Conservation Strategy Fund Comments to CITSC on the Bonyic Hydroelectric Project (Panama)

Friday, September 3, 2010

To Whom It May Concern:

This letter contains my comments on the subject of Clean Development Mechanism credits for the Bonyic Hydroelectric project in the Teribe watershed of Panama.

This project does not meet the CDM's requirement of financial additionality. A study conducted by Conservation Strategy Fund and partners in 2006 found that the Bonyic project was financially feasible without carbon credits. The study analyzed the Bonyic project along with three planned at the time on the Changuinola River, finding that the collection of projects would generate an after-tax net present value of $87 million on an investment of $523 million. Though ours was not a stand-alone assessment of the Bonyic project, we have no reason to suspect that it was unprofitable as an independent project. In fact, since it is being pursued independently with no other project on the same watercourse, we can only conclude that the project is an attractive stand-alone business proposition. Our study is available here.

It has been suggested that carbon credits are needed to offset the cost of efforts to mitigate, compensate and offset environmental and social costs of the Bonyic project. This concept threatens to take the "Clean" out of the Clean Development Mechanism. That is because carbon credits will put projects with high non-climate environmental and social impacts on an equal financial footing with low-impact projects. The latter, if equally profitable before considering environmental issues, would not have access to CDM payments. In effect, the carbon credits become a subsidy for less-clean development. If all impacts could be fully mitigated, the environmental spending could be characterized as just one more cost, like any other, that CDM funding was overcoming to install clean energy. But, having visited the area in question, I cannot see how the CDM payments will heal the divisions wrought by the project in the Naso Community, nor maintain the ecological integrity of the Teribe basin, one of the better preserved in Western Panama.


John Reid
Conservation Strategy Fund