Ecuador's Amazon Drilling Plan Shows Need for Fossil Non-Proliferation Treaty

Ten years after Ecuador abandoned efforts to get the international community to pay it not to drill for oil in a corner of Yasuní National Park, one of the most biodiverse places on Earth, the cash-strapped country’s decision to double down on fossil exploration is signalling the need for a global fossil fuel non-proliferation agreement.

In the oil business since 1972, Ecuador has seen its standard of living improve, at least for some of its citizens. Its per capita gross domestic product nearly doubled in 50 years, a slightly faster pace than Latin America as a whole, writes the New York Times. “Many credit oil.”

“There has been a change from a very backward Ecuador to an Ecuador that has progressed not to the first world but to the middle—a breakthrough,” Energy Minister Fernando Santos said in an interview last November.

One of the world’s top 40 petrostates, Ecuador now gets 19% of its revenue from mostly heavy crude. As this income grew over time, global markets allowed the government to borrow more heavily. Poorer countries like Ecuador with oil boom and bust economies often get trapped in debt, borrowing at higher interest rates because they are considered riskier.

“The story of this place, Yasuní National Park, offers a case study on how global financial forces continue to trap developing countries into depleting some of the most biodiverse places on the planet,” the Times reports from Amazonian Ecuador.

While Santos agrees that his country is “in monstrous debt,” and that oil dependence is part of the problem, he says only more drilling and mining will take Ecuador out of the red.

But even if this were feasible, Ecuador’s oil revenues have never benefited its poorest citizens, many of whom live in small forest communities very close to drilling sites. For instance, after 30 years of oil extraction virtually at its back door, the forest hamlet of Yarentaro has neither a sanitation system nor running water.

Former oil executive Ramiro Páez Rivera faults the government for failing to spend oil tax revenue on public good. “We pay millions of dollars,” he said. “People don’t even have potable water.” And as the government tells it, the poorest people are still drinking from increasingly contaminated rivers because Ecuador cannot yet afford the infrastructure to do otherwise.

“Ecuadorean leaders say they simply can’t walk away from oil money in a country where as many as one in four children suffers from malnutrition,” writes the Times.

The Plan that Failed: The Yasuní-ITT Initiative

Ecuador’s leaders did try to walk away from oil money, once upon a time. In 2007, then-president Rafael Correa proposed the Yasuní-ITT initiative as a pathway to relinquishing oil revenue.

Under the initiative, the international community would compensate Ecuador US$3.6 billion to leave undisturbed the oil in an area known as Block 43, the Ishpingo-Tiputini-Tambococha (ITT) oil fields within the Yasuní national park. At the time, that was half the estimated value of the oil underground in that parcel of the 9,800-square-kilometre park, which was designated a UNESCO Biosphere Reserve in 1989. Frequently cited as the most biologically diverse place on Earth, Yasuní contains 380+ known species of fish, 590+ bird species, and an estimated 117 bat species. A single hectare of the park houses more than 100,000 different insect species, more than all of North America, while 2.5 acres are said to contain more tree species than the United States and Canada combined.

The park also shelters an unknown number of Tagaeri and Taromenane people, two Waorani clans who live in voluntary, and increasingly threatened, isolation.

Unfortunately for all its denizens, Yasuní is also rich in crude oil, with an estimated 1.7 billion barrels—or 40% of the country’s reserves—buried in the ITT oil fields in its northeast corner.

The Yasuní-ITT initiative was formalized in 2007, after revelations about the extent to which decades of oil extraction, especially the building of infrastructure and roads, had devastated the rainforest ecosystem and delivered social, physical, and psychological harms to its human inhabitants.

According to estimates at the time, a successful initiative would have avoided 410 million tonnes of carbon dioxide emissions and preserved nearly $9.89 billion in environmental benefits. Oil production in the ITT would cost Ecuador $1.25 billion, including the effects of deforestation and lost ecotourism potential, but excluding spills, pollution, and public health implications, a 2009 paper estimated.

But six years after its inauguration, with only $336 million pledged towards the $3.6-billion target and merely $13.3 million delivered, the Correa government pulled the plug on the deal. Then it secured some $8 billion in loans from China, with the promise to repay some of that money in barrels of oil, says the Times.

Ecuador’s former ambassador to the United Kingdom, Juan Falconi Puig, blamed a failure of international political will. “The financial backing fell way short of the widespread expressions of support,” he said. It had not been charity that Ecuador was asking for, but rather a partnership of nations who recognized their “co-responsibility in the battle against climate change.”

“Rich countries were reluctant to contribute to a climate initiative that did not grant them carbon credits, and it didn’t help that a global financial collapse came just months after Ecuador launched the initiative,” explained the Oakland-based non-profit Amazon Watch in 2013. “However, amidst all of his finger pointing, Correa failed to mention his role in undermining the initiative’s credibility.” Ecuador’s government started drilling in Yasuní long before terminating the initiative. Oil development had been active in parts of the park since the early 1990s. And by 2013, some 40% of the park had been divided into oil concessions.

