Ecuador’s Yasuní-ITT initiative for mitigating the impact of climate change

Ecuador’s Yasuní-ITT initiative for mitigatingthe impact of climate changeTammy Vallejo Silva and Martin Calisto Friant*

This article analyses the Yasuní-ITT initiative through which Ecuador proposedto leave an estimated reserve of one billion barrels of crude oil underground, inexchange for an international commitment of half the revenue that theexploitation would have generated. The article argues that the Yasuní-ITTinitiative was a coherent and innovative proposal to address climate change. Itfirst reviews the background, structure and content of the Yasuní-ITT initiative.Second, it examines the initiative under the innovative concept of avoided netemissions. Third, it outlines the Yasuní-ITT Fund. Fourth, it assesses thetheoretical and legal analysis underpinning the implementation of the Yasuní-ITT initiative, specifically reviewing its advantages in comparison to otherinternational mechanisms such as CDM and REDD+. It concludes by assert-ing that this strategy was an innovative measure for the mitigation of climatechange in a developing country and that it can, and should, be replicated in thefuture.

INTRODUCTION

Humanity cannot continue to develop in the way it has since industrialisation at the expense of ournatural and common resources. Considering the current state of our natural environment and the rateof emission of green-house gases (GHGs), business-as-usual is not an option.1 Moreover, if theworld’s proven fossil fuel reserves were to be burned, they would release four times the amount ofCO2 needed to cause an increase in global temperatures of over two degrees Celsius, leading tounprecedented climatic disasters.2 Yet the measures that we have taken so far are not proportional withthe scale of the issue at hand. Alternative compromises and initiatives are thus desperately needed totackle climate change and to prevent emissions from our current carbon reserves.

In 2007, Ecuador surprised the world at the United Nations (UN) General Assembly with aninnovative initiative for this purpose. It proposed the non-exploitation of almost one billion barrels ofheavy crude reserves of the Ishpingo-Tambococha-Tiputini (ITT) oil field located within the YasuníNational Park, declared by the UN Educational, Scientific and Cultural Organization (UNESCO) as aMan and Biosphere Reserve in 1989.3 Although Ecuador needed to use these petroleum resources inorder to meet its development needs, it was willing to give up its oil revenues to avoid the predictableconsequences, including the emissions of 407 million metric tonnes of CO2 in the atmosphere and thedestruction of one of the most biodiverse regions on earth. In exchange, the country asked theinternational community for a contribution equivalent to at least half of the opportunity cost of

* Tammy Vallejo Silva, Master of Public and International Law from the University of Melbourne, and Master of Globalizationand Social Integration from the University of Navarra, Spain. Martin Calisto Friant, Master of Development Studies from theUniversity of Melbourne, and Master of Environment and Sustainable Development from the Development Planning Unit ofUniversity College London. The authors would like to thank Margaret Young from the University of Melbourne, whosecontributions, encouragement and insights helped in the development of this article; and also Damien Luckie, for his review andcomments, which helped in consolidating the article.

1 Intergovernmental Panel on Climate Change (IPCC), Climate Change 2014: Mitigation of Climate Change, Contribution ofWorking Group III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change (2014).

2 Carbon Tracker Initiative, “Unburnable Carbon – Are the World’s Financial Markets Carrying A Carbon Bubble?”, available athttp://www.carbontracker.org/wp-content/uploads/2014/09/Unburnable-Carbon-Full-rev2-1.pdf.

3 United Nations Development Group, Ecuador Yasuní-ITT Trust Fund: Terms of Reference (2010) at [3], available athttp://mptf.undp.org/yasuni (Yasuní-ITT Trust Fund).

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exploiting the petroleum, under the concept of avoided net emissions (ANE).4 Unfortunately, theinitiative was brought to an end in August 20135 and exploitation of the reserve is now under way.Nevertheless, this article will argue that the initiative was a coherent and innovative strategy toaddress climate change by avoiding the production of fossil fuels in a biologically and culturallysensitive protected area. The article first analyses the context and relevant background in which theinitiative was developed. It will then review the Yasuní-ITT initiative in detail and its laterabandonment. Second, the article examines the initiative under the innovative concept of ANE. Itprovides clear data of the direct and indirect impacts that the initiative would have had in the climatechange context. The analysis includes a review of other benefits that would have derived from theinitiative. Third, the article provides an understanding of the Yasuní-ITT Fund, its governance,principles and the allocation of its resources in sustainable development projects. Fourth, the articleassesses the theoretical and legal analysis underpinning the implementation of the initiative at aninternational level. Within the legal framework analysis, the article looks at some advantages of theYasuní-ITT initiative in comparison to other international mechanisms “suitable” for developingcountries. Finally, taking into account all the elements analysed, the article asserts that the strategywas an innovative measure for the mitigation of climate change in a developing country and that itcan, and should, be replicated in the future.

CONTEXT AND BACKGROUND

The Yasuní National Park and the Ishpingo-Tambococha-Tiputini (ITT) oil field

The Yasuní National Park has an area of 928,000 hectares in Ecuador’s Amazon region (see Figure 1).It was created in 1979 and in 1989 UNESCO declared it a Man and Biosphere Reserve.6 Below thepark lies the ITT oil field. The ITT oil field carries an estimated 900 million barrels of heavy crude oil,representing approximately 20% of the country’s petroleum reserves7 with an economic value ofroughly US$7 billion (as at 25 May 2009).8

Scientists agree on the Yasuní National Park’s unique value due to its extraordinary biodiversityand cultural heritage.9 The reserve has more trees and bush species in one hectare than the totalnumber of native tree species in the United States of America and Canada together. It also has thehighest density of amphibious, mammal, bird and plant species in the Amazon region.10 The YasuníNational Park is uniquely located near the intersection of the Amazon, the Andes mountains, and theEquator. The ITT oil field is located in the north-east section of the park – see Figure 1.11

4 Republic of Ecuador, The Yasuní-ITT Initiative: Enhancing Cost-Effectiveness of and Promoting Mitigation Actions, AD HOCWG UNFCC, 14th session, Agenda Item 11, FCCC/A WGLCA/2011/MISC.4/Add.1 (Yasuní-ITT Initiative).

