CDM Large Hydro Status Note for the World Bank/IETA Carbon Expo, June 2004

Tuesday, June 1, 2004

The World Bank claims that its flagship carbon market vehicle – the Prototype Carbon Fund (PCF) – is focussed primarily on renewables, and includes small hydro as one of the most common renewable technologies it is developing. This is deliberately misleading. The Bank includes hydro projects up to 43MW as “small hydro” in its calculations, many times the commonly accepted capacity limit of 10MW. In fact, of the 8 CDM hydro projects currently being developed by the PCF, 5 are in excess of 10MW and thus large hydro projects, not renewables. These 5 projects generate nearly twice as many carbon credits as the PCF’s 8 existing CDM renewables projects combined.

The PCF’s large hydro projects are also beginning to undermine the Bank’s rhetoric about developing “high quality” carbon credits. Not only is the Bank’s biggest CDM large hydro project in trouble due to its blatant non-additionality, but the Bank is being left behind by the increasing use of World Commission on Dams (WCD) criteria as an assessment tool for CDM hydro projects by carbon credit buyers. Arguably, some of the Bank’s large hydro projects are currently not eligible for the new European Emissions Trading Scheme (ETS) – the world’s biggest carbon market - due to their failure to show how they have “respected” the principles and guidelines of the WCD, as the ETS requires.