Crunching the Hydro Numbers: 2012 CDM Update

Katy Yan
The World Bank-funded Bujagali Dam, which drowned a treasured waterfall and forced hundreds from their lands, was registered by the CDM Board to the tune of 858,000 CERs for the Netherlands or €3.5 million per year for the developer.
The Bujagali Dam, which drowned a treasured waterfall and forced hundreds from their lands, was registered by the CDM for 858,000 CERs.

On September 10, the High-Level Panel for the Clean Development Mechanism (CDM) Policy Dialogue presented its final recommendations on CDM reforms. Despite an oversupply of credits and waning confidence in the CDM from both market players and civil society watchdogs, the report presented an optimistic and biased view of the CDM and its future while failing to recommend concrete solutions to address some of its fundamental flaws, such as additionality testing.

However, the report did take into account a range of stakeholder views, which were solicited during the eight-month consultation process, and has recommended some improvements that will hopefully deal with some of the problems of existing projects and processes. It will take active engagement and monitoring from civil society to ensure that these recommended reforms are adopted by the CDM Executive Board, and implemented by not only by the UNFCCC Secretariat but also host countries (to find your country's Designated National Authority, click here).

Below is a review of some of the key recommendations from the report:

  • "Urgently address the immediate crisis of demand." While the report recognizes that the lack of demand for CDM credits has caused the price of credits to plummet, it fails to consider the role of fake credits that have flooded the market due to the ease with which project developers can manipulate financial feasiblity figures to show a project is additional when it is not. Industry papers recently celebrated the milestone of one billion CERs issued, while ignoring that much of those CERs could be fake, as studies have shown again and again. In addition, the report recommends establishing a fund to purchase and cancel part of the current oversupply, which according to CDM Watch, "could create huge windfall profits to industrial gas and large infrastructure projects which deliver the vast majority of credits but have very limited environmental integrity and deliver only few or no sustainbility benefits."
  • "Support the rapid implementation of the Green Climate Fund." The Green Climate Fund (GCF) is set to become the next big fund for climate mitigation. However, governments and the private sector have already positioned themselves to submit business-as-usual projects such as large hydro to the fund. The Panel recommends the promotion of CDM standards and methodologies for the GCF, but if the CDM does not improve its standards and guidelines, it will risk undermining the GCF by supporting large high-impact infrastructure projects over truly renewable projects that are decentralized, community-driven, and pro-poor.
  • "Implement standardized methods for assessing additionality." While never explicitly mentioning large hydro, the report recommends moving away from unverifiable financial additionality tests and recommends improvements that "may lead to questioning the continued inclusion of certain technologies in specific locations where they are likely to be the norm." Large hydropower is currently the dominant project type in the CDM pipeline, with most of these projects coming from major dam-building countries like China, India, and Brazil (see Fig. 5 below). While these recommendations for improving additionality testing is positive, clear restrictions and guidelines will need to be set that explicitly excludes such technologies as large hydro in places where it is clearly business-as-usual.
  • "Ensure that CDM projects help to achieve sustainable development." The Panel recommends that sustainable development impacts be reported, monitored, and verified. However, it is currently only developing a voluntary set of reporting guidelines, and it places the responsibility of ensuring sustainable development  – and responding to allegations of negative impacts – on host countries. On the positive side, it recommends that host countries be allowed to withdraw their approval for harmful projects. 
  • "Encourage greater access to the CDM for underrepresented regions." The Panel calls for the prioritization and acceleration of  projects in the least developing countries. It will be important that current guidelines for maintaining environmental integrity, stakeholder involvement and sustainable development are not sacrificed for rapid adoption of new projects.
  • "Improve stakeholder interactions and public engagement." The Panel makes some strong recommendations about improving interaction with stakeholders including the establishment of local consultation procedures that can ensure better local consutlation and notification of proposed projects.
  • "Establish independent mechanisms for appeals and grievances."The Panel recommends the establishment of an appeals mechanism for both positive and negative rulings, which means that while local communities can appeal a decision to register a project, a project developer could also appeal the rejection of a project. The Panel also recommends the establishment of a grievance mechanism for local stakeholders to address environmental and social issues, though this will be led by host countries.

In addition to monitoring the adoption and implementation of these recommendations, civil society will increasingly have to 

Below is the regular CDM update on all hydropower projects in the CDM pipeline. This is an update through the second half of the year. Data is based on the UNEP Risoe spreadsheet (September 1, 2012).


  • The percent of registered projects that have been reviewed before they get registered has dropped recently: 9.5% in 2005, 9.1% in 2006, 19.3% in 2007, 56.9% in 2008, 70.4% in 2009, 39.3% in 2010, 16.7% in 2011, and 6.5% (as of Sept 1, 2012). This may be a response to the huge influx of projects particularly from China and India as they rush to get their projects registered before 2013 (when only projects from least developing countries can apply to the EU ETS). Overall, the number of projects being reviewed has dropped significantly since 2009 (see Figs. 1 and 2).
  • The overall number of projects entering the CDM pipeline rose significantly at the end of 2011 and through 2012. The percentage of hydro projects also rose during the 3rd quarter and 4th quarter of 2011 (see Fig. 3). 
  • Wind projects have surpassed hydro projects in terms of the number of projects entering the CDM pipeline (see Fig. 4). However, hydropower is still expected to generate the most amount of CERs by 2020 – at 23% – with wind at 18% and reduction of gases (such as HFCs, PFCs, SF6 and N2O) at 15% (see Fig 6).
  • China remains the dominant CDM hydro country, with approximately 61% of all projects in the pipeline. However, India and Vietnam are beginning to increase the amount of hydro projects they submit, at 10% and 8% respectively (see Fig. 5).

Click on the following graphs to see a larger version:

Fig 1: Projects requesting registration

Fig 1: Projects requesting registration

Fig 2: Projects registered by year

Fig 3: Projects at validation, including hydro

Fig 3: Projects at validation, including hydro

Fig 4: Projects in the CDM pipeline by type

Fig 5: Percentage of hydro projects in the pipeline by region

Fig 5: Regional distribution of hydro projects 

Fig 6: Expected CERs by 2020

More information: