Yasuni – ITT Initiative: a Case of Innovation in Global Sustainability Governance

Introduction

Ecuador is a small, less developed country in South America that is abundant in biological and cultural diversity. In 1972 Ecuador became an oil exporter and since then this product is the centerpiece of the national economy[1]. Although, Ecuador remains overwhelmingly oil dependent, oil’s vast revenues did not show a path out of the national dept. Its population continues to suffer from crushing poverty and there is a direct negative correlation between oil exploitation and poverty. As is the case with many oil-rich developing countries, the oil industry has resulted in poor social performance and caused devastating environmental and health effects. This is what is called “Natural resources curse”.[2]

In light of recent confirmation of large deposits of heavy crude oil in the Ishpingo Tambococha Tiputini (ITT) field, which  is located  in the Yasuni National Park, one of the most important and biological diverse in the world[3] as well as home to indigenous cultures living in voluntary isolation, President Rafael Correa proposed to refrain indefinitely from extracting the oil reserves within the ITT block if the international community were to compensate Ecuador for at least half of foregone income – a proposal widely known as Yasuni ITT Initiative. On 3 August 2010, a global trust fund administered by the Multi-Partner Trust Fund Office (MPTF) of United Nation Development Programme (UNDP) was officially launched to enable the international community to channel financial contributions invested exclusively in much-needed local alternative economic activities such as renewable energies and social development projects.

The unique Yasuni ITT Initiative aims at shifting Ecuador from an exporting primarily economy to a bio-knowledge society[4] and thereby represents a new model for post-extractive sustainable development. Given the Kyoto Protocol’s current limitations[5], Ecuador has put forward Yasuni ITT Initiative as an alternative to allow for the active participation of developing countries in mitigating climate change, protecting biodiversity, and the rights of indigenous peoples and promoting a new style of human development which is equitable and sustainable.[6]

Yasuni National Park: An imperiled Paradise

“The true wealth of the Yasuni does not lie below the ground or in gold or minerals, but instead with its extraordinary and unique biodiversity and the indigenous people that choose to live, uncontacted, within its canopy…”[7]

Located at the intersection of the Amazon, the Andean Mountains and the Equator, Yasuni National Park is among the top 5 biodiversity hotspots[8] in the world. The Yasuni National Park in Ecuador is the refuge to one of the greatest genetic varieties of plants and animals on Earth[9]. It spans nearly a million hectares of almost untouched primary rainforest and is situated in the Ecuadorian Amazon, predominantly in the province of Francisco de Orellana[10]. Far from the interference of civilization, the national park is sanctuary to various indigenous groups including the Waorani, Kichwa, Shuar, Tagaeri and Taromenane. It is worth-mentioning that the Tagaeri together with the Taromenane make up the two last known indigenous groups that choose to maintain no contact with the outside world, fighting bravely in defense of their ancestral territory and their right of self determination constantly  threatened  by unregulated oil exploitation of “neo-colonial” multinational oil companies, deforestation, and colonization.[11]

Due to its exceptional diversity and the presence of Tagaeri and Taromenane, UNESCO declared the Yasuni Park a Bio-reserve and Cultural Heritage site in 1989.  Despite this fact, the Yasuni Park boundaries have been re-drawn several times to accommodate oil exploitation which would be otherwise forbidden. In 1999 the Constitutional court approved[12] plans to extract oil from the Yasuni National Park, a decree which clearly violated the park’s legal status. In the same year, the Ecuadorian government declared 700.000 hectares of the park an “Untouchable Zone” which was delimited in 2006.[13] Recently, large reserves of oil were identified beneath the Ishpingo Tambococha Tiputini field[14] (ITT) holding 846 million barrels of crude oil, accounting for 20% of Ecuador’s national reserves. On the other hand, the ITT crude[15] oil is very difficult to extract and has higher carbon content, making it even more polluting than other oil.

