The Corner House Comments on Changuinola 1 (Chan 75) Large Hydro Project (Panama)

Comments by Larry Lohmann, The Corner House, on Changuinola 1 Hydropower Project in Panama

CLEAN DEVELOPMENTMECHANISM

Changuinola 1 Hydroelectric Project in Panama
PROJECT DESIGN DOCUMENT Version 03.1

Comments
Larry Lohmann
The Corner House

OVERALL SUMMARY COMMENT

1. 1. The evidence and arguments presented cannot establish the project as additional. The project cannot be argued to have passed any of Steps 0, 1, 3 or 4.
2. 2. The project cannot fulfil, and would indeed detract from, the sustainable development objectives of the CDM.
3. 3. In addition to the ecological threats the project poses, its notoriety for the violence, illegalities, human rights violations and harm to local well-being and livelihoods that have been connected with its planning and construction is already such that support for it would be seriously damaging both to the DOE and to the CDM itself.
4. 4. No mitigation is possible for the damage the project would cause to unique fisheries and other aspects of a natural area of World Heritage status. The claim that 20 per cent of CER revenues would overcome the barrier that exists to its location is accordingly without foundation. Biological realities aside, the revenues would have to go to different agencies than those specified for the claim to be entertained seriously.

DETAILED COMMENTS

p. 8. Themethodology chosen is inappropriate due to the way it incorrectly draws projectboundaries, for example excluding fossil fuel emissions during construction andmaintenance, reservoir methane emissions (for which CDM methodologies useessentially arbitrary criteria for inclusion within project boundaries),indirect emissions effects from the consequences for energy investment andother operations of the project developer, and of course the very considerableknock-on emissions effects, both fossil and biotic, from the social andecological disruption in the area that the project would entail. These arewell-rehearsed problems with the faulty scientific methodology in the CDM regulatory process overall, and are not unique tothis project and its methodology choice. However, it would be irresponsible notto draw attention to these realities in any project comment, since they bear onevery project that uses a faulty methodology, whether or not it has beenapproved by the CDM political process.

p. 11. Step 0. Preliminary Screening Based on StartDate. Insufficient evidence is presented that the incentive to develop the project activity as a CDM projectwas considered and played an important role in the decision to go ahead withthe project. The investment memorandum being made available to the DOE is notbeing made available to the public for scrutiny. The conflict of interest towhich the DOE, like many others, is subject in this and other projects rendersthe unsubstantiated assertions in this paragraph particularly in need of someevidential backing. AES Corporation's economic evaluation would be suspect forsimilar reasons even if it were responsibly referenced in this PDD, which it isnot. In any case, the decision to go ahead with the project had been made longbefore October 2006, making it unclear what relevance either the InvestmentMemorandum and the Minutes from the Board of Directors would have to thisissue. Conclusion: the project does not pass Step 0.

p. 11. Step 1. Identification of Alternatives Consistentwith Current Laws and Regulations. Sub-step 1a. An inadequate range ofalternatives is defined here. In any case, the basis for singling out thesethree alternatives is not explained or justified. This is unsatisfactory. Sub-step1b. Compliance with legal regimes is irrelevant if an inadequate range ofalternatives has been specified in the first place. Conclusion: The projectdoes not pass Step 1.

p. 12. Step 3. Barrier Analysis. The CDM is claimedto have helped the project overcome three barriers. To take them in order:

(1) The first barrier is the project's sensitive location.The CDM is asserted to be the only mechanism that could "address the specialrequirements of the BPPS Protected Area" by earmarking funds to an ANAM fundenforcing land regulations and implementing management plans (paragraph 3) thataim to "prevent deforestation, encroachment, and other stresses" and"strengthen the institutional capability to support local development needs".

The location is indeed sensitive. It is home to thousands ofindigenous Ngöbe people, whoselivelihood depends on access to local land, forests and streams. In addition, the dam projects of which Changuinola 1 is anintegral part are considered by conservationists to be a severe threat to LaAmistad Biosphere Reserve and International Park, which contains CentralAmerica's largest old-growth tropical rainforest, an extremely biodiverse areawith few upland roads and estimated to be home to almost four percent ofterrestrial species, including 250 species of reptiles and amphibians; 215species of mammals including puma, ocelot, jaguarundi, tiger-cat, jaguar andtapir; and 600 species of birds, including the yellow-green finch, resplendentquetzal, three-wattled bellbird, bare-necked umbrella bird, harpy eagle,crested eagle, solitary eagle and orange-breasted falcon. More than 180 endemicplant species and six endemic amphibians have been recorded at La Amistad.

