Yasuní-ITT vs. Dirk Niebel

A few weeks ago I wrote a post about the Yasuní-ITT initiative as an attempt to attach a value to ecosystems. The initiative’s goal is to set up a fund assisting the development of Ecuador in return for the country’s government not exploiting the oil reserves lying under the Yasuní-ITT rainforest. Owing mainly to the refusal of the German development minister Dirk Niebel, the fund has not been set up so far. Thus it was interesting to read his commentary on that subject in a newspaper the day before yesterday. In the following I would like to present his arguments and comment on them.

Dirk Niebel is opposing the instrument of the proposed Yasuní-ITT fund, although he claims to be sharing the Ecuadorian government’s goals of protecting biodiversity, the climate and the rights of Indigenous People living in the forest. In the commentary mentioned above I found the following arguments against the initiative:

  1. Mr Niebel is opposing the idea to pay Ecuador for not destroying the forest on the basis of foregone oil revenues. Instead he would prefer a mechanism similar to that co-financed by Germany in Brazil (as a part of REDD) where the Brazilian side is paid for reducing the deforestation rate as compared to a reference scenario.
  2. In the German minister’s opinion, the Yasuní-ITT proposal provides no political incentives, since it is (allegedly) not active forest protection that is to be rewarded, but forborne oil extraction.
  3. The structure of the Yasuní-ITT initiative is supposed to provide lower social and ecological standards than the REDD mechanism, and civil society groups have not been involved in the planning of the initiative.
  4. Mr Niebel is suggesting that there are no potential donors to be found in the international community – despite all the promotion efforts.
  5. He doesn’t want to create a precedence and emphasizes that point by writing that he also wouldn’t pay Somalia for Somalian pirates not to rob food shipments.

Let us now analyse these points, one after another. Here are my answers:

  1. I would like to know where the price per ha of protected forest under REDD comes from. Since forests generally have no market prices, these must be created in a somewhat ad-hoc way if someone is to be paid for not destroying the forests in question. From the economic point of view, opportunity costs (destroying the forests and extracting the oil is clearly the alternative to protecting it) are no worse than anything else. And surely no more arbitrary. Furthermore, while it is not really that relevant how the specific price is arrived at, it is important what the effect of the initiative would be – and this is the protection of the Yasuní-ITT forest which shall not be touched as long as the initiative remains in place.From this point of view, Yasuní-ITT is even more effective than the REDD mechanism, since it is about deforestation seizure, not about marginal changes in deforestation rates.
  2. In fact, forborne forest destruction = forest protection. Thus the distinction emphasized by Niebel is rootless.With regard to the “political” incentives: the idea is to set up a fund, not to give a “blank cheque” to the Ecuadorian government. Donors shall be represented in the executive board, thus being able to provide further incentives and to set conditions and standards for spending the money.
  3. As of the standards – see above. With respect to the involvement of the civil society – the fact is that the vast majority (more than two-thirds) of the Ecuadorian population does welcome the initiative. That the Indigenous People living in the forest itself welcome it, shall be obvious – under the initiative, their livelihoods will be preserved.
  4. For the time being, about the half of the $100 million needed until the end of 2011 have been warranted ($52.3 million as for today). Many potential donors are said to wait for Germany’s involvement, since this country was the first to embrace the initiative (before Dirk Niebel took office).
  5. It is clear that Mr Niebel doesn’t want to create a precedence, since he apparently does not find the initiative good. If he would, he would be likely to be eager to create a precedence. Thus this is not an argument actually. The comparison of the initiative to paying Somalia for Somalian pirates not to rob food transports is not only silly – it is offending, since the minister is thus implicitly setting pirates (i.e., criminals) “working” in their own interests equal to a government whose primary goal is (supposed to be) the well-being of its nation.

All in all I had the impression that Mr Niebel sees development assistance primarily as a tool to ensure his own country’s interests. Furthermore he seems not to be able to grasp the innovativeness of the Yasuní-ITT initiative and its great potential for effectively protecting biodiversity, the climate and the rights of Indigenous People. And, last but not least, he has shown in his commentary that he does not understand the way economic valuation of ecosystems functions – viz., that using opportunity costs as a proxy is no less reasonable than using some arbitrary prices.

