Carbon Offsets Misused by Hydropower Industry

Katy Yan
Wednesday, June 6, 2012

Brazilian Megadams Make Mockery of Clean Development Mechanism

The Clean Development Mechanism (CDM) is meant to catalyze climate-friendly and sustainable projects in low-income countries by providing financial support to projects that could not go forward without the extra help. Instead, it's been used to subsidize destructive large dams that fail to meet the CDM’s two main criteria: promoting sustainable development, and supporting clean energy projects that are only able to go ahead if they get funding from carbon credits (this is called being “additional” in CDM jargon).

Because of their well-known extensive environmental and social impacts, and because dams in tropical regions can be major emitters of greenhouse gases, many large dams don’t belong in a fund devoted to “sustainable development.” Yet hydropower projects dominate the CDM pipeline: 27% of all carbon offsets projects registered under the CDM are hydropower projects. Over 1,000 hydropower projects are already registered under the CDM and another 700 are applying for registration, more than any other project type. Through deception and abuse of the system, at least two-thirds of all CDM projects are likely not additional, and more are slipping in each year.  

In particular, dam developers in Brazil, India and China are rushing to get their projects registered before stricter rules take effect next year. After 2012, the European Union’s Emissions Trading System (ETS) – the largest cap-and-trade scheme – will only accept credits for projects from least-developed countries.

Brazil seeks rewards for damming Amazon

The increase in projects applying for carbon credits has led to a higher percentage of controversial megadam projects in the CDM pipeline. Three recent examples in Brazil are the 3,150 MW Santo Antônio Dam and the 3,750 MW Jirau Dam (both part of the Madeira Complex) on the Madeira River, and the 1,820 MW Teles Pires Dam in the Tapajós Basin in the Brazilian Amazon. Some key issues raised by Brazilian civil society include the following:

  • These projects are not carbon neutral. The latest research in reservoir emissions confirms that hydroelectric plants in the tropics are intrinsically large emitters of CO2 and CH4 (methane).  In addition to large emissions produced by decomposing vegetation submerged in the reservoirs (particularly in the first 10 years of plant operation), a large amount of methane is also released at the turbines, spillways, and downstream. Moreover, these projects will lead to greater deforestation of the Amazon rainforest – a key climate regulator and carbon sink – through an increase in migration, land speculation, and through their connection with large-scale soybean agribusinesses, which results in the clearing of large expanses of rainforest.

  • The EIAs are inadequate and poorly conducted. Experts have criticized the EIAs of all three projects, citing the lack of consideration for transboundary impacts by the Madeira Complex in Peru and Bolivia, underestimation of sedimentation, impact on migratory fish species and subsequent effects on the food security of both indigenous and urban citizens, and underestimation of reservoir size and greenhouse gas emissions.

  • The dams are a setback for environmental sustainability. Since the opening of its gates in 2012, Santo Antônio has caused massive damage along the river and displaced hundreds of communities. Teles Pires would destroy one of the most important spiritual heritage sites of the indigenous Munduruku, Kayabi and Apiacá, flood 95 km2 of surrounding land and destroy spawning habitat for more than 200 species of fish.

  • The projects violate Brazilian legislation and international agreements around free, prior and informed consultation with affected indigenous communities. All three hydropower plants have had their environmental licenses legally questioned by federal prosecutors because of their enormous environmental and social impacts. In the case of the Teles Pires Dam, a federal judge suspended its license in March due to a lack of free, prior and informed consultation with indigenous communities as required by Brazilian laws.  Brazilian civil society groups have also filed several lawsuits against the Santo Antônio project for violations of Brazilian law.

  • Projects are not additional. All CDM projects must show that they would not have been built without CDM financing. The resources for all three of these projects have been guaranteed by private and public investors and public funding through the participation of state companies and the National Bank of Economic and Social Development (BNDES).

Calling for European leadership

Unfortunately, the CDM’s track record of preventing the registration of the worst projects, such as those with human rights violations, is poor. In response, several developing countries have asked the UN for permission to withdraw letters of approval for CDM projects that later evidence a breach of human rights laws or serious environmental impacts.

Where host countries and the executive board have failed to restrict harmful projects from the CDM, the European Union has recognized the importance of improving the sustainability and additionality of offset credits entering the EU Emissions Trading System. To this end, the EU commissioned a study to assess the integrity of the CDM that was released in December 2011. In addition to reviewing the performance of the CDM thus far, the authors of the study also discuss potential policy options for reform, which include the option to ban large hydropower projects and improve the environmental integrity of small- and medium-sized projects.

As the largest buyer of CDM credits, sound decisions taken by the EU can both reduce the likelihood of harmful projects entering the CDM and be the catalyst for reforms of the CDM at the UN level, if it is up to the challenge. As its own study has shown, large hydropower projects often do not support sustainable development. Any international climate financing, whether through climate funds or market mechanisms, must support renewable energy systems that improve climate resilience rather than harm the very resources upon which millions of people depend.