The government of Ecuador led by President Rafael Correa has decided to leave in the ground the one billion barrels of heavy oil in the Yasuni National Park.  This is after all not  different from avoiding oil extraction in the Wildlife Refuge in Alaska, or trying to keep down the level of fishing in Galapagos.

This decision entails a large financial opportunity cost. However, there are good economic reasons for the Yasuni oil moratorium. The real costs of oil exploitation are probably higher than the benefits.
First, there are the extraction and transport costs, particularly high compared to price since this is heavy oil. Its price is lower, and pumping over the Andes is expensive. Second, there would be the local externalities, in the form of air and water pollution, deforestation and loss of very rich biodiversity, threats to the livelihood, health and culture of the Huoarani indigenous peoples. Such costs are not easy to translate into money terms but  they are very real, and often irreversible.
 
Avoiding deforestation makes a contribution also against climate change.
 
Third, the oil would finally be converted into dissipated heat and carbon dioxide, while the production of carbon dioxide worldwide is increasing at over 3 per cent per year (emissions doubling in twenty-two years instead of decreasing by half, as they should). Ecuador has very little historical responsibility for global climate change. Ecuador is not yet obliged by international treaties to decrease greenhouse gases. Nevertheless, the government of Ecuador would like to make a contribution to carbon abatement, as a leader from the South.
 
Climate change affects Ecuador and other Andean countries very directly already, in the form of melting of glaciers and loss of water reserves. Nobody is compensating Ecuador for this damage. Moreover, a small increase in the sea level will damage the coast and especially Guayaquil.
 
Leaving the Yasuni oil in the ground for the time being is therefore a sensible thing to do.
 
Moreover, the price of oil is likely to increase in the future. Perhaps the difference between price and costs will grow faster than the discount rate, as the peak-oil point is reached in the Hubbert curve possibly at about 100 mbd. Taking the oil out now, means to sacrifice future revenue if in 20 or 30 years time oil can be extracted fetching a higher price than  today and perhaps without such heavy costs as today. For instance,  technologies of carbon sequestration seem to be making slow progress. On the other hand, the value of preserved biodiversity is likely to increase with time as so much of it is being destroyed. There is then much uncertainty about the distant future, so that the decision of the government of Ecuador is taken  with regard to today's costs and benefits. This decision is reinforced by looking  towards the future.
 
Normally, nobody pays for the local and global externalities. Are then externalities cases of market failure, or perhaps of goverment  failure such as the international disagreements on reductions of greenhouse gases emissions?
 
In fact, externalities are often cases of cost-shifting success. The rich and powerful impose costs on the weak (the poor of today, the future generations, and other species). Oil, mining, logging companies sometimes shift costs to the local inhabitants and their environments. The environmental and social liabilities ("pasivos socio-ambientales") do not appear in their accounts. Look at court cases such as that of Chevron-Texaco in Ecuador. Meanwhile, rich countries produce more greenhouse gases per capita than their fair share. They shift the costs of climate change to poorer people and to future generations.
 
The government of Ecuador is rationally in favour of leaving the oil in the ground. Ecuador asks that one part of the foregone revenue be compensated by outside donors. Oil exploitation from Yasuni would yield a positive financial revenue only because the externalities are not  factored into the accounts. The preservation of Yasuni benefits humankind, not only Ecuador.
 
Such donations (which could take the form of reductions of the external debt) could go to a trust fund earmarked for socio-environmental investments,  such as transfer of wind, geothermal and solar energy technology, a large programme of energy efficient new housing, school buildings and public transport, and eco-tourism expertise and investments.
 

Joan Martinez Alier
Universitat Autonoma de Barcelona
President of the International Society for Ecological Economics