Rather than helping to overcome the obstacles tohydroelectric development that such sensitive areas are rightly felt topresent, however, CDM support could only exacerbate them. This is both becauseCDM benefits would necessarily go to bodies that cannot address the specialneeds of the site, implement responsible management plans, nor strengthencapacity to address local development needs; and because the relevance of the20 per cent figure cited to the overcoming of the obstacle would require adetailed argument which is not given here and whose possibility of formulationmust be doubted.

Indeed, implausible as it may be tosuggest that the ecological or social sensitivity of the location is ameaningful "barrier" either to the government of Panama or to AES, the idea that the CDM could "remove" such a barrier issimply ludicrous. First, the CDM is incapable of "strengthening institutionalcapacity to support local development needs" if this is being done by providinga fraction of CER revenues to AES and ANAM. In reality, approval of the CDM project would belikely to do precisely the opposite, by, to whatever degree, providing backingfor agency practices that the record shows have been consistent in undermininglocal development needs in a number of respects. Evidence for this is plentifuland in the public domain. AESCorporation is on record as having denied the existence of any land rights forlocal Ngöbe people, many of whom were living in the area many years before thecreation of the protected areas in the 1980s, yet were never granted landdocuments. Indeed, the project would require the relocation of hundreds offarmers in several communities many of whom, questioning the notion thatcomparable land or livelihood awaits them elsewhere, oppose the project. Thecommitment of AES to undermining rather than supporting the most basiclocal development need - secure land tenure - can be inferred from the factthat the company, which has actually been made officially responsible forresettlement, has refused to hold negotiations with local villages, insteadresorting to threats, bribery and blackmail in order to get signatures onindividual agreements and thereby divide the community. Local opposition hasbeen violently repressed and local citizens arbitrarily detained, includingwomen and children. On 3 January 2008, according to Cultural Survival, AES and the Panamanian government brought in asquadron of police in riot gear who attacked villagers with clubs. Theyarrested 54 people, including 13 children and two babies, taking them to a jailin the city of Changuinola, first breaking the nose of a nine-year-old boy andinjuring his sister's arm; knocking down and sexually humiliating a womancarrying a three-year-old child on her back; and knocking down a sixty-year-oldman, grinding his face into the dirt with a boot.[i]

While AES dynamited the land of a local resident afterpressuring her to sign a transfer document that she could not read andbulldozed roads in areas where people have refused permission, a police campwas set up at the beginning of the year to cordon off Ngöbe lands and "protect AES contracts". With this quasi-military backing, AES construction crews began clearing four farms towhich it does not have title, leaving 50 people without a food source. AES, moreover, has simply refused to relocate thevillage of Nance de Risco, which is located a few kilometers downriver from thedam site. In spring of 2008, UNESCO visited Panama to investigate the dam's environmental and socialimpacts (La Amistad is a UNESCO World Heritage Site.) A petition will besubmitted to the Inter-American Commission on Human Rights asking that thedestructive work be halted. The project is regarded with some disdain even bymultilateral development bank staff not noted for their fastidiousness,suggesting the hazards both to the reputation of the CDM and the reputation ofthe DOE of being associated with such a project.

CDM approval would also unavoidably contributetoward disrupting longstanding land use patterns and blocking paths importantfor livelihood requirements for thousands of local residents living above andbelow the dam and reservoir. Again, the CDM would be contributing to theviolation of development principles. The record shows, in addition, that nosafety considerations have been taken into account in earthquake-, landslide-and flood-prone areas.

CDM approval would also reinforce (rather thanremoving) the barrier presented by any responsible assessment of the value ofthe unique location by making it easier for the agencies in question to damagecrucial fisheries. Some 115 species of fish are reported in the general area,many of them diadromous, and no possible mitigation procedures funded by anyamount of money (even were there agencies present who with the dedication andcapacity to take on such jobs) would capable of mitigating the block tomigration to and from salt water presented by dams such as Changuinola 1. Thisis a biological reality attested to by experience with scores of such damsaround the world. Destruction of major fish species living in La AmistadInternational Park would be inevitable. The PDD contains no evidence that therelevance - or, rather, irrelevance - of the 20 per cent of CER revenues to bemanaged by ANAM to such harsh realities has been evaluated or even consideredby the PDD authors.

