Tuesday, August 20, 2013

The Dilemma of Ecuador's Oil Drilling in Unique Rainforest

(Rainforest River Toucans/FlickrRedfish1223)
"Six years ago, President Rafael Correa of Ecuador offered the world what he considered an enticing deal: donate $3.6 billion to a trust fund intended to protect nearly 4,000 square miles of the Amazon jungle and his country would refrain from oil drilling in the rain forest.", The New York Times reports today.

“...The world has failed us,” President Correa said as he withdrew the offer in a nationally televised news conference on Thursday night. “With deep sadness but also with absolute responsibility to our people and history, I have had to take one of the hardest decisions of my government.” 

What happened here? First, potential reserves of 800 million barrels of oil were found  in the Yasuni national park in Ecuador, one of the most bio diverse places in the world. The oil reserves were valued at $7.2 billion, and Ecuador came up with a plan in 2007 to raise half of the expected proceeds, $3.6 billion in 12 years, from other governments, institutions, and rich and famous individuals, and then it would refrain from opening up this unique rainforest to oil drilling.

Some governments paid something. So did Al Gore, Leo DiCaprio and Bo Derek among others. Coca Cola, airlines and banks also contributed. But no leading conservation groups participated, and "the German development minister, Dirk Niebel, said that the principle of paying for the oil not to be exploited "would be setting a precedent with unforeseeable referrals"." There was also criticism that even if the money would have been raised, Ecuador's government would not have been able to manage those sums and the protection of the park, its native inhabitants and wildlife.

See the following video clip:

Now, six years later, only a pittance was raised ($13 million, although more has been pledged) and Ecuador has decided to go for exploration and money now. Let me come up with a few observations:
one, it seems quite odd that in those six years not more has been raised. There is increasing financial wealth in the world (see below) and with the new online crowd funding tools, this should be achievable (if some of the crowd funding sites combine their technological platforms with someone's marketing savvy: the government of Ecuador or the U.N.?)

Here a back of the envelope calculation: according to Forbes there are 1,426 billionaires in the world. Let's say that instead of buying another private jet or spending money on the salary of a professional athlete, let 100 of them pay $10 million each ($1 billion in total); another 100 billionaires pay           $1 million each ($100 million in total).

There is also a record breaking number of millionaires in the world: 12 million. Let's assume 1,000 of them pay half a million each ($500 million in total) instead of buying a different color Bentley or Rolls Royce; and 100,000 millionaires pay $10,000 each - equal to a weekend get-away - ( $ 1 billion in total)

We've now raised a total of $2.6 billion. Still $1 billion to go. Let's look at the middle class around the world: according to the World Bank, there are 369 million people in the middle class in the developing G-20 countries. Without even adding up the middle class populations in Europe, U.S., Canada, Australia and Japan, it would not be unreasonable to expect 10 million people to donate $50 each ($ 500 million in total), and 50 million people to donate $10 each ($500 in total. ) And there you have $3.6 billion raised to protect unique flora and fauna, benefiting not only the local indigenous population, and Ecuador, but also the rest of mankind which will be saved from increased pollution and climate change. Correct? Well, maybe not.

The earlier criticisms still stand that this was a proposal by a government of a very poor country, which has not shown it can manage its economy very well. Also the other criticism, that this proposal is a veiled ransom request has some validity. What is it next time, mr. Blofeld: "we won't build a nuclear reactor on our shore, if the international community pays us $10 billion in small denomination dollar bills?"

Last but not least, I want to quote Michael J. Sandel, author of What Money Can't Buy: The Moral Limits of Markets, who writes about his concern that we have a moved to a society where everything has a price and is up for sale:

"When we decide that certain goods may be bought and sold, we decide, at least implicitly, that it is appropriate to treat them as commodities, as instruments of profit and use. But not all goods are properly valued in this way. The most obvious example is human beings. Slavery was appalling because it treated human beings as a commodity, to be bought and sold at auction. Such treatment fails to value human beings as persons, worthy of dignity and respect; it sees them as instruments of gain and objects of use.....

 ...some of the good things in life are degraded if turned into commodities. So to decide where the market belongs, and where it should be kept at a distance, we have to decide how to value the goods in question—health, education, family life, nature, art, civic duties, and so on. These are moral and political questions, not merely economic ones. To resolve them, we have to debate, case by case, the moral meaning of these goods, and the proper way of valuing them."

Frankly, I agree with Sandel: is it possible to financially value a unique part of the world, which a rainforest is? And, if we come up with a value, and let the highest bidder decide what to do with it, don't we risk ending up in a society and a planet where some people have millions or even billions of dollars in oil revenues, but the rest of the world lives in a wasteland, resembling sooner or later the Mad Max movies?  If we don't find a better way of dealing with these kind of problems soon, that's what will happen to Yasuni national park and to the world.

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