Why Ecuador Abandoned Plans to Leave Fossil Fuels in the Ground and Save the Amazon

Adam Chimienti

On Aug. 15, Ecuadorian President Rafael Correa announced his government’s abandonment of the Yasuni-ITT Initiative, the innovative attempt to reverse the economic arrangement of oil extraction in the Amazon by keeping the oil in the soil in exchange for international assistance. His words that evening were disheartening to many. They encroached on the hopes of environmentalists and indigenous rights activists in Ecuador and progressives around the world.

Oxbow lake, Yasuni National Park, Equador.

Correa had announced on Ecuadorian state television that he was liquidating the fund for the program and that it was the world’s fault. “The world has failed us,” the fiery president declared, implying that the global community of wealthy nations, organizations and individuals rejected the unique opportunity to cooperate with the Ecuadorian government and its people to save one of the most biodiverse regions on the planet. The idea, highly touted by environmental activists and international supporters of the Correa government, as well as the government itself, was radical in the sense that it would try to provide a model for not extracting oil, while sparing the inhabitants and countless species of the forest from the invariably destructive nature of drilling. Conservation groups have pointed out that the idea for the plan came from civil society, not the government, as one might assume from press coverage.

Growth, Environment and Democracy

If the world is to blame, then surely Correa, as the leader of Ecuador and a prominent voice for an alternative twenty-first century development model, must take his fair share of the responsibility. Correa has earned respect around the world for his economic management, defense of sovereignty and promotion of innovative approaches to the environment, or Pachamama. The latter factor was most notably manifested in what is called the Green Constitution. Yet, Correa dismissed the key Article 71 wherein the ambitious drafters declared

All persons, communities, peoples and nations can call upon public authorities to enforce the rights of nature. To enforce and interpret these rights, the principles set forth in the Constitution shall be observed, as appropriate…The State shall give incentives to natural persons and legal entities and to communities to protect nature and to promote respect for all the elements comprising an ecosystem.

The problem Correa faces after announcing the end of the initiative can best be understood in the classic jobs/growth vs. environment dilemma. While many respected the idea that the government was willing to choose the environment as long as tangible forms of cooperation were coming from wealthier nations abroad, to back away from this initiative deals a blow that an overwhelming majority of Ecuadorians (over 90 percent from the major cities according to a recent poll) are unable to accept. Additionally, Correa’s many critics abroad, especially in the international media, are delighted to point out the hypocrisy of the decision.

To address these concerns, opponents of drilling are now preparing to organize a referendum. Such a move requires five percent of the population to sign a petition and deliver it for review to the National Electoral Council, and then an absolute majority of valid votes is required for the referendum to succeed.

Environmental Stewardship?

While people around the world can only lament the lack of leadership on environmental issues, despite the abundance of dire forecasts and scientific consensus, encouraging models are rarely visible or effective. The Ecuadorian government has succeeded in providing stable economic and political conditions, something unfortunately rare in the South American country. Yet, if we are to believe the rhetoric that boldly emanates from the capital Quito, that Correa’s policies are part of a citizen’s revolution, then the facts on the environmental front must be reviewed. The groups opposed to the drilling of oil in and near Yasuni National Park are on the front lines defending the world’s diminishing biological reserves. In a country plagued by centuries of inequality, a revolution based on the citizenry’s needs must be radical and innovative. The Correa government often insists it is both, but pragmatism in the traditional sense of markets and growth seem to be the defining feature. How could a citizen’s revolution exclude the de jure citizens inhabiting the biological reserves, i.e. the indigenous tribes, some of which have little or no contact with the outside world?

Furthermore, the 2008 constitution, in granting rights to nature, is trailblazing but also essential. UN data reports that threatened species in Ecuador in the year 2011 were no less than 2,260. In neighboring Peru and Colombia, both countries with roughly four times the territory of Ecuador, the number of threatened species is roughly a quarter of that amount (even the vastly larger U.S. and Brazil do not come close to Ecuador in threats to endemic species). For a sense of how Ecuador is leading the world in this harrowing category, check out this infographic by the Mother Nature Network. This phenomenon can likely be explained as a reflection of both the dense biodiversity within the Andean-Amazon corridor near the equator and vast ecocide that has occurred over the years.

