Similar letters to the below were also sent to ECIS (now known as INCIS) members Barclays, Citibank, Fortis, MorganStanley, Credit Suisse, Deutsche Bank, Dresdner Kleinworth and Climate Change Capital.
Senior Vice President Sustainable Development Europe
Head Sustainable Business Advisory
Via E-mail: email@example.com & firstname.lastname@example.org
Re: Voluntary Offset Standard
Dear Frans Cornelissen and Andre Abadie,
We were very interested to learn of your commitment to the Voluntary Offset Standard (VOS) established by European Carbon Investor Services (ECIS).
We welcome the exclusion from the VOS of nuclear power, HFC destruction from new HCFC plants, and new hydroelectric dams with an installed capacity greater than 20 MW that do not adhere to the criteria and guidelines of the World Commission on Dams.
We are concerned however by the implication in the VOS that the regulated Kyoto markets are intrinsically of a high quality to which voluntary markets should aspire. Our experience of closely tracking numerous hydropower projects through the CDM pipeline shows that this is not the case.
To take just the issue of additionality – the central requirement under the CDM that guarantees that CDM projects will lead to emission reductions – International Rivers’s reviews of Project Design Documents (PDDs) for a sample of hydropower projects indicate that a conservative interpretation of additionality as required under CDM rules is rarely, if ever, applied. While we have looked at documentation for only a couple of dozen of the more than 500 hydro projects in the CDM project pipeline, we have not found one project that satisfies the CDM requirements. Many of the projects we have reviewed, including some which have now been registered, are very clearly non-additional, including some which were completed or nearing completion before even applying for credits.
Other experts who have reviewed samples of non-hydro CDM projects have similar concerns. Axel Michaelowa of carbon consultancy Perspectives who has closely followed the CDM since its inception has said that only a third of a sample of 50 Indian projects he looked at were additional. Michaelowa has also identified a trend whereby large non-additional projects are more likely to be registered by the CDM Executive Board than small ones (“Small fish are caught while big sharks escape”). Another CDM expert and member of the CDM’s methodology panel stated during the European Climate Change Program European Trading System (ETS) review meeting (15 June 2007) that 30-50% of the CDM credits offered to the carbon market are “hot air” and do not represent real emission reductions.
Thus if the voluntary market is to based upon credits which represent “real,” “measurable,” “permanent’” and “additional” emission reductions as the VOS states is its goal, it cannot rely on the current CDM verification and registration process.
Large dams are some of the most controversial emission reduction projects available to date. Large dams can result in the forced evictions of many thousands of people and the large-scale destruction of riverine and riparian ecosystems. They are often strongly contested by local communities and can only be implemented through non-transparent and often repressive processes. Large tropical reservoirs can also emit large quantities of greenhouse gases, in particular methane.
It was this poor social, environmental, technical and economic record of dams which led the World Bank-supported World Commission on Dams to issue its recommendations for future water and energy planning. These recommendations are widely supported by civil society groups around the world and were endorsed by the EU in its “Linking Directive.” Unfortunately, despite the Linking Directive requirement that CERs from large hydropower projects can only be used in the European Trading System (ETS) if the projects comply with the WCD, the great majority of large hydropower projects currently in the CDM project pipeline fail to even mention the WCD. Unless there is an explicit and convincingly documented effort to meet the WCD’s recommendations, it should be assumed that a hydropower project is not in WCD compliance.
According to International Rivers research, out of 217 projects in the CDM pipeline which must comply with the WCD for their credits to enter the ETS (i.e. hydro projects with a capacity over 20 MW) only 11 even mention the WCD in their CDM documentation. It will send a strong and welcome message to project developers if ECIS members can make clear that they will comply with the VOS standard on hydropower and not purchase credits from non-WCD compliant large hydro projects.
By excluding large dams that do not adhere to the World Commission on Dams guidelines from the VOS, ECIS acknowledges the serious problems with non-WCD compliant large dams. We therefore encourage you to mainstream this principle of WCD compliance into your sector policies for water and energy projects and into your day-to-day project and corporate financing decisions related to large dam projects.
Cc: Chris Amsinger, NGO and IFI Relations, ABN Amro, Ingrid de Jong, NGO Liaison, ABN Amro, Paul Cuppen, Vice President Stakeholder Engagement, ABN Amro