Hydro projects garnering carbon credits based on a "foundation of lies."

by Patrick McCully
Saturday, December 15, 2007

The global program designed to cut greenhouse gases through carbon offsets from developing countries is being undermined by a huge influx of projects that do not actually need the credits to get built. The UN’s Clean Development Mechanism (CDM) is set to provide massive subsidies to hydropower developers while increasing greenhouse gas emissions, according to an investigation by International Rivers.    
The CDM, part of the Kyoto protocol, allows richer countries to emit extra greenhouse gases by paying for carbon credits to fund supposedly climate friendly schemes in the developing world.    

As of November 1, 2007, 654 hydro projects had received or applied to receive carbon credits from the CDM. If approved, these credits would provide dam developers with a windfall of around a billion dollars each year. Hydro is now the most common technology in the CDM, representing a quarter of all projects in the project pipeline.    

“The CDM is blindly subsidizing the destruction of rivers, while the dams it supports are helping destroy the environmental integrity of the CDM,” says Barbara Haya, a consultant for International Rivers, and author of the new analysis.    

The great majority of hydros in the CDM would very likely be built regardless of receiving credits (in CDM-jargon they are “nonadditional”), in violation of the mechanism’s basic principle. The CDM was designed to issue credits only to projects that are “additional” – projects that are being built because they receive revenue from selling carbon credits. Each CDM credit sold from a “non-additional” project means one extra ton of CO2 is released to the atmosphere. The hydros currently in the CDM pipeline are requesting over 60 million credits per year.    

“Money that should be supporting decarbonization in developing countries is flowing into the coffers of hydropower developers with the only effect on carbon emission levels being to increase them,” says Haya. “Hydro developers are repeatedly justifying their applications to the CDM with surreal arguments, such as stating that projects that are already completed will only be completed if they receive CDM revenue. Even worse is that the companies supposed to audit the developers’ claims and the CDM’s Executive Board seem prepared to endorse such Alice in Wonderland arguments.”    

More than a third of the large hydros approved for credits by the CDM’s Executive Board were already completed before CDM approval. The majority of the dam projects (89%) were expected to be completed within a year following approval, and almost all (96%) within two years. As a large hydro project typically takes 4-8 years to build (on top of several years of project preparation), few if any of the developers of these projects could have realistically needed CDM credits to build their dams.    

Haya’s investigation of hydro projects implies that the same flaws in the CDM’s conceptual basis and project vetting procedures also allow many non-hydro projects that are not additional to receive CDM credits.    

Haya said that many carbon market insiders privately admit that CDM project applications are rife with deceptions and manipulation. “How wise is it for the main mechanism supporting climate change mitigation in developing countries to be standing on a foundation of lies?”   

China dominates    

Most of the CDM hydros – 402 projects – are in China, the world’s most prolific dambuilder. The majority of large hydros nearing completion in China are now applying for CDM credits. Yet there is no evidence of a substantial increase in the number of hydros under construction in China compared to recent years when hydro developers did not benefit from carbon credits.    

The CDM is the main global carbontrading vehicle. Its credits are expected to be widely used to help Europe and Japan meet their emission reduction commitments under the Kyoto Protocol. CDM offsets are also being proposed for use in emerging US carbon reduction schemes, including at the federal level and in California.    

Many of the large dams now angling for CDM certification impose significant environmental and social damage. The massive 880 MW Campos Novos Dam in Brazil (completed in 2005, yet applied for credits in 2007) displaced 3,000 people, many without being granted the promised compensation. Local project opponents were subjected to arbitrary arrests and police violence.    

Similarly, construction on Kenya’s Sondu Miriu hydro project began in 1999; yet last year it applied to the CDM saying it proceeded only on the basis that it would earn income from carbon credits.    

Fortunately, three-quarters of the hydros in the CDM pipeline have not yet been approved by the Executive Board, so there is still time for the Board to reject most of these projects. International Rivers gives several recommendations for minimizing conflicts of interest, preventing projects under construction or already completed from obtaining CDM funding, and making adherence to the World Commission on Dams’ social and environmental guidelines mandatory. In the longer term, the CDM desperately needs to be completely restructured or replaced.