5 Decreto Ejecutivo No 74 de 15 de Agosto de 2013 [Executive Decree No 74 of 15 August 2013] (Ecuador) [Tammy Vallejotrans] (Executive Decree).

6 Bass M et al, “Global Conservation Significance of Ecuador’s Yasuní National Park” (2010) 5(1) PLOS ONE e8767, availableat http://journals.plos.org/plosone/article?id=10.1371/journal.pone.0008767.

7 Davidsen C and Kiff L, “Global Carbon-and-Conservation Models, Global Eco-States? Ecuador’s Yasuní-ITT Initiative andGovernance Implications” (2013) 4(2) Journal of International & Global Studies 2 at [4].

8 Larrea C and Warnars L, “Ecuador’s Yasuní-ITT Initiative: Avoiding Emissions by Keeping Petroleum Underground” (2009)13 Energy for Sustainable Development 219.

9 Bass et al, n 6.

10 Bass et al, n 6.

11 Finer M, Moncel R and Jenkins C, “Leaving the Oil under the Amazon: Ecuador’s Yasuní-ITT Initiative” (2010) 42(1)Biotropica 63 at 64.

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FIGURE 1 Location of Yasuní-ITT oil field

Ecuador has 12 different indigenous cultures.12 Only two voluntary isolated indigenous groupsexist in Ecuador, the Tagaeri and Taromenane, and they both lived in the Yasuní National Park.13

Ecuador at a glanceEcuador ranks in position 98 among 187 countries by its Human Development Index14 and has thethird lowest income per capita of South America (5,760 at current US$).15 Ecuador’s economy ismostly based on oil. The country’s Amazon region has abundant petroleum reserves. Since the 1970soil extraction has become the main driver of its economy.16

The environmental consequences of over 40 years of oil exploitation are severe.17 The 2011Ecuadorian judgment rendered against Chevron-Texaco for the contamination resulting from its crudeoil production in the region from 1964 to 1992 is a testimony of these environmental consequences.18

During the last decade there has been an increased recognition of the environmental importanceof Ecuador’s biodiversity and its rich ancestral culture. This recognition imbued the ConstituentAssembly of 2008, elected to draft a new Constitution. As a result, the Ecuadorian Constitution19

granted rights to nature. Linked to this recognition are several collective rights granted to indigenouspeople. Within these rights, Art 57 of the Ecuadorian Constitution guarantees and protects the will ofindigenous people to live in isolation.20

Additionally, the Ecuadorian National Plan for 2009-201321 criticised the prevalent concept ofdevelopment and the unsustainable modes of consumption on which hegemonic visions of progressare based. The National Plan proposed the notion of good living, based on Andean indigenous

12 Yasuní-ITT Initiative, n 4.

13 Larrea and Warnars, n 8 at 220.

14 United Nations Development Programme, Human Development Report 2014 (2014), p 160-162, available athttp://hdr.undp.org/sites/default/files/hdr14-report-en-1.pdf.

15 World Bank, Data: GDP Per Capita (Current US$) (2015), available at http://data.worldbank.org/country/ecuador.

16 Davidsen and Kiff, n 7 at [9].

17 Larrea and Warnars, n 8.

18 Chevron, Ecuador Lawsuit: Facts about Chevron and Texaco in Ecuador, available at http://www.chevron.com/ecuador.

19 Constitución de la República del Ecuador [Constitution of the Republic of Ecuador].

20 Constitución de la República del Ecuador [Constitution of the Republic of Ecuador], Art 57, item 21.

21 Republic of Ecuador, Plan Nacional del Buen Vivir 2009-2013 [National Plan for Good Living 2009-2013] (2009),

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cosmo-vision, as an alternative to mainstream visions of development. The core principle of goodliving is to create harmonious relations both within and between nature and humankind. Based on thisprinciple, the National Plan sought to shift the economic reliance on the primary sector of theeconomy by creating a knowledge-based economy founded on eco-tourism and biotechnology.22

The initiativeEcuador committed itself to forego the extraction of 846 million barrels of petroleum located in theYasuní National Park, if an international contribution of at least US$3.6 billion dollars (half of therevenue that the state would have received by extracting the petroleum) was raised in a 13-year period.By doing so, Ecuador was assuming half of the opportunity cost of keeping the petroleum in theground.23

The initiative aimed to prevent the emission of 407 million metric tonnes of CO2, which wouldresult from the burning of the fossil fuel, as well as protecting one of the most bio-diverse regions ofthe world and the indigenous people that live within the area. The funds would have been allocatedexclusively for renewable energy facilities, enhancing the energy efficiency in consumption, avoidingdeforestation, for reforestation, social development and research.24

The Ecuadorian President Rafael Correa formally presented the initiative at the UN GeneralAssembly in September 2007.25 By 2010, Germany, Spain, France, Belgium, the United ArabEmirates, Iran and the OPEC (Organization of the Petroleum Exporting Countries) officiallyannounced their support for the initiative.26 In August 2010, the Ecuadorian government and the UNDevelopment Programme (UNDP) signed an international agreement to constitute the Yasuní TrustFund.27

The initiative, linked to the realisation of good living, was conceptualised as a mitigation tool foraddressing climate change through ANE. It was also seeking further recognition in the climate changeinternational legal scenario as a market instrument.28

Abandonment of the initiativeOn 15 August 2013 the Yasuní-ITT initiative was officially closed through a presidential decree,followed by a vote of the National Assembly, due to the lack of “international commitment”.29 Indeed,after almost four years of international negotiations, the initiative was only able to secureUS$11 million in donations.30 According to the Terms of Reference, contributions should havereached a minimum threshold of US$100 million by the end of 2011.31

The rationale behind the President’s decision evolved around the necessity of funds to fightpoverty. Additionally, the government promised to carry out the drilling with the highest

http://www.planificacion.gob.ec/wp-content/uploads/downloads/2012/08/versión-resumida-en-inglés.pdf (National Plan forGood Living).

