US policy shift to hit dam funding

Shift in focus from hydropower to new renewables may impact World Bank funds for big dams

By Soma Basu
Published: Saturday 15 February 2014

THE US Congress passed a resolution on January 13 directing the government and its agencies to oppose any financial or policy support to large dams. The decision comes less than six months after the World Bank announced its dec i s ion to start funding large hydropower projects.

The resolution can affect the World Bank’s policy of funding large dams since the US is one of the biggest contributors to the Bank and other international financial institu tions (IFIs). It also has the biggest vote share in the Bank. For financial year 2014, US department of the treasu ry has asked the government for a $1,358.5 million grant for the Inter national Development Asso c iation and $187 million for the International Bank for Reconstruction and Develop ment. The two bodies form the World Bank.

damsPeter Bosshard, policy director of US-based non-profit International Rive rs, says the Congress decision shows a shift of public funding from large hydropower projects to new renewable energy solutions. The decision has been forced on the government by the Congress as some important legislators, concerned about environ mental destruc tion and human rights abuses in projects funded by IFIs, managed to get the Bill passed, he adds. Also, the clean energy sector has been growing in the US. Its solar power generation capa city recently surpassed 10 gigawatts as the price of solar panels has fallen by around 75 per cent in the past five years, and continues to drop. Wind energy contr ibuted the most to US’ power capacity in 2012, lifting the total wind energy generation to over 60 gigawatts.

Congressional resolution
The resolution, Consolidated Appropriations Act, 2014, reads: “The Secretary of the Treasury shall instruct the United States executive director of each international financial institution that it is the policy of the United States to oppose any loan, grant, strategy or policy of such institution to support the construction of any large hydroelectric dam (as defined in Dams and Development: A New Framework for Decision Making by World Comm ission on Dams (November 2000).” The World Commission on Dams was set up in 1998 by the World Bank and the World Conservation Union to look into issues related to dam construction. According to its defi nition, a large dam is one which has a height of 15 m or more from the foundation. If a dam is betw een 5 m and 15 m high and has a reservoir volume of more than 3 million metre cube, it is also classified as large dam. As per this definition, there are over 45,000 large dams in the world.

Having funded more than 600 such projects since the 1950s, the World Bank Group has been the world’s most important financier of dams. The World Bank Group Energy Directions paper, approved in July 2013, suggests that the Bank plans to increase funding large hydro power projects. A trend in this direction is already evident, with lending for large hydropower increasing from $333 million in financial year 2012 to $844 million in 2013, says Oil Change Inter national, an advocacy body for clean energy. Some of the large dams the Bank has funded are in India. These include the 775 MW Luhri hydroelectric project in Himachal Pradesh and the 444 MW Vishnu gad Pipalkoti hydro electric project in Uttarakhand.

“The recent US resolution would certai nly affect the World Bank policy on funding large dams,” says Joe Athialy, South Asia coordinator for Bank Infor mation Centre, a Washington-based non-profit monitor ing lending by IFIs. Hailing the resolution as a landmark one, Bosshard says, “If the World Bank and other international financial insti tu tions ignore the position of the US executive directors, Congress should redirect its financial contributions to institutions that are more willing and better equipped to support clean local energy solutions.”

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