Better Decision Making about Large Dams with a View to Sustainable Development
The purpose of this advice is to provide updated insights to enable discussion on the options and instruments available for a donor, like DGIS, to contribute to more sustainable decisionmaking on large dams. To that end, the DSU has carried out a study of recent publications, and undertaken expert consultations, on the sustainability, cost-effectiveness and future perspectives of large dams. Experts were selected from different backgrounds (financial institutions, research institutes, consultants involved in decision-making on dams) to acquire an updated view of current thinking about dams and alternatives for more sustainable options. On the basis of the results of that study, the present advice has been developed. It includes some suggestions for policy which DGIS could further develop.
The first observation is that prevention and mitigation of the effects of large dams often falls short, or potentially more sustainable options than dams are not transparently considered, resulting in unnecessary risks. Risks include those of resettlement and human rights, negative effects on ecosystem values, operational and economic performance risks including time overruns. Risk underestimations are likely incentives not to look for alternatives.
The second observation is that drivers for negative effects are not in the first place associated with the absence of tools and approaches to prevent and mitigate risks, but are mainly related to the wider governance context. Especially to be mentioned are:
- neglect of strategic and system-based studies;
- favouring large dams without sound and transparent justification;
- national public governance incapable of correcting this situation.
The advice then looks at how development, where large dams are envisaged, may become more sustainable, considering that alternatives for large dams are becoming more sustainable and cost-effective, and there is increasing discussion about whether many more large dams will still be needed. Thus, the advice lists two possible main donor strategies for improvement. First, to consider putting more emphasis on a fair comparison of up-to-date alternatives before choosing large dam options. Second, to consider shifting the attention to development of a transformative change away from large dams.
In order to operationalise this strategy, donors may consider a decision-matrix. A possible decision-matrix is developed in this advice. It has three main components. First, and upfront, donors may assess the governance context including track record on respect of human rights. Second, donors may assess the capacities for transformative change within public institutions. Where a donor concludes that a governance context has unacceptable risks, and depending upon assessment of the capacities for transformative change, the donor may consider, following the decision-matrix, to not finance the dam proposal but instead support lobby activities to improve governance or to support selected institutions on improved practices for strategic planning. Where the donor considers the governance context to be acceptable, the third component of the decision-matrix suggests to look at the phase of decision-making of the large dam proposal and if good practices of assessment and planning in this phase have been adopted.
In short, donors may use this decision-matrix, or a similar one, to support decision-makers and associated agencies to move upfront from dam pre- and final feasibility design towards strengthening capacities for strategic decision-making phases. Good practices may be supported by system-based environmental and social assessments, that look at multifunctionality of options (energy, water, food security), different technical options (of dams and other techniques), and assessments of institutional requirements at different levels and sectors, as well as cross-boundary effects.
Introduction
Context and purpose
DGIS, the Directorate-General International Cooperation of the Dutch Ministry of Foreign Affairs, is increasingly being asked to participate in the financing of large dams (through financial institutions). In many cases, participation will concern dam rehabilitation, but the expected number of new large dams is also substantial.
Dams are often multifunctional (food security, water, energy supply). So, dams could be expected to contribute to DGIS’ general policy objectives, which are aligned with the Sustainable Development Goals (SDGs); in particular goals related to water supply, food security and affordable energy. However, there are strong indications that many large dams do not sufficiently contribute to the SDGs. This is the case for each pillar of sustainable development: economic, environmental (which includes biodiversity conservation) and social (which includes protection of human rights). And, despite the application of environmental and social safeguards, in many cases they still have negative effects on these same goals.
This raises doubts about whether DGIS development funds will be used in a cost-effective way when DGIS participates in the financing of large dams. This also raises questions about the effectiveness of established Environmental and Social Safeguard systems and newer assessment frameworks such as the Hydropower Sustainability Assessment Protocol (HSAP). Often something goes wrong in the planning and implementation process of dams, or there are doubts about it; either in their design, approval and/or implementation. Likewise, results often do not meet with ex-ante expectations or forecasts. Although awareness of this undesirable situation is increasing among donors and financial institutions, and new approaches are being developed, it is not yet fully clear what can go wrong in the planning and assessment process and what the options for improvement are.
The purpose of this advice is therefore to provide updated insights to enable discussion on the options and instruments available for a donor, like DGIS, to contribute to more sustainable decision-making on large dams. This advice may be discussed within DGIS and possibly within the wider donor community as well. To that end, the DSU has carried out a study of recent publications, and undertaken expert consultations, on the sustainability, cost-effectiveness and future perspectives of large dams. Experts were selected from different backgrounds (financial institutions, research institutes, consultants involved in decision-making on dams) to acquire an updated view of current thinking about dams and alternatives for more sustainable options. On the basis of the results of that study, the present advice has been developed. Where expert views diverge, conclusions are cautiously formulated.
