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Hydropower and Carbon Trading

Hydropower and Carbon Trading

The Clean Development Mechanism is one of the "flexible mechanisms" of the Kyoto Protocol. It is intended to lower developed countries’ costs of reducing their greenhouse gas emissions through the purchase of "carbon credits" that subsidize supposedly low–carbon projects in developing countries. Experience to date with the CDM has shown numerous serious flaws in its theory and application. Many of the projects proposed for CDM credits would have taken place without help from sales of carbon credits, meaning that developed countries are claiming credits for fictitious emission reductions. Project proposal documents are marred by misleading claims. Read comments on specific projects.

For an explanation of the intricacies of the CDM, see the Toolkit produced by CDM Watch.

European Union Linking Directive

In November 2004, the European Union adopted a directive (PDF) regulating the admission of CDM credits into the EU’s emissions trading system. The 25 member states of the European Union have to "transpose" (adopt) this "Linking Directive" into national law before November 13, 2005.

The Directive states: "In the case of hydro–electric power production project activities with a generating capacity exceeding 20MW, Member States shall, when approving such project activities, ensure that relevant international criteria and guidelines, including those contained in the World Commission on Dams year 2000 Final Report, will be respected during the development of such project activities."

To supply carbon credits for the EU, the European Bank for Reconstruction and Development (EBRD), the European Investment Bank (EIB) and the World Bank are developing two new funds, the EBRD–EIB Multilateral Carbon Credit Fund (MCCF) and the World Bank–EIB Carbon Fund for Europe (CFE). These funds will source carbon credits from a variety of greenhouse gas emission–reduction projects.

The EIB and the EBRD – the two biggest public banks in Europe – announced in October 2005 that their carbon funds will take into account the WCD recommendations for dams larger than 20MW. The World Bank, however, continues to disregard the recommendations of the WCD, despite being one of the Commission’s two original co–sponsors. Read an IRN press release on the issue.


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