Controversy continues: The World Bank’s hydropower

10 July 2009

A recent paper by World Bank staff, which argues for enhanced support of large hydropower projects, has reignited controversy over the Bank’s approach, with NGOs claiming that project planning and implementation still show disregard for social and environmental considerations.

The Bank committed to re-engage in large water infrastructure projects in 2003. Since then, lending to large projects supplying over 10 megawatts increased from $23 million to over $1 billion in 2008. Additional projects worth $2 billion are in preparation. In Directions in Hydropower: Scaling up for development, Bank staff write that the Bank will further increase its lending with a trend towards larger projects and more private sector involvement through the International Finance Corporation (IFC). The first allocation of the newly established Clean Technology Fund (see Update 60) will allow the development of private sector hydropower to be counted as a renewable energy source. Turkey is among the first to receive financing from the CTF and is expected to invest in hydropower.

The paper argues that hydropower projects both allow better management of water resources and offer an alternative to fossil fuels, thereby reducing countries’ dependence on oil imports and global CO2 emissions. However, it acknowledges that hydropower “is and will remain risky and sometimes controversial”.

According to Bank estimates, 77 per cent of feasible hydropower potential in developing countries is unexploited. Peter Bosshard from the NGO International Rivers argues that estimates would be much lower if the Bank incorporated environmental and social costs. “The World Bank thus touts a propaganda line of the dam industry and ignores the negative social and economic experience of countries such as Zambia, Zimbabwe and Ghana, which have exploited much of their existing hydropower potential,” he says.

The Bank’s new paper argues that the new aproach of the Bank internalises environmental considerations and social inclusion. It claims that the Bank has a new sustainable approach, which fully internalises the impacts on affected populations; incorporates responsible environmental management; leverages development opportunities such as benefit sharing with local populations; integrates economic, social and environmental values for analysis; and integrates questions of institutional development such as compliance mechanisms.

Critics point out that local communities have not been involved in decision-making processes; impacts on the surrounding ecosystems have been downplayed; and agreed social and environmental commitments have been broken in various projects (see Update 60, 63). Bosshard argues that the Bank has not accepted responsibility for social and environmental damage done by previously funded projects, such as uncompensated displacements, massive debt burdens, damaged ecosystems and serious human rights violations.

The IFC may be learning some lessons. In the Kafue hydropower project in Zambia (see Update 64, 61), the IFC has recommended to downsize the project for environmental reasons.

Several major NGOs are working together with the World Bank on hydropower initiatives and how to get them right. WWF and Oxfam participate in the Hydropower Sustainability Assessment Forum, which will develop a new sustainability assessment tool this month. However, even the Forum has been criticised because the guidelines might replace the tougher framework developed by the World Commission on Dams (see Update 47, 20) and because affected communities are not formally represented.