Playing Catch Up in Late Capitalism

President Correa is certainly aware of the inequity present within the global climate change debate. On Sept. 24, 2007, when he first announced the initiative at the UN High Level Meeting on Climate Change, he pointed out that over 90 percent of damages from climate-change related disaster occurred in developing countries, and clearly the poorest are the most vulnerable within such countries. Now, however, his leadership appears aimed to assist the majority of impoverished people in Ecuador (while giving the middle and upper classes a significant boost) at the expense of the environment and the many native peoples who are categorized as impoverished and are clearly marginalized. This new policy seems to be a betrayal of his former sympathies. It has been widely reported that in his younger years, Correa lived amongst indigenous people, learning Quechua, and even despairing over the extent of the poverty they had to endure.

284px-Localización_de_Yasuní_en_Ecuador.svgSince the announcement, the president has fired back at critics by arguing that this drilling, Plan B of the Yasuni proposal, will only take place in one thousandth (.001) of the park's territory. He also claims that the public, especially the youth, are being manipulated in an effort to take down the government. Critics point out that there has already been drilling in the park under Correa and that the auctions of oil blocks nearby are also problematic. Moreover, the issue of mining for copper and gold in the south of the country, near the Peruvian border in the Cordillera del Condor, will also have a major impact on indigenous people, water supplies and precious rainforest. Overall, the green position is increasingly stained, the revolution less radical.

Due to the international headlines announcing the initiative’s failure, now would be an appropriate time to look over the facts related to oil extraction in Ecuador. It is nothing short of dismaying. Over the years, firms including Texaco, Occidental Petroleum (with deep ties to the family of former VP Al Gore), Brazil’s Petrobras, Venezuela’s PDVSA and others backed by the Chinese CNPC and Sinopec, as well as the Ecuadorian state firms PetroEcuador and PetroAmazonas, have all played a role in the extraction sector in the country. Many of these companies have been implicated in irresponsible methods that have led to considerable pollution. The most famous example is Texaco’s near three-decade span of exploration and extraction in the northeastern corner of the country near the towns of Lago Agrio and Coca. This involved the construction of an inexcusably faulty pipeline in coordination with the government, dumping of produced water into waterways and creating a major disaster zone with unlined pits that continue to frequently spill over when it rains. A fierce legal battle rages on over this issue and the area’s inhabitants are still suffering.

The history of oil extraction in the Andean nation is also notorious among the whole of the Ecuadorian population. Aside from the pollution, there is also the inverse relationship, especially in the 1970s and '80s, with oil production and exports to national debt. The more oil the country exported in previous decades, the more indebted it became to foreign entities. Since a key aspect of Correa’s approach has been a break with the Western-backed international financial institutions like the IMF and World Bank, the leadership has been able to acquire a brand new source of lending from China.

Correa has also prided himself on the ability to negotiate or renegotiate contracts that are much more favorable for Ecuador. This success must be noted and credit is due the government in this regard. Correa’s explanation that he is doing this for poverty-stricken Ecuadorians does ring true to a certain extent. After a 2008 default on $3.2 billion in bonds that left the country with a poor credit rating, the government had to rely heavily on China to maintain public works projects. These have been on the rise and having a notable effect on poverty reduction and infrastructure. This has boosted support for Correa, evidenced by his landslide reelection in February of this year, winning around 35 percent more votes than his closest rival. 

However, such progress is not clearly established and the country’s loans coming from China (representing more than half of borrowing by Ecuador between 2005-2011 and certainly on the rise) arrive with a significant premium in the form of high interest rates. Experts also believe the country is running the risk of an over reliance on oil exports, thereby contributing to an eagerness to continue exploitation of proven reserves. This enthusiasm is clearly on display in the decision over Yasuni, where the president claims profits from reserves may actually be worth as much as $18 billion, nearly three times the amount when the initiative first got underway.

The attitude expressed over the initiative is also proving politically unpopular. Mr. Correa is not able to run for office again under the current rules and has repeatedly expressed that he has no interest in ruling Ecuador beyond the end of his term in 2017 (though he recently signed a proposal to reform the constitution in August that would, among other things, include indefinite reelection). Yet there may certainly be backlash against his party and effective resistance on the ground. The leader of the largest indigenous collective, the Confederation of Indigneous Nationalities of Ecuador, or CONAIE, Humberto Cholango, has declared that it is up to all Ecuadorians to defend the park and its tribes as this issue is of “transcendental importance, not only for Ecuadorians, but for all of humanity.” Correa, however, disagrees and says he is confident that the Ecuadorian people will trust him and that his government, defenders of their self-proclaimed revolution, will win again.