Questions for discussion
Governance and good governance in planning and assessment processes In making decisions (e.g. in design, approval or adjustment of plans), public and private actors make use of assessments to know the expected impacts (economic, social, environmental) of their choices. The assessment results are expected to inform the planning process. Assessments are particularly important for large construction projects as construction results are irreversible. In addition, once the infrastructure has been constructed (ex-post) continued monitoring can be applied to determine the realised impacts and make corrections where needed. The way in which influential actors in such processes behave is called governance. The governance of these assessment and planning processes determines their outcomes. For that reason, countries have procedures that regulate the behaviour of actors in planning and assessment processes. Having such procedures and applying them can be seen as ‘good’ governance. It is, for example, widely accepted that those leading the assessment and planning process should assure that local and affected communities participate in an adequate way, and that key decision makers assure transparency and accountability (justification of their decisions). Such requirements are not always met. For example, decisions are made without justification or with poorly developed evidence or arguments. Also, despite existing standards related to human rights and consultation processes, local communities are excluded or insufficiently included in the process. Also, the capacities or procedures related to transparency and accountability may not be in place. Three phases in the assessment and decision-making process lead to financing of large dams: 1. Strategic planning: based on an analysis of the need for additional energy / water / food supply, system-based studies are done on a mix of options with dams as one option, ideally with assessments that also cover the social and environmental consequences and the governance context. 2. Dam pre-feasibility: once a large dam has been identified as a possible option, strategic studies are initiated for further exploration, including siting studies. 3. Dam feasibility and design: once the preferred dam configuration has been selected, more detailed studies are done for the chosen option, including Environmental Impact Assessment (or Environmental and Social Impact Assessment, as many banks say). These phases show similarity with the phases of the HSAP protocol. However, there are also significant differences, especially in the first two phases. HSAP phase 1 (called early stage) already takes the dam as a starting point and then looks back (ex-post justification). At that stage the dam will likely not be abandoned even if the need cannot be strongly demonstrated. In this approach an ex-ante justification may be applied. Further details on these phases with an overview of good practices for each phase are given in Annex 2. |
In what way can large dams be unsustainable?
What are the drivers for unsustainable large dam development?
Decision-making on dams often underestimates the weakness of the wider governance context
The risks of large dams are intricately related to the governance context in which they are being planned and constructed. What makes large dam projects so problematic is not any individual impact or risk (such as 5,000 people to resettle) but that these impacts and risks need to be managed in a governance context. For example, a weak regulatory framework may lead to insufficient enforcement and financing of mitigating measures. There may be a need to deal with governance systems at different levels, since dams often serve local, national as well as international (regional) and basin-wide interests. Local government is often bypassed by central construction agencies yet they will have to deal with local impacts in the medium and long term. In these contexts, large dams tend to reproduce and deepen existing inequalities between rich and poor, urban and rural, and informal small scale entrepreneurs or producers and large-scale industries. Many large dams are located in large river basins with different countries involved. While there are examples of large basins where dam projects are negotiated through transboundary agencies, such as in the Niger Basin, Mekong Basin, etc. the risks related to cross-boundary potential conflicts is also real.
Most decision-making on dams neglects strategic planning and system-based studies
The sequence of improvements in decision-making, but where to start? All experts consulted for this study seem to share the view that the commonly seen assessment and decision-making processes for large dams is insufficient. However, they do not present a clear solution. Typically, their reasoning is as follows: - We have a safeguards system, but it is not enough -we need to define the ‘right projects’ and not only ‘doing them right’. - So we undertake screening at early stages using multiple criteria, but it is not enough we need to address cumulative effects. - So we undertake river-basin wide assessments using multiple criteria, but it is not enough we need to look at alternative strategies to meet societal goals and multiple functions. - So we undertake a systems approach with multiple options, but it is not enough we need to address the political level where the choices have already been made. - So we add a capacity building component to influence responsible agencies, but it is not enough big dam projects are still not sustainable. In summary, if the objective is to find solutions that are in the public interest, decision-making about dams is definitely a demanding and complex issue, requiring a multi-sectoral strategic vision and sufficient implementation capacity, awareness of societal needs, alternative options and best practices, quantitative data and models, stakeholder involvement. |
Large dams are often favoured without sound justification
National public governance is often incapable of correcting this situation
Political lock-in in favour of large dams is a common situation
How can the development including dams become more sustainable?