It remains to hope that Mr Niebel will be forced by the German parliament and/or government to abandon his parochial position.

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13 thoughts on “Yasuní-ITT vs. Dirk Niebel

  1. “All in all I had the impression that Mr Niebel sees development assistance primarily as a tool to ensure his own country’s interests.”

    This is the root of problems with all “donor” based initiatives. At some stage donors may loose interest or money ( for that matter) may become in short supply. Who gives may as well take it back. What then? There are many examples to prove that. In the 60’s Zambia was pressurised by Britain to stop trading with the then Rhodesia. The promise was made to cover all Zambia’s loses – it never happened. Yes, we shall protect rain forest ( not only ) but is paying bribes the best way?

    Regards,

  2. We are not in the 60’s any more. The times have changed, it is not so easy any more to pull back what was once promised.

    If what you call “paying bribes” is not the best way – what alternatives do you propose?

  3. “The times have changed, it is not so easy any more to pull back what was once promised.”

    Are so sure? In that respect nothing has changed. At the end of the day if going gets tough one will first look after own interests.

    As for the alternative to paying bribes ( those are the bribes in a true sense of the word) there are no simple solutions. The best way would be through development and wealth creation. At some stage a nation would be wealthy enough to forego certain economic activities in favour of non material aspects. All that takes time. That is what has happened with the developed nations. But now they are in a hurry and are trying to splash “instant solution” in form of “easy money”. For how long? Taking into account what has happened for 50 years, aren’t we afraid that development of the III world will be throttled even more.?
    For how long citizens of the developed world are going to be prepared to splash money on somebody’s problem while they themselves suffer cuts in social spending, increasing costs of living( including additional taxation for good causes) etc.?

    Regards,

  4. In that respect nothing has changed.

    I beg to differ. While you are right that in tough times governments (and people) are first looking after their own interests, I can hardly imagine that any major country in this world would be eager to commit to a specific action (such as paying into a fund) and then just pull back. The outcry within the international community would be far too large. There are many reasons for this: the end of colonialism (and thus the feeling that developed countries are responsible for at least a part of the developing world’s misery and that they have something to “pay back”); the rising weight of emerging economies in world politics (the club of the wealthy is not that exclusive and thus “arrogant” as it was in the 60’s); the reach and power of the civil society; the power of media… All this makes me believe that, indeed, times have changed.

    Let us clear something: have you called the Yasuní-ITT initiative a bribe, or did you just want to bring another point into the discussion? I think, the initiative we are discussing here is exactly what you are calling for: an attempt to create some wealth in Ecuador.

    The best way would be through development and wealth creation.

    To take a more general stance: what you are writing is a truism. Of course, development and wealth creation is what developing countries need. The question is: how to achieve this goal? You want it to happen slowly. In fact, it does – and people are starving all the while.

    additional taxation for good causes

    I suppose, you’ve meant the carbon tax by that. If that is the case, your criticism is off the point: the idea is to introduce a carbon tax and to lower other taxes as a compensation (particularly income taxes). And, you shall not forget: by and large, people in the developed world are (on average) awfully rich. All their basic needs are fulfilled, even if they depend on social security. I think, most of the problems within the developed world are about distribution, not about absolute wealth. So, helping developing countries is neither good nor bad – it has hardly any relevance.

  5. 1. “I can hardly imagine that any major country in this world would be eager to commit to a specific action (such as paying into a fund) and then just pull back. ”

    While I can imagine as this happens rather frequently. May I ask you. Since when has the developed world stopped treating all forms of aid as a very effective political weapon? And if that does not help there are other means, including military intervention. Let’s not kid ourselves.

    2. While the intentions are good it comes close a bribe ( blackmail?). In the same way one may try to stop rhino poaching by paying all those involved some sort of a fee to cover losses. The fact of the matter is there is no guarantee that the poachers are not going to come for more while blackmailing you with the renewal of poaching. In fact they may be taking money and still hunting the rhino. Saouth AMerica cannot be seen as a shinning example of financial/economic mamnagement.

    3. “what you are writing is a truism.”

