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| Yasuni National Park, Ecuador |
There are two types of people who come to Yasuni National Park. There are the bird watchers and there are the oilmen.
This excerpt from a Planet Money podcast entitled "Holding a Rainforest Hostage", captures the fundamental dilemma that the government of Ecuador faces in regards to whether they should protect their verdant tropical vegetation, or cash in on it.
Don't be mistaken, Ecuadorians love the rainforest. In fact, the people of Ecuador have such profound respect for nature that it is given guaranteed rights "to exist, persist, maintain and regenerate its vital cycles" under their constitution. Enforcement of these rights would not only protect Yasuni National Park from deforestation, but would also protect the inhabitants of one of the most ecologically diverse regions in the world.
Unfortunately for the critters and flora that reside deep in the jungle, there exists a threat below the surface of the canopy which threatens their survival. This of course is a whole ocean of oil that is just waiting to be turned into gold.
So how much "milkshake" could Ecuador potentially drink if they start drilling in Yasuni National Park? Conservative estimates believe that roughly 900 million barrels of oil could be extracted if the rainforest is cleared out. At the current price of $100/barrel, this would gross around $20 billion dollars. For a developing country that has a GDP of only $134.8 billion, this is quite a hefty sum. Consider also that Ecuador's oil exports (petroleum is the chief export) fund roughly two fifth of the country's public sector, which is crucial for human capital development and infrastructure spending.
So either Ecuador preserves the rainforest, but loses a chance to grow the economy, or the government can unleash the power of the market on Yasuni National Park and let the wildlife be at the mercy of the oil industry. These are two pretty bleak options, however President Rafeal Correa has cleverly hatched a third alternative.
Hold the rainforest hostage and demand ransom from the "rich" countries.
The option isn't actually as sinister as it sounds. Instead of "ransom", Mr. Correa would prefer the term "compensation", essentially it would be payment for preserving the rainforest instead of exploiting it. The government doesn't even want the full $20 billion to match the estimated oil worth, but just a relatively measly $3.6 billion (they have 12 years to do it). Even if this is extortion on some level, its pretty lenient/generous as far as black mail goes. Of course this has not stopped some in the global community from expressing outrage. The German Development minister, Dirk Niebel, dismissed the whole endeavor as preposterous, claiming that "only action must be rewarded".
I personally disagree with Dirk Niebel and think this policy is not only genius, but also justified. Why you might ask? It is because Yasuni National Park is not just valuable for its ecological diversity, but also for its use as a global carbon sink. According the most recent findings in climate science, tropical rainforests capture about 1.2 billion tons of dioxide a year! Since we know from the Jeffrey Frankel article from class that green house gases are transnational in a sense, the emissions from industrialized economies have been absorbed by Latin America's rainforests...free of charge! Does it not stand to reason that countries like Ecuador deserve just compensation for this environmental service? Shouldn't those that pollute the most have to "interalize" these "externalities" by paying for the preservation of this precious resource?
Well either way, the world has only 12 years to get the money to Ecuador...or else!
I remember reading about this a while back, at first I felt pretty unhappy about the whole idea. The feeling of being "blackmailed" just gets that nerve all agitated. But I think I have to agree with you that it can also be considered a service to some degree. In fact, paying $3.6 billion divided amongst some of the wealthier nations of the world doesn't seem so bad when considering the long-term benefits. It alleviates the freeriding that is happening every day when their forest helps to stave off climate change due to everyone's pollution. I think that there is potentially a third option however, and it may even have more long-term benefits to Ecuador than anything else. Costa Rica serves as a model for eco-tourism where an entire economy revolves around tourists coming to see their beautiful and unique ecosystems. Maybe investment towards this type of economy(clear signage in other languages, tourism offices, infrastructure and law enforcement for safety) could create a long-lasting and more diversified source of income. After all, as is always the case with blackmail what's to stop Ecuador from holding the forest hostage again even after receiving payment? I guess we'll see what happens in 12 years!
ReplyDeleteI think the situation with the Yasuni National Park emphasizes the global need to shift away from oil. The prices of oil are continuing to rise which makes tapping into inconvenient and/or persevered sources of oil economically feasible. I'm not saying we shouldn't pay Ecuador. However, if we don't decrease the global demand for oil problems like this will only continue. Paying the bribe is just a band-aid. It doesn't fix the root of the problem.
ReplyDeleteI agree with the first commenter's point on promoting ecotourism as a stable source of income. Ecotourism is becoming more and more popular as an increasing number of tourists are becoming more environmentally conscious. Promoting ecotourism would thus attract funding while also protecting the integrity of the rainforest. Indeed certain infrastructure is required to facilitate a flow of tourists, but in my opinion the costs of such an endeavor are short term and are far less than allowing drilling. Getting states to pay to preserve the wildlife is a noble pursuit, but I am skeptical that the rainforest will remain untouched forever.
ReplyDeleteI am not convinced that states have an obligation to give money to protect this rainforest. More likely it will be private donors, NGOs and non-profits that accrue the $3.6 billion asked. The blog post gives the impression that industrialized or developed states are free-riding countries like Ecuador that reduce the detriments of industrialization. But if the industrialized states are free-riding, so are countries like Ecuador, who use most of the products produced in these industrialized countries.
I didn't include this in my post, but industrialized countries (and some developing) have already donated around $350,000 to preserve Yasuni National Park from being drilled (even Germany donated some money albeit in a very indirect way). Although I know little about ecotourism, this seems like a feasible alternative to protect the forest. It should be noted though that Costa Rica was more developed relative to most of the region when it started this venture, thus Ecuador might have difficulty establishing the necessary infrastructure to make this a reality.
ReplyDeleteAnother alternative not discussed in my post is a cap and trade system where international and domestic firms pay Ecuador for more cap space to release more emissions. This of course runs into the problem of setting up an international framework to govern this trade, which we are obviously far from.
As to your comments that Ecuador is also free-riding because they import industrial products, I have to disagree. When externalities occur, the one/group who imposes the cost should be the one to internalize it. In this case, the firms producing the goods that release excess pollution should be constrained by some penalty (tax of some sort/cap system) so that they shoulder the true cost of their industry. By doing this, the imports that Ecuador buys will reflect the most socially beneficial outcome as decided by the market (the price will increase, thus reducing demand which will reduce CO2 emissions).
Furthermore, although industry/manufacturing make up a significant amount of CO2 emissions in the US (about 18%), transportion/energy (two areas that benefit Ecuador very little) add up to 52% of all CO2 emissions. Speaking on a per capita basis, Americans release about 9x as much CO2 as an Ecuadorian. With all this, I feel that the burden still rests with the developed countries to contribute and pay a fair share for this carbon sink service.
It seems pretty ridiculous to me that Ecuador should even think about exploiting oil resources in Yasuni. The estimate of the current market value of that, at a mere 14.8% of their GDP is hardly worth the permanent destruction of ecosystems and the future ability to base industries (as was mentioned above with Costa Rica) sustainably on their environment.
ReplyDeleteUnfortunately, the short term desires of institutions, whether they be states or firms far too often creates serious long-term problems for the environment. Either long term interests will win or short term interests lose out, and I think it's difficult to justify the short term interests most of the time given the long term cost.
This is a really great post- it shows how oil issues are effecting both the environment and economies. It seems unthinkable to exploit areas like this for oil. I agree with Rachel, as this problem, and similar issues, are calling for innovation with the oil industry.
ReplyDelete