Civil Society Pressures UN and EU Over Carbon Credits

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For as long as the Kyoto Protocol’s Clean Development Mechanism (CDM) has been funneling money to projects that supposedly cut carbon emissions, civil society groups have been monitoring the worst projects in the pipeline. While investors, experts, and governments have started to take note both of the environmental and social problems of specific projects and of the intrinsic flaws within the system, the UN’s CDM Executive Board continues to lag behind. The latest affront has been the approval of two projects linked to human rights abuses.

In January, the Board approved the Barro Blanco Hydroelectric Project, planned for Panama’s Tabasara River. The project would displace 5,000 indigenous people and flood the community of Nuevo Palomar, home of the region’s official elementary school. In late 2010, groups from across Panama and Europe were successful in prompting an investigation by the European Investment Bank into human rights abuses at the dam. The developer then pulled out its loan request and turned to the CDM for support. Over the objections of several local and international groups, the CDM Executive Board approved the project.

The Board also approved a controversial biogas project in Honduras linked to human rights abuses. The project developer’s security forces allegedly killed five people. A coalition led by the Brussels-based group CDM Watch is calling on the European Union to ban carbon credits from any projects linked to human rights abuses.

Despite the Board’s lack of action to curtail faulty CDM projects, there has been a change in mood among carbon-market investors. At least one investor and a German investment bank have withdrawn from the biogas project in Honduras, for instance, following the revelation of human rights abuses. Another project seeking credit buyers, the massive Coca-Codo Sinclair hydropower project in Ecuador, has met with almost no interest among investors. Experts have indicated that the project is unlikely to qualify for the CDM, citing environmental concerns, as the project is 19 kilometers upstream of the San Rafael Falls, the country’s biggest waterfall and a biosphere reserve.

While the uncertain future of the CDM post-Kyoto (i.e. after 2012) is a major driver in the downturn of interest, environmental and social concerns are clearly important factors due to the reputational risks they confer onto a project. International Rivers and our partners have submitted comments on more than 40 hydropower projects over the years, highlighting their social, environmental and technical problems. Almost a third of these have had their validation contracts terminated and another third are stalled. The combination of vocal stakeholder opposition, a poor global reputation, and lack of investor confidence is making the CDM an unattractive pit stop for easy money.