Rainforests and sheikhs: Two kinds of climate finance

For nearly two decades now, the much-promised flow of money from industrialised countries to developing ones to tackle climate change has come only in fits and starts – faintly glimmering through the opaqueness of carbon trading markets, UN and World Bank pots containing only nickles and dimes rather than dollars and cheques.

So the announcement in early August that progress was being made towards a landmark deal that would see Ecuador being paid not to extract oil and preserve the biologically diverse Yasuni tropical rainforest is hugely exciting, in a way. $3.6bn to one country is nothing to sniff at – the figure reflecting half the expected oil revenue if the fields under the Yasuni were to be exploited, and the agreement of the UNDP to act as administrator for the project trust fund (which is the what’s new bit) is a vital sign of the seriousness of the project.

It seems like the ultimate win-win, even though when I first heard of the idea a year or so ago I was rather skeptical that a) the Ecuadorian government was serious and b) that Western donors might actually come close to coughing up the money. A globally-significant bit of the Amazon gets preserved; a developing country reliant on oil exports gets the financial incentives to nudge its economy away from fossil fuels as well as invest in human development programs; the indigenous peoples who live in the Yasuni park avert environmental and social dislocation; something serious is done to actually avoid deforestation, which is massively more efficient than mitigating carbon emissions.

But I wonder. If (still a big if) this project (“the world’s first really green oil deal”, the Independent calls it), gets off the ground, it would represent a happy convergence where a unique ecosystem sits on top of fossil fuel reserves. There are other places around the world, to be sure, where these two factors converge. But I’m not sure if it bodes well for the many other instances where it doesn’t – where unique ecosystems need protection but do not sit on exploitable energy resources, and where dependency on fossil fuel exports leaves countries highly resistant to a post-carbon world.

The latter is a reminder of Saudi Arabia’s demand in the UN climate change negotiations, for financial compensation for the lost oil revenue that it would suffer if the world goes off fossil fuels. This was raised again at August’s negotiations, but is a longstanding demand and nothing essentially new. OPEC’s demand that the “impact of response measures”, as such compensation is called (i.e. that measures taken to respond to climate change have impacts of their own, viz. on fossil fuel exporters), be considered alongside the “adverse effects” of climate change (i.e. the actual ecological impacts of climate change on vulnerable countries) has successfully been a major obstacle to progress: because they refer to vastly different phenomena, the trouble for any discussion about climate finance to developing countries is clarifying which type of problem is actually being addressed. The UN climate convention, in this regard, offers a legal equivalence between the two (Article 4.8), allowing Saudi Arabia and others to claim that progress to assist the most vulnerable to climate change impacts be mirrored in discussions on prospective compensation for themselves.

The promise that the Yasuni offers the world, then, is not so far removed from the audacity of the Saudi demand for compensation of its own. While we might dismiss the ludicrousness of the latter, for industrialised countries with increasingly shallow pockets, it is this prospect that may be sufficient to balk at the former.

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One thought on “Rainforests and sheikhs: Two kinds of climate finance

  1. […] road to get there will be immense temptation for any country sitting on oil reserves, especially those that might have made pledges to forgo them, to reap the economic and political bonanza when supply doesn’t quite meet demand. […]

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