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Dams Don’t Build Themselves

by Nicholas Hildyard

first published 18 January 2000

This presentation to an NGO Meeting held in Bratislava, Slovakia on the theme of "Damned at Home, Damming Abroad -- Europe, the World Commission on Dams and Large Dams" challenges four myths about large dams: they provide a cheap and economic source of energy; are an environmentally-benign source of energy; are uncontroversial in Europe; and result from impartial decision-making processes. It poses several detailed questions for the World Commission on Dams.

Contents

Introduction

More than 40,000 large dams now regulate the world's rivers: some have been built to generate hydroelectricity, others to provide irrigation water, and others as part of flood control programmes.

The prime purpose of this meeting is to document the impact of such dams in Europe and to examine the role of European funding agencies, companies, consultants and governments in promoting and building dams abroad. The intention is not only to share information amongst the many activists who have travelled from many different countries to attend this meeting but also to relay our collective concerns to the World Commission on Dams, which is currently collecting evidence on the development effectiveness of dams. I hope that the meeting will prove useful in guiding the Commission's deliberations.

Over the next two days, we will hear evidence - often harrowing - of the severe ecological and social impacts of European dams and dams promoted by European interests abroad. We will hear of riverine ecosystems that have been destroyed; of communities that have suffered more devastating, not less devastating, floods as a result of dams intended to control flooding; of massacres of communities which have opposed dams; of corruption by European companies of water bureaucracies in the South; of European-promoted dams which have increased waterborne diseases in the Third World; of communities which have been forcibly evicted from their lands without consultation, without adequate compensation and without redress to make way for dams conceived in Europe and built by European companies.

In the process, I hope that a number of the myths that surround dams - and which still serve as powerful "justifications" for dam building - will be exploded.

MYTH 1: Dams provide a cheap and economic source of energy

Where dams have been built to generate electricity, the justification has been that they provide a cheap, reliable and economic source of power - a claim long disputed by critics of large dams. Such critics point out that slippage in construction schedules and over-optimistic assessments of output have made many dams costly white elephants, saddling Southern countries in particular with unmanageable debts which poorer people invariably end up paying for through cuts in public expenditure on health, education and other services. One World Bank study, for example, examined the financial record of 70 World-Bank funded dams - dams which European tax payers have therefore backed - and found that costs were, on average, 27 per cent above appraisal estimates (inflation adjusted), almost five times higher than the average cost overruns on coal and thermal power stations.

Time overruns are also a common feature of large hydropower projects. As with cost overruns, schedule slippage can have a damaging effect on project economics by delaying the time from which revenues from electricity sales can start to repay the costs of servicing debts. In Sri Lanka, where European companies were much involved in building the dams that form the Mahaweli Project, time overruns on hydroelectric projects have led to major power shortages, prompting the government to reassess its dam programme. In 1996, the country faced a severe power crisis, in large part due to the repercussions of projects not being completed on time.

Indeed, the high financial risks associated with dams are one of many reasons why the private sector has run shy of investing in dams. Proposals for independent power projects - that is, private sector financed projects - have mushroomed since the early 1990s. But only 11 per cent of these projects are dams - and only a handful of these have raised the necessary finance. The reason? Private investors simply do not accept the financial claims made by dam builders. The risks are perceived as simply being too high - and the financial returns too low - to consider dams an attractive investment. Small wonder that the dam building industry is actively seeking new sources of public subsidy to underwrite private sector hydro projects. That is, they want you and I and the poor of the Third World to take on the financial risks of the project.

Question to the WCD:

Why, when massive subsidies have failed to make dams economic in the past, should further subsidies be justified in the future? And, if public subsidies are to be made available, what conditions will the WCD insist on being attached?

What recommendations will the Commission make to Export Credit Agencies, which currently (with the exception of EXIM Bank in the US) have no mandatory environmental or development standards conditioning their support? What measures will it propose to enforce these standards?

Question to the WCD:

Will the WCD assess the financial and economic record of dams built to date? Will it compare planned costs against actual costs? Will it document the extent of cost and time overruns? Will it name names where consultants underestimated the costs? And, where it finds that no such comparison of planned versus actual costs exists - the vast majority of cases - will it investigate how it has come about that such vast sums of public money have been disbursed in such a cavalier fashion, with no oversight as to their cost-effectiveness? Will it document the document the institutional failure that has permitted such a lack of accountability? And will it insist on financial, legal and career penalties for those responsible?

MYTH 2: Dams are an environmentally-benign source of energy

We will hear much over the next two days that rips apart this claim. We will hear of destruction caused to wetlands, to forests and farmland that have been submerged under the reservoirs of dams or destroyed through their downstream impacts - and we will hear how such environmental impacts have undermined or destroyed the lives and livelihoods of numerous affected people.

We will also hear much that casts doubt on the claim that dams, particularly those in built in arid areas and in the tropics, are needed to counter the greenhouse effect. Evidence from several academic researchers strongly suggests that, in many cases, dams themselves may be powerful emitters of greenhouse gases, as inundated soils and vegetation decompose to emit methane - a greenhouse gas 15 times more damaging to the climate than carbon dioxide.

