Applying Ecological Economics (ISEE)

Development Policy27 Aug 2010Diego Murguía

Early from the beginning of the ISEE 2010 conference, the Yasuni-ITT initiative was in my priority list among the sessions as it is at the frontier of the sustainability, ecological economics, environmental economics and political ecology debate. This case clearly shows how science is put into practice in a warm battle between economic, ecological and human imperatives and, moreover, how ideas developing during the last twenty years about the value of biodiversity and the problem of climate change are crystallizing into new conservation schemes.

In a few words, the Yasuni-ITT initiative was designed in Ecuador as a rejection to a development model based capitalising on oil-extraction benefits and leaving as result social and environmental ‘externalities’ like pollution or degradation. The debate focuses on the question of whether to leave untouched or extract an estimated amount of 846 million barrels of crude oil reserves located underground within the Yasuni National Park in the Ecuadorian Amazon rainforest. The extracting option has been the regular one in Ecuador for many years in other areas, thus bringing important revenues for the government but also provoking high social and environmental negative effects, namely impacting significantly the ecosystem, biodiversity, the territory of indigenous communities inhabiting the area, the chance of ecologic tourism and by the emission of CO2 tons. However, nowadays Ecuador is discussing other ways of valuing its resources and intends to leave the oil underground.

If a conventional economics approach were considered, the economic value of such piece of land like Yasuni would reach U$S 7 billions, an income that would be generated at a market price of U$S 82 per barrel and considering only the value of the land as oil-producer. Considering Ecuador’s 2010 budget of U$S 21282 millions, the amount seems significant for the government funding needs. Nevertheless, profiting from research on biodiversity and climate change, the integrated economic valuation of the Yasuni area done by the government has gone beyond economic value and, as mentioned by president Correa, seeks to put socio-cultural and environmental reserves as more valuable than revenues. No numbers on the value of ecosystem services, biodiversity and culture have been defined but just the valuation of the CO2 that will not be emitted (estimated at U$S 7188 millions for 407 millions of metric tons at a EU ETS price of U$S 17.66 per avoided metric ton of CO2) provides some argument in favour of the initiative.

As it was mentioned in the session, a milestone was achieved in August 3 2010 as the Multi-donor Trust Fund was created. This fund is administered by UNDP and its mission is to collect and manage the amount of the famous U$S 7 billion, the price to leave oil untouched, obtaining funds from donations by the Ecuadorian government and international donors, each group paying 50% of the total. The idea is that UNDP will manage the fund, issue Yasuni Guarantee Certificates to international donors and will use the funds to invest in renewable energies in Ecuador, to guarantee indigenous people’s voluntary isolation rights and to improve public health and education. This looks promising, though the session proved that uncertainty exists as to how financial contributors can feel safe against political instability later in Ecuador and yet no funds have been awarded.

In a similar logic with the international carbon trading system, the initiative is based on a financial transfer of funds from the global North to the South, but within the framework of the ecological debt debate. The political support granted by the leading European countries somehow becomes a powerful recognition of this debt and a willingness to pay part of it back under the principle of co-responsibility. Strikingly, this is a significant moment in an oil-exporting country like Ecuador and provides a practical revolution in ecological economics and a precedent for reflection on similar cases around the world: how do we value natural resources and come to decisions as to avoid polluting the environment? Polluter-pays schemes are no longer useful, pollution or high risk of it can not be allowed since once destructed, ecosystems will recover slowly, if ever, as the recent BP oil spill shows.

Another question that comes to the mind is to what extent this specific case can be adapted and reproduced to avoid oil-extraction environmental impacts in other megadiverse countries like Brazil, Colombia, Indonesia, Philippines, India or Malaysia? And how can we use these ideas for multi-criteria decision analysis for large-scale impacting activities, like mining or deforestation, taking place in priority areas for conservation?

These challenges require creativity and more research on new methods on economic valuation. No easy solution can be found but it does look like political ecology is gaining strength and visibility as a new generation of scientists and practitioners are putting ideas into politics. As I saw it, that was the importance of the session. However, strange as it may seem, the topic and even the presence of Dr. Fander Falconi, economist, former Foreign Relationships Minister of Ecuador and main promoter of this initiative, were not enough to have a full room. Yet the initiative remains as a model and I am convinced will produce innovative results in the discipline.