22 Calisto Friant M and Langmore J, “The Buen Vivir: A Policy to Survive the Anthropocene?” (2015) 6(1) Global Policy 64.

23 Yasuní-ITT Trust Fund, n 3; Yasuní-ITT Initiative, n 4.

24 Yasuní-ITT Initiative, n 4, p 3; United Nations Development Programme, Ecuador Yasuní-ITT Trust Fund: Overview,available at http://mptf.undp.org/yasuni.

25 Statement by His Excellency Economist Rafael Correa President of the Republic of Ecuador, Sixty-Second Session of theUnited Nations General Assembly (26 September 2007), available at http://www.un.org/webcast/ga/62/2007/pdfs/ecuador-eng.pdf.

26 Martin P, “Pay to Preserve: The Global Politics of Ecuador’s Yasuní-ITT Proposal” in Carbonnier G (ed), InternationalDevelopment Policy Energy and Development (Graduate Institute of International and Development Studies, 2011), p 117.

27 Ecuador-UNDP, Memorandum of Agreement for Management and Other Support Services Related to the Ecuador Yasuní-ITT Fund (3 August 2010).

28 Martin, n 26.

29 Executive Decree, n 5. Resolución del Pleno de la Asamblea Nacional de 3 de Octubre del 2013 [National AssemblyResolution on 3 October 2013] (Ecuador) [Tammy Vallejo trans].

30 Executive Decree, n 5.

31 Yasuní-ITT Trust Fund, n 3.


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environmental standards, affecting only 1/1000th of the National Park and taking all precautionarymeasures to safeguard the people living in voluntary isolation.32

It is important to note that Art 54.7 of the Ecuadorian Constitution requires the previousconsultation of indigenous peoples for any project involving the exploitation of natural resources intheir territories. Additionally, Art 57 guarantees and protects the will of indigenous people to live inisolation and it qualifies as “ethnocide” the violation of this provision. Both scholars and civil societyhave criticised the Ecuadorian government for failing to uphold these constitutional guarantees beforetaking the decision to exploit the Yasuní National Park.33

With Correa’s unwillingness to stand by these constitutional guarantees, the Ecuadorian civilsociety responded by upholding another constitutional right that allows citizens to call for areferendum, after obtaining the signatures of 5% of the national electorate (representing 583,323signatures).34 In April 2014, Ecuadorian activists presented 756,291 signatures to call for a nationalreferendum, which would allow Ecuadorians to vote on whether they wanted to carry out theexploitation, or leave the Yasuní National Park untouched.35 However, the National Election Councilvalidated only 359,762 signatures, claiming that the rest were false or duplicates.36 The governmenthence refused to carry out a national referendum and the exploitation of the National Park is nowunder way.37 Presently, a social movement led by a non-governmental organisation (NGO) calledYasunidos is still looking for alternatives to prevent the exploitation of the national reserve.

AVOIDED NET EMISSIONS (ANE)This innovative concept to combat global warming strikes at the root of the problem by preventing therelease of CO2 in the first place.38

The Yasuní-ITT initiative can be understood under the concept of ANE. ANE refers to “[greenhousegas] emissions, which can occur within each country’s economy but are avoided”. The preventedemissions could come from any form of economic activity undertaken by a developing country at themoment that the mechanism is applied.39 ANE is not limited to a specific sector and therefore includesany economic activity as long as it involves the exploitation of renewable and non-renewable naturalresources.40 In net terms, as the Ecuadorian President pointed out, “not polluting the environment”(compensation by omission while having the right to carry out an action) is equivalent to cleaning it(compensation by action without having the duty to carry it out).41

ANE constitutes a new climate change mitigation mechanism that can be implemented both as amarket or a non-market mechanism. In the former scenario, it puts an economic value on each tonne

32 Executive Decree, n 5.

33 Becker M, “Resource Extraction and Yasuní National Park Ecuador’s Bitter Choice” (2014) 168 Against the Current 10 at10-13.

34 Constitución de la República del Ecuador [Constitution of the Republic of Ecuador], Art 104.

35 Dene D, “Ecuador’s Tribes Declare ‘National Mobilization’ against Oil and Mining”, Upside Down World (26 May 2014),available at http://upsidedownworld.org/main/news-briefs-archives-68/4866-ecuadors-tribes-declare-national-mobilization-against-oil-and-mining.

36 Dene, n 35.

37 Dene, n 35.

38 Ban K, Secretary-General’s Remarks at Joint Press Encounter with President Rafael Correa of Ecuador (press release,14 February 2011), available at http://www.un.org/sg/offthecuff/?nid=1723.

39 Republic of Ecuador, Net Avoided Emissions: Workshops on Various Approaches and New Market-based Mechanism (2012),available at https://unfccc.int/files/bodies/awg-lca/application/pdf/20120519__ecuador_1500.pdf (Net Avoided Emissions).

40 Statement by His Excellency Economist Rafael Correa President of the Republic of Ecuador, UN Climate Change Conference(Cancun, 2010), https://www.youtube.com/watch?v=UxW8E76LYPs (UN Climate Change Conference).

41 Gallegos RR, “A Major Transition for a Great Transformation: Reflections from the Yasuni?-ITT Initiative” (2012) 237 NewSociety Magazine 32.


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of CO2 that remains locked at the source, applying the stock maintenance approach.42 Compensationis based on the emissions avoided. Therefore, ANE requires a comparison between the emissions inthe absence of the specific economic activity and the expected emissions generated by undertaking theactivity.43 ANE is hence similar to REDD+, yet it varies from it in key aspects, which are outlinedlater in this article.

