The Pennsylvania State University Schreyer Honors College
Total Page：16
File Type：pdf, Size：1020Kb
THE PENNSYLVANIA STATE UNIVERSITY SCHREYER HONORS COLLEGE DEPARTMENT OF AGRICULTURAL ECONOMICS AND RURAL SOCIOLOGY THE YASUNI-ITT INITIATIVE: PROTECTING BIODIVERSITY THROUGH ECONOMIC DEVELOPMENT AND INTERNATIONAL COLLABORATION LAURA DIGIULIO Spring 2012 A thesis submitted in partial fulfillment of the requirements for baccalaureate degrees in Community, Environment, and Development, Spanish, and International Studies with honors in Community, Environment, and Development Reviewed and approved* by the following: Anouk Patel Assistant Professor of Rural Sociology Thesis Supervisor Theodore Alter Professor of Agricultural, Environmental and Regional Economics Honors Adviser * Signatures are on file in the Schreyer Honors College. i ABSTRACT Within a part of eastern Ecuador called the “Oriente”, which is home to the Yasuní National Park in the Amazon Rainforest, lay the Ishpingo, Tampococha, and Tiputini (ITT) oil fields. These fields hold not only vast oil reserves, but also a unique opportunity for environmental justice and change in natural resource economics and policy. The Ecuadorian government has been faced with a choice: drill for the oil and endanger precious ecosystems, or forego the oil revenue and preserve this natural gem. However, Ecuadorian President Rafael Correa has proposed a potential third option, called the Yasuní-ITT Initiative. This endeavor would require international reimbursement to Ecuador for half of the revenue that will be foregone if the oil is left in the ground, but would allow for the preservation of a part of the rainforest within the Yasuní National Park. The project has already experienced some success, but will require enhanced and ongoing support into the future. This paper will explore the economic consequences of the Yasuní-ITT Initiative in the context of the Kyoto Protocol and the “resource curse” experienced in some developing countries, showing that the societal benefits of supporting the Yasuní-ITT Initiative likely outweigh the costs. ii TABLE OF CONTENTS List of Figures and Tables………………………………………………………………..………iii Acknowledgements……………………………………………………………………………….iv Introduction A History of Oil in Ecuador………………………………………………………………1 The Yasuní National Park…………………….…………………………………………...3 Threatened Peoples………………………………………………………………………..5 ITT Oil Potential…………………………………………………………………………..8 The Correa Administration’s Yasuní-ITT Initiative………………………………………9 Research Questions………………………………………………………………………14 Background The International Panel on Climate Change and a “new economic logic”………………16 Texaco/Chevron………………………………………………………………………….19 Oil and the Environment…………………………………………………………………23 Carbon Abatement and the Yasuní-ITT Initiative……………..…. …………………………….25 The General Economic Theory of Second Best and the Kyoto Protocol………………………..30 The “Resource Curse”……………………………………………………………………………32 Towards a Post-Petroleum Economy…………….. ……………………………………………..36 Conclusion……………………………………………………...………………………………..42 Research Approach………………………………………………………………………………44 Policy Recommendations………………………………………………………………………...48 Summary….………………………………………………………………………………...……50 Works Cited……………………………………………………………………………………...52 iii LIST OF TABLES AND FIGURES Figure 1: Oil Exports, 1965-2020…………………………………………………………………3 Figure 2: Location of the Yasuní National Park in Ecuador………………………………………3 Figure 3: Map of Ecuador; Yasuní National Park, Waorani Territory, and the Intangible Zone…5 Figure 4: Location of ITT Oilfields……………………………………………………………….8 Table 1: Donors and Donations………………………………………………………………….13 Figure 5: Oil Discovery Trend…………………………………………………………………...17 Figure 6: Net Difference- Additions to World Oil Reserves & Oil Consumption (Annually)…..17 Figure 7: Net Economic Benefits- Yasuní-ITT Initiative vs. Plan B…………………………….27 Figure 8: Ecuador’s Oil Production and Consumption, 2000-2010……………………………..34 iv ACKNOWLEDGEMENTS Thank you to my thesis adviser, Anouk Patel, for her guidance and patience throughout this process. My honors adviser and second reader, Ted Alter, was also instrumental in the formation and organization of the ideas for this thesis. I could not have completed this work without their help and support. I would also like to thank my friends and family for being there during those stressful moments and reminding me to take things one step at a time. Thank you to my brother, Anthony DiGiulio, for encouragement and advice, and to my boyfriend, Alexander Flores for his patience, support, and radiant optimism. I would also like to thank my host family in Lumbisí, Ecuador for welcoming me into their home, as my time there would surely not have been as beneficial or influential as it was to me if not for them. I am also sure that my thesis experience would have been much less rewarding without the commiseration and comic relief I found in my housemates, especially fellow Schreyer students Claire Steiner and Andy Goga. Finally, thank you to my parents, Tony and Sandy DiGiulio, for encouraging and supporting me throughout my education and in all of my endeavors. 