Recent research on biogeochemical recycling of organic carbon raises concerns too that, by trapping silt and depriving coastal areas of sediments, dams may inhibit the ocean's capacity to act as a carbon sink. Studies in the Bay of Bengal have revealed the key role that freshwater and sediment input play in the global carbon cycle, the silt delivered to the oceans by rivers playing a key part in speeding the delivery of atmospheric carbon into the deep oceans. Other research documents how plankton populations, which fix carbon, are severely impacted by the marine ecosystems being deprived of the nutrients in silt transported by rivers.

Moreover, dams may themselves be victims of climate change. As global warming takes hold, there are likely to be significant changes in seasonal and annual rainfall patterns and other factors affecting streamflow. Calculations of the amounts of water available to turn turbines, the maximum flood which spillways will have to discharge, and the rates at which reservoirs fill with sediment will thus become increasingly unreliable. Many dams built to produce electricity or supply irrigation water may simply not work. In other cases, higher than expected flows may jeopardise the structure of the dam or lead to overspilling and floods. As the International Panel on Climate Change - the UN body charged with assessing the impacts of global warming - has itself warned: "Increased run-off due to climate change could potentially pose a severe threat to the safety of existing dams with design deficiencies. Design criteria for dams may require re-evaluation to incorporate the effects of climate change."

Despite uncertainty over the climatic impacts of dams, industry is nonetheless already moving to make deals that would see the South building dams to enable the North to continue emitting carbon dioxide as usual. ABB, for example, has been in forefront of promoting "carbon-offset trading". In conjunction with two other Norwegian companies - Kvaerner Energy and EEG-Henriksen - ABB Kraft is collaborating with the state-owned power utility in Costa Rica in planning the construction of a small hydropower plant on the Virilla River. The dam is being developed as part of a "carbon-credit scheme" whereby the carbon emissions "saved" by replacing diesel-generated electricity by "clean" hydroelectric will be traded with the Norwegian companies. The companies would be "free to sell them to other Norwegian companies in need of reducing their own CO2 emission quotas or to other buyers on an international emissions trading market". Commenting on the scheme, ABB's 1998 Environmental Management Report notes: "As electrical partner in the project consortium, ABB is taking a lead role in this entrepreneurial venture, which could serve as a model to the rest of the world as one of the first applications of the new Clean Development Mechanism covered by the Kyoto Protocol."1

Critics of such emissions trading argue that it threatens the gradual privatisation of the atmosphere, as companies buy up the right to pollute, at the expense of poorer groups in the South who must bear the social and environmental brunt of dams and other schemes aimed at reducing carbon emissions. Meanwhile, the North continues its emissions unabated.2

Question to the WCD:

Will the Commission be examining the full impacts of dams on climate? Will it look into the impacts of dams on the sediment loads in rivers and hence on the global carbon cycle? Will it examine the extent to which dams contribute to global warming by trapping sediments and disrupting a vitally important mechanism locking away carbon?

Question to the WCD:

If the jury is still out on net emissions from dams, will the Commission make it clear that claims from industry as to the climatic benefits of dams are misleading and should not be used as a guide for future policy?

Question to the WCD:

What will the WCD have to say about deals such as that struck between ABB and Costa Rica? Is it right that tracts of the Third World should be submerged in order that Northern countries can continue to pollute? What are the implications of such deals for equity? Is it right that companies should be able to use their financial resources effectively to privatise the atmosphere?

MYTH 3: Dams are uncontroversial in Europe

Time and again, those of us who have worked with colleagues in the South to oppose destructive dam projects have been told: "If dams are so problematic, why is there no opposition in Europe? You are just trying to deny the Third World a technology that has brought huge benefits to you in Europe".

The testimonies you will hear today debunk that myth. Far from being an uncontested technology, dams have been opposed and resisted throughout Europe. Indeed, such has been the resistance to dams that many European countries are no longer building dams - and, in some cases, have specifically legislated against further dam building. In Sweden and Switzerland, widespread public opposition has stopped construction of all but the smallest projects. Sweden's 1987 Natural Resources Act now prohibits any hydropower exploitation of the countries last four free-flowing rivers - the Torne, Kalix, Pite and Vindel. In Norway, after a bitter struggle in the early 1980s, the Alta dam in the north of the country was eventually built only on the condition that it would be the last of its kind. In France, the proposed Serre de la Fare dam on the Loire River was scrapped in 1994. And in Austria, the Freudenau dam, built after massive public opposition, is acknowledged by the industry to be the country's last major dam. As the chief executive officer of Verbund, Austria's biggest electricity supply company, told an industry conference only three months ago when discussing dams in Austria, "The era of large power plant construction is over!"

In effect, far from being a technology that is wanted in Europe, dams are a technology that has been rejected in European country after European country. In exporting dam equipment to the South, Europe's dam companies are simply dumping what they cannot sell in Europe.

