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A forest of issues

Richard Black | 11:13 UK time, Tuesday, 27 October 2009

An innovative proposal recently emerged from the foliage that aims to keep fossil fuels in the ground while preserving some of South America's most startling biodiversity and securing the traditional territories of indigenous peoples.

About one-third of the Ecuadorian government's income now derives from oil.

And about one-fifth of its stocks lie in a field that extends under the Yasuni nature reserve, an Andean region that scientists regard as one of the most biodiverse on Earth, with 655 species of tree and plant recorded within a single hectare, not to mention exotic monkeys, frogs and so on.

The same oil field also underlies land traditionally trodden by the Tagaeri and Taromanane indigenous groups who live partially in the Yasuni reserve - groups that have elected to remain apart from modern society, a right granted under Ecuadorian law.

The Tagaeri may now number only about 30 individuals.

Extracting the oil would clearly have major implications for people and nature. Six interconnected drilling platforms would be required; the road network would inevitably lead to logging and increased contact between drillers and indigenous groups - contact that has literally proved lethal to one or other in the past.

Yet not extracting it would mean $7bn of revenue lost.

Spider_monkey_footTwo years ago, the government came up with a plan aimed at squaring this particular circle - the Yasuni-ITT Initiative.

The basic idea is that if Western countries are as concerned about greenhouse gas emissions and indigenous rights and biodiversity as they profess to be, they can and should pay Ecuador not to drill here.

The proposal is couched in terms of avoiding emissions from burning the oil. At about 400 million tonnes of CO2, the government estimates this is roughly equivalent to Ecuador's total emissions for 13 years.

(This doesn't factor in any added benefit of avoiding emissions by keeping the forest intact.)

The sum of $350m per year for 10 years - totalling about half of the oilfield's estimated value - was suggested as a reasonable price.

Although drilling is currently banned in the area, Ecuadorian law could allow it in future under a "national interest" clause.

Investing the money in trust fund with some degree of international oversight should ensure that future governments would gain more from perpetuating the fund than they would by ripping up the deal, paying the money back and drilling the oil.

Notice_board_in_Yasuni_reserve(There's an interesting comparison to be made here, incidentally, to the attitude of governments towards UN negotiations on climate and other environmental matters, where it's assumed that labelling an agreement as "binding" will guarantee action from future regimes - even when one of the lessons of Kyoto is that it won't.

The UK goes further by calling its unilateral 2050 climate target "legally binding" without specifying who will be hung, drawn or quartered in the event of failure.

The Ecuadorian proposal, on the other hand, acknowledges that future governments may go against its wishes and seeks a way of keeping them on track.)

The scheme has gone through several iterations and the current idea for finance is a bit more convoluted, involving the issue of tradeable "Yasunı Guarantee Certificates"; but the basic concept remains the same.

The Yasuni-ITT concept has found favour with a number of governments, including those of Germany, Italy and Norway.

Ecuador's President Rafael Correa is in London this week to promote the initiative. And a paper just out in the journal Biotropica explores its potential and some of the issues it raises.

It's written by a group of conservationists and researchers including Matt Finer of Save America's Forests, who conclude that the Yasuni scheme is "a potentially precedent-setting advance towards avoiding oil and gas development in sensitive areas of megadiverse developing countries".

But as they acknowledge, it also raises a few difficulties and objections.

Firstly, if there is a thirst for fuel, it will be slaked; Ecuador would be rewarded for keeping its oil in the ground, but companies would obtain it from elsewhere, leading to zero net impact on carbon emissions.

An associated issue is that if finance comes through a global carbon market - should the forthcoming Copenhagen climate summit bring such an entity into existence - those who bought carbon credits for protecting the Yasuni reserve would buy the right to emit an equivalent amount of carbon themselves; that's what carbon trading is all about.

The researchers ask whether it's appropriate to spend such a large sum of money on protecting a relatively small region of the world - especially as some would argue that Ecuador has a simple duty to protect areas it has designated as reserves without the need for international aid.

They also ask how much money could guarantee the oil staying put; and one can imagine that if the starkest peak oil forecasts turn out to be true, within decades the price could escalate so much that the rewards of exploiting the field would dwarf income from any trust fund.

River_in_Yasuni_parkAnd there is a big logistical problem with the Yasuni idea. As yet, no fund, no mechanism exists that can financially reward countries for protecting biodiversity or indigenous peoples, let alone tying that to reducing greenhouse gas emissions.

Despite the progress of research analysing the economic worth of nature, an international mechanism to pay for its protection is years away.

On the climate side, the Kyoto Protocol doesn't allow for trading in carbon credits for what you might call "avoided extraction" of fossil fuels.

A Copenhagen treaty might - although currently it doesn't seem likely.

If it did permit payment for avoided extraction, what doors would that open?

For years, Saudi Arabia has sought financial compensation for the oil and gas it would have to delay selling, or not sell at all, in a carbon-constrained world. The request was made again at the recent round of UN climate negotiations in Bangkok.

If a mechanism were set up to encourage Ecuador to keep 850 million barrels of oil in the ground, how fast might Saudi Arabia sprint out of the blocks in pursuit of dollars relating to its 267 billion barrels?

Ecuador's answer is that funding should be reserved for developing countries in tropical, megadiverse regions.

But that's just Ecuador's view. What if newly autonomous Greenland, say, proposed keeping oil in the ground to preserve habitat for whales and polar bears and protect the traditional way of life of its indigenous Inuit communities?

Should that be barred on grounds of geography? Where does it stop?

Recent reports indicate that Germany is preparing to pledge regular money - $50-70m per year - for the Yasuni fund.

Given as a simple donation, this circumvents some of the issues surrounding the project - though clearly it's not nearly enough to fund the whole thing.

Looking across the entire environmental and social piece, you might conclude that the Yasuni initiative is exactly the kind of scheme needed in a world where species and ecosystems are disappearing at least 100 times the natural rate, where indigenous peoples are increasingly squeezed, and where there is so much apparent concern at the political top table about greenhouse warming.

But if that's the case, how can it best be funded so as to avoid all of the evident pitfalls?

Where do national responsibilities end and become the business of the global community?

Can the developed world afford to back Yasuni, and the other similar bids that will doubtless follow if it is successful?

Or can the developed world afford not to back it?

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