Development vs. Conservation

Sara y Tzunki / CC BY-NC 2.0

Ecuador, the OPEC member with the smallest amount of proven oil reserves, has gained outsized attention in the debate over the future of oil extraction in recent days and may well play a decisive role in the outcome of the global tension between economic development and environmental conservation.

On August 15, President Rafael Correa announced that “the world has failed” Ecuador in its UNDP-supported goal of attracting $3.6 billion from the international community to offset the opportunity costs of not exploiting oil reserves located beneath a sensitive region of Yasuní National Park. Known as Ishpingo-Tambococha-Tiputini (ITT), the area is closely tied to two indigenous groups that have chosen to live in isolation and is touted by the government as “the most important reserve for biodiversity on the planet.”

Having received only $13 million for the initiative in six years, Correa argues that his government can no longer afford to leave the area, which represents approximately one-fifth of the country’s known reserves, unexploited. The decision infuriated indigenous leaders, who are working to bring the question up for a national referendum.

The battle over Yasuní-ITT is representative of similar conflicts taking place throughout the world, and its outcome will have long-lasting impacts on broader global trends related to environmental preservation and indigenous rights. From the Belo Monte dam in Brazil to “fracking” in the United States, debate rages over who should pay for the negative externalities of major development projects and the opportunity costs of not carrying them out.

What are the possible outcomes of the current situation in Ecuador, and how could they affect global trends in the debate between development and conservation? Three possible scenarios hold particular relevance for the rest of the world:

1. Ecuador Moves Forward With Extraction

If Correa is able to overcome opposition to the measure, the Ecuadorian government has promised that the extraction will affect no more than one percent of land in the park and that it will take precautions to prevent damage to the environment. Past experience suggests that impacts will not be minimal, however.

In 2011, Ecuadorian courts ordered Chevron to pay $18 billion in damages to 30,000 indigenous plaintiffs harmed by the disposal of extraction waste by its subsidiary, Texaco, between 1964 and 1992 – one of the largest environmental penalties ever. Chevron has yet to pay the fine, arguing that the decision was based on fraudulent charges. While responsibility for the damage remains controversial, both sides agree that pristine natural environments were contaminated by the extraction process.

More recently, in May of this year, a pipeline damaged by a landslide near the Yasuní-ITT area caused approximately 420,000 gallons of oil to spill into Ecuador’s Coca River, contaminating the drinking water of 80,000 people and threatening waters in Peru and Brazil.

While similar damages in the Yasuní case would clearly be undesirable, the potential economic benefits of extraction are hard to ignore. Oil is a critical funder of the Ecuadorian government budget, making up a projected 23 percent of revenue in 2013. Since Correa took office in 2007, the social spending portion of this budget has more than doubled and poverty rates have fallen by 25 percent. This track record suggests that at least during Correa’s tenure, his argument that revenues from drilling in Yasuní would be used to alleviate poverty could hold true.

2. Local Actors Legally Block Extraction

Local groups ranging from lawyers to youth and indigenous organizations are working feverishly to prevent Correa’s decision from being carried out. In the most likely effort, activists hope to raise the 580,000 signatures required to hold a national referendum on whether to block extraction in Yasuni-ITT. If successful, the referendum would not only preserve Yasuní, but also force international development practitioners to accept that at least for Ecuadorians, natural and cultural preservation is a higher priority than guaranteed GDP growth.

Public opinion polls offer conflicting evidence of how such a referendum would play out. A survey taken by Perfiles de Opinión in June in Quito and Guayaquil, Ecuador’s two largest cities, showed that 66 percent of respondents would not support extraction in the park if the Yasuní-ITT Initiative failed. However, a similar poll carried out by the Ecuadorian firm Cedatos in 15 cities throughout the country put the number at only 31 percent. Another poll by Cedatos, conducted after Correa’s decision, concluded that 56 percent of respondents supported it, with only 32 percent opposed. These results may have been biased by the wording of the question though, which emphasized the economic benefits of extraction and minimized environmental and cultural concerns.

3. Correa Delays Extraction

Because both of the two previous scenarios carry heavy costs, Correa could delay extraction in Yasuní-ITT to give the international community more time to act. It is possible that this was his plan from the beginning, and that the decision to move forward with extraction was intended to force the world to take the situation seriously.

At the 2010 Framework Convention on Climate Change in Cancún, world leaders established the Green Climate Fund as part of an effort to raise $100 billion by 2020 for projects like Ecuador’s. But as Correa acknowledged, the global financial crisis made it unlikely that any of the wealthy countries would come up with the funds required to meet the initiative’s goal in the short term. As the global economy continues to slowly recover, however, funds for long-term environmental projects may become less scarce.

In addition, a strong international reaction to Correa’s announcement as well as the pending release of the fifth assessment of the Intergovernmental Panel on Climate Change – the first in six years – may make rich countries more likely to donate to the Yasuní-ITT Initiative. Giving the international community more time to act would increase the likelihood that Ecuador can both preserve and gain economic benefit from the forest.

As a microcosm of international debates over the costs and benefits of natural resource extraction in biologically and culturally rich areas, Ecuador’s handling of the Yasuní situation will have broad implications for global trends.

If drilling begins immediately, indigenous groups and conservationists will continue to lose ground to economic development. The opposite will occur if local actors prevent extraction. But by giving the international community more time to act, Ecuador may be able to convince the world’s largest polluters to pay for the preservation of Yasuní-ITT. Doing so successfully would prove that environmental health and economic development need not be mutually exclusive.

Sources: Al Jazeera, BBC, Chevron, El Ciudadano, El Comercio (Ecuador), El Comercio (Peru), Green Climate Fund, Infolatam, Intergovernmental Panel on Climate Change, International Monetary Fund, Ministerio de Finanzas del Ecuador, Navajo Times, The New York Times, Organization of Petroleum Exporting Countries, The Washington Post, World Bank, Yasuni-ITT Initiative.