In this context, the Yasuní-ITT initiative was the first practical application of the concept of ANEto one of the main sources of climate change – the burning of fossil fuels.44 Since the initiativeoperated outside the Kyoto Protocol, it relied only on voluntary contributions from the internationalcommunity. However, it is important to point out that the initiative was aiming for future recognitionas a market mechanism under a new post-Kyoto agreement within the concept of ANE fromunexploited fossil fuel reserves.45 For this purpose, the Ecuadorian government provided YasuníGuarantee Certificates (CGYs) in exchange for each contribution.46

Direct carbon mitigation

Direct carbon mitigation refers only to the benefits of keeping the oil reserves underground, thusavoiding the release of CO2 into the atmosphere through the burning of the extracted oil.47 It wasestimated that the Yasuní-ITT initiative would have prevented the emission of 407 million metrictonnes of CO2.48

Indirect carbon mitigation

In addition to the 407 million metric tonnes of CO2 emissions that the Yasuní-ITT initiative wouldhave avoided, the initiative would also have led to savings of 800 million metric tonnes of CO2. Theavoided deforestation and the reforestation that would have been carried out with the initiative’s fundsaccount for this additional carbon mitigation.

Deforestation

Through the Yasuní-ITT Trust Fund the Ecuadorian government committed to finance several strategicsustainable development programs.49 One of these programs was exclusively aimed at avoidingdeforestation and protecting rainforests and remaining ecosystems in Ecuador.50

The final goal was to completely eliminate deforestation in a 30-year period. The total avoideddeforestation was calculated at 1.35 million hectares, leading to 791 million tonnes of avoided CO2

emissions.51

Reforestation

Ecuador also committed to allocate resources to finance reforestation, afforestation, naturalregeneration and the appropriate management of one million hectares of forest in a 30-year period.

42 Angelsen A (ed), Moving Ahead with REDD: Issues, Options and Implications (CIFOR, 2008), p 17.

43 Net Avoided Emissions, n 39.


45 Finer et al, n 11, 64-65.

46 Finer et al, n 11, 64-65.

47 Yasuní-ITT Initiative, n 4, p 6.

48 Yasuní-ITT Trust Fund, n 3, p 4.


50 Yasuní-ITT Trust Fund, n 3 at [8].



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The investments were part of the strategic sustainable development programs created by theEcuadorian government under the initiative.52 The contribution to mitigation from this program wasestimated at 68 million tonnes of CO2.53

Renewable energy

The decision to shift to renewable energy was clear and strong throughout the entire initiative. In fact,the capital fund window of the contributions to the Yasuní-ITT initiative was to be investedexclusively on renewable energy facilities through the development of specific projects approved bythe Steering Committee of the Yasuní-ITT fund (Government Body).54 Contributions of energyconversion to mitigation were estimated to reduce 43 million tonnes of CO2 emissions, from which atleast 30% would have been the direct result of the initiative.55

All in all, the Yasuní-ITT initiative would have led to total savings of 1,278 million metric tonnesof CO2.

Other benefits of the Yasuní-ITT initiativeUnlike most mitigation tools within the Kyoto Protocol, the Yasuní-ITT initiative was an originalinitiative that incorporated the protection of biodiversity and the right of indigenous people to live involuntary isolation.56

The initiative can be seen as a conservation mechanism since its ultimate goal was the protectionof the Yasuní National Park. In this context, it has been pointed out that the initiative had the potentialto realise aspects of other international instruments,57 such as the UN Convention on BiologicalDiversity (1992) 1760 UNTS 79; 31 ILM 818; [1993] ATS 32.

Moreover, the Yasuní-ITT initiative had the potential to address some other issues regarding therights of indigenous people. If well implemented, the initiative could have lead to the realisation ofkey provisions of the UN Declaration on the Rights of Indigenous Peoples (2007) GA res 61/295, theInternational Labour Organization’s Convention concerning Indigenous Peoples and Tribal Peoplesin Independent Countries (1989) 28 ILM 1382; (1991) ILO 169 and the Inter-American Commissionon Human Rights ruling to protect indigenous people living in voluntary isolation. Indeed, theinitiative would have led to the protection of the indigenous groups that live in the Yasuní NationalPark, respecting their right to self-determination.58

YASUNÍ-ITT FUND

In 2010, the Yasuní-ITT Trust Fund was created. The Fund was established for the reception ofcontributions from supporters of the Yasuní-ITT initiative59 and to promote the transition fromEcuador’s current development model, to a “new strategy based on equality and sustainability”.60

52 Yasuní-ITT Trust Fund, n 3 at [b].


54 Ecuador-UNDP, n 27 at [6].


56 Martin, n 26, p 133.

57 Warnars L, “The Yasuní-ITT Initiative: A New Model to Implement Human Rights and Biological Diversity Conventions andFrameworks?” (2010) 17 Policy Matters 55.

58 Warnars, n 57 at 60.

59 United Nations Development Programme, n 24.



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Purpose, principles and structure of the Yasuní-ITT FundThe Yasuní-ITT Fund was designed to finance specific programs. The Fund had two windows: acapital fund window and a revenue fund window established to assist the Ecuadorian governmentfinance “strategic sustainable development programmes” all within the guidelines of the EcuadorianNational Plan.61

The difference is important since the capital fund window was financed by contributions to theYasuní Fund Account and/or the sale of CGYs to private or public entities. It would have exclusivelyfinanced renewable energy projects (hydro, geothermal, solar, wind, biomass and tidal), as well asprojects increasing national energy efficiency and energy savings. On the other hand, the revenue fundwindow was financed by annual revenue payments from recipient organisations for their use of fundsfrom the capital fund window.62 See Figure 2.63

FIGURE 2 Funding flowchart of the Yasuní Fund

61 Yasuní-ITT Trust Fund, n 3 at [8]; Larrea and Warnars, n 8.


63 Yasuní-ITT Trust Fund, n 3, p 7.


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The revenue fund window was strictly established for the purpose of achieving:1. Conservation of ecosystems, particularly the protected areas that are part of the Ecuadorian

national system of protected areas, which approximate to 20% of the national territory.2. Reforestation, afforestation, natural regeneration and appropriate management of forest owned by

small and medium landholders (including watershed management).3. Promotion of social development in the initiative’s zone of influence through the development of

health and education programs as well as training, technical assistance and productive job creationin sustainable endeavours. Specifically, the strategy refers to ecotourism, agriculture, theprotection of ecosystem services and agro-forestry.

