Will Holland Fuel Carbon-Credit Dam Scam?

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Bujagali Falls

Like most rich nations, the Netherlands has seen its “carbon footprint” rise in recent decades. In an effort to shrink that footprint, the Dutch government has been purchasing “carbon credits” through the Clean Development Mechanism (CDM). The Netherlands now proposes to purchase “offsets” from the Bujagali Dam on the Nile River in Uganda. The CDM board will decide whether to register Bujagali for credits on Dec. 29.

The CDM is supposed to catalyze climate-friendly projects in low-income countries by allowing developers to sell carbon credits to clean-energy projects that couldn’t otherwise be built without the extra boost from the carbon credits. While this sounds like a “win-win” situation, CDM credits too often do not represent real reductions in emissions (and too often have supported dirty dams rather than real clean energy projects). Structural flaws in the system and cheating by project developers has meant that billions of dollars worth of credits are being sold by projects that never needed assistance from the CDM to be built.

Like most of the large dams that have been approved to sell CDM offsets, Bujagali should be ineligible for the CDM, which requires projects to be "additional" – that is, projects that only go forward from the sale of carbon credits. Lex De Jonge, a former CDM Executive Board member, has said: “I find it somewhat difficult to believe that for projects that cost more than $50-100 million, the CDM plays a crucial role to invest or not to invest.”

Bujagali is clearly not additional. Although its application for the CDM describes it as "proposed," construction is nearly complete on the problematic project. For years, International Rivers and our Ugandan partners questioned the dam's economic viability but were repeatedly assured by the World Bank, Ugandan government, and the project developers that it was by far the cheapest option for power in Uganda. It is disingenuous for the developers to now claim that they only invested in Bujagali because of the hope of getting money from the CDM. Adding insult to injury, the project’s private developers would get the income, not Ugandan taxpayers.

None of the various economic and financial reviews of this project state that CDM income was necessary to build the project. In fact, the key economic document leading to the World Bank’s approval of Bujagali assessed the impact of receiving carbon credit income and concluded: “The greenhouse gas benefits are … not significant in the economic justification of the project.”

Problem Project
The Bujagali Dam is not a “clean” energy project. It drowned a treasured waterfall – a spectacular series of cascading rapids that was a national treasure. It impacted fisheries, submerged highly productive agricultural land and islands of high biodiversity, and forced thousands from their lands near the dam project and its transmission lines.

The dam’s impact on the health of Lake Victoria, which supports millions of people and extensive biodiversity, is an ongoing and unresolved concern. The lake suffered a dramatic drop in its water level in recent years, in large part because an existing dam released more water than would naturally have flowed out. As a result, the lake level dropped to record lows in recent years, causing energy shortages and economic disruption. In 2008, the African Development Bank’s Compliance Review and Mediation Unit (CRMU) found that the dam’s contract creates perverse incentives to maintain constant flows from Lake Victoria even during droughts, bringing greater risk that the dam could contribute to an ongoing drop in the lake's levels.

Bujagali epitomizes what is wrong with the current carbon-trading scheme. Participating governments should press for major reforms, including a ban of large hydropower projects. In the meantime, the Dutch government should take steps to reduce emissions within its own borders first, and “just say no” to scams like carbon credits for Bujagali Dam.

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