Ecuador has abandoned a conservation plan that would have paid the country not to drill for oil in previously untouched parts of Yasuni National Park in the Amazon rainforest. President Rafael Correa said rich nations had failed to back the initiative, leaving Ecuador with no choice but go ahead with drilling.
The park is one of the most bio-diverse areas in the world. Hundreds of people gathered in Quito to protest against Mr Correa's decision.
Oil exploitation has been taking place in parts of the Yasuni National Park, which covers nearly 10,000 sq km since the 1970s.
An UN-backed scheme to attract donations to forego drilling in the east of the park was launched by President Correa in 2010. The aim was to raise 3.6bn dollars, 50% of the value of the reserves in the park's Ishpingo-Tambococha-Tiputini (ITT) oil field, over 13 years.
But in a televised news conference President Correa said the initiative had attracted only a fraction of the cash it had aimed to raise. With only 13 million dollars so far in actual donations, he said he had no other option but to abandon the fund as the world has failed us.
I have signed the executive decree for the liquidation of the Yasuni-ITT trust fund and through it, end the initiative, the president said in the televised address. He called the decision one of the most difficult he had had to take as president.
It was not charity that we sought from the international community, but co-responsibility in the face of climate change, he said.
The president added that the oil exploration would leave most of the park untouched, affecting less that 1% of its area. Environmental activists demonstrated outside the presidential palace in the capital, Quito, about the announcement.
According to the Yasuni-ITT trust fund, 78% of Ecuadorians are against drilling in the park, which is also home to indigenous communities, including the Tagaeri and the Taromenane.
The fund, administered by the UN Development Program argues that stopping the drilling would prevent more than 400 million tons of carbon dioxide from going into the atmosphere.
The Yanusi National Park holds a huge variety of wildlife, including unique species of birds, monkeys and amphibians. It has been proved that one hectare of Yasuni contains more tree species than are native to all of North America. But the Yanusi oilfields hold an estimated 846 million barrels of crude, 20% of Ecuador's reserves, and oil is the country’s main export and source of government revenue.