The Ecuadorian government under President Rafael Correa has stated its intention to forgo extraction of the Ishpingo-Tambococha-Tiputini (ITT) oilfields if the international community compensates Ecuador for the projected forgone revenue. President Correa has offered to leave the ITT reserves unexploited for $350 million for 10 years, and the government has expressed its willingness to place the funds in a financial trust, which could be structured to include co-administration by international representation.

The ITT oil block is located in the easternmost corner of Ecuador 's Amazon region, within Yasuni National Park. Yasuni was named a UNESCO biosphere reserve in 1989 and scientists including Jane Goodall and E.O. Wilson have called it "one of the most biodiverse places on earth". At least two indigenous tribes, the Tagaeri and Taromenane, maintain their traditional lifestyles in voluntary isolation in Yasuni.

ITT's proven and probable reserves are estimated at 900 million barrels, representing over 20% of Ecuador's total reserves. The oil is a heavy (14.7 API) crude requiring upgrading to transport via pipeline. The associated water production from extraction activities is estimated to be 4 barrels per barrel of oil, based on similar production projects. Direct and indirect impacts from oil extraction could include: degraded ecosystems, particularly watersheds; colonization due to road building; and illegal logging and hunting. Energy Minister Alberto Acosta's University of Maryland presentation outlined the government's working assumptions:

Among the options for revenue-substitution that share parity with ITT's value are debt relief or direct compensation in exchange for carbon emissions reduction credits. The carbon embodied in ITT reserves represents avoided CO2 emissions equal to 436 million tons (970 lb CO2 /bl), equivalent to an avoided cost of mitigation equal to $4.36 billion (at $10/ ton CO2).

Multilateral, bilateral or private creditors could conceivably forgive a portion of Ecuador's $10.9 billion external debt for verified emissions reduction (VER) credits on the voluntary carbon market with third party validation. However, leaving oil-in-place for avoided carbon emissions (or carbon sequestration) to protect indigenous culture and biodiversity is not considered a valid certified emissions reduction (CER) credit under current UNFCCC Clean Development Mechanism (CDM) methodologies.

Currently, the voluntary carbon trading market is evolving standards for avoided emissions projects and could present a viable opportunity for offering carbon credits (VER) to companies and individuals seeking to reduce their carbon footprint while simultaneously protecting Yasuni's biodiversity and indigenous tribes. Additionally, financial institutions willing to risk future UNFCCC CER approval could swap private external debt cancellation for VER.

Revenue from the voluntary carbon market, or debt relief from multilateral development institutions, could be directed toward a sustainable development fund, administered by Ecuadorian and international representation. Some portion of these funds could be used to finance small-scale (<15 MW) renewable energy projects in Ecuador that would be eligible for CER credits under current Clean Development Mechanism methodologies, generating a “double dividend” beyond carbon sequestration and protection of biodiversity and indigenous culture.

At the invitation of Ecuadorian government officials, a Yasuni-ITT working group was assembled in the U.S. consisting of scientists and non-governmental representatives to explore options for making the ITT proposal tenable on the international stage. The working group has developed a strategy for providing a sound basis and support for the EG proposal which includes: i) conducting a comprehensive cost-benefit analysis; ii) delineating revenue-substitution possibilities; and iii) supporting the international campaign for Yasuni-ITT as a model for post-Kyoto discussions.

Contact:

Max Christian, Program Manager, Sustainable Energy Projects, University of Maryland

For information email sef@umd.edu