Extracting this oil will inevitably induce the extinction of known and unknown species, oil contamination of water and soil and a large contribution to climate change through further oil production and extensive logging. It will also mean the final extermination of indigenous people living in voluntary isolation through violence and disease.[16] Against all odds, President Rafael Correa conceived a revolutionary idea with a view to preserve this natural wonder as a gift for the future generations.

The Yasuni ITT Initiative: A Win-Win Paradigm for Sustainability

During the 62nd Session of the United Nations General Assembly (UNGA) in September 2007, the Ecuadorian President Rafael Correa presented his innovative Yasuni ITT Initiative to save Yasuni National Park and the Amazon, known as the “green lungs” of the planet. In this proposal, the government committed itself to permanently forego the exploitation of the ITT field, thus avoiding the emissions of 407 million metric tons of CO2 due to non-extraction and burning oil. This would lead to savings of 800 metric tons of CO2 from avoided deforestation and reforestation it would promote nationwide.[17] Reducing further production and burning of fossil oils and mass deforestation is arguably a sine qua non condition to combat climate change.

Envisioning global co-responsibility for the governance of environmental challenges and challenges regarding human rights, Ecuador was “requesting the world community to contribute 50 percent of the income it is forgoing, amounting to US$ 3.6 billion” (which should come mostly from developed countries over a 13 year period starting from 2011), “with the balance being the contribution of the people of Ecuador to global goods”.[18] Through Yasuni ITT Initiative, the Ecuadorian government decided to put social and environmental values first and finance renewable energy and sustainable development  investments such as avoidance of deforestation and conservation of ecosystems.

The original proposal initiative set three main goals, each of which represents an issue of international common interest:

• To protect  of Biodiversity;
• To support the livehood and culture of the indigenous communities living in voluntary isolation;
• To ensure net avoided emissions of greenhouse gases.[19]

The pioneering, holistic Yasuni ITT Initiative is based upon a paradigmatic shift towards a post-fossil fuel model of development and builds upon the internationally agreed Millennium Development Goals. In other words, this Initiative seeks to achieve three complementary objectives simultaneously: to reduce CO2,  to protect biodiversity and to reduce poverty in Ecuador by investing in education, training, health and the development of sustainable technologies and non-extractive economic activities that will favor the poorest and most marginalized sectors of Ecuadorian society.[20] The weakness[21] of this plan is that it needs funders so as to step up and fulfil its target.

Yasuni ITT Trust Fund: An Innovative Regime of Global Sustainability Governance

On 3 August 2010, the Memorandum of Agreement Between the Government of Ecuador and the United Nations Environment Programme  for Management and Other Support Services Related to the Ecuador Yasuni ITT Trust Fund (MOA) was signed providing the establishment and the governance system (the Steering Committee, the Administrative Agent, the Government Coordinating Agency, reporting-monitoring-evaluation and auditing procedures as well as joint communication procedures) of
the Yasuni ITT Trust Fund.[22]

The governance architecture of the Memorandum of Agreement requires special attention as it reflects the contemporary “participatory approach” to global environmental governance, dominant at the current phase of development of international environmental regimes, and introduced after the Rio Declaration 1992. This agreement[23] constitutes a regime which consists of the Yasuni ITT Trust Fund Steering Committee, the Yasuni Fund Technical Secretariat and the Government Coordinating Entity.

In addition, this unique legal agreement provides special roles for the National Recipient and Implementing Organizations. According to the Ecuador Yasuni ITT Trust Fund Terms of Reference,[24] Recipient Organizations are national institutions responsible for the implementation of projects funded by the Capital Fund Window[25] of the Yasuni Fund, while Implementing Organizations are national institutions responsible for implementation of projects funded from the Revenue Fund Window[26] of the Yasuni Fund.

More specifically, the Yasuni ITT Trust Fund consists of two windows, a Capital Fund Window and a Revenue Fund Window, which serve as a mechanism to channel contributions from “international community”.[27] They also ensure[28] that the funds are used effectively and transparently for certain sustainable development activities in accordance with the Ecuadorian National Development Plan and the National Regulatory Framework, provided that national financial regulations and rules do
not contravene the principle of UNDP’s Financial Regulations and Rules.

