The Ugly Face Of Climate Compensation: Saudi Arabia And Equador

Posted on 05. Aug, 2010 by Ross in Climate Change, Middle East, South America

One of the key negotiating points in the continuing grudge match of international climate change diplomacy surrounds the demands of developing countries for western nations to foot the bill both for climate adaptation and low-carbon growth.

The argument generally goes like this: developed nations have caused climate change by polluting the atmosphere in their quest for greater profits, so developed nations should be the ones to help those countries who haven’t not industrialised, don’t have the finances to protect themselves from the effects of climate change, and are often likely to be the worst hit by increased incidences of flooding, drought and other shifts in weather patterns.

There is a certain level of acceptance behind the demands from such developing countries, many of whom are serial recipients of international aid due to levels of poverty, starvation and war. However, a couple of claimants spoke out again this week in highly contrasting demands which both raise rather more controversial concerns.

Saudi Arabia - Supply or demands

On the downright ugly side of the climate compensation debate sits Saudi Arabia. Facing the possibility of lowering demand for petroleum in a world trying to reduce dependency on fossil fuels, Saudi Arabia and some other OPEC countries are claiming that they stand to lose around $19bn every year in oil profits.

Rather than acknowledge the diminishing value of it’s primary economic resource and adapt it’s economy accordingly, just as other economies are having to adapt to climate change, Saudi Arabia believes that it should be compensated for the lost revenues from it’s oil empire. The country’s contention is that because it only has oil and sand as resources it is being unfairly penalised.

The demand was first made almost a year ago, and was seen by many as just a part of the political positioning that countries took in the run-up to the Copenhagen conference. However, the position has failed to soften since the collapse of the talks, spreading alarm amongst other claimants with more appreciable stakes, especially the Alliance of Small Island Nations. Their fear is that Saudi Arabia’s claim would take a massive chunk out of available climate compensation funding, leaving more deserving nations with less to get by with.

There is also much anger that Saudi Arabia, having reaped the rewards of supply and demand from the massive escalation of oil prices over the last decade, should be so quick to decry the evils of the market when demand for it’s commodity dissipates. The International Energy Agency last year also found that oil-producing countries would not lose money for many years: a finding the Saudis contest vehemently.

Equador - Greenwashed blackmail

If the Saudi demands seem downright ludicrous to all and sundry outside of the Middle East, then Equador’s latest gambit has split opinion down the middle. To some it’s a great mechanism to lock oil under the ground and protect precious rainforests. To others it is nothing but greenwashed blackmail.

There is nothing particularly radical about the idea of paying countries to not destroy their forests: the REDD proposal at Copenhagen sought to do this, and was seen as the most likely source of agreement at the talks. However, Equador are seeking to take the idea and supercharge it, seeking compensation not only for not developing 675 rainforested square miles of the Amazon’s Yasuni national park, but for not extracting the vast oil reserves that have been found beneath.

In exchange for leaving the oil under the ground, Equador are seeking compensation from the developed world at half the value of the oil on today’s market, equating to $3.6bn. As carbon offsets, the oil would be worth $5bn on the global carbon markets.

Under the terms of a unique trust fund set up between the government of Equador and the UN, all oil and timber in the agreed area of Yasuni would be protected from exploitation forever. The legally-binding commitment would be enforced once the money had been found, which would go towards further forest protection, renewable energy and much-needed services for indigenous people.

European governments have shown interest in investing, partially with an eye to offsetting their own emissions against it. But there is also wide concern that the deal is flawed, with the whole Yasuni national park failing to be protected from oil drilling and logging, and Equador’s sanctioning of further oil exploration in other nearby areas of rainforest.

Of course, there is also the concern that future political regimes could decide to exploit the oil anyway - there is little detail yet as to how Equador would be found accountable should it renege on it’s commitment to protecting the area.

Ultimately the deal amounts to little more than blackmail: if you don’t stump up the money, we’re going to destroy loads of forests and burn loads of oil. Oh and by the way: we’re going to keep doing it elsewhere too, so what are you going to do about that…?

Image of a rainforest by Abeeeer @ Flickr