Ecuador asked the world to pay it not to drill for oil. The world said no.

August 16, 2013

The tiny nation of Ecuador is sitting on a lucrative oil reserve — some 846 million barrels of heavy crude. But that oil also happens to be right under a large, biodiverse rain forest. There'd be some obvious environmental problems with digging it up.

Ecuador Amazon Oil.JPEG-0da51
A protester outside a government palace in Quito holds up a sign that says "Ecuador doesn't love life." (Dolores Ochoa / Associated Press)

And so, in 2007, Ecuador President Rafael Correa came up with a innovative proposal. He'd ask wealthy countries and donors to pay Ecuador $3.6 billion to leave that oil untouched.

It'd be an elegant way to help tackle climate change, he explained. The carbon would stay out of the atmosphere. Ecuador's Yasuní National Park, one of the most biologically diverse spots on Earth, would remain unharmed. And Ecuador would be compensated for the billions in foregone oil revenue. (The three oil fields in Yasuní make up about one-fifth of Ecuador's oil reserves.)

The problem? Those wealthy donors never materialized. Spain chipped in a couple million. So did the Andean Development Bank and the Inter-American Development Bank. The U.N. and other private individuals raised some funds. But in the end, Ecuador only raised $13 million, a far cry from the $3.6 billion Correa had sought.

And so, on Thursday, Correa said he was abandoning the proposal altogether. "The world has failed us," he told the country in a televised speech. "It was not charity that we sought from the international community, but co-responsibility in the face of climate change."

It wasn't hard to imagine how Correa's scheme might have worked. At the U.N. climate talks in 2009, wealthy nations had pledged to mobilize $100 billion a year by 2020 from public and private sources to help poorer nations curb their greenhouse-gas emissions.

Ecuador seemed like a reasonable target for those climate efforts: By the country's own estimates, keeping the heavy crude underground would avoid some 410 million tons of carbon dioxide emissions. Protecting Yasuní National Park would prevent another 800 million tons of carbon. Add it all up, and that's like preventing three years' worth of Brazil's total emissions.

Yet the plan quickly ran into obstacles. The Green Climate Fund was slow to materialize, with only a fraction of that $100 billion pledged as of July 2013 — mostly to cover start-up costs. (The Obama administration has recently announced that the U.S. would "seek to build" on the $7.5 billion in international climate finance that it has contributed so far, but it's unclear where those funds will come from, and Congress has no plans to pay more into this fund.)

There were also plenty of hard questions about how Ecuador's plan would actually work in practice. Where would the money go? What assurances did anyone have that Ecuador would actually keep the oil in the ground? Was this really the best place to spend billions of dollars in the fight against climate change?

In this Aug. 20, 2010 file photo, a butterfly perches on a leaf at the Yasuni National Park in the Upper Napo Valley of the western Amazon region in Ecuador. (Dolores Ochoa / Associated Press)
In this Aug. 20, 2010 file photo, a butterfly perches on a leaf at the Yasuni National Park in the Upper Napo Valley of the western Amazon region in Ecuador. (Dolores Ochoa / Associated Press)

A State Department cable in 2009, uncovered by Wikileaks, noted that U.S. officials were dubious about the "lack of clarity on the guarantees that the [Ecuadorian government] will provide; continued pressure to develop the petroleum reserves; and likely Ecuadorian resistance to an internationally managed fund because of sovereignty concerns." (The government of Ecuador later agreed to set up a joint fund with the U.N. Development Programme and promised to return all outside contributions if the country ever did start drilling for oil in Yasuní, but that didn't quell the skepticism.)

It's also worth noting that the United States relies on Ecuador for a stable, friendly source of oil. Ecuador sends about half of the 538,000 barrels of crude it produces each day to the United States — amounting to about 3 percent of net U.S. imports.

For now, then, the idea is moribund. On Thursday, Correa said he would propose legislation to begin oil exploration in Yasuní, though he tried to reassure viewers it would be limited to less than 1 percent of the park's 3,800 square miles.

It's not impossible to think that the "pay-to-not-drill" idea could resurface again later — if not in Ecuador, then elsewhere. Last year, in a paper in the Journal of Political Economy, Northwestern's Bård Harstad argued that paying poorer countries to keep their fossil fuel resources unexploited could be one of the most cost-effective ways of tackling climate change. The big hitch, as always, is where the money will actually come from.

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Brian Fung · August 16, 2013