Breaking ground without lifting a shovel: Ecuador's plan to leave its oil in the ground.

• Author: Davis, Tracy C.

1. SAVING THE YASUNI NATIONAL FOREST A. The Yasuni National Forest and the ITT Oilfield B. President Correa's Yasuni-ITT Proposal C. The Development Context: Drawing Upon the Debt-for-Nature Swap Experience D. The Environmental Context: Reducing Global Carbon Emissions and Protecting the Rain forests II. AN ALTERNATIVE FOR THE FUTURE? With a proposal that had been several months in the making, Ecuadorian President Rafael Correa stepped in front of a gathering of world leaders, and delivered an address that has the potential to shift existing environmental and development paradigms and provide a new way of thinking about the complex problems of carbon emissions, deforestation, and foreign debt relief for developing countries. Speaking to the United Nations conference on climate change on September 24, 2007, (1) and again to a panel of the Clinton Global Initiative two days later, (2) President Correa outlined a proposal that would leave nearly one billion barrels of heavy crude oil in the ground beneath the Ishpingo Tambococha Tiputini (ITT) oilfield located in his nation's Yasuni National Forest (or Parque Nacional Yasuni), in the environmentally sensitive Amazon River Basin. (3) Not developing the ITT oilfield will avoid a substantial amount of carbon emissions and will protect the forest and indigenous tribes that live in it. (4) In exchange for leaving such a valuable natural resource undisturbed and the corresponding environmental benefits, President Correa explained, Ecuador is seeking "fair compensation" from the international community. (5) By putting forth this proposal, President Correa has moved his country into the forefront of the fight against global man-made climate change, has taken steps toward creating a sustainable economy in Ecuador, and has provided a potential alternative for other developing nations that are faced with difficult choices between the development of their economies and protecting their substantial natural resources.

1. SAVING THE YASUNI NATIONAL FOREST

   1. The Yasuni National Forest and the ITT Oilfield

      Located just 190 miles from Ecuador's capital city of Quito, the Yasuni National Forest sits in the eastern half of the country, along the border with Peru, in the Amazon River Basin. (6) The forest contains several rivers that feed into the Amazon and is bordered by the Napo and the Curaray Rivers. (7) The humid tropical rainforest is expansive, spanning at least 2.4 million acres, 1.8 million of which constitute a strictly limited "No-Go" zone. (8) The topography of the forest consists primarily of low-lying, fiat plains and is dotted with the foothills of the nearby Andes Mountains to the west. (9)

      Dubbed the "cradle of the Amazon," the Yasuni National Forest is one of the most biologically diverse areas in the world. (10) It is thought to contain over 4,000 species of plants, 173 species of mammals, and over 100,000 species of insects per hectare. (11) Moreover, given the forest's large geographical expanse, it is capable of supporting substantial populations of large carnivores, such as the jaguar and the harpy eagle, which generally cannot survive in smaller parks or wildlife reserves because of the large geographic region these animals need for hunting grounds. (12)

      In addition to its incredible array of flora and fauna, the Yasuni Forest also supports several tribes of indigenous people, including the Huaorani, the Tagaeri, and the Taromenane tribes. (13) It is estimated that 9,800 people live in the forest, supporting themselves primarily by agriculture and hunting and gathering. (14) The Huaorani live on a 612,000 hectare reserve created by Ecuador's government in 1983. (15) The Tagaeri and Taromenane tribes have remained voluntarily isolated within the forest, leading traditional lifestyles, independent from other civilizations. (16)

      Ecuador designated the Yasuni Forest a national park in 1979, recognizing it as a natural resource worthy of protection. (17) It was similarly recognized internationally in 1989, when the United Nations Education, Scientific and Cultural Organization (UNESCO) designated it as a Biosphere Reserve. (18)

      The ITT oilfield sits in the easternmost portion of the forest, just along the Ecuadorian-Peruvian border. (19) Estimates show that the oilfield contains at least 900 million barrels of heavy crude oil reserves. (20) That amounts to at least twenty percent of the country's total oil reserves. (21) In order to transport such heavy crude oil via pipeline, the oil must undergo significant processing, which produces four barrels of toxic water for every barrel of oil, and can significantly degrade watersheds in the area. (22)

   2. President Correa's Yasuni-ITT Proposal

      President Correa's proposal would leave this vast natural resource virtually untouched. Although several international oil companies already operate in certain blocks of the Yasuni Forest, including Brazil's Petrobras, Canada's EnCana, and Spain's and Argentina's Repsol-YPF, (23) the Yasuni-ITT proposal would prohibit the development of any blocks sitting over the ITT reserve. (24) In exchange for the payments it has requested, Ecuador indicated it will issue bonds for the crude oil that is to remain undeveloped, with the understanding that the oil will never be extracted and the Yasuni Forest will be protected. (25)

      Ecuador is willing to forego the extraction and development of such resources, President Correa explained, because his country believes the value of avoiding the potential negative impacts of climate change and deforestation and of protecting the Yasuni Forest are far greater, both to Ecuador and to the international community, than the financial revenues that would accrue to Ecuador if it allowed drilling and development of the ITT field. (26) In days where the price of oil has reached over $90 per barrel, (27) revenues from developing the ITT field would be significant, to say the least. Estimates are that the revenues for extraction of this oil would total $9.2 billion. (28) For a nation that currently achieves revenues equal to one third of its annual budget from oil exports, (29) the loss of such revenue would be too painful to be fiscally responsible, absent some type of offsetting revenue source.

      Under President Correa's proposal, Ecuador would seek to obtain half of those estimated lost revenues per year from other countries, non-governmental organizations, environmental groups, and others. (30) President Correa asked the international community to contribute $350 million annually for 10 years, which is equivalent to half of the annual revenues Ecuador would expect to receive from exporting the ITT oil. (31) Payments could take the form of credits against or reduction of Ecuador's foreign debt. (32) Ecuador would place those funds in a "National Development Fund," which would help the country promote and develop renewable energy projects, transportation systems, programs to eliminate poverty, and equitable access to health care and education. (33) Officials have indicated the fund would be administered internationally and structured such that if future administrations drill in the ITT oilfield, Ecuador would risk losing its cash flow from the fund. (34)

      In addition to the revenue it would collect, Ecuador would also be able to sell greenhouse gas emissions credits that will result from foregoing the development of the ITT reserve. (35) It is estimated that leaving the ITT oil undeveloped would result in permanently sequestering nearly 436 million tons of carbon dioxide in the ground. (36)

      Several entities have already expressed support for the proposal. The government of Norway has stated it supports the plan, at least conceptually, and Spain has reportedly stated it would contribute to a compensation fund if it was found that exploiting the ITT oil was not a "viable option." (37) The Clinton Global Initiative selected Ecuador's proposal to be one of its 2007 "Member Commitments," which are goals that the organization pledges to promote and...