All the evidence, inaddition, is that the CDM would not help address, but would rather promotefurther disregard for, other "special requirements of the BPPS Protected Area".This is because, again, support from sale of CDM-sanctioned CERs wouldstrengthen the agencies whose consistent practice it is to disregard thosespecial requirements. For example,the Center for Biological Diversity, whose express concern is with suchrequirements, has found it necessary to challenge AES contractors for their participation in theillegal destruction of Ngöbe lands; the firm that responded said it had a"contractual obligation to complete the project" and was not legally liable.

Further evidence of theirrelevance of CER income allocations to the responsible agencies' capacity tohandle the "special requirements" of the location includes the fact that the2005 EIA was approved by ANAM without having involved any of the necessarybiological surveys and without considering the effects on the La Amistad WorldHeritage Site; the fact that in 2006, AES changed the project design without carrying outthe required new EIA to assess the effects of the changes; the fact that AES has refused to make public biological datacollected in 2006 and 2007; and the fact that ANAM and AES have not considered the synergistic ecosystemeffects of the various dam projects being considered in conjunction withChanguinola 1, although these are bound to be significant.

ANAM does not even havethe authority under Panamanian law to administer any funds set aside from CERincome to "address the special requirements" of the Palo Seco Protected Forest. ANAM'sstatus as DNA involved in approval, in addition,entails that it is subject to a conflict of interest with regard to thesefunds. There are no legal mechanismsto ensure that any of the supposed benefits of CER income would be felt bylocal people.

The PDD asserts on this pagethat the "nature conservation and social protection measures facilitated by thecarbon income are key for the shifting from rejection to support of the projectby local communities" and cites a 95 per cent local approval rate for theproject. These claims sit uneasily with clear evidence of a type of widespreadand continuing local resistance to the project that is not going to be lessenedby promises to provide extra income to some of the very actors whose practiceslocal people are protesting against. In December 2007, the people of Charco laPava, staged a peaceful protest with a banner across the road to the projectconstruction site. Police conducted house-to-house searches for the leadersthey believed responsible, used a helicopter to chase some of them into theforest, where they hid for three days, and attempted to cut off communicationbetween local people and outsiders. The project was approved without the free,previous, and informed consent of the affected Ngöbe communities; an AES contractor is on record as claimingthat it is under no obligation to understand Panamanian law requiring projectdevelopers to consult with indigenous communities before beginning projects.Incidentally, pace the PDD's assertion (p. 32), theproject does not comply with the guidelines of the World Commission on Dams,for example on consultation or EIA issues.

p. 13. (2) The second barrier is an investment barrier. Theproject developer is said to have faced "lowfinancial return" for the project, plus difficulty "gaining access to long-termdebt". Again, however, the evidence cited for this claim is confidential andpresumably not available for checking, raising the question of how the publicis supposed to comment meaningfully on what is, as it stands, hearsay. Onecannot both respect commercial confidentiality on the one hand and, on theother, claim to have opened the PDD to public comment. One must choose one orthe other, which in this case would presumably entail dropping the claim thatthis PDD has in fact been opened for public comment. This would amount to awelcome clarification.

Sharpening questions about the evidentialbasis for assessing the alleged investment barrier is the fact that there existconflicting claims from independent sources suggesting that the project has an "extremely high" financial return becauseof special legislation in Panama that allows hydroelectric companies to sell electricity inthe spot market at the same price as thermal plants. According to La Prensa,some hydroelectric plants are exporting energy to the Central American market,and a new transmission line is planned that would integrate Panama to the South American grid as well. Table 5 is notconvincing as it stands not only because no independent verification ispossible, but also because the figures, suspiciously, so very neatly fit theassertion that it is the CDM, and only the CDM, that would make the investmentpossible.

