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Monday, July 02, 2007

Business View: Why not pay them not to pump their oil?

We could avoid emissions by helping nations like Ecuador to keep the oil in the ground

By Tim Webb

The Independent, 2 July 2007

Here's an idea. There are billions of barrels of oil left in the ground, much of it belonging to the world's poorer countries. And money from rich countries is pouring into carbon-offsetting projects, many of them of questionable science. So why not just pay countries to keep their oil in the ground and avoid the emissions in the first place?

This is what Rafael Correa, the leftist President of Ecuador, is proposing (bear with me on this one). Beneath the pristine rainforest of the Yasuni National Park lie almost one billion barrels of oil, representing around a quarter of the country's reserves. If exploited, they would generate some $700m (£350m) in much-needed cash for the government's social programmes. But Mr Correa won last year's election promising to be green. So he has come up with a novel, if untested, solution to this conundrum: he wants someone - he hasn't made clear who - to pay the government $350m each year not to start drilling in the national park.

It's not as crazy as it sounds. Some of the world's oil-producing countries don't take too kindly to those in the West who, having exhausted most of their own oil reserves, castigate them for wanting to do the same.

I was at the Russian annual oil and gas conference in Moscow last year on the day the Stern review of climate change was published. The secretary-general of Opec did not hide his contempt for its conclusions, calling the report "misguided" with "no foundations in either science or economics".

You can hardly blame him. It's not as if the world, even if it really wants to, will stop using oil any time soon. But it's in the interests of Opec and other oil-producing nations to make sure this day is put off as long as possible. And oil revenues don't just go towards kitting out sheikhs with the latest Mercedes. Poorer countries like Ecuador depend on them to improve living standards.

Which brings us back to Mr Correa's dilemma. Can he justify not exploiting the country's oil just to be green? Not really. And he shouldn't have to.

This is where Western businesses come in. Many carbon- offsetting companies are getting pasted for investing in projects that don't actually reduce emissions. Later this month, Channel 4's Dispatches programme is expected to look at a project in Honduras to provide fuel-efficient stoves. This is being funded by Climate Care, a reputable offsetting firm that is used by Conservative leader David Cameron. But the carbon savings from many such schemes are hard to quantify and expensive to audit.

It doesn't have to be this complicated. Why not just pay countries like Ecuador not to pump the oil, the root cause of most of the pollution, in the first place? "Barrels of oil in the ground credits" could become the new carbon credits.

Obviously, this would have to be monitored to make sure the oil stayed put as promised. But surely it's not beyond the wit of the world's statesmen - and entrepreneurs - to come up with a workable scheme, particularly if there's money to be made. This has got to be far easier than cooking stoves in Honduras.


Andrew Murray-Watson is away

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