The Yasuni ITT Trust Fund Steering Committee serves as the primary coordination and governance mechanism, whereas the Yasuni Fund Technical Secretariat undertakes[29] four functions under one management structure: (i) technical support; (ii) project appraisal; (iii) monitoring and evaluation; and (iv) administrative support. It is worth-mentioning that he Steering Committee is entrusted with the commission of an independent “lessons-learned and review studies” of the entire operation of the Yasuni Fund in case that it becomes a  development model applicable to other developing countries.[30]

As Government Coordinating Entity serves the Ministry of Heritage which was appointed by the Government. The Ministry of Heritage assumes full financial and programmatic accountability for the funds disbursed to the Recipient and Implementing Organizations by the Administrative Agent, represented by UNDP.[31] The Administrative Agent is entrusted[32] with fund administration functions for the Yasuni Fund.

More specifically, the Government Coordinating Entity is responsible for the development, implementation and monitoring and evaluation of the Yasuni Fund portfolio implemented by national entities. These entities, the National Recipient and Implementing Organizations, prepare proposals for funding and submit them to the Steering Committee for approval after review by the Technical Secretariat. The Government Coordinating Entity ensures[33] that each Recipient and Implementing Organization is responsible for the activities carried out by it, in accordance with the decisions of the Steering Committee and the National Regulatory Framework.[34] The Administrative Agent is empowered to deduct[35] the initial payment before disbursement to the Recipient Organization and deposit it into the Revenue Fund Window. The Government Coordinating Entity recognizes[36] that it is important to take all necessary precautions to avoid inappropriate practices. To this end, it guarantees the application of the National Regulatory Framework for the use of public funds.

In addition, the Government Coordinating Entity – and, through it, the Recipient and Implementing Organizations – provides the Administrative Agent with the statements and reports[37] for the progress of the activities and the financial situation. The provision of the Memorandum regarding the reporting procedures is considered very important to the extent that it ensures the sound use of the funds by the National Institutions. Moreover, the Administrative Agent will also provide the Contributors – on the basis of a Standard Administrative Arrangement[38] – the Steering Committee and the Government Coordinating Entity with certified financial statements on its activities. The MOA refers also to monitoring and evaluation[39] of the Yasuni Fund and to its publication.[40] Furthermore, it commands[41] that the Government Coordinating Entity and, through it, the Recipient and Implementing Organizations will be audited in accordance with the national audit framework. The Administrative Agent will be audited too, in accordance with its own Financial Regulations and Rules.

According to MOA’s general provisions,[42] in the event of any controversy, claim or dispute between the Parties arising out of this agreement or the breach thereof, the Parties should first seek an amicable resolution through good faith direct negotiations. Otherwise, arbitration could be initiated. The MOA is provided to expire[43] upon winding up of the Yasuni Fund or upon its termination by the Government upon selection of a successor to UNDP. It may also be terminated upon 180 days notice, upon mutual agreement of the Parties. Finally, the MOA may be modified only by written agreement between the Parties.

Fighting Against Time…

Since the proposal was presented in 2007, there has been some positive advancement.  In particular, Ecuador became the first country which grants rights in the nature to its Constitution in 2008, thus presenting an exemplary model for other nations to follow. Despite all efforts, the original July 2008 deadline for the proposal has been extended several times. In order for the Initiative to be deemed viable, it needed to have 100 million dollars in the Trust Fund by 31 December 2011. In January 2012, Ivonne Baki, the plenipotentiary representative of Ecuador to Yasuni ITT Initiative, announced that the project has been deemed viable since the government received $116 million in pledges.[44] Outside Ecuador, countries such as Spain, Norway and Germany, have responded positively and International funding bodies like The Clinton Foundation have shown active interest in the proposal.[45] Given the catalytic importance of the Yasuni Initiative, other stakeholders such as governmental and non-governmental organisations and individuals from across the world have stepped out in support or launched campaigns, such as Yasuni Green Gold, Amazonia por la Vida and Save America’s Forests, to contribute to national efforts to save the Yasuni.[46]  In view of the weakness of this plan as it needs more funders to step up and fulfil its target, the next step is to launch an aggressive advertising, social networking, and promotional campaign focused on Europe, North America, and Australasia.[47] The new goal is to secure $ 291 million in contributions in both 2012 and 2013 to keep the Initiative going. During the side-event entitled “The Yasuni-ITT Initiative: shifting paradigms for a sustainable future” that took place at United Nations Conference on Sustainable Development (UNCSD or Rio +20) in June 2012, President Rafael Correa urged the innovative proposal as an alternative to preserve the environment and got the offer of a new monetary contribution.[48]