Alternatives for large dams are becoming more sustainable and cost-effective
Benefits of these alternative options include the following:
Increasing discussion whether many more large dams are still needed
Considering a transformative change away from large dams towards a more systems based approach
Good practices of systems-based approaches Good practices are emerging with systems-based approaches that lead to more sustainable solutions (cumulative effects, indirect effects, basin-wide, multi-level, nexus, …). Thus, technically, complexity need not be an argument anymore not to invest in a strategic phase of public, transparent and participative decision-making based on sound assessments. Examples of system-based assessments include evaluations of the multi-functionality of dams: can they provide electricity, irrigation and drinking water as well as preserve the ecological functions of the river downstream to counter the impacts of climate change?15 Have indirect effects on ecosystems and local peoples been adequately addressed? Tools are being developed to carry out strategic, integrated or system oriented assessments, pre-feasibility studies and cumulative studies at landscape, river basin or regional level. These may lead to energy or river basin master plans that look at available alternatives at a system level, and that assess both direct and indirect effects. |
What can donors do to promote sustainable options?
Supporting transformative change where possible
Donors may support a transformative change to meet societal needs (energy, food, water), as described above. Where this is not realistic in the short term, donors might look for alternatives to supporting large dams. However, urgent demand for water, food and energy will remain, and a transformative change towards alternative options for from large dams may not be easy and may take time. So what can a donor do?
The DSU sees a number of possible donor interventions that depend on whether the donor thinks there is an acceptable “governance context risk” and sufficient “capacity for transformative change”. (See below for possibilities to assess these two factors). Depending on how these two factors are assessed, the intervention options are:
1. If they assess governance context risk to be unacceptable,
donors may focus on improvement of governance as an alternative to financing dams. This assessment could be based on the track record on governance, for example, as inferred from the number of human rights violations. In particular the threshold level chosen for acceptability would be a political choice. The transformative impact of the decision not to finance by itself may be limited. In addition, a donor could perhaps have a more transformative influence by supporting civil society to build up pressure, for example on government agencies to respect human rights.
2. If, in a country, they assess the governance context risk to be acceptable and an assessment shows potential for transformative change, donors may consider:
- supporting the implementation of alternatives to large dams that can meet energy, water, food needs, to demonstrate the benefits of those alternatives (in terms of sustainability);
- co-financing and building capacities on nexus studies in order to provide inputs for strategic planning processes, for which a Strategic Environmental Assessment can be a suitable tool in order to increase transparency and participation;
- building capacities and stimulate upstream strategic planning based on good studies and assessments.
Potential for transformative change could be assessed by identifying institutions and decision makers willing to seriously consider new approaches to meeting societal needs.
3. More in general, donors could consider stimulating understanding of sustainability and cost-effectiveness of large dams, by:
- supporting reviews of existing dam projects, learning activities and study tours to countries with good practices on more sustainable options;
- supporting benchmark studies, on costs and construction time for large dams; costs or land area per kWh generated; human rights violations, people displaced per dam size; success in re-establishing livelihoods etc.
In any of the above options, the donor might pay attention to being consistent and coherent in the position being taken about specific large dam proposals or proposals that influence the need for large dams, in all related sectors of the donor policy and among involved donors.
Adopt a differentiated approach tailored to different phases of the planning and decision-making process
A possible decision-matrix for donors
1. ‘Governance context risk assessment’:
An assessment of the current governance situation where the proposed dam is located. This could be done in a quick way (e.g. using World Bank governance indicators) or a more detailed way (e.g. see the example in Annex 3, with a set of global indices available to assess governance risks).
2. ‘Assessment of capacity for transformative change’:
An assessment of the existing capacities with public agencies to transform towards more attention for strategic decision-making, inclusive decision-making processes, the use of assessment tools to support decisionmaking, and nexus-oriented thinking. The assessment can be made by looking at current capacities and expertise of relevant institutions, absorption capacity, willingness to learn and improve, existing relations between the Dutch Embassy and the recipient country.
3. ‘Assessment of the decision-making phase of the proposal’,
with three main questions:
- What phase of decision-making for the proposed dam matches the proposal: (1) the strategic planning phase, (2) the dam identification phase, or (3) the dam preparation phase? Note that in most cases this will be phase 3.
- Have upstream decision-making phases have been adequately carried out? If not, the donor can consider supporting agencies to develop upstream decision-making capacities. Note that in most cases this will imply support for carrying out adequate strategic planning and dam identification.
- Have good practices been carried out to assure good quality of implementation of the current phase? If not, the donor may consider supporting the adoption of good practices for that specific phase of the proposal. Good practices of each phase are listed in Annex 2.
4. An assessment of the position of the donor: What is the position of the donor, what is its sphere of influence and relation with the relevant decision-makers and stakeholders? This may clarify the feasibility of intervention options, and the possible synergy with other donors.
