Status Note on Hydro and the CDM, May 2003

Thursday, May 1, 2003

The Good, the Bad and the Dammed Ugly

In October 2002, International Rivers and CDM Watch published “Damming the CDM: Why Big Hydro is Ruining the Clean Development Mechanism.” The report showed that a significant proportion of proposed Clean Development Mechanism credits could be captured by “non-additional,” business-asusual, large hydro projects. “Damming the CDM” warned that this trend threatened to undermine the effectiveness and credibility of the Kyoto Protocol.

The seven months since our report was released have seen positive and negative developments relating to hydro in the CDM. On the positive side, the Dutch government rejected the largest and most controversial hydro project proposed for credits so far, Bujagali Dam in Uganda. Also highly positive is the Dutch and Germans’ move toward requiring that hydro projects from which they source credits comply with the recommendations of the World Commission on Dams.

On the negative side, precedents may be set that would make it standard practice for developers to benefit from CDM credits for business-asusual projects – ones which are being built regardless of whether they receive carbon credits. Evidence has also emerged that the World Bank hopes to use the CDM to promote an upsurge in large hydro building.

Overall, the concerns expressed in “Damming the CDM” remain. Large hydro may still help turn the CDM into a carbon accounting scam that produces spurious credits, subsidizes bad projects and undermines the integrity of the Kyoto Protocol.