4. Research, science, technology and innovation with programs that enhance the generation of goodsand services based on bio-knowledge, river basin management and the change of the country’senergy matrix.64

Administration and governance structureAfter several negotiations, the UNDP was designated to administer the Fund, assuring thetransparency and effectiveness of the investments.65 The Fund was governed and supervised by aSteering Committee led by the Ecuadorian government (three representatives, including theChairperson with a casting vote), and the participation of two representatives from Contributorgovernments and one representative from the Ecuadorian civil society. Decisions were to be made bymajority, aiming for consensus, with the Chairperson casting the deciding vote in case a consensuscould not be reached.66

The Committee provided overall leadership to the Yasuní-ITT Fund and set its strategic direction.Among its functions the Committee: reviewed and made fund allocation decisions; authorised therelease of funds for project implementation; oversaw, monitored and evaluated the effectiveness of allYasuní-ITT Fund activities.67

The Yasuní-ITT Fund had a Technical Secretariat68 and a Government Coordinating Entity (GCE)responsible and accountable for the development, implementation, monitoring and evaluation of theYasuní-ITT Fund portfolio, implemented by national entities.69

National recipients and implementing organisations had to prepare proposals for funding throughthe GCE. Projects had to be within the purpose and principles of the Yasuní-ITT Fund. Proposals wereto be submitted to the Steering Committee for approval. Based on the instructions from theCommittee, the Administrative Agent would have transferred the approved funding.70

Yasuní Guarantee Certificates (CGYs)CGYs were provided in exchange for contributions and served as a guarantee to maintain the ITTreserves unexploited. The Ecuadorian government issued them in US dollars equivalent to the facevalue of each contribution equal to or above US$50,000. CGYs could be redeemed if the Ecuadoriangovernment were to break the commitment upon which the Yasuní-ITT initiative was based.71 Thisoccurred in August 2013.

ContributorsContributions to the Fund were accepted from governments, intergovernmental entities, non-governmental organisations, private foundations, private-sector organisations and individuals. As

64 Yasuní-ITT Trust Fund, n 3 at [8]; United Nations Development Programme, n 24; Larrea and Warnars, n 8; Martin, n 26,p 125.

65 Ecuador-UNDP, n 27.


67 Yasuní-ITT Trust Fund, n 3 at [16.37]; United Nations Development Programme, n 24.

68 Yasuní-ITT Trust Fund, n 3 at [16.39].





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stated above, the initiative left the door open for a future incorporation of CGYs in the carbon marketthrough a post-Kyoto negotiation.72 In this case, contributions would have come from the sale ofCGYs by the government to private and public entities in return for mitigating GHG emissionsthrough the avoidance of oil and gas extractions from the Yasuní National Park.73

THEORETICAL AND LEGAL ANALYSIS UNDERPINNING THE YASUNÍ-ITT INITIATIVE

Theoretical approachThe Yasuní-ITT initiative called for co-responsibility with the rest of the world in avoiding the CO2

emissions that the nearly 900 barrels of oil in the ITT block would produce. Several academics haveclaimed the validity of this co-responsibility scheme.74 This article examines some of these arguments.

Vogel argues that northern countries have appropriated the atmospheric sink at the expense ofsouthern countries.75 Compensation for not extracting the Yasuní oil fields also stands over theconcept of fairness between the north and the south. In 1990 when the Intergovernmental Panel onClimate Change (IPCC) released its first assessment report, it calculated with confidence that“long-lived gases would require immediate reductions in emissions from human activities of over60 percent to stabilize their concentrations at today’s levels”.76 Despite the very clear recommendation,developed countries ended up increasing their CO2 emissions significantly when they should havebegun the cuts immediately. Therefore, countries that surpassed the recommended levels shouldcompensate southern countries in proportion to their excess emissions, so they can achieve a transitiontowards sustainable development.77

In other words, because no developed country achieved or even attempted to achieve therecommended percentage of reductions, or at least significant reductions in their emissions, Ecuador’sclaim of being paid to preserve the petroleum underground gained a moral justification after 1990.78

Other ideas underpinning the Yasuní-ITT initiative rely on the notion of the ecosystem servicesthat the National Park provides to all humankind and the necessity to pay for those services.79

However, it is important to have in mind that currently there is no international consent about thevalue of nature and the ecosystem services that it provides, especially in the case of a climatechange-sensitive ecosystem such as the Amazon region.80 Nevertheless, Ecuadorian President RafaelCorrea did point out on several occasions that ANE’s long-term goal was to convert developingcountries into exporters of ecosystem services.81

Legal frameworkThe Yasuní-ITT initiative was not developed under the United Nations Framework Convention onClimate Change (1992) 1771 UNTS 107; 31 ILM 849; [1994] ATS 2 (UNFCCC) or the KyotoProtocol to the United Nations Framework Convention on Climate Change (1997) 37 ILM 22; [2005]ATS 2 (Kyoto Protocol). However, as an international climate change strategy, it fits within therelevant provisions of the framework. Moreover, the principle of Common but DifferentiatedResponsibilities (CDR) stated in the Convention could also be seen as clear foundation for theinclusion of the initiative within the UNFCCC and the Kyoto Protocol.


73 Yasuní-ITT Trust Fund, n 3 at [11.18]; Martin, n 26, p 12; United Nations Development Programme, n 24.

74 See Martin, n 26; Larrea and Warnars, n 8; Acosta A, The Course of Abundance (Abya Yala, 2009); Vogel J, The Economicsof the Yasuní-ITT Initiative: Climate Change as if Thermodynamics Matters (Anthem Press, 2010).