    Possible it is. In the same way as we write/talk about democracy, freedom etc. Upon investigation one will find that people understand those concepts in different ways. I am not advocating a slow down of development. What I am saying it is a long process and there are no shortcuts. Wealth of Europe took ages to create. German economic miracle goes back 50 years ( at least). Giving out money, even if the cause is noble, has failed, very little can be shown for the amounts spent.

    4.”the idea is to introduce a carbon tax and to lower other taxes as a compensation (particularly income taxes)”

    So, if I understand you correctly, the governments of this world will be prepared to sacrifice their income. It has not happened until now. But let’s assume so. At the end of the day all those “other taxes” will come back to Mr. John Average in various forms and he will have to pay. A little bit of honesty would help.

    5. “So, helping developing countries is neither good nor bad – it has hardly any relevance.

    You said it yourself.

    Regards,

    • One more remark about what you call “bribes”: if you want people in poor countries to abandon some practices from which they get funds that can be used for development purposes (e.g., oil drilling or rhino/elephant killing), you have to give them an alternative. Of course, in most, especially micro-scale cases (as with the rhinos), it would be better to provide alternative activities as sources of income (e.g., farming with sensible outlet market possibilities, as FairTrade initiatives inter alia try to do). But this is not as simple when the actor to be given an alternative is a country. Especially when its decisions are irreversible (if Ecuador start drilling for oil, no-one will be able to restore the wilderness). Then a “bribe” (though I personally don’t think this is one) may be the best solution.

  6. 1. Any examples? (I guess, in this case you are bearing the burden of proof)

    2. There are some differences, I think (especially the severity of the problem for us, i.e. rhinos against rainforest). However, I would be pleased if you were able to name an alternative.

    3. Of course development needs time. However, the exact time span varies largely (consider, e.g., the Asian Tigers and their very fast development). Furthermore, to acknowledge that development needs time and to stop helping the developing countries financially are two different things.

    4. I don’t understand your point. The idea (I am talking about the idea now, clearly most governments don’t realize ideas faithfully – but this is the case in almost every field) is to cut income taxes after having imposed a carbon tax (in about the same magnitude). There are also proposals to give the revenues directly to the people as transfers (what came to be called cap and dividend).

    I have the feeling that in your reasoning all good ideas turn, “at the end of the day”, into disaster. But then it is futile to discuss anything here.

    5. Come on, you are not a tabloid journalist. What I’ve meant was not that development assistance doesn’t matter, but that it doesn’t meaningfully influence developed countries’ problems. And that’s two different things.

  7. 1. Just think about Pakistan and Pakistan’s sudden involvement in the war against terror. It is not a secret the country is USA’s client – money without which Pakistan would implode. A more drastic case would be Gaza and the West Bank where funds flow in or are stopped depending on the whims of international community. And so on.

    2. Differences might be there but the same principle applies to both of them.

    3. You are right here in many aspects. However, so called financial help will have to be re-defined ie. it must not be in the form of giving money.

    4. “… is to cut income taxes after having imposed a carbon tax ”

    How do you see it in a real life? So we will impose a “carbon tax” and reduce personal tax while the carbon tax will come back in the form of increased costs of living – Mr. Average will be taxed in a more indirect way and possibly at a higher rate than the tax reduction given to him. And I suspect the bets are on a prediction that carbon dependent economy will last for a long time to come in order to provide revenue. In fact it will be beneficial to have carbon emissions systematically growing. But what is going to happen once carbon emissions are eradicated together with the revenue?

    5. You are right in what you have stated.

    Regards,

  8. 1. What you are describing here is not the problem of the donors actually pulling back, but of the possibility that they do (due to some dependence on the side of the developing countries). That is a problem, indeed. However, with regard to Ecuador you may say: oil price volatility is not much better. Furthermore, my question remains: what is the alternative?

    3. The whole structure of ODA must be redefined, for that matter.

    4.

    In fact it will be beneficial to have carbon emissions systematically growing.

    That’s wrong. If one considers the carbon tax as a source of revenue only – yes. But then the introduction of the tax would make no sense. The idea is to cut emissions, not to provide revenue. You are right in pointing out (I think, this is what you mean) that it would not be a simple thing to reduce, say, income taxes and than to increase them again as emissions go down. The answer to that point is: reducing emissions will not be simple, no matter how it should be achieved.