Despite the fact that the Yasuni Initiative becomes the center of attention of the international community as Ecuador is the first developing country seeking international support to keep its oil underground, this proposal has been severely criticized for serious weaknesses. One fundamental problem seems to be that[49] local Yasuni bodies were not invited to participate in the proposal or in any future planning, thus casting doubt on how much money would be channelled into the needed economic activities. Moreover, it was maintained that this proposal does not clearly guarantee the preservation of the Yasuni but it only sets a time limit for financial savings – after which, presumably, the Yasuni would be thrown to the mercy of oil exploitation.

Provided that these challenges would be successfully met through the effective operation of the new governance system and the conduction of public awareness campaigns, the new mechanism could clearly be considered as a pilot project for other countries that fulfil similar to Ecuador’s conditions[50] e.g. Bolivia, Brazil, Colombia, Costa Rica, Democratic Republic of Congo, India, Indonesia, Madagascar, Malaysia, Papua New Guinea, Peru, the Philippines and Venezuela.[51]

An Epilogue

The Yasuni ITT Initiative illustrates a case of innovation in global sustainability governance that signals a post-petroleum era. It constitutes a breakthrough example of what   UNDP describes as a “triple win” approach to sustainable development, where initiatives deliver economic, social, and environmental benefits simultaneously.[52]

The funds to be given to Yasuni ITT Trust Fund will be used for the country’s sustainable development and could not be considered as a bargain exchange. In fact, they operate for the benefit of mankind as long as a major world biodiversity’s reserve is being effectively conserved. At the same time, the protection of the environmental rights of the indigenous inhabitants of Yasuni, is a basic requirement for the protection of other basic rights, such as the right to life and the right to property.As is remarked by Helen Clark, UNDP Administrator, the Initiative “presents a new approach to dealing with common but differentiated responsibilities when facing global challenges. The resources mobilized for Yasuni are considered contributions from countries or individuals. There are no donors but rather sharing contributors, with Ecuador being the largest contributor. This kind of shared responsibility provides a new conceptual framework for international co-operation which could be followed and built upon around the world.”[53] Indeed, Yasuni ITT Initiative is undoubtedly “a big idea from a small country”.

