated with foregoing development and exploitation of
natural resources. It has been proposed that REDD+ compensa-
tion be based on foregone opportunity costs or the value of on
the value of carbon market prices.75 In fact, the most equitable
compensation scheme would reject such an either-or system in
18 SUSTAINABLE DEVELOPMENT LAW & POLICY
favor of one that takes weighted consideration of both the fore-
gone opportunity costs and the value of carbon market prices
as it relates to the action’s impact on greenhouse gas emissions.
This type of framework would not only save the natural wonder
of the Yasuní b ut also represents a large step in the fight against
global climate change.
Endnotes: An Un-Conventional Approach: Ecuador’s Yasuní-ITT
Initiative is in Discord with the UNFCCC
1 CGI Member Commitments: Leaving Ecuador’s Oil in the Ground, CLINTON
GLOBAL INITIATIVE (2007), http://www.clintonglobalinitiative.org/ (follow “Com-
mitments” hyperlink; then follow “Browse/Search Commitments” hyperlink;
then search “Yasuni.”) [hereinafter Leaving Ecuador’s Oil in the Ground].
2 Yasuní National Park, ECUADOR.COM (2012), http://www.ecuador.com/
protected-areas/yasuni-national-park/.
3 Bryan Walsh, Rain Forest for Ransom, TIME, Dec. 19, 2011, http://www.
time.com/time/magazine/article/0,9171,2101884,00.html.
4 Ecuador Travel Guide – Yasuni National Park, MINISTRY OF TOURISM OF
ECUADOR, http://ecuador.travel/en/ecuador-travel-guide/amazon-rainforest-basin/
amazonia-destinations-and-attractions/yasuni-national-park.html (last visited
Apr. 20, 2012).
5 Id.
6 Kintto Lucas, Support Grows for Letting Sleeping Amazon Oil Lie, INTER
PRESS SERV. (Aug. 27, 2007), http://ipsnews.net/news.asp?idnews=39002.
7 Id.
8 Tracy C. Davis, Breaking Ground Without Lifting a Shovel: Ecuador’s
Plan to Leave its Oil in the Ground, 30 HOUS. J. INTL L. 243, 245 (2008)
(citing UNESCO, Biosphere Reserve Information: Ecuador, Yasuní,
UNESCO.ORG, http://www.unesco.org/mabdb/br/brdir/directory/biores.
asp?code=ECU+02&mode=all (last updated Jan. 12, 2011)).
9 Walsh, supra note 3.
10 Thomas M. Gremillion, Reducing Carbon Emissions Through Compensated
Moratoria: Ecuador’s Yasuní Initiative and Beyond, 41 ENVTL. L. REP. NEWS &
ANALYSIS 10641, 10644 (2011).
11 Walsh, supra note 3.
12 Walsh, supra note 3.
13 Press Release, Min. of Foreign Affairs, Republic of Ecuador, Ecuador Takes
Leadership Role on Climate Change (Sept. 24, 2007), http://www.prnewswire
.com/cgi-bin/stories.pl?ACCT=104&STORY=/www/story/09-24-2007/
0004668939&EDATE= [hereinafter Min. of Foreign Affairs].
14 Leaving Ecuador’s Oil in the Ground, Supra note 1.
15 Min. of Foreign Affairs, supra note 13.
16 Walsh, supra note 3.
17 JOHN HENRY VOGEL, THE ECONOMICS OF THE YASUNÍ INITIATIVE: CLIMATE
CHANGE AS IF THERMODYNAMICS MATTERED 22 (2009).
18 Min. of Foreign Affairs, supra note 13.
19 Ecuador Yasuni ITT Trust Fund – Overview, U.N. DEV. GRP., http://mdtf.
undp.org/yasuni (last visited Apr. 20, 2012).
20 Lucas, supra note 6.
21 Id.
22 Supra note 19.
23 Leaving Ecuador’s Oil in the Ground, supra note 1.
24 Ecuador Yasuni ITT Trust Fund Factsheet, U.N. DEV. GRP. (Apr. 11, 2012),
http://mdtf.undp.org/document/download/7793.
25 Id. at 12.
26 Id. at 13.
27 Id. at 12.
28 Yasuní-ITT Initiative: Frequently Asked Questions, U.N. DEV. GRP.,
http://mdtf.undp.org/document/download/7500; Dicaprio and Norton Join Sea
Eco-Conference, DAILY NEWS & ANALYSIS (Apr. 14, 2010), http://www.dnaindia.
com/entertainment/report_leonardo-dicaprio-edward-norton-participate-in-
sea-eco-conference_1371318..
