What value can society put on the environment? If once this question was primarily philosophical it is fast becoming a practical consideration as society attempts to mitigate against environmental damage by marrying environmental impact with an economic cost. One such current scheme is the EU emissions trading system (EU ETS), where companies and governments trade the rights (or permits) to release carbon into the atmosphere. Previously the linkage between the environment and economy was seen primarily in terms of enforcing a financial cost for environmental damage rendered; the polluter pays principle. However a new deal could turn this system on its head, creating a financial incentive for actions that help the environment; in essence being paid for not polluting.
In an international first the South American country of Ecudor has signed a pact with the UN stating that it will leave millions of tons of oil untouched indefinitely in return for financial compensation from the international community. The oil reserves situated in the Yasuni natural park would have the potential to release millions of tons of CO2 into the atmosphere if extracted and burned. The drilling process would also cause massive damage to the 675 square miles of Amazonian rainforest sitting above the oil reserves. The rainforest contains a huge amount of biodiversity, as well as being home to many indigenous tribes whose way of life would be threatened by the drilling process.
Yasuni National Park
Instead of drilling Ecudor will sell Guarantee Certificates that promise the oil will remain underground indefinitely, saving over 410 million tons of CO2 from being released into the atmosphere.1 Like the EU carbon trading scheme where permits to release carbon can be traded the scheme will produce Yasuni Guarantee Certificates (CGYs in the native Spanish) which the Ecuadorian government will issue to bidders equivalent to the amount of carbon saved.
Money for the credits could come from a variety of different sources. One source of income is likely to be from EU countries buying the oil as part of the EU ETS. Buying CGYs would be a way for European countries to offset their own carbon emissions to stay within EU limits. However for this to happen the CGYs would have to be recognised within the European Trading System. If sold this way the total amount of income received by the certificates would be dependent on the market conditions and the price of carbon within the scheme.
Other credits could be bought up be NGOs, philanthropists, charities and companies much like other current carbon offsetting schemes
Although asking for international money Ecuador does not want to be seen as a charity. The approximate 1 billion barrels of oil have a net value of around $7 billion, meaning the $3.6 billion they are asking for is less than market value. Helga Serrraao from the Ecuadoran foreign ministry said “We will keep the oil underground indefinitely. We think $3.6 billion is a fair contribution from developed countries.”
The system could pave the way for other countries rich in oil to gain wealth from their natural resources without contributing to global warming or critically damaging local ecosystems. It’s not just environmental concerns that may get countries considering the idea, in many countries the extraction of oil has left thousands without job prospects and seriously reduced life expectancy. However the certificates are very unlikely to be purchased for the value of the crude oil they replace and so the scheme may be of limited appeal to economically less developed nations.
The scheme is not without issues. Taking the oil off the market will not effect worldwide oil demand but will effect supply, and as this decreases the price of oil could rise accordingly. A rise in price could lead companies across the globe to drill out even dirtier sources of oil resulting in a net increase in environmental damage. Other critics argue that Ecuador is essentially blackmailing the world, using its vast biodiversity as leverage and forcing Europe to pay dearly for its environmental conscience.
However, true change in the way we treat this planet will only come about when we decide to make the decisions to hold off the removal of fossil fuels from the earth for reasons other than just the economic arguments. Climate change will only be diverted from its current course when we decide to leave fossil fuels in the ground that we could remove for profit, even if, in 2010 at least, this might require some financial incentive.
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