Trans-Ecuadorian pipeline (SOTE) that runs from Lago Agrio to Esmeralda has caused unfathomable amounts of pollution. Photo credit: Adam Chimienti

Missing an Opportunity to Lead and Inspire

After all is said and done, the loss of integrity in Yasuni National Park would be a tragic blow to the ecosystem, the indigenous tribes and environmentalists around the world. Celebrities such as actor Leonardo DiCaprio have expressed their support for the initiative along with people around the world in search of alternative models. It is therefore very unfortunate that, as his critics see it, Correa did not fully engage in the promotion of the Yasuni-ITT initiative.

Interestingly, while the governments of other developing countries, such as Indonesia and Turkey and neighboring Colombia and Chile, pledged their support, the U.S., China, UK and Japan all officially stood on the sidelines. (Individual contributions have come from at least 11 countries though, including the U.S., UK and Japan.) The Italian, Spanish and a regional government in Belgium led the way in commitments and deposits, but the German government never backed the fund and disagreed with the premise. However, earlier this year Germany and Ecuador did reach an agreement amounting to 34.5 million euros in support of forest protection and the UN’s Reducing Emissions from Deforestation and Forest Degradation. Responding to German criticism over the Yasuni decision, that deal has now been unilaterally canceled by the Correa government.

Considering the negotiating prowess of Rafael Correa and the burgeoning relationship with the People’s Republic of China, which promotes harmonious, respectful and mutually beneficial cooperation, it begs another question: Why weren’t Chinese leaders brought aboard?

Similarly, we see a failure in terms of multinational corporations. Major firms like Coca-Cola (which committed to a $100,000 contribution, but didn’t deposit the funds), Google and Facebook are highly visible in the Ecuadorian market and should have been under more pressure to back the initiative and earn some positive press. One can easily see how a company like Amazon might have felt compelled to save an important corner of the forest that is its namesake.

The unfortunate reality is that Correa’s brash style is likely a factor.

Billy Pizer, a former deputy assistant secretary for environment and energy under President Obama, made the case that the initiative was about holding the forest hostage, as did other Western observers. This seems more than a bit disingenuous though. Consider that Ecuador’s history has been rife with corrupt leadership that has been under the sway of not only Washington but also Wall Street for decades. This has led Ecuador to the state in which it currently finds itself, with few good options to successfully lift up its poor. The Ecuadorian president, in condemning critics opposed to the open-pit copper mine that a Chinese firm is currently readying, declared that the country cannot be beggars sitting on a sack of gold. The jobs/growth vs. environment argument, when it applies to developing countries, is always complicated by history—history that is all too often ignored by the wealthier colonizers of previous eras.

Such debate has bogged down progress on the climate change accords and is incredibly depressing in its nature. We are likely to see more disheartening scenes throughout the developed world as leaders are increasingly concerned with succeeding in today’s harshly competitive global economy. This comes alongside a drive to improve the lives of millions of impoverished human beings. Unfortunately, it leaves out future generations who may never get to experience nature in its most diverse form or a state that could be considered unspoiled. A citizen’s revolution should necessarily account not only for the poor majority of a society, but for those in the margins living on top of the reserves of oil and minerals. It should also account for our descendants. For this to happen, we need good ideas. The Yasuni-ITT Initiative is one such good idea. Its fate now rests on the democratic will of a nation of some 15 million human beings, 29 percent of whom are living in dire poverty. Its fate should have rested on a government that seeks to inspire the world through a genuinely alternative model of development. It should have rested on the desire of people, organizations and nations around the world aiming to right some of the wrongs of the global system. In any case, there is enough blame to go around.

Visit EcoWatch’s BIODIVERSITY page for more related news on this topic.


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The huge surge this year in Amazon deforestation is leading some European countries to think twice about LeoFFreitas / Moment / Getty Images

By Sue Branford and Thais Borges

Ola Elvestrun, Norway's environment minister, announced Thursday that it is freezing its contributions to the Amazon Fund, and will no longer be transferring €300 million ($33.2 million) to Brazil. In a press release, the Norwegian embassy in Brazil stated:

Given the present circumstances, Norway does not have either the legal or the technical basis for making its annual contribution to the Amazon Fund.

Brazilian President Jair Bolsonaro reacted with sarcasm to Norway's decision, which had been widely expected. After an official event, he commented: "Isn't Norway the country that kills whales at the North Pole? Doesn't it also produce oil? It has no basis for telling us what to do. It should give the money to Angela Merkel [the German Chancellor] to reforest Germany."