“How could Correa expect the global community to donate billions of dollars to protect a fraction of a national park that he was actively chopping up into oil blocks?” Amazon Watch asked. “How could he expect the world to donate when he regularly spoke about a ‘Plan B’ to drill the ITT wells if the world didn’t pay up?”

Doubling Down on ‘Plan B’

Fast forward a decade, and Plan B is in play, even as Ecuador knows it holds an increasingly poor hand.

“Now that the global trend is to abandon fossil fuels, the time has come to extract every last drop of benefit from our oil, so that it can serve the poorest while respecting the environment,” Ecuador’s current president Guillermo Lasso said in a May 2022 speech, pledging to double Ecuador’s oil production to one million barrels per day by 2025.

Swift and fierce resistance followed Lasso’s plan to auction oil reserves within three million hectares of pristine rainforest, especially from the Indigenous communities that stand to suffer most from further oil extraction in the Amazon. Lasso responded by cracking down heavily on civil disobedience, Reuters reported last June.

Lasso’s pledge to go all-in on oil came weeks after French financier BNP Paribas announced it would stop funding any new oil and gas projects in the Amazon. Ecuador is in the crosshairs of this exclusion, Reuters wrote: “Over the past 18 months, French, Dutch and Swiss lenders, including BNP Paribas, Natixis, ING and Credit Suisse, have made various commitments to stop financing the international trade in cargoes of Ecuadorian crude, which make up 90% of the oil exported from the Amazon.”

Yet oil development in Yasuní continues. Energy Minister Santos told Argus Media last week that Ecuador’s minister of environment hadauthorized four new oil platforms in Block 43, close to Yasuní’s buffer zone, bringing the number of platforms in the block to 16.

“We think ITT’s output will increase from 50,000 barrels per day to 80,000 per day this year,” Santos said.

And state-owned oil company Petroecuador continues to “knock on doors” in the impoverished Indigenous communities that dot Block 43, writes the Times. Lured by the rare opportunity for income, as well as offers of better housing and sanitation projects, “hundreds of workers toil in shifts, 24 hours a day.”

But it is unclear how long the oil in Block 43 will be worth the investment. “The heavy oil is less valuable and emits more carbon than lighter types,” , the news story states. And “over 90% of what’s pumped is toxic water that needs to be removed and treated, making operations more expensive.”

Santos acknowledged the problem but said his government has “identified American and Canadian companies specialized in extracting this kind of crude.”

The Path to a Better Future: The Fossil Fuel Non-Proliferation Treaty

Amazon Watch suggested the Yasuní-ITT initiative fell apart because of a shared lack of trust, but the factors that led to its unravelling are complex. The Times points to fears over Ecuador’s record of political instability, while others see the initiative as having been in losing competition with the United Nations’ REDD+ programs.

But another factor at play was the lack of an international mechanism to ensure compliance by all parties involved—the kind of mechanism that proponents say would be guaranteed by the proposed Fossil Fuel Non-Proliferation Treaty (FFNPT).

“The rationale and point of departure for the treaty is the ‘production gap’ that exists between the plans by fossil fuel-producing countries to produce 110% more fossil fuels by 2030 and their incompatibility with the goal of the Paris Agreement to keep warming below 1.5 °C compared to pre-industrial levels,” says a December, 2022, paper in the journal Earth System Governance.

Closing the gap means cutting production 6% each year by 2030, the authors say, an endeavour that will require immediate international cooperation. And the FFNPT would do more than end fossil fuel expansion and phase out present use as its first two pillars propose: An important third pillar, one that dictates how the first two are realized and could have made all the difference to Ecuador, calls for a “global just transition” out of the perils of a fossil fuel economy.

“The treaty could provide financial support to countries expected to forego fossil fuel production for the collective good (i.e., achieving the goals of the Paris Agreement) in the form of funding and support for low-carbon energy provision,” the study authors write.

A 2021 paper in the journal Energy Policy notes that “a fundamental conundrum accompanying the funding mechanism would be that the right-holders, after being compensated for foregoing extraction rights, could face the temptation of breaking their promise by keeping the compensation and still engaging in extraction activities.” That risk “would be amplified by political cycles and the volatility of fossil fuel prices.” So “credible commitment instruments should be nested in the mechanism,” including international arbitration provisions “similar to the ones routinely included in international investment agreements.”

Two countries, 76 cities and subnational governments, 1,800 civil society organizations, 3,000 scientists, 101 Nobel Laureates, and 552,217 individuals have endorsed the FFNPT to date. You can find out more and consider joining them here.