    Mr. Average will be taxed in a more indirect way and possibly at a higher rate than the tax reduction given to him.

    Do you have any reasonable ground to assume that?

  9. “If one considers the carbon tax as a source of revenue only – yes. But then the introduction of the tax would make no sense. The idea is to cut emissions, not to provide revenue. ”

    However you look at it, such a tax is a source of revenue. Specifically if as a “by-product”, personal tax is going to be cut ( I personally do not believe it will happen to any significant degree).

    “Do you have any reasonable ground to assume that?”

    Yes I do. It is simple. Costs are passed down the line. I have been running my own consultancy for a couple of decades. A structure of my fees includes increase in the cost of living and doing business. My clients do exactly the same ie. their increased costs (including my fees for that matter) are reflected in the price of electricity, transport, minerals, products etc. This whole chain stops at the final consumer ie. Mr. Average. And I do not think that will change. Industries will not be prepared to absorb additional cost. If things go really wrong for a country or a continent, companies will relocate to another destination. One must remember that so called “carbon free” economy is not possible with the knowledge we have and technologies available.
    Well, a tax is a nice bureaucratic way of solving problems without any significant intellectual effort.

    Regards,

  10. This whole chain stops at the final consumer ie. Mr. Average.

    Therefore the idea is to recompensate him with lower income and related taxes.

    I personally do not believe it will happen to any significant degree)

    I personally do not believe much will change to the better in this world (be it inequality, be it environmental destruction, be it widespread poverty and hunger and preventable diseases, be it senseless consumption…). But this is not a reason not to try. So I try to show how the things might go, even if I doubt anybody (especially politicians) is consequent, reasonable and far-sighted enough to actually employ these proposals.

    a tax is a nice bureaucratic way of solving problems without any significant intellectual effort.

    I beg to differ, again. A tax (if reasonably enforced) is a very good incentive-providing instrument. And it requires a lot of intellectual effort if it is to function well and make sense. Furthermore, let me ask this question one more time: have you better ideas?

    “carbon free” economy

    This is possible. But, as I’ve tried to show here again and again, we have to at least try. Maybe we will not be perfectly successful (i.e., become 100% carbon free). Actually, this is not necessary. But doing nothing is no alternative.

  11. “But this is not a reason not to try.”

    But this is not the point. An effective “trying” makes sense. Trying for the sake of trying is at least wasteful.
    However, on a personal level I do appreciate your “tries to show how the things might go”.

    ” A tax (if reasonably enforced) is a very good incentive-providing instrument. ”

    I am not sure. Possibly it does from time to time. The main proviso is that there is a choice. One of the “pet” taxes of any government are “sin taxes” ie. on alcohol, cigarettes etc . – the same applies to “speed trapping” on the roads. Their effectiveness is debatable – people still do smoke, drink and drive very fast.

    “have you better ideas?”

    Yes, I am a firm believer in self awareness and self discipline – both of individuals and society as a whole. However, this requires a different approach on the part of the state and society.

    “Maybe we will not be perfectly successful (i.e., become 100% carbon free).”

    I have my doubts about the success in the short to medium term. Technological constraints are obvious – unless we decide to stop manufacturing. In the long term, there are some possibilities of reduction but wouldn’t call them a success.

    Regards,

  12. An effective “trying” makes sense.

    I sometimes doubt whether there is anything potentially effective.

    people still do smoke, drink and drive very fast.

    Smoking: they at least pay (to some extent) for the costs to the health system they cause. And we do not know how many people would smoke were there no such tax.

    Drinking: see above.

    “Speed trapping”: here the effectivity of the system is important. In Sweden where punishments are very high and the road system has been adapted, it seems to work.

    I am a firm believer in self awareness and self discipline

    I guess, that is the reason why we cannot agree. I do not believe in self-awareness and self-discipline. Of course, people are not completely self-interested. egoistic and “stupid”. But the complexity of the world prevents them from acting in a socially (and sometimes even presonally) desirable way, even if they are provided with the information needed. However, this is something more of “belief” than of empirially testable assumptions. Therefore we are unlike to reach meaningful agreements.

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