Endnotes

1. See, LARREA C., “Yasuni-ITT Initiative: A Big Idea from a Small Country”, Ecuadorian Governmental Report, Ministerio del Ambiente, Ministerio de Relaciones Exteriores, Comercio e Integracion, 17 December 2009, p.10. Available online at: http://www.indiaenvironmentportal.org.in/files/Yasuni_ITT_Initiative1009.pdf.
2. See, LYGKONI, E., “When the ‘Natural Resource Curse’ Becomes a Social Blessing: Sustainable Governance of Oil and Gas Development in Shetland Islands”, MEPIELAN E-Bulletin, 20 September 2011. Available online at: http://www.mepielan-ebulletin.gr/default.aspx?pid=18&CategoryId=4&ArticleId=72&Article.
3. See, “The Ecuador Yasuni ITT Trust Funds – Terms of Reference”, 28 July 2010, (Yasuni Fund TOR), Introduction.
4. See, RENE R.G., “A Major Transition for a Great Transformation – Reflections from the Yasuni-ITT Initiative”, New Society Magazine No. 237, January-February 2012,  pp.8. Available online at:  http://goo.gl/tbO0r.
5. Parties to Kyoto Protocol not listed in Annex I of the Convention (non-Annex I Parties) are mostly developing countries and they do not have legally binding emissions reduction targets.
6. See, LARREA C., Yasuni-ITT: An Initiative to Change History, Institutional Support, UNDP, Ecuador, 2009, p.4. Available online at: http://yasuni-itt.gob.ec/download/documentos/7.pdf.
7. See, http://www.yasunigreengold.org/about-yasuni.html.
8. It is thought to be a zone that did not freeze during the last ice-age, which began 2 million years ago and lasted up to 10,000 years ago. As a result, it became an island of vegetation where rich flora and fauna survived and eventually re-populated the Amazon. Ibid.
9. This biodiversity hotspot has been reported to contain 593 species of birds, 2.274 species of trees and bushes, 150 species of amphibians, 121 species of reptiles, 80 species of bats and 4.000 species of vascular plants. There are also more than 100.000 species of insects per hectare as well as many endangered and endemic species. See, http://www.uncsd2012.org/index.php?page=view&nr=82&type=1000&menu=126.
10. In 1541 the explorer Francisco de Orellana ventured into the heart of the Yasuni in search of the mysterious “El Dorado”, a kingdom of gold and precious minerals. Colonizers and missionaries have left a deep footprint on the Yasuni forever. Orellana’s expedition has become one of the most famous pieces of Amazonian history and the region was name after him. See, http://www.yasunigreengold.org/about-yasuni.html.
11. According to Article 3 of United Nations Declaration on the Rights of Indigenous People, 2007, “Indigenous People have the right to self-determination. By virtue of that right they freely determine their political status, and freely pursue their economic, social and cultural development.” Available online at: http://www.un.org/esa/socdev/unpfii/documents/DRIPS_en.pdf.
12. See, http://www.yasunigreengold.org/effects-of-oil-yasuni.html.
13. The designation implies that the zone is to be protected from any mining, oil activity, logging, colonization or anything that might tamper with the biodiversity and ethno-cultural nature of the area. See, http://www.yasunigreengold.org/about-yasuni.htm.
14. Ecuador’s oil reserves are divided into different geographical “blocks”, with rights given to different companies to exploit each one. Ishpingo-Tambococha-Tiputini (ITT) is the name for the block in the heart of the Yasuni under which lies between million 412 million and a possible 920 barrels of oil, Ibid.
15. See, http://www.yasunigreengold.org/effects-of-oil-yasuni.php.
16. See, http://www.yasunigreengold.org/
17. Ibid.
18. Ibid.
19. Ibid.
20. See, LARREA C., supra note 6, p.8.
21. See, http://www.yasunigreengold.org/yasuni-campaign.php.
22. See Yasuni –ITT Trust Fund MOA, 3 August 2010, available online at:  http://mptf.undp.org/yasuni/en.
23. The Memorandum of Agreement (MOA) was established after the Government of Ecuador had requested the United Nations Development Programme (UNDP), through its Multi-Donor Trust Fund Office (MDTF Office), to provide support services related to the establishment and management of the ECUADOR YASUNI ITT TRUST FUND, (MOA, Preamble, para. 3).
24. The Ecuador Yasuni ITT Trust Funds – Terms of Reference, 28 July 2010 (Yasuni Fund TOR), Art. 9, paras. (b) and (c). Available at: http://mptf.undp.org/yasuni.