According to its website, the Amazon Fund is a "REDD+ mechanism created to raise donations for non-reimbursable investments in efforts to prevent, monitor and combat deforestation, as well as to promote the preservation and sustainable use in the Brazilian Amazon." The bulk of funding comes from Norway and Germany.

The annual transfer of funds from developed world donors to the Amazon Fund depends on a report from the Fund's technical committee. This committee meets after the National Institute of Space Research, which gathers official Amazon deforestation data, publishes its annual report with the definitive figures for deforestation in the previous year.

But this year the Amazon Fund's technical committee, along with its steering committee, COFA, were abolished by the Bolsonaro government on 11 April as part of a sweeping move to dissolve some 600 bodies, most of which had NGO involvement. The Bolsonaro government views NGO work in Brazil as a conspiracy to undermine Brazil's sovereignty.

The Brazilian government then demanded far-reaching changes in the way the fund is managed, as documented in a previous article. As a result, the Amazon Fund's technical committee has been unable to meet; Norway says it therefore cannot continue making donations without a favorable report from the committee.

Archer Daniels Midland soy silos in Mato Grosso along the BR-163 highway, where Amazon rainforest has largely been replaced by soy destined for the EU, UK, China and other international markets.

Thaís Borges.

An Uncertain Future

The Amazon Fund was announced during the 2007 United Nations Climate Change Conference in Bali, during a period when environmentalists were alarmed at the rocketing rate of deforestation in the Brazilian Amazon. It was created as a way of encouraging Brazil to continue bringing down the rate of forest conversion to pastures and croplands.

Government agencies, such as IBAMA, Brazil's environmental agency, and NGOs shared Amazon Fund donations. IBAMA used the money primarily to enforce deforestation laws, while the NGOs oversaw projects to support sustainable communities and livelihoods in the Amazon.

There has been some controversy as to whether the Fund has actually achieved its goals: in the three years before the deal, the rate of deforestation fell dramatically but, after money from the Fund started pouring into the Amazon, the rate remained fairly stationary until 2014, when it began to rise once again. But, in general, the international donors have been pleased with the Fund's performance, and until the Bolsonaro government came to office, the program was expected to continue indefinitely.

Norway has been the main donor (94 percent) to the Amazon Fund, followed by Germany (5 percent), and Brazil's state-owned oil company, Petrobrás (1 percent). Over the past 11 years, the Norwegians have made, by far, the biggest contribution: R$3.2 billion ($855 million) out of the total of R$3.4 billion ($903 million).

Up till now the Fund has approved 103 projects, with the dispersal of R$1.8 billion ($478 million). These projects will not be affected by Norway's funding freeze because the donors have already provided the funding and the Brazilian Development Bank is contractually obliged to disburse the money until the end of the projects. But there are another 54 projects, currently being analyzed, whose future is far less secure.

One of the projects left stranded by the dissolution of the Fund's committees is Projeto Frutificar, which should be a three-year project, with a budget of R$29 million ($7.3 million), for the production of açai and cacao by 1,000 small-scale farmers in the states of Amapá and Pará. The project was drawn up by the Brazilian NGO IPAM (Institute of Environmental research in Amazonia).

Paulo Moutinho, an IPAM researcher, told Globo newspaper: "Our program was ready to go when the [Brazilian] government asked for changes in the Fund. It's now stuck in the BNDES. Without funding from Norway, we don't know what will happen to it."

Norway is not the only European nation to be reconsidering the way it funds environmental projects in Brazil. Germany has many environmental projects in the Latin American country, apart from its small contribution to the Amazon Fund, and is deeply concerned about the way the rate of deforestation has been soaring this year.

The German environment ministry told Mongabay that its minister, Svenja Schulze, had decided to put financial support for forest and biodiversity projects in Brazil on hold, with €35 million ($39 million) for various projects now frozen.

The ministry explained why: "The Brazilian government's policy in the Amazon raises doubts whether a consistent reduction in deforestation rates is still being pursued. Only when clarity is restored, can project collaboration be continued."

Bauxite mines in Paragominas, Brazil. The Bolsonaro administration is urging new laws that would allow large-scale mining within Brazil's indigenous reserves.