75 Vogel, n 74.

76 IPCC Working Group I, Policymakers Summary, available at www.ipcc.ch/ipccreports/far/wg_I/ipcc_far_wg_I_spm.pdf.

77 Vogel, n 74, pp 35, 44.

78 Vogel, n 74, p 22.

79 Gallegos, n 41.

80 Martin, n 26, p 123.

81 UN Climate Change Conference, n 40.


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The United Nations Framework Convention on Climate Change

The UNFCCC recognises that GHG emissions in developing countries are comparatively low and thatthey will continue to grow.82 In a vague form, the UNFCCC entitles developing countries to increasetheir share of GHG emissions in order to meet their social and development needs.83 Moreover, theConvention restates a well-known principle of public international law regarding the sovereignty ofstates to exploit their own resources pursuant to their environmental and development policies, withthe only limitation that their activities do not cause trans-boundary environmental harm.84

In this context, some have argued that the legal justification of the Yasuní-ITT compensationscheme can be found in the resignation of these rights, since, within the Yasuní-ITT initiative, Ecuadoris foregoing the exploitation of a natural resource, as well as the increase of its CO2 emissions.85 TheUNFCCC sets up different priorities between developed and developing countries.86 Developingcountries should focus on achieving sustainable social and economic development, whereas developedcountries should take immediate actions to cut their emission of GHGs.87 The Convention alsorecognises that, in order to achieve this goal, developing countries need access to resources. Moreover,it states that there is a need for developing countries to engage in “greater energy efficiency” and tocontrol GHG emissions in order to achieve sustainable development.88

The Yasuní-ITT initiative fits perfectly within this framework since the strategy was aimed toconsolidate an alternative model of social and economic development (good living) and to reducepoverty in the country. The strategy focused on a transition to greater energy efficiency by changingthe energy matrix of the country from fossil fuels to renewables. Such an ambitious goal towardssustainable development needed a substantial amount of investments, as the Convention recognised.

In the body of the Convention, it is important to mention Art 3.1, which contains a guidingprinciple that also underpins the Yasuní-ITT initiative. In fact, the CDR principle, also stated in thepreamble, can reflect “totally different ways of thinking” about the roles between developed anddeveloping countries in tackling environmental degradation.89

The principle needs to be interpreted in a pragmatic way. It calls for action to solve climatechange and implies that wealthier countries should do proportionally more than developingcountries.90 Some academics have also argued that the principle should be interpreted as a “source ofco-responsibility” under which the north should contribute to the protection of nature in the southsince they became wealthy through environmental carelessness.91

Within the UNFCCC, the Yasuní-ITT initiative can also be seen as an exercise of the right thatparties have to promote sustainable development, which is provided within the fourth principle of theConvention.92 Moreover, under the terms of the Convention, the initiative, which was integrated in theEcuadorian National Plan since 2009, could be qualified as an appropriate measure, adapted to the

82 United Nations Framework Convention on Climate Change (1992) 1771 UNTS 107; 31 ILM 849; [1994] ATS 2, Preamble.

83 Zahar A, Peel J and Godden L, Australian Climate Law in Global Context (Cambridge University Press, 2010), pp 54-59.

84 United Nations Framework Convention on Climate Change (1992) 1771 UNTS 107; 31 ILM 849; [1994] ATS 2, Preamble;Zahar, Peel and Godden, n 83.

85 Gallegos, n 41 at 7.

86 Zahar, Peel and Godden, n 83, p 61.



89 Mickelson K, “South, North, International Environmental Law, and International Environmental Lawyers” (2000) 11Yearbook of International Environmental Law 52.

90 Zahar, Peel and Godden, n 83.

91 Martin, n 26, p 131.



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specific conditions of Ecuador as a developing country to protect the “climate system”.93 One canargue that the Yasuní-ITT initiative was in fact a response to the impact, or the lack of impact, of theresponse measures from the developed world.

The UNFCCC specifies commitments to all parties, which in accordance with their common butdifferentiated responsibilities and their national and regional priorities, are to promote sustainablemanagement and cooperate in the conservation of sinks and reservoirs of GHGs including forests.94

This very general commitment currently being used to support the REDD mechanism95 also creates aframework for the development of the Yasuní-ITT strategy, which was directly linked to theconservation of 928,000 hectares of primary forest.96

Finally, it is important to mention that the UNFCCC provides a particular attention for developingcountries. It specifically mentions countries with fragile ecosystems and countries whose economiesare highly dependent on income from fossil fuels.97 This is exactly the case of Ecuador as it has beendescribed in this article.

Kyoto Protocol and current mechanisms

The Kyoto Protocol imposed quantifiable emissions caps on Annex I parties and created three differentmechanisms for countries to meet their binding reduction requirements: the Emission Trading System(ETS), the Joint Implementation (JI) and the Clean Development Mechanism (CDM). The latter is theonly mechanism that allows the participation of developing and least developed countries in mitigationactivities.98 The Yasuní-ITT initiative was not developed under the Kyoto Protocol; however, somedistinctions should be made between the Ecuadorian initiative and CDMs to highlight the benefits ofthe Yasuní-ITT initiative over this Kyoto mechanism.

Clean Development Mechanism (CDM)

Under the Kyoto Protocol, the CDM allows an Annex B party to implement an emission-reductionproject in a developing country. It is linked to the emission of CERs (certified emissions reductions),which can be counted towards meeting Kyoto targets.99

The Yasuní-ITT initiative aims to avoid the release of CO2 into the atmosphere, by leaving oilunderground, while CDM projects aim to compensate and reduce the emissions of developedcountries. The Ecuadorian initiative is based in the ANE concept, which is not included in the KyotoProtocol.100 This concept strikes at the centre of the problem by preventing the release of emissions inthe first place. While CDM only reduces the impact of polluting activities by compensating thereleased emissions in developed countries, the Yasuní-ITT initiative prevents those activities fromoccurring in the first place.

Contributing to the Ecuadorian initiative is not limited to Kyoto Protocol parties (Annex I andnon-Annex I countries) as it is open for the participation of developed and developing countries, aswell as NGOs and individuals around the word.101 This much broader spectrum of contributors canhelp to raise awareness towards the preservation of biodiversity, while the CDM is mostlybusiness-orientated.