25. The Capital Fund Window finances renewable energy projects (hydro, geothermal, solar, wind, biomass and tidal plants), Yasuni Fund TOR, Art. 8.
26. The Revenue Fund Window finances conservation, reforestation, energy efficiency, social programmes, research and innovation, Yasuni Fund TOR, Art.8.
27. According to Yasuni Fund TOR, Art.18, the contributions to the Yasuni Fund will be accepted from three main sources: (a) contributions from Governments, Intergovernmental Entities, Non-Governmental Organizations, Private Foundations, Private-Sector Organizations, and individuals, (b) contributions from the public at large, through public fund-raising events following the prior approval of the Steering Committee, (c) income for the sale of Yasuni Guarantee Certificates (CGYs) by the Government to private and public entities in return for mitigating greenhouse gas emissions through avoidance of oil and gas extractions from the Yasuni area that is socially and environmentally sensitive.
28. Yasuni Fund TOR, Art.8.
29. See, http://mptf.undp.org/yasuni.
30. Yasuni Fund TOR, Art. 5(5).
31. According to article 2(9) of MOA, “UNDP shall use its multi-donor trust fund management mechanism adapted for the management support services arrangements described herein.”
32. Yasuni Fund TOR, Art. 9 (d).
33. MOA, Art. 4 (23).
34. As provided by Art. 4of the MOA, all project proposals submitted from the national institutions, are subject to prior authorization from the Government Coordinating Entity. Before granting the authorization, the Government Coordinating Entity shall be satisfied that the project proposals meet the priorities of the Ecuadorian National Development Plan.
35. MOA, Art. 4 (24).
36. MOA, Art. 4 (32).
37. MOA, Art. 4 (33).
38. According to the Yasuni Fund TOR, Art. 15(b), Standard Administrative Arrangements will be signed between the Administrative Agent and the Contributors to the Yasuni Fund, except for contributions under a minimum threshold to be established by the Steering Committee in its Rules of Procedures.
39. MOA, Art. 6.
40. MOA, Art. 8.
41. MOA, Art. 7.
42. MOA, Art. 11.
43. MOA, Art. 9.
44. NYSINGH S. A., The Yasuni-ITT Initiative; Dreaming of Keeping Oil in the Soil ,Thesis, Master of Science, School of Natural Resources and Environment,  University of  Michigan , April 2012, p.15. Available online at: http://goo.gl/W2KTb.
45. See, http://www.yasunigreengold.org/yasuni-campaign.php. More information about contribution to Yasuni ITT Initiative is available at: http://mptf.undp.org/factsheet/fund/3EYC0.
46. See, http://www.yasunigreengold.org/yasuni-campaign.php. The Initiative is also supported by European Union, the Inter-American development Bank (IDB), Andean Development Corporation (CAF), the Organization of Petroleum Exporting Countries (OPEC), South American Union of Nations (UNSAR), Andean Community of Nations (CAN), Organization of American States (OAS), International Union for Conservation of Nature and Natural Resources (IUCN), and various indigenous organizations and ecological groups in Ecuador. See: http://goo.gl/FgzhH .
47. See http://news.sciencemag.org/scienceinsider/2012/01/with-116-million-pledged-ecuador.html.
48. See, Ecuador Times.net, June 21 2012, “Yasuni -ITT Initiative is supported at Rio+20 Summit,” available online at: http://www.ecuadortimes.net/2012/06/21/yasuni-tt-initiative-is-supported-at-rio-20-summit/.
49. Ibid.
50. The new mechanism can be considered as a pilot project for other countries selected according to three criteria: (a) Be developing countries, (b) Be megadiverse countries located between the Tropics of Cancer and Capricorn, which have the highest density of tropical forests and contain most of the planet’s biodiversity, (c) Have significant fossil fuel reserves in areas of high biological or cultural sensitivity. See, LARREA C., supra note 6, p. 4.
51. See http://www.dfid.gov.uk/R4D/PDF/Outputs/ELLA/120316_ECO_ExtIndLanUse_BRIEF4_0.pdf.
52. CLARK, H., “Yasuni-ITT Side Event with the Government of Ecuador“,  UNDP, 20 July 2012, available at: http://www.undp.org/content/undp/en/home/presscenter/speeches/2012/06/20/helen-clark-yasuni-itt-side-event-with-the-government-of-ecuador.html.
53. Ibid.