1 INTRODUCTION This paper will consider the ecological, economic, and developmental implications of the Yasuní-ITT Initiative in order to analyze the project’s potential as a leader in a new breed of environmental policy. By employing the data on the costs and benefits of carbon abatement and natural resource preservation, as well as economic and development theories, this thesis will outline the likely consequences of the Yasuní-ITT Initiative. The implications of the project on environmental concerns and financial resources, previous policies like the Kyoto Protocol, and Ecuador’s growth as a resource-rich, developing nation will also be discussed. The paper aims to show how the Yasuní-ITT Initiative could provide a framework though which Ecuador and other developing nations could reduce pollution, deforestation, biodiversity loss and many other environmental costs without sacrificing economic development. Finally, suggestions for how the policy might be altered should insufficient international support be offered or adapted in other parts of the world will be examined. A History of Oil in Ecuador In 1878, Ecuador’s National Assembly granted exclusive rights to M.G. Mier and Company for the extraction of petroleum and other substances in the Santa Elena Peninsula on the country’s west coast (Chevron Inc. U.S.A. n.d.). Exploration began in the “Oriente” (eastern, Amazonian) region of the nation in the 1920s, but oil was not extracted until years later (Coutsoukis 2004). The first government oil concession given in the Oriente went to Shell Oil in 1937 (Chevron Inc. U.S.A. n.d.). In 1964 Texaco Petroleum Company (a subsidiary of Texaco) and Gulf Oil were invited by the Ecuadorian government to explore and produce oil there as well (Chevron Inc. U.S.A. n.d.). In 1972 Texaco helped to build Ecuador’s first oil pipeline running from the eastern rainforest out to the Pacific coast, which allowed for significant increases in both production and exportation (Donahue 2003). By the mid-1980s coastal production had fallen and in the late 1980s most of Ecuador’s proven reserves (1.6 million barrels) remained in the northern part of the Oriente (Coutsoukis 2004). The success experienced by the Texaco-Gulf operations attracted more foreign companies 2 to the Oriente and over the twenty years that followed more than fifty new wells went into production (Coutsoukis 2004). By 1986, petroleum made up over 14 percent of Ecuador’s GDP (Coutsoukis 2004). In 1989, Ecuadorian crude oil production amounted to more than 1.1 billion barrels, with over 99 percent of that amount originating from the Oriente. Since then, oil extraction has been a very important part of the Ecuadorian economy (Adoum et al. n.d., 2); with petroleum now ranking as the developing nation’s largest export and source of income (43% of the nation’s federal budget in 2005 [Backer 2010]). In 2000, Ecuador’s then President Gustavo Noboa allowed the construction of a second pipeline, known as the Oleoducto de Crudo Pesado (OCP) to allow for more production and to attain eligibility for assistance from the International Monetary Fund (IMF) (Donahue 2003). The pipeline, which was completed in 2003 (Asociación de la Industria Hidrocarburífera del Ecuador (AIHE) n.d.), cost $1.1 billion and follows a 300-mile route crossing fragile ecosystems and 11 protected areas (Donahue 2003). One of these areas is home to the Mindo Nambillo Cloud Forest1 Reserve, which is thought to be one of the most important areas of intact cloud forest in the Ecuadorian Andes (Donahue 2003). The majority of the oil that flows through the OCP is sold in markets on the west coast of the United States (Donahue 2003). Although Ecuador exports a significant amount of oil relative to its geographic area (about the size of Colorado), it is evident in Figure 1 that the nation has never been a major producer on the global scale. Furthermore, Figure 1 shows that Ecuador’s relative share in the market is only predicted to decrease. This may suggest that a reduction in the amount of Ecuadorian oil being traded internationally (i.e. the ITT oil2) as a result of policies such as the Yasuní-ITT Initiative would have a minimal impact on the world energy market. (Adoum et al. n.d., 42) Nonetheless, oil continues to be an important export for Ecuador’s national economy. A few years ago Ecuador’s Yasuní National Park also gained significance to the industry when great amounts of crude oil were discovered in a section of the park now known as the Ishpingo, Tampococha and