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Saving Rainforests With Oil Revenues - 2003-06-27


In many countries, oil and mineral production are often associated with environmental damage. But a new study says the revenues generated by those natural resources can actually help prevent destruction of rainforests. It all comes down to careful planning and foresight.

The report comes from the Indonesian-based Center for International Forestry Research, or CIFOR, which says it receives no money from oil or mining companies.

The report says, “Practically one half of all tropical forests are in countries that rely heavily on petroleum and mineral exports for their incomes.” These include Gabon, Guinea, Venezuela, Ecuador, Indonesia and Papua New Guinea.

The author of the study, Sven Wunder(VUN-der), is an economist at CIFOR. He says when revenues from oil and mineral production rise, it triggers urbanization.

He says, "People are being drawn out of the countryside and into the cities. And although when they are in the cities they still have an impact on forests through their ecological footprints and the goods that they demand from outside that tends to be lower than if they are in rural areas. So urbanization from oil is a good thing for forests in a way that it’s relieved some of the pressures."

He says, “High revenues from oil and mineral exports strengthen exporters’ national currencies.” As a result, investing in forest destroying activities, such as farming and logging, becomes less attractive.

One country that has seen a major change in its economy because of oil revenue is Gabon.

Mr. Wunder says, "Export agriculture has completely died out, negligible amount of cocoa and coffee exports. But also agriculture for its own consumption and production of food crops has dropped significantly as people massively moved into the cities, particularly the capital, Libreville, to take advantage of government employment being financed by these oil revenues or by the general pick-up in the urban economy."

However, the lack of agriculture production in Gabon could come back to haunt the country. Oil resources are reported to be “slowly drying up.”

Another factor that could affect all oil-producing countries in tropical areas is the expected influx of Iraqi oil. While that means cheaper gasoline prices for consumers, it could spell trouble for rainforests.

The CIFOR economist says, “When oil and mineral revenues fall and economic crisis follows, everything works in reverse.”

he says, "If more oil is being produced, then the price will go down and the foreign exchange being received by producer countries is going to be lower. So, as these countries make less money from their oil revenues they will start to dedicate more efforts to other activities, in particular, perhaps agriculture."

Environmentalists have long campaigned against oil and mineral exploration in jungle or rainforest areas. They have said access roads, drilling platforms and worker camps seriously damage the environment.

But the Center for International Forestry Research report says, the effects that oil wealth bring “greatly outweigh the direct negative impact” of production.

He says, "My own report should probably be seen as an argument for exploiting oil resources if there are large economic benefits, even if it occurs in somewhat sensitive areas ecologically. The economic benefits from that for the population may be large. But also the derived forest protective impact of the oil revenues could be important. From an environmental point of view, it would be important to make sure that the oil revenues are not spent in a way that damage forests."

For example, Ecuador used its revenue to build major roads causing widespread deforestation.

Mr. Wunder says, “Environmentalists should not misinterpret this report.” He says it “in no way excuses companies using destructive practices that excessively damage the environment.