Chinese Dam Under Fire, But Germany in the Hot Seat

by Katy Yan
Tuesday, December 1, 2009

When a dam developer claims that 97% of the people it surveyed are satisfied with their compensation, take it with a large grain of salt.

Back in November 2008, International Rivers hired a consultant to visit the site of the Xiaoxi Dam on the Zishui River in China. Our researcher documented a long series of problems, including the forced eviction of 7,500 people, the failure to restore pre-eviction incomes, arbitrary and inadequate compensation for displaced villagers, no legal recourse for those suffering losses, and a biased Environmental Impact Assessment process. As one evicted villager described it, "Nobody asked if we wanted to move... The government just posted a notice that said, 'Your home will be demolished.'"

After International Rivers published its report, an Associated Press reporter traveled to China and interviewed resettled villagers. They told him they had received less than China's legally required amount of compensation, which requires payment of the value of at least five years' harvests. What they received for their homes was not enough for them to buy replacement homes. When residents refused the provincial government's offer, they reported that officials simply forced them out and demolished their homes.

Adding insult to injury, the dam received carbon offsets that would allow German company RWE, located 7,500 kilometers away, to build more dirty coal plants in Europe. That's because Xiaoxi is part of the Clean Development Mechanism (CDM), a controversial program set up under the Kyoto Protocol that allows developed countries like Germany to offset their emissions reductions through carbon credits purchased from projects in developing countries. RWE is one of the biggest CO2 emitters in Europe and intends to buy CDM credits from Xiaoxi so that it can legally meet its emission reduction commitments while continuing to expand its coal-fired electricity generation.

RWE is legally allowed to emit 450,000 tons of greenhouse gases above their emission reduction targets each year, thanks to the Xiaoxi credits. Altogether, RWE intends to buy 14 million credits by 2012 from 41 projects. These would allow RWE to emit 14 million metric tonnes of emissions above its legal target - more than 1% of Germany's annual emissions.

As of October, China has at least 910 hydro projects in the CDM approval pipeline and is adding an average of 25 a month. By 2012, those projects alone are expected to generate more than 300 million million "certified emission reductions," each supposedly representing the reduction of one tonne of carbon dioxide. Those credits would be worth billions of dollars.

Under EU and German law, RWE has to show that any large hydro projects from which it buys CDM credits comply with the recommendations of the World Commission on Dams (WCD). The German government initially accepted that Xiaoxi was WCD-compliant in March 2008, based on a report done by the consulting firm TÜV-SÜD, which had previously given a favorable review of the project as part of its formal application for CDM credits. (The CDM itself is governed by the UN and does not require compliance with the WCD or other social and environmental standards.) Yet our consultant and the AP reporter provided ample evidence that Xiaoxi, beset as it is with resettlement abuses, fails to meet the most basic standards set forth by the WCD.

After publication of the site-visit report by International Rivers' consultant and the ensuing media coverage, Germany's Emissions Trading Authority decided to review its decision to allow the Xiaoxi CDM credits. This review has not yet been made public, but CDM-watchers have little hope that it will upturn any apple carts. The consulting company chosen by the Authority to verify the report by TÜV-SÜD is none other than TÜV-SÜD.

The Emissions Trading Authority's final decision was supposed to have been published on their website in late July 2009, according to a spokesperson. No decision has been issued, even though TÜV-SÜD has already returned from the field. According to leading carbon trade analysts Point Carbon, the World Bank is also compiling a report on the project's effect on the villagers living near the dam. Given the World Bank's strong advocacy of hydropower for carbon offsetting, it is also unlikely to issue an unbiased report.

Currently, an international coalition of NGOs including International Rivers is calling on the German government to set up a credible process for verifying WCD compliance, especially for the 13 large hydro projects in China that Germany's Emissions Trading Authority has accepted as WCD compliant. This coalition is also demanding that the German government rescind its approval for Xiaoxi, rather than reward its developers for forcibly displacing the thousands of people that once lived in its reservoir zone.

Latest additions: