Climate Funds to Underwrite the World Bank's Love Affair With Big Dams?

03/29/2011 05:48 pm ET | Updated May 29, 2011

Climate funds such as the Prototype Carbon Fund and the European carbon market prioritize support for renewable energy technologies, and exclude large hydropower from this definition. There are good reasons for this: Big dams irreversibly damage freshwater ecosystems, which are already reeling under the impacts of climate change. Slow, lumpy investments in large dams are not well suited for the uncertainties of climate change, which call for nimble, decentralized and flexible energy strategies. Finally, the purpose of carbon credits is to facilitate emission reductions that would not happen without them. Yet developers of big hydropower projects will not make billion dollar investments based on the uncertain prospects of receiving carbon finance. Carbon credits for big dams are the icing on the cake of projects that are already going forward, and will not bring about reductions in greenhouse gas emissions.

Large hydropower projects increase countries' vulnerability to climate change. Yet they also serve the interests of a closely-knit hydro-industrial complex. They offer large contracts for the international dam industry. They serve the interests (and sometimes line the pockets) of ribbon-cutting politicians and bureaucrats. And they appeal to development financiers who need to push big loans out of the door quickly. These may be the reasons why the new Energy Strategy of the World Bank, which has just been leaked to the public, proposes an increase in funding for large hydropower.

The World Bank has had a love affair with big, centralized, concrete projects for many decades. Since 1992, a series of World Bank reports have identified a pervasive "pressure to lend" within the institution, which encourages staff and management to neglect risks and prioritize big loans that can be disbursed without much overhead. This "big is beautiful" philosophy has resulted in the approval of white elephant projects such as the Kariba, Kedung Ombo, Pak Mun, Sardar Sarovar and Yacyreta dams.

In spite of this legacy, the new Energy Strategy says it "will seek to increase the average size of [energy] projects to reinforce World Bank Group operational efficiency," even if this "may seem somewhat at odds with the goal of scaling up" small, decentralized renewable energy projects. Once again, the bank's institutional self-interests thus seem to dictate its operational strategy.

A particular target for the World Bank's renewed large hydro push is Africa. Here, the bank wants to "focus on key large-scale transformative projects." The African continent desperately needs expanded electricity generation, but has a long and sorry tradition of ambitious, transformative hydropower projects. Dams such as Akosombo on the Volta River, Kariba on the Zambezi, and Inga 1 and 2 on the Congo were supposed to propel whole countries into modernity within one or two decades. Instead, their spiraling costs became an albatross for development, and their limited benefits left poor populations high and dry.

Today, Sub-Saharan Africa is among the world's most hydro-dependent regions. Of the world's poorest countries, 15 are dependent on hydropower for more than 90% of their electricity generation. In comparison, only one of the world's richest countries -- Norway -- is so hydro-dependent. In contrast to the World Bank's plans for Africa, Norway has prioritized small and medium-sized dams with limited impacts on the environment and direct benefits for rural development. The average size of Norway's major hydropower projects is only 83 megawatt - much smaller than the projects in the World Bank's portfolio.

Financing risky big dam projects is difficult. The World Bank would thus like to channel more funds from international climate change mechanisms into large hydropower projects. At a conference in Cape Town, the manager of the bank's central water unit recently urged that from now on all hydropower projects should be considered renewable, so that they could access more climate finance. In an effort to support such a shift, the bank's new Energy Strategy argues that hydropower projects should no longer be categorized by size.

Africa deserves increased support for the expansion of its energy infrastructure. Small, decentralized renewable energy projects such as wind, small hydropower and geothermal power plants provide a win-win solution for poverty reduction and resilience to climate change. They are less vulnerable to the vagaries of global warming than big sunk investments. They have a modest environmental footprint. And as the Norwegian example demonstrates, they are most effective in promoting broad-based access to energy and economic development. They deserve scaled-up support from carbon credits and development finance institutions.

Tomorrow's problems cannot be resolved with yesterday's approaches. There is no reason to dilute the criteria of the funds which are urgently needed to combat climate change to underwrite the World Bank's love affair with big dams.

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