93 United Nations Framework Convention on Climate Change (1992) 1771 UNTS 107; 31 ILM 849; [1994] ATS 2, Art 3(4).

94 United Nations Framework Convention on Climate Change (1992) 1771 UNTS 107; 31 ILM 849; [1994] ATS 2, Art 4(1)(D).


96 Finer et al, n 11.

97 United Nations Framework Convention on Climate Change (1992) 1771 UNTS 107; 31 ILM 849; [1994] ATS 2,Art 3(8)(g)-(h).


99 United Nations Framework Convention on Climate Change, Clean Development Mechanism (CDM), available athttp://unfccc.int/kyoto_protocol/mechanisms/clean_development_mechanism/items/2718.php.

100 Ganchozo M, Yasuní-ITT Initiative: A Different Conservation Proposal. Comparative Analysis with the Clean DevelopmentMechanism under the Kyoto Protocol (LLM thesis, Universidad de Chile and Heildelberg Centre), p 5.

101 United Nations Development Programme, n 24.


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In contrast to CDM projects, the implementation of the Yasuní-ITT scheme does not involve thetransfer of environmentally safe technology, knowledge and expertise for the transition to alow-carbon economy and the promotion of sustainable development.102 Under the Yasuní-ITT scheme,sustainable development is attained through the investment of the fund in renewable, environmentaland social projects.103

Finally, the Yasuní-ITT initiative is not limited to the avoidance of GHG emissions, since it isdirectly linked to the conservation of biodiversity and the protection of the rights of the indigenouspopulation that lives within the Yasuní National Park and therefore depends on its ecosystem.

Reducing Emissions from Deforestation and Forest Degradation (REDD)

Another distinction has to be made between the Yasuní-ITT initiative and REDD (Reducing Emissionsfrom Deforestation and Forest Degradation), since the latter also seeks to curb developing countries’GHG emissions by preventing deforestation.104 Developed under the UNFCCC, the more ambitiousform of REDD known as REDD+ aims “to generate credits from projects directed to the conservationand enhancement of forest stocks”.105

Even though the Yasuní-ITT initiative is linked to the prevention of deforestation, the CO2

emissions from deforestation and forest degradation are not its direct target. The Yasuní-ITT initiativeseeks to primarily avoid CO2 emissions from the burning of fossil oil.106 As a model it targetsdeveloping countries with significant fossil fuel reserves in highly biologically and cultural sensitiveareas aiming to switch from extractive models of development towards sustainable alternatives todevelopment. It is important to point out that the Yasuní-ITT initiative does not reflect a lack ofinterest of Ecuador in participating in REDD, the issue is that REDD still is an emerging scheme thatfaces major implementation issues such as the legal and beneficial interest in publicly-owned forest,land tenure, the rights of indigenous peoples, etc.107

YASUNI-ITT: A STRATEGY TO ADDRESS CLIMATE CHANGE

After the release of the first IPCC report in 1990, where a 60% reduction of CO2 was recommended,the majority of countries ended up significantly increasing their CO2 emissions during the nextdecade.108 Trying to tackle the climate change issue through international agreements has proved to bea complex task. After years of negotiation the only noteworthy strategy in the international sphere hasbeen the Kyoto Protocol. However, within the Kyoto Protocol the participation of developingcountries is mostly confined to the implementation of CDMs.109 Currently, there are not manyalternatives for southern petroleum-rich countries to be part of the climate change strategy in a timewhere new commitments and initiatives are desperately needed.

In this context, the Yasuní-ITT initiative proves to be an innovative response aiming to create aclear strategy for developing countries to address climate change. The initiative was clearly focusedtowards achieving social, economic and environmental sustainability through the implementation ofrenewable energy and conservation projects.

The initiative needs to be understood in the socio-economic context of the country in which itoriginated. The abandonment of the initiative in 2013 cannot be qualified as a failure of the strategybut as a reflection that exploiting the petroleum of Yasuní-ITT was, and still is, a more profitable

102 Ganchozo, n 100.


104 Ganchozo, n 100, p 48.

105 Zahar, Peel and Godden, n 83, pp 230-231.

106 Ganchozo, n 100.


108 Vogel, n 77, pp 19, 29.

109 Vogel, n 77, p xv (note: Foreword by Chichilnisky G).


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option.110 US$7 billion in revenue easily sounds more promising than having to rely on aninternational cooperation scheme hoping for half of that amount, especially for a developing countrystill struggling to overcome poverty. Moreover, the grim international economic situation and theslowing economic prosperity in Europe and the United States, provide little hope for such an initiativeto obtain the necessary funding.

As a climate change strategy, the application of the initiative under the innovative concept ofANE would have prevented the emissions of 1,278 million metric tonnes of CO2. Paying for notpolluting the environment might sound controversial; however, it tackles the core of the issue, whichis the production of CO2 in the first place. In addition, it helps the transition towards a cleanereconomy for developing countries, preventing new emissions in the future.

The basis for compensation, linked to the price of petroleum, was always the initiative’s mostcontroversial point. Relying on speculation of the future price of petroleum for a 13-year period was aconcern that created disagreements over predictions. This disrupted the basis for compensation.111

Despite these disagreements over oil price predictions, the initiative remains a practical andrealistic approach that directly deals with one of the main causes of climate change: the burning offossil fuels. It can also be seen as a simple yet effective methodology that could solve the issueregarding compensation for ecosystem services.112

Beyond the direct avoidance of a significant amount of emissions, the initiative was able toincorporate two essential elements that are continuously missing in the current international climatechange scenario: the conservation of biodiversity and the rights of indigenous people.

Another key element that supports the strength and transparency of the initiative was theinternational fund devoted to promote Ecuador’s transition towards sustainable development. TheYasuní-ITT Fund had a comprehensive governance and management structure. It guaranteed that thefunds would be allocated exclusively in “strategic sustainable development programs” approved by anexternal committee.113 Since the allocation of funds for these programs was clearly specified in theagreement signed with the UNDP and, long before that, incorporated in the Ecuadorian National Plan,one can say that it was a legitimate attempt to genuinely invest in the sustainable future of the country.

