September 3, 2010

To Whom It May Concern:

This letter contains my comments on the subject of Clean Development Mechanism credits for the Bonyic Hydroelectric project in the Teribe watershed of Panama.  

This project does not meet the CDM’s requirement of financial additionality.  A study conducted by Conservation Strategy Fund and partners in 2006 found that the Bonyic project was financially feasible without carbon credits.  The study analyzed the Bonyic project along with three planned at the time on the Changuinola River, finding that the collection of projects would generate an after-tax net present value of $87 million on an investment of $523 million.  Though ours was not a stand-alone assessment of the Bonyic project, we have no reason to suspect that it was unprofitable as an independent project.  In fact, since it is being pursued independently with no other project on the same watercourse, we can only conclude that the project is an attractive stand-alone business proposition.  Our study is available at http://conservation-strategy.org/en/publication/an%C3%A1lisis-de-costo-beneficio-de-cuatro-proyectos-hidroel%C3%A9ctricos-en-la-cuenca-changuinola.

It has been suggested that carbon credits are needed to offset the cost of efforts to mitigate, compensate and offset environmental and social costs of the Bonyic project.  This concept threatens to take the “Clean” out of the Clean Development Mechanism.  That is because carbon credits will put projects with high non-climate environmental and social impacts on an equal financial footing with low-impact projects.  The latter, if equally profitable before considering environmental issues, would not have access to CDM payments.  In effect, the carbon credits become a subsidy for less-clean development.  If all impacts could be fully mitigated, the environmental spending could be characterized as just one more cost, like any other, that CDM funding was overcoming to install clean energy.  But, having visited the area in question, I cannot see how the CDM payments will heal the divisions wrought by the project in the Naso Community, nor maintain the ecological integrity of the Teribe basin, one of the better preserved in Western Panama.  

Sincerely, 


John Reid
President
Conservation Strategy Fund

The Bonyic hydroelectric project is non-additional and has raised a number of major environmental and social concerns. Bonyic should not be validated as a CDM project. 

The project is presented as additional on the grounds that it is not a “continuation of the current trends of the Panamanian interconnected grid” (p.15, PDD) - specifically, that a thermal power plant would be a more likely alternative given current conditions. In reality, hydropower has long supplied the majority of Panama’s electricity, contributing over half of installed capacity (56% based on 2004 figures). The Autoridad Nacional de los Servicios Publicos (Asep) has predicted that 31 hydroelectric projects (totalling 1,047 MW ) will be added by 2013. 17 of these projects are already under construction, with the remainder at the final design stage. Hydropower development is the norm, and Bonyic is non-additional.

However, the Bonyic project claims that “A significant barrier for project implementation has been the project location in a sensitive social and
 biophysical environment, which has led to major obstacles in obtaining project financing and,
 consequently, serious delays in project construction and implementation.
” (p.16). By this twisted logic, the risk of environmental damage is advanced as a reason for granting CDM project approval.

The reservoir is located within the Palo Seco Protected Forest, close to the border of La Amistad International Park, a UNESCO World Heritage Site. The project will affect a wide array of bird life (including the Harpy eagle), jaguars and many other rare species. The World Heritage Committee of UNESCO has recently expressed “extreme concern” about the lack of appropriate measures of mitigation to prevent the possible extirpation of up to 16 species of migratory fish and shrimp in the heritage site, in the event that the dam is built. To claim these environmental concerns as a barrier to the building of the dam makes a mockery of any claims that the project offers a form of “clean development.”

Despite the claims made in the PDD, there are serious social concerns too. The activities of Hidroecológica del Teribe, S.A. (HET), the holding company established to carry out the project, have been directly responsible for the collapse of the structure of government locally – rewarding Naso leaders favorable to the company, and sewing divisions between them and those opposed to the project. In other words, the promise of a proportion of the credits (25%) has been devised as a divide and rule tactic.

This approach on the part of the project developers exploits the vulnerability of Naso's population, with the government of Panama not recognising the Naso as an autonomous territory. Although the presence of Naso in the area has been documented for centuries, there is currently no legal title to acknowledge the Naso's property rights on their territory, including the watershed encompassed by the project. For this reason, the people of Naso have recently presented a petition to the Inter-American Commission on Human Rights, in which the construction of Bonyic was explicitly mentioned as threatening the cultural survival of the Naso. It has also been documented that the “information/consultation/consensus process with the indigenous community” (PDD; p.16) fell a long way short of the standard of free, prior and informed consent.