29 Yasuní-ITT Initiative: Frequently Asked Questions, supra note 28.
30 Press Release, Ban Ki-Moon, Secretary-General, Secretary-General’s
Remarks at Joint Press Encounter With President Rafael Correa of Ecuador,
UN.ORG (Feb. 14, 2011), http://www.un.org/sg/offthecuff/?nid=1723.
31 Id.
32 Davis, supra note 8, at 246 (citing Ecuador’s Yasuní-ITT Proposal, UNIV.
OF MD. COLL. OF CHEM. & LIFE SCI., http://sef.umd.edu/sef2007.html (last visited
Apr. 20, 2012).
33 Min. of Foreign Affairs, supra note 13.
34 Amy E. Robertson, Ecuador Invites World to Save Its Forest, CHRISTIAN
SCI. MONITOR, June 5, 2007, at 6.
35 Gremillion, supra note 10, at 10642.
36 Davis, supra note 8, at 254, 255.
37 Walsh, supra note 3.
38 Gremillion, supra note 10, at 10641.
39 Muji Operator Donates $200,000 for Eco-site in Ecuador, DAILY YOMIURI,
Dec. 29, 2011.
40 Yasuní-ITT Initiative: Frequently Asked Questions, supra note 28.
41 Walsh, supra note 3.
42 Energy & Oil Prices: Natural Gas, Electricity and Oil, BLOOMBERG.COM,
http://www.bloomberg.com/energy/ (last visited Apr. 20, 2012).
43 Min. of Foreign Affairs, supra note 13.
44 Gremillion, supra note 10, at 10647.
45 Id.
46 Id.
47 Id.
48 Walsh, supra note 3.
49 United Nations Collaborative Programme on Reducing Emissions from
Deforestation and Forest Degradation in Developing Countries Sixth Policy
Board Meeting, Mar. 21-22, National Programme Document – Ecuador, 9, U.N.
Doc. U.N.R.E.D.D./PB6/2011/V/1 (Feb. 28, 2011).
50 Id. at 10.
51 Ecuador Yasuni ITT Trust Fund Factsheet, supra note 24, at 12.
52 Gremillion, supra note 10, at 10647.
53 Exec. Order No. 41, 9 NYCRR 7.41 (Paterson Executive Order suspending
high-volume hydraulic fracturing while Draft Supplemental Generic Environ-
mental Impact Statement can be prepared; ratified by Governor Cuomo in 9
NYCRR 8.2).
54 United Nations Framework Convention on Climate Change, May 5, 1992,
1771 U.N.T.S. 107, U.N. Doc. A/AC.237/18, http://unfccc.int/resource/docs/
convkp/conveng.pdf [hereinafter UNFCCC].
55 Id. art. III, ¶ 3.
56 See generally, Id. art. IV, ¶ 6, (acknowledging common but differentiated
responsibilities and respective capabilities of member nations, as well as
sovereign rights to exploit natural resources pursuant to national environmental
policies).
57 Id. art. V, ¶ (a).
58 Randall S. Abate, REDD, White, and Blue: Is Proposed U.S. Climate
Legislation Adequate to Promote a Global Carbon Credits System for Avoided
Deforestation in a Post-Kyoto Regime?, 19 TUL. J. INTL & COMP. L. 95, 99 (2010).
59 Id.(citing About REDD+, UN-REDD Programme, UN-REDD.ORG, http://
www.un-redd.org/AboutREDD/tabid/582/language/en-US/Default.aspx.
60 UNFCCC Conference of the Parties, Copenhagen, Denmark, Dec. 7-18,
2009, Copenhagen Accord, 2-3 U.N. Doc. FCCC/CP/2009/11/Add.1 (Dec. 18,
2009); Gerard Wynn, What Was Agreed and Left Unfinished in U.N. Climate
Deal, REUTERS.COM (DEC. 20, 2009), HTTP://IN.REUTERS.COM/ARTICLE/2009/12/20/
IDININDIA-44872920091220.
61 See Abate, supra note 60, at 99 (citing COAL. FOR RAINFOREST NATIONS,
http://www.rainforestcoalition.org (last visited Apr. 20, 2012)).
62 Rhett Butler, Forest Conservation in U.S. Climate Policy: An Interview
with Jeff Horowitz, MONGABAY.COM (Feb. 5, 2010), http:// print.news.mongabay.
com/2010/0205-adp_forests_redd.html?print.
continued on page 56