Ecuador’s Conservation Innovation

Ecuador has a problem. It is one of only seventeen mega-biodiverse countries on the planet, with more than 5,000 endemic species. But it is also one of the least developed countries in Latin America, ranking in the bottom half of Latin American countries in the UN human development index. Like much of the developing world, the need to preserve its unique and staggering natural environment and its obligation to provide for its citizens pulls policy-makers in two different directions. But here the conflict is especially acute because 60% of its GDP is currently provided by oil extraction.

If need breeds innovation, it makes sense that one of the most unique recent attempts to fund conservation and development would come out of Ecuador.

The concept? Paying to leave oil in the ground.

Yasuni National Park is the focus of this new idea. Located in the Ecuadorian Amazon it is a place of superlatives. Yasuni is the only protected area in the only area of the Amazon in which the maximum global levels of biodiversity are found for birds, mammals, and amphibians. This has led scientists to distinguish Yasuni as one of the most biologically diverse places on the planet. Unfortunately, Yasuni only protects 14% of the area in the mega-diverse Ecuadorian Amazon. In contrast, 79% of the land has been given over to oil concessions. And Yasuni is not invulnerable to further encroachment from oil interests — an estimated 846 million barrels of oil lie underneath the protected area.

Ecuador’s proposal targets this untapped oil. In 2007 the Ecuadorian government asked the rest of the world to contribute to a fund worth roughly half the amount of the known oil reserves. In return Ecuador would leave the oil in the ground and, critically, leave Yasuni undisturbed. By using the fund to pay for infrastructure improvements, sustainable energy investment, and education Ecuador would solve the problem of providing for the development and protecting its natural environment at the same time.

What makes this proposal unique is that the funding would occur outside of any payment for ecosystem services structure like REDD or carbon trading. Ecuador is not being compensated for avoiding a certain level of emissions or providing measured benefits to the global community. Rather, the global community, by supporting the project, is making a statement that the biodiversity of Yasuni is worth more than the oil underneath it — regardless of the measured benefits of not extracting the oil.

Market purists may cringe at the lack of specific measurement. Even those economists who believe environmental externalities should be priced into markets tend to insist that these externalities are precisely measured and markets pay only for this precisely measured amount. Hence the term ecosystem services and the pressure for rigorous baseline measures and monitoring in REDD programs. Yasuni has none of those measurements. Ecuador receives some of the expected compensation for providing the oil to the global market without actually providing it. They are, in effect, paid to do nothing.

In many respects, the Yasuni conservation proposal seems like a typical form of development aid, rather than a financing mechanism. But it should not be viewed this way. In economics parlance, the non-use or existence value of Yasuni is being monetized. Ecuador is counting on the fact that people around the world who have never been to, and never will go to, Yasuni value the knowledge that it exists and are willing to pay for that knowledge. Over fifteen thousand dollars of private donations have already been made to the fund, which confirms that people do value this knowledge.

Furthermore, Ecuador has laid out specific requirements that restrict which countries could pursue this type of funding. First among these is that only the countries that are classed as mega-biodiversity sites qualify. These requirements may quiet fears that if Ecuador is successful then all oil rich countries will make the same demands.

Unfortunately, it is unlikely that private donations will be sufficient. Ecuador has said that the fund must reach $100 million USD by the end of 2011 or they may cancel the project. Right now the fund stands at just over $2 million but funds committed by European and South American governments that would bring that to over $55 million have yet to be paid. But if enough funding is raised to continue the project, and if the project successfully improves the lives of Ecuador’s citizens while also protecting Yasuni, it will provide a blueprint that other mega-biodiverse countries could follow to reconcile the competing demands of development based on resource extraction and the preservation of the environment.

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