How not to eliminate fossil fuel subsidies

| 21st October 2019
Ecuador protests
Twitter: @pecesglobal
Fossil fuel subsidies have been reinstated in Ecuador following violent protests. Still, 'people's demands for a safe, stable economy and environment are not being listened to.'

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Across Europe, and many other places, people are laying their bodies down, facing arrest, calling for government action on environmental policies, including cutting fossil fuel subsidies. In Ecuador, people are putting their lives at risk to reinstate them.  

The protests were successful. After eleven days of unrest, seven dead, hundreds arrested and thousands injured, the government met with protesters for peace talks, and negotiated the reinstatement of fossil fuel subsidies in Ecuador.  

On Monday 14 October, people cleared concrete debris and stones from makeshift road blockades and swept the black ash that lined the streets from protest fires. Transport services resumed, and schools, shops and offices reopened. The nation returning to peace. 

Price rise

What went wrong in Ecuador? 

The third of October is the first day the effect of eliminating government fuel subsidies shattered Ecuador's population: fuel prices rose by 25-75 percent overnight. 

The protests began with a transport strike, as the immediate rise in gasoline and diesel prices forced bus operators and taxis to hike up fares. With only a handful of tourist trains in the country, the primary form of transport in Ecuador is public bus. 

Quito is gaining a metro, but construction is delayed; it will not open till next summer at the earliest. Until it opens, grime covered red and blue buses spew trails of toxic black clouds, zooming through the valleys of Quito – home for more than two million people.  

For the vast majority of Ecuadorians, these buses are the only way to navigate the cities looping, dangerous tunnels and overhead highways. A single fair on one of these (often) overcrowded, questionably driven buses - that would never meet European safety standards - is 25 US cents. 

The subsidy cut resulted in fares as high as 40 US cents for a single journey. Overnight millions of people could not get to work or school, the price of goods and food rose with it, as the cost of freight spiked.  

Unstable economy

Johana Sánchez, Ecuadorian cultural sociologist and journalist, explained: “The subsidy goes beyond gasoline and diesel. It affects all the freight vehicles loaded with products for transportation."

The price of an unstable fossil fuel reliant economy, as well as the weight of the clouds of polluting fumes, was in one policy, laid on the shoulders of the poorest people in Ecuador.  

Many people have, “to take five buses a day” to get to work in Quito, explains Maggie Criollo, an activist for Solidarios Chiriquí, a local group that provides emergency food, water and medicine for indigenous people that have travelled to Quito to protest.  

The price hikes, coupled with Ecuador’s low wages, meant people could not cope with the price increases. 

The minimum wage in Ecuador is US$300 to $400 a month. According to the World Bank, nearly a quarter of Ecuador’s population live under the poverty line.  

Anger

Criollo claims that most people are on a basic wage of $300 dollars. She, a single mother with two young children, is living on just $200 dollars a month. Criollo said:  “It does not meet our needs, but there are people who have much less.

“People who are not so worried, it is because the price hikes will not affect them. The president just says we should work harder.

“People are angry because of the economic measures that [president] Lenin Moreno's nefarious government is applying. We have to respond in some way.”

People responded in their thousands by taking to the streets. Roads were blockaded, airports closed, shops and schools shut their gates. The entire nation came to a sudden halt.  

It started with transport workers, then students and young people, explains Criollo, then the strike “intensified” as indigenous communities travelled from as far as the Amazon region to join protests in city streets.

Criollo added: “There are some Cotopaxi [a province neighbouring Quito] mothers who say that it is very sweet to die for their children. People get up and protest because they have nothing to lose."

Nationwide protests

After five days of nationwide protests, where protesters clashed with riot police and the military in the worst civil unrest seen in Ecuador for over a decade, Ecuador’s government fled to the coastal city of Guayaquil, declaring a two-month state of emergency.  

Seven people lost their lives in the unrest. Criollo says that one young man was hospitalised after being wounded in an altercation with the police, and later died, while in Cayambe (north of Quito) two middle aged people died from rubber bullet wounds. 

Criollo said: “They [the government] are violating our human rights and they are killing us."

Subsidy cuts in service to austerity, not the environment 

Fossil fuel subsidy cuts are supposed to save the environment, signaling an end to fossil fuel dominance, and the beginning of heavy investment in alternatives, while also saving tax payers money. 

However, in Ecuador, the subsidy cut is just one of many austerity obligations that are part of a US$4.2 billion arrangement with the International Monetary Fund. President Lenin Moreno – who won by popular vote in April, 2017 - told reporters last week that Ecuador´s fuel subsidies, which have been in place for decades, “distort” Ecuador’s economy and were being eliminated. 

Petrostate

A third of the country’s export earnings came from petroleum resources in 2017: the nation is dependent on fossil fuels, fossil fuel exports, or international loans to exploit more fossil fuels.  

Sánchez said that Ecuador has “always depended on external funds. Venezuela and Ecuador have refineries that other countries would like to manage. Latin America's economies are based on oil extraction."

For years, Ecuador’s neighbour (on the other side of Colombia), Venezuela has been in crisis.  

According to OPEC, Venezuela's oil revenues account for 99 percent of export earnings – the nation is often referred to as a 'petrostate'. With the largest oil reserves in the world, economic instability was spurred after oil prices began to fall in 2014. This economic dependence on fossil fuels, alongside political mismanagement and corruption, led to the humanitarian crisis in Venezuela.  

Millions of Venezuelan´s fled their home country, with over 100,000 Venezuelans seeking refuge in Ecuador last year. 

Fossil fuel-dependency

Last month, Argentina implemented currency controls, as it is also in the midst of a fossil fuel-dependency caused financial crisis.  

Tom Sanzillo is director of finance at the Institute for Energy Economics and Financial Affairs (IEEFA), which has just released a report that investigates Argentina´s energy mix and economy. Sanzillo said: “Global oil and gas prices are low, global markets weak, foreign partners stepping back, production costs high, Argentina’ s economy and politics unstable."

But there are alternatives. The IEEFA's report lays out a roadmap to reduce dependency on fossil fuel exports and international funds to increase economic and political stability.  

The report states: “An energy plan that promotes renewable energy and prudent use of oil and gas assets will reduce inflationary pressures in the energy sector. Once built, renewable energy has no fuel cost. And renewable costs are expected to continue to fall due to economies of scale and accelerating technology gains.” 

Today, 43 percent of Ecuador’s electricity comes from fossil fuels, 54 percent from hydro and 2 percent from other renewables.  

Renewable energy

Ecuador’s 2015 INDC Paris climate agreement, stated that the country aimed to generate 90 percent of its energy from hydropower by 2017, and to increase its use of renewables by 2025. 

While some of this hydropower generation is in development, along with a 16.5MW wind farm in Villonaco, and solar energy projects in the Galapagos Islands, and Feed-in-Tarrif mechanisms for renewables, the country is far behind its renewable energy generation targets.  

There are also projects underway to electrify buses in Quito and the southern city of Cuenca – which, if supplied with renewable electricity, would eliminate much of the current anger over rising bus fares, as gasoline and diesel would not be needed.  

Protesters in Ecuador care about the environment, says Sánchez: “There is a subversive fight for the environment, but the media are complicit in not reporting what is happening.” 

Indigenous families, groups and activists leading the protests are also national champions for environmental reforms. Sánchez said: “Indigenous people go to the head of the protest and are also against the exploitation of the land."

Peace negotiations

However, at the moment, peoples demands for a safe, stable economy and environment are not being listened to.

Lucrecia Maldonado is a Spanish professor living in Quito and strongly supports the previous populist regime. Maldonado said: "A national reconciliation is not possible, because of inequality, the classes are irreconcilable.

“No one is willing to give in. I feel sad for my country, but at least people are fighting and not leaving. They are putting their bodies in the way of bullets, without being submissive."

On the 11 and 12 October, open letters on social media from indigenous activist group, CONAIE (the national confederation of indigenous people in Ecuador), stated it believes there are alternatives to the current IMF subsidy fuel cut agreement, and that negotiations to end the protests can only occur in public - not behind closed doors – and only with guarantees of the safety of indigenous representatives, with mediation from the United Nations.  

On 13 October, peace negotiations finally began in Quito, live on television and social media, with the president, a United Nations mediator and representatives from across Ecuador. The talks began with the president standing firm on keeping on the subsidy cut, while Jaime Vargas, president of CONIAE, and other local and indigenous leaders called for the subsidy cut (decree 883) to be cancelled, and agreed to end the protests. 

Oppression

After several hours, the government agreed to retract the subsidy cut, known as decree 883, ending the subsidy cut.  

The need for violent protest to reach the agreement, “breaks my heart,” says Sánchez. 

“I don’t want any more bloodshed,” says Criollo, “but we are tired, and we cannot allow this oppression to continue.” 

Ecuador will not “kneel” to the whims of fossil fuel caused instability, says Sánchez. 

This Author

Lucy EJ Woods is a freelance journalist specialising in on-the-ground environmental reporting. She is currently reporting from South America and lives in Quito.

Image: Twitter, @pecesglobal.

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