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

15WINTER 2012

AN UN-CONVENTIONALAPPROACH: ECUADOR’S

YASUNÍ-ITT INITIATIVEISIN DISCORDWITHTHE

UNFCCC

by Ryan Haddad*

THEYASUNÍ 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

THEYASUNÍ-ITT INITIATIVE

An unconventional alternative has emerged. Speaking to

the United Nations conference on climate change on September

24, 2007,13 Ecuadorian President Rafael Correa 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.26The 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 precludingthe 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 TRUTHABOUTTHEYASUNÍ -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 PROBLEMSOFTHE INITIATIVE’S 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 DEATHOFAUTONOMOUS CONSERVATION EFFORTSIN

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.

REDUNDANCYIN LIGHTOF 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 but 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

1CGI 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].

2Yasuní National Park, ECUADOR.COM (2012), http://www.ecuador.com/

protected-areas/yasuni-national-park/.

3Bryan Walsh, Rain Forest for Ransom, TIME, Dec. 19, 2011, http://www.

time.com/time/magazine/article/0,9171,2101884,00.html.

4Ecuador Travel Guide – Yasuni National Park, MINISTRYOF TOURISMOF

ECUADOR, http://ecuador.travel/en/ecuador-travel-guide/amazon-rainforest-basin/

amazonia-destinations-and-attractions/yasuni-national-park.html (last visited

Apr. 20, 2012).

5Id.

6Kintto Lucas, Support Grows for Letting Sleeping Amazon Oil Lie, INTER

PRESS SERV. (Aug. 27, 2007), http://ipsnews.net/news.asp?idnews=39002.

7Id.

8Tracy C. Davis, Breaking Ground Without Lifting a Shovel: Ecuador’s

Plan to Leave its Oil in the Ground, 30 HOUS. J. INT’L 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.

10Thomas 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.

13Press 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].

14Leaving Ecuador’s Oil in the Ground, Supra note 1.

15Min. of Foreign Affairs, supra note 13.

16 Walsh, supra note 3.

17JOHN HENRY VOGEL, THE ECONOMICSOFTHE YASUNÍ INITIATIVE: CLIMATE

CHANGEASIF THERMODYNAMICS MATTERED 22 (2009).

18Min. of Foreign Affairs, supra note 13.

19Ecuador Yasuni ITT Trust Fund – Overview, U.N. DEV. GRP., http://mdtf.

undp.org/yasuni (last visited Apr. 20, 2012).

20 Lucas, supra note 6.

21Id.

22Supra note 19.

23Leaving Ecuador’s Oil in the Ground, supra note 1.

24Ecuador Yasuni ITT Trust Fund Factsheet, U.N. DEV. GRP. (Apr. 11, 2012),

http://mdtf.undp.org/document/download/7793.

25Id. at 12.

26Id. at 13.

27Id. at 12.

28Yasuní-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..

29Yasuní-ITT Initiative: Frequently Asked Questions, supra note 28.

30Press 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.

31Id.

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).

33Min. of Foreign Affairs, supra note 13.

34Amy 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.

39Muji Operator Donates $200,000 for Eco-site in Ecuador, DAILY YOMIURI,

Dec. 29, 2011.

40Yasuní-ITT Initiative: Frequently Asked Questions, supra note 28.

41 Walsh, supra note 3.

42Energy & Oil Prices: Natural Gas, Electricity and Oil, BLOOMBERG.COM,

http://www.bloomberg.com/energy/ (last visited Apr. 20, 2012).

43Min. of Foreign Affairs, supra note 13.

44 Gremillion, supra note 10, at 10647.

45Id.

46Id.

47Id.

48 Walsh, supra note 3.

49United 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).

50Id. at 10.

51Ecuador Yasuni ITT Trust Fund Factsheet, supra note 24, at 12.

52 Gremillion, supra note 10, at 10647.

53Exec. 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).

54United 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].

55Id. art. III, ¶ 3.

56See 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).

57Id. art. V, ¶ (a).

58Randall 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. INT’L & COMP. L. 95, 99 (2010).

59Id.(citing About REDD+, UN-REDD Programme, UN-REDD.ORG, http://

www.un-redd.org/AboutREDD/tabid/582/language/en-US/Default.aspx.

60UNFCCC 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.

61See Abate, supra note 60, at 99 (citing COAL. FOR RAINFOREST NATIONS,

http://www.rainforestcoalition.org (last visited Apr. 20, 2012)).

62Rhett 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.

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