(3) The third barrier is the Prevailing Practice Barrier.Here, the claim that "since 1984 no new hydroelectric capacity hasbeen developed in Panama with the exception of Estí, in 2003" is rathermisleading if considered as a piece of evidence for the assertion that hydro is"not the technology of choice in Panama" since, among other reasons, itneglects to mention the attempts and plans that have been made to install suchcapacity. Hydropower is hardly an exotic species in the country from aninvestment point of view. Regarding the isolation of the Bocas del Toro regionfrom transmission lines that could be used to export the electricity elsewhere,it is not clear how the extension of essentially extractive andenvironmentally-damaging infrastructure of this kind should be a priority forthe CDM, as opposed to, say, locally-effective, small-scale renewable energysystems that could serve the Bocas del Toro region more effectively andefficiently (see above comments on p. 11). This is, of course, not a questionfor the Changuinola I project alone, but it also applies to the Changuinolaproject's CDM application and cannot be evaded.

p. 14. Sub-step3b. The reasoning in support of the claim that barriers exist for theproject, but not for other conceivable projects, is thin and rather desperate.First, again, the range of possible other projects identified is artificiallyrestricted (see above). Second, the argument is speculative and seeminglyself-contradictory. For example, the lack of transmission lines in Bocas delToro is supposed to be a barrier for the Changuinola 1 project, but not, it ismysteriously implied, for a coal-fired plant which, as is clearly noted, couldalso be "specifically in Bocas del Toro region" (p. 14, last paragraph).

Therelevance of the speculation that "the local population would also mostprobably pressure the park's resources increasingly over time for theirnecessities of fuelwood and food" to a discussion of barriers to futurecentralized generating plants, whether an ecologically destructive Changuinola1 or an ecologically destructive coal-fired station, is unclear.

pp.15-16. Any prohibition on fossil fuel-fired generating plants in the BPPS wouldappear to be a local barrier for them, not for Changuinola 1.

Conclusion:The claim that the project passes Step 3 cannot be substantiated by the PDD asit stands.

Step 4. CommonPractice Analysis.

Constructionof hydropower plants is said not to be "common practice" in Panama, withvarious kinds of thermal plant being more cost-effective. However, see above onwhether this would actually exclude Changuinola 1 were it not for the CDM. Thequestion of future common practice is also not considered, despite thelikelihood of rising diesel and even coal prices. Given current trendsworldwide, it makes little sense toassume that the main alternative to hydropower throughout the next 30-50 yearswill be diesel or coal plants.

Why aboom in demand in Bocas del Toro due to increased tourism (p. 15, paragraph 5),or a boom in demand in Panama ingeneral, should increase the financial attractiveness of fossil-fired plantswhile not increasing, or increasing to a lesser degree, the attractiveness ofhydropower, is not clear.

Conclusion:similar activities are not analysed in any depth.

Additionalityhas not been established.

pp.18-27. Measurement of "emissions reductions". This is a chronically weaksection of PDDs for this type of project, and this PDD is no exception.Reasoning based on emission factors excludes too many variables to be ameaningful form of speculation. It is not only that its predictive capacitieshave been shown in many cases to be defective by ex post analysis, but, moreseriously, it illegitimately neglects from the outset the distinction betweendecision and prediction which is critical to achieving UNFCCC objectives.[ii]

Incidentally,it is not actual emissions reductions that are being measured. Of course, themisnomer has long been entrenched in CDM policy and documentation, but, again,that does not exonerate any specific PDD that repeats the mistake from thefault of using unscientific terminology.

p. 32. Asnoted above, the assertion in the first sentence of D. 1. concerning compliancewith WCD guidelines is false.

As notedabove, the assertion in the second sentence regarding the EIA is also false andlikewise should be corrected.

p. 33.The falsehoods regarding the EIA in the first full paragraph, third sentence,should also be corrected.

p. 34.Again, the statements in the first paragraph under E. 1. regardingparticipation are misleading and should be corrected following an independentinvestigation of how the "consultations" and the EIA were conducted. See abovecomments on p. 12.

p. 35. Responseto resettlement concerns. See above. The resettlement plan can hardly bemeaningful if coercion, intimidation and the solicitation of signatures on landdocuments by people who cannot read or have not understood them is standardoperating procedure for the agencies involved.

ManagementPlan for BPPS. See above regarding "participation of localcommunities" [sic] and "addresses environmental and social development of theregion".

[i]"PanamaDam Construction Steps Up the Pace", Cultural Survival Quarterly 32, 1,April 2008.

[ii]Lohmann, L. (2005) Marketing and Making Carbon Dumps: Commodification,Calculation and Counterfactuals in Climate Change Mitigation, Science asCulture 14, 3, 203-235; Lohmann, L. (forthcoming) Toward aDifferent Debate in Environmental Accounting, Accounting, Organisations andSociety.