There are several arguments underpinning the Yasuní-ITT cooperation scheme. Their receptiondepends on the ethics of the audience.114 A fairness approach from the UNFCCC’s CDR principle isrelevant. The CDR principle can be used as the foundation for a “cooperative model” betweendeveloped and developing countries such as the one proposed by the initiative.115 It was not trying togive developing countries a free ride on the developed countries’ contributions or measures to tackleclimate change.116 Indeed, the Yasuní-ITT initiative was not charging developed countries with theentire burden of environmental degradation, hoping to gain the entire surplus of the cooperationscheme that it proposed. Within the initiative, Ecuador, despite its condition as a developing country,took a substantive share of the burden (50% of its oil revenues) to favour the entire internationalcommunity.

Additionally, the CDR principle can have several interpretations. Currently, it does not compelany wealthy state to provide any kind of monetary aid.117 However, it is precisely in this broadscenario that the Yasuní-ITT initiative also acquires its value since it could help define the future

110 Martin, n 26, p 121.

111 Vogel, n 74.

112 UN Climate Change Conference, n 40.


114 Vogel, n 74, p 22.


116 Stone C, “Common but Differentiated Responsibilities in International Law” (2004) American Journal of International Law276.



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meaning, limits and applications of the general terms of the principle. It could help transform analready recognised moral obligation into a legal obligation, perhaps helping to build a system ofinternational co-operation in the future.

As a mechanism to address climate change, the Yasuní-ITT initiative is not in contradiction withthe UNFCCC. In fact, it can be framed under several provisions of the Convention and open tangibleopportunities towards sustainable development (one of the main goals of the UNFCCC).

The current international climate change regime places a limitation for countries whoseeconomies depend on the exploitation of natural resources and who lack the means to respond toclimate change challenges.118 This opens opportunities for alternative strategies such as theYasuní-ITT initiative that could be incorporated in the international carbon market in the future.119

In the case of CDM it is important to mention that it has delivered few benefits to the poorestnations in the developing word. Carbon-rich Latin American and African countries have very low CO2

emissions and therefore they cannot benefit much from reducing it.120 Additionally, the vast majorityof CDM projects are located in the most powerful developing and emerging economies such as China,India, Brazil and Mexico, rather than the least developed countries and heavily indebted poorcountries.121

In the case of REDD(+), there are great expectations regarding the benefits that it would derivefor developing countries. However, there is still controversy over definitions, financing, monitoringsystems, requirements and so on, that would have to be resolved before moving to the recognition andimplementation phase.122

Certainly, there are some issues within the strategy and the general concept of ANE. One of themis the risk of leakage. In fact, the initiative might not reduce CO2 emissions globally but rather shiftthe production from one country to another. Thus, if Ecuador reduces its oil production, anotherproducer in South America or the Middle East could pump more oil to compensate for the shortfall.123

It has also been pointed out that the Ecuadorian government might use the money for other purposes,which are not necessarily linked to the agreed objectives.124 Moreover, there are practical difficultiesregarding the need to prove the counter-factual scenario against which the benefits of the initiative aremeasured. However, the Yasuní-ITT initiative does not have a global precedent of the same dimensionand that certainly posed difficulties in its creation and implementation. It can thus be seen as a“prudent pilot project”125 and more importantly as a perfectible “global model”126 for addressingclimate change that could be replicated in the future.

As a strategy for addressing climate change by leaving proven reserves of petroleumunderground, it could be replicated by a specific group of developing countries. They would have tobe mega diverse countries located between the Tropics of Cancer and Capricorn, where tropical forestsare concentrated. They should also have significant fossil fuel reserves in highly biologically andculturally sensitive areas. Some of the countries that fulfil these conditions are Brazil, Colombia,Costa Rica, the Democratic Republic of Congo, Madagascar, India, Indonesia, Malaysia, Papua NewGuinea, Peru, the Philippines and Venezuela.127

118 Zahar, Peel and Godden, n 83, p 62, Ganchozo, n 100, p 5.





123 Haddad R, “An Un-conventional Approach: Ecuador’s Yasuní-ITT Initiative is in Discord with the UNFCCC” (2012) 12Sustainable Development Law & Policy 15.

124 Martin, n 26, p 123.

125 Vogel, n 74, p 44.




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CONCLUSION

This article has validated the Yasuní-ITT initiative under the innovative concept of ANE. For thispurpose, the article has analysed the background in which the initiative emerged and its subsequentabandonment. The socio-economic and environmental characteristics of the country and the recentlegal and policy changes built upon the concept of good living are key in understanding the initiativeand the reasons that propelled its creation.

The article has examined the value of the strategy as a tool for addressing climate change underthe concept of ANE. The direct and indirect benefits of the application of this concept have beenshown through the identification of the total amount of emissions that the initiative would haveprevented. Additionally, the article has shown other benefits related to the conservation of biodiversityand the rights of indigenous peoples.

It has been demonstrated that the initiative was focused on achieving social, economic andenvironmental sustainability in Ecuador through the financing of renewable energies and other socialand environmental development programs. Moreover, it was shown that the creation of the Yasuní-ITTfund gave transparency to the whole process.

The article has also demonstrated the validity of the theories underpinning the co-responsibilityscheme designed in the Yasuní-ITT initiative. It has also looked at the UNFCCC to assess the extent towhich the initiative could effectively function under some of its provisions. The CDM mechanismunder the Kyoto Protocol and the REDD initiative have been examined to outline their limitations incomparison with the Yasuní-ITT initiative.

Finally, the article has highlighted all the key elements of the strategy to assert the potential thatthe Yasuní-ITT initiative has to be replicated in the future as a climate change strategy forpetroleum-rich developing countries. Considering the serious global warming potential of provenfossil-fuel reserves, the Yasuní-ITT initiative is an effective model that could avoid the catastrophiceffects caused by burning them. Indeed, this model could incentivise petroleum-rich countries to divestfrom fossil fuels and find sustainable pathways to human progress.


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Ecuador’s Yasuní-ITT initiative for mitigating the impact of climate change

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Transcript of Ecuador’s Yasuní-ITT initiative for mitigating the impact of climate change