Hydro / Halvor Molland / Flickr

Alternative Amazon Funding

Although there will certainly be disruption in the short-term as a result of the paralysis in the Amazon Fund, the governors of Brazil's Amazon states, which rely on international funding for their environmental projects, are already scrambling to create alternative channels.

In a press release issued yesterday Helder Barbalho, the governor of Pará, the state with the highest number of projects financed by the Fund, said that he will do all he can to maintain and increase his state partnership with Norway.

Barbalho had announced earlier that his state would be receiving €12.5 million ($11.1 million) to run deforestation monitoring centers in five regions of Pará. Barbalho said: "The state governments' monitoring systems are recording a high level of deforestation in Pará, as in the other Amazon states. The money will be made available to those who want to help [the Pará government reduce deforestation] without this being seen as international intervention."

Amazonas state has funding partnerships with Germany and is negotiating deals with France. "I am talking with countries, mainly European, that are interested in investing in projects in the Amazon," said Amazonas governor Wilson Miranda Lima. "It is important to look at Amazônia, not only from the point of view of conservation, but also — and this is even more important — from the point of view of its citizens. It's impossible to preserve Amazônia if its inhabitants are poor."

Signing of the EU-Mercusor Latin American trading agreement earlier this year. The pact still needs to be ratified.

Council of Hemispheric Affairs

Looming International Difficulties

The Bolsonaro government's perceived reluctance to take effective measures to curb deforestation may in the longer-term lead to a far more serious problem than the paralysis of the Amazon Fund.

In June, the European Union and Mercosur, the South American trade bloc, reached an agreement to create the largest trading bloc in the world. If all goes ahead as planned, the pact would account for a quarter of the world's economy, involving 780 million people, and remove import tariffs on 90 percent of the goods traded between the two blocs. The Brazilian government has predicted that the deal will lead to an increase of almost $100 billion in Brazilian exports, particularly agricultural products, by 2035.

But the huge surge this year in Amazon deforestation is leading some European countries to think twice about ratifying the deal. In an interview with Mongabay, the German environment ministry made it very clear that Germany is very worried about events in the Amazon: "We are deeply concerned given the pace of destruction in Brazil … The Amazon Forest is vital for the atmospheric circulation and considered as one of the tipping points of the climate system."

The ministry stated that, for the trade deal to go ahead, Brazil must carry out its commitment under the Paris Climate agreement to reduce its greenhouse gas emissions by 43 percent below the 2005 level by 2030. The German environment ministry said: If the trade deal is to go ahead, "It is necessary that Brazil is effectively implementing its climate change objectives adopted under the [Paris] Agreement. It is precisely this commitment that is expressly confirmed in the text of the EU-Mercosur Free Trade Agreement."

Blairo Maggi, Brazil agriculture minister under the Temer administration, and a major shareholder in Amaggi, the largest Brazilian-owned commodities trading company, has said very little in public since Bolsonaro came to power; he's been "in a voluntary retreat," as he puts it. But Maggi is so concerned about the damage Bolsonaro's off the cuff remarks and policies are doing to international relationships he decided to speak out earlier this week.

Former Brazil Agriculture Minister Blairo Maggi, who has broken a self-imposed silence to criticize the Bolsonaro government, saying that its rhetoric and policies could threaten Brazil's international commodities trade.

Senado Federal / Visualhunt / CC BY

Maggi, a ruralista who strongly supports agribusiness, told the newspaper, Valor Econômico, that, even if the European Union doesn't get to the point of tearing up a deal that has taken 20 years to negotiate, there could be long delays. "These environmental confusions could create a situation in which the EU says that Brazil isn't sticking to the rules." Maggi speculated. "France doesn't want the deal and perhaps it is taking advantage of the situation to tear it up. Or the deal could take much longer to ratify — three, five years."

Such a delay could have severe repercussions for Brazil's struggling economy which relies heavily on its commodities trade with the EU. Analysists say that Bolsonaro's fears over such an outcome could be one reason for his recently announced October meeting with Chinese President Xi Jinping, another key trading partner.

Maggi is worried about another, even more alarming, potential consequence of Bolsonaro's failure to stem illegal deforestation — Brazil could be hit by a boycott by its foreign customers. "I don't buy this idea that the world needs Brazil … We are only a player and, worse still, replaceable." Maggi warns, "As an exporter, I'm telling you: things are getting very difficult. Brazil has been saying for years that it is possible to produce and preserve, but with this [Bolsonaro administration] rhetoric, we are going back to square one … We could find markets closed to us."

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