Carbon Trading & the CDM / Reports

The following assessment by International Rivers compares the compliance report for the Xiaoxi project to the Strategic Priorities of the WCD, as well as the German Emissions Trading Authority Guideline for Determination of Compliance with the recommendations of the WCD. We begin with background on the report. We then provide a summary of our main observations and a detailed critique of the report. We end with conclusions and recommendations.

International Rivers' third annual "Dams, Rivers & People" report explains the failure of the world's biggest carbon offsets program to make a dent in greenhouse-gas emissions. It also maps the world of rivers and dams for the past year and pinpoints hotspots for the coming year.

As the World Bank unveiled its new Investment Framework on Clean Energy and Development at its annual meeting in Singapore in September 2006, a coalition of environment and development organizations charge that the strategy will not be effective at combating climate change and expanding energy access for the poor.

In the six months since our last CDM large hydro status note, the World Bank has continued to unveil new CDM large hydro projects of questionable additionality - including the largest hydro project in its carbon portfolio to date. None of these projects have demonstrated compliance with the recommendations of the World Commission on Dams. The World Bank continues to cling to the fiction that all of the projects are "small hydro".

The World Bank claims that its flagship carbon market vehicle – the Prototype Carbon Fund (PCF) – is focussed primarily on renewables, and includes small hydro as one of the most common renewable technologies it is developing. This is deliberately misleading. The Bank includes hydro projects up to 43MW as “small hydro” in its calculations, many times the commonly accepted capacity limit of 10MW. In fact, of the 8 CDM hydro projects currently being developed by the PCF, 5 are in excess of 10MW and thus large hydro projects, not renewables. These 5 projects generate nearly twice as many carbon credits as the PCF’s 8 existing CDM renewables projects combined.

Eradicating poverty and reducing global warming are two of the biggest challenges facing the world in the 21st century. The urgent need to address these challenges has led to many initiatives to promote renewable energies. While the aim of these efforts should be strongly supported, they could be counterproductive if – as the large hydro industry is advocating – they are turned into instruments to promote hydropower megaprojects.

Large Hydro Still a Large Problem for the CDM 

As the CDM approval process nears the point at which the first projects may soon be registered, large hydro projects continue to be a concern. In addition to the millions of credits already being claimed by CDM large hydro projects, many more have signalled an interest in using the CDM. At the same time, concerns about the non-additionality of large hydro projects has been borne out by the validation opinions for the Dutch CERUPT projects and the baseline methodology review of other large hydros, underlining the need to exclude them altogether.

The Good, the Bad and the Dammed Ugly

In October 2002, International Rivers Network 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.