Supply-side climate policies and the Yasuní-ITT initiative

Abstract

In recent years, there has been a surge of interest in the use of supply-side climate policies (ie those aimed at reducing the supply of fossil fuels) as an alternative to demand-side approaches, such as carbon taxes (ie those aimed at reducing the use of fossil fuels). Proponents assert that where demand-side policies have failed, supply-side approaches will succeed, often ignoring or downplaying the institutional, political, social and economic factors that impede progress and the importance of policy design. To illustrate the types of design flaws that can emerge in supply-side approaches as a result of these factors, this article critically evaluates one of the most well-known of these proposals, Ecuador’s Yasuní-ITT Initiative. The article analyses the factors that shaped its design and its technical deficiencies, providing new insights on why the Initiative failed and the blessings in its termination. The lesson from the Yasuní-ITT Initiative is that, while supply-side approaches have potential, like demand-side approaches, their effectiveness depends on how well central policy actors supportive of their use are able to manage the factors that shape and constrain their choices, and how this is reflected in policy design and implementation.