The DSU highlights the options that emerge from the application of the possible decision matrix:
- In the case of assumed unacceptable governance context risk:
the donor may consider not financing any large dams. However, there are options for supporting NGOs and/or decentralised agencies that have a better track record and show willingness to improve their performance.
- In the case of an assumed acceptable governance context risk but poor transformative capacity,
the donor could support NGOs and research institutes in developing good practices on nexus approaches and finance projects with more sustainable options, to show their benefits and to build local capacities. If possible, the aim is to move attention towards upstream planning and decision-making phases.
- In the case of assumed acceptable governance context risk and available transformative capacity,
the donor could support government agencies and project proponents in developing capacities on good practices within each of the decision-making phases, where possible moving attention towards upstream decision-making phases as real transformation will take place only if changes are realised at this level. At decentralised level there could be better capacities for supporting transformative change (as compared to national level agencies).
Applying the above strategy for identification of interventions, donors may be expected to gradually receive better-justified and more sustainable project proposals - that include a combination of technologies (renewable, hydro, ecosystem-based, demand based measures) – and meet the societal objectives for energy, food and access to water.
Annex 3: Sources for a governance context risk assessment
Relevant information sources are the following:
References
1. For instance when local communities lose their lands without adequate free prior informed consent procedures.
2. Ansar et al., (in prep). Should we build more large dams? The actual costs of hydropower megaproject development. Energy Policy. Time and cost overruns can be predicted by the size of the dam but the economic context also matters (using an indicator of income), with risks significantly increasing in developing countries.
3. Barasa et al. (2016). A cost optimal resolution for Sub-Saharan Africa powered by 100% renewables for year 2030. Togo and Benin have jointly applied EIA to the Adjarala dam (see http://www.eia.nl/en/our-work/advisory-reports/099-i), but this is an exception rather than the rule.
4. Ansar et al., (in prep). Ibid.
5. A recent example: the Kandadji Dam in Niger originally due to fill in 2015 has now been planned for 2022.
6. There is increasing CDM financing for what is considered “small dams” and many countries like India, China, Mexico and Brazil have greatly “relaxed” legislative and regulatory checks for small dams (Opermann, 2014).
7. For instance, at present ECOWAS (economic union of west African states) has planned the development of 7,000 MW hydropower energy and only 800 MW renewable energy in West Africa.
8. see http://pubs.iied.org/pdfs/17580IIED.pdf
9. For example, ‘of the 147 hydropower projects for which the Arunachal Pradesh government in India has signed memoranda of agreement with developers only one is for a “multi-purpose” project – the 3000 MW Dibang project is referred to as “multipurpose” because it has a flood moderation component. The rest are all single-purpose hydropower projects’ (Baruah, 2012).
10. Typically, in India the Expert Appraisal Committees under the Ministry of Environment to appraise dam projects has not disapproved a single hydropower project, in other words, there is a “zero rejection rate” of hydropower development projects, in spite of the fact that many of these dams have been contested by environmental groups and/or civil society.
11. The NOOR project in Morocco (€ 565 million) can store solar heat in molten salts up to 4 hours (the proposed Noor Midelt project in Morocco can store solar heat for 8 hours) to produce steam for electricity generation for part of the night.
12. Selected projects in a renewable energy auction in Peru included 162 MW of wind at an average of US$37.49/MWh, 80 MW of mini-hydro at US$46.48/MWh, 184.5 MW of solar PV at US$48.39/MWh, and 4 MW of biomass at US$77/MWh. See: http://carlosstjames.com/renewable-energy/why-the-recent-peruvian-renewable-energy-auction-was-significant-forlatin-america/; see for the Zambia case: http://blogs.worldbank.org/energy/why-zambia-s-6-cents-more-significantdubai-s-3-cents?CID=EAE_TT_Energy_EN_EXT.
13. Reference by one expert is also made to so-called 3R solutions to improve water supply, including recharge (of water buffers), retention and reuse of water.
14. Two smaller dams could significantly reduce resettlement, while providing similar project benefits. These smaller dams could be built in different periods as and when needed.
15. As is the case for the Manantali Dam on the Senegal River in Mali, the Kandadji Dam on the Niger River in Niger and the proposed Fomi Dam on the Niger River in Guinea.
16. What is generally the position of a donor like DGIS regarding large dam projects? DGIS would often operate on the sideline of such expensive projects (e.g. 500 million USD). There is also a current trend towards having multiple donors for a dam project. As DGIS will be a “minor” donor, it will be buffeted by decisions made (and often imposed) by the lead (often the WB). This exposes DGIS to greater risk than if it was a majority donor and “in control”.
The Dutch Sustainability Unit is hosted by the Netherlands Commission for Environmental Assessment at the request of the Ministry of Foreign Affairs. The views expressed in this publication are those of the DSU and do not necessarily reflect the views and policies of the Netherlands Government.