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Ecuador to Propose Levy on Oil to Fill Climate Fund

December 06, 2012

Ecuador Plans OPEC Proposal for Oil Levy to Fill Climate Fund

A vehicles drives along a street as a heavy sand storm engulfs OPEC member Kuwait. Photographer: Yasser Al-Zayyat/AFP via Getty Images

Ecuador plans to propose a levy on every barrel of oil sold by OPEC members to help fund projects that cut greenhouse gases and protect against the effects of climate change.

The proposal will be made at the meeting of the Organization of Petroleum Exporting Countries in Vienna on Dec. 12, said Ivonne A-Baki, Ecuador’s delegation chief at United Nations global warming talks and a state secretary in President Rafael Correa’s government. It builds on a proposal Correa made in 2010 and is now reviving, she said.

“We’re presenting it again as a matter we must deal with urgency,” A-Baki said in an interview today in Doha. “We haven’t proposed a number. It could be a dollar. It could be 30 cents. It should be chosen by OPEC members.”

Envoys at the United Nations climate talks are trying to come up with new sources of funding for emissions reduction projects that go beyond government aid. Industrial nations have pledged $100 billion in public and private money by 2020, without saying exactly who would pay what and when.

The Ecuadorian plan wouldn’t contribute to the $100 billion target because none of OPEC’s 12 members are classed as “developed” under the UN Framework Convention on Climate Change. Still, with nations including Saudi Arabia, Kuwait, Qatar and the United Arab Emirates, the group would have an opportunity with the proposal to show its commitment for tackling climate change.

’Litmus Test’

“It’s an economically rational and implementable proposal,” Nick Mabey, chief executive of E3G, a non-profit group in London that works to promote sustainability, said in an interview in Doha. “This is one of the easiest ways for Arab countries to live up to their responsibilities as oil exporters and a litmus test of their seriousness about climate change.”

Correa mooted a variant of the idea as long ago as December 2010, when he suggested at an OPEC meeting in Quito that a 5- percent sales tax on oil could generate $40 billion a year. He proposed the idea of channeling the proceeds of any fee into a climate change fund. The proposal was made at a meeting of Arab and South American leaders in Lima in October, A-Baki said.

“The fund would be would be especially for adaptation, mitigation, technology, and renewable energy,” A-Baki said. “It’s for everything that can help improve emissions reductions.”

A-Baki is also secretary of state for Ecuador’s Yasuni initiative, which aims to raise $3.6 billion by 2025 from countries, companies and private donors. In return, Ecuador would guarantee to protect the country’s Yasuni National Park and not extract 846 million barrels of oil, worth $7.2 billion estimated to lie under the reserve. That’s about a fifth of Ecuador’s oil reserves.

Coca Cola

To date, donations total about $200 million into a trust fund administered by the UN Development Program, A-Baki said. She said talks are ongoing with many more countries over possible donations. She declined to name the nations because she doesn’t want to jeopardize the discussions.

As well as countries, companies including Unilever NV (UNA), and Coca-Cola Co. (KO:US) are also contributing to the Yasuni initiative, the state secretary said. Coke is planning a contribution for sales in Ecuador of its Dasani bottled water, she said. Ecuadorian chocolate brand Republica del Cacao has a Yasuni- branded chocolate bar from which 22 percent of the sales price is channeled to the initiative, she said.

To contact the reporter on this story: Alex Morales in Doha at amorales2@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net


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