Indeed, the reality is that without The Third World providing such a dumping ground, many dam building companies in Europe would long have gone out of business. As the home market has shrunk, companies have extended their networks abroad, using development aid as the means to secure new contracts and to break into new markets. Exploiting the Nordic countries' reputation as enlightened donors, the Nordic hydropower industry targeted South-East Asia for expansion, the two largest state-owned hydro companies, Statkraft and Vattenfall, building their first dam outside Sweden and Norway in Laos in 1994. As Karl-Erik Norlander, then Senior Manager of Norway's Vattenfall, told Ann Danaiya Usher, a journalist who has investigated the connection between the Nordic hydropower industry and Nordic aid, "There are very few new projects in Sweden and Norway. But we still need professionals in the field, so we go abroad to find possibilities to use our skills." Indeed, by the mid-1990s, about half of the hydro-related exports of ABB Generation were linked to aid money. Likewise, half of the dam-related contracts for the consultancy Swedpower were being paid for by the Swedish bilateral agencies SIDA and BITS, while multinational agencies like the World Bank and the Asian Development Bank provided the rest.

Britain's construction industry has been no less adept at using Third World contracts to climb out of industrial recession in Europe. In a comment that reflects the strategy of UK companies across the industry as a whole, the then Chief Executive of Tarmac told the Financial Times in 1984: "We used to concentrate on the oil rich countries just like every other contractor in the world. That meant there were huge tender lists with 50 or 60 companies bidding for every project - which put our chance of getting work down to 50 or 60 to one and meant we could only get the job on price. So our philosophy now is to forget the oil-rich countries and to look at the underdeveloped and developing world where we can ensure funding before we get the work and provide them with a total design, construct and finance package."

Whilst dam building has undoubtedly brought profits for European equipment suppliers, consultants and construction companies, the impacts on project-affected communities have been devastating. A 1990 review, undertaken by the World Bank, of the Latin American region was "unable to find a single study of a Bank-financed project [in the Latin American region] which quantitatively demonstrated that a resettlement population has been adequately rehabilitated in terms of income, health or other social welfare measures." Four years later, another Bank report similarly concluded: "The weight of available evidence points to unsatisfactory income restoration more frequently than to satisfactory outcomes." For India, another study stated, "the overall record is poor to the extent of being unacceptable." Indeed, in all its reviews, the Bank was only able to find one Bank-funded dam - the Khao Laem in Thailand, which displaced mainly ethnic minority Karen - where the "fundamental goal" of the Bank's policy had been met and "incomes for all households rose after resettlement". Even here, however, the Bank's figures have been criticised as misleading and are at odds with the accounts of independent observers.

Not only have European companies remained involved in projects where human rights abuses are common and adverse environmental impacts have been clearly demonstrated; they have also in many cases actively promoted such projects in the face of local opposition, often in direct contravention of their own corporate environmental guidelines.

Question to the WCD:

Will the Commission examine the links between aid agencies and the use of development aid to bail out failing European dam building companies at the expense of the South?

Question to the WCD:

Will the WCD consider the moral and financial obligations that European companies have to the communities whose lives have been so violently disrupted by the projects from which they have benefited?

Question to the WCD:

Will the Commission be proposing mechanisms that would oblige Northern countries to behave abroad as they would be expected to behave at home? Or legislative changes which would prevent the dumping of outdated and outmoded technologies on the South?

MYTH 4: Dams result from impartial decision-making processes

Dams do not build themselves. Nor are they the outcome of impartial decision-making by impartial political and economic actors responding impartially to the pre-existing needs of society.

On the contrary, underpinning each of the 40,000 dams that now straddle the world's rivers lies a well-developed political infrastructure that has enabled a small but powerful group of vested interests to direct water for their own benefits; to capture public subsidies; to crush, co-opt or bypass opposition; to filter out or suppress alternative solutions to water and energy problems; and to ensure their own institutional survival, even expansion.

Key players in this infrastructure are consultants, construction companies, Northern and Southern governments, multilateral and bilateral development agencies, machinery suppliers, academics, politicians and even NGOs. Working in lose alliance - often based on informal contacts - they have proved phenomenally successful in reshaping the political and social landscape in ways that are friendly to themselves.

Consultant companies, for example, help identify new market opportunities. They propose, plan and design new products and projects. They give "objectivity" to projects which construction companies and equipment suppliers would like to implement - often, as this report documents, on the basis of seriously flawed (and manipulated) studies.

Bilateral aid agencies, meanwhile, provide an accessible - and easily pressured - source of public money that can used to offload the risks of projects onto the taxpayer, or to enable home country industries to undercut their rivals abroad. Other national agencies, such as Export Credit Agencies, are also important players, constantly on the look out for new outlets for the goods produced in their countries - and ever willing to stump up concessional credits and guarantees if they help boost export figures. Meanwhile, the embassies of national governments have proved critical to extending the reach of companies into countries where they are unfamiliar, providing diplomats to make appropriate introductions, to argue industry's case and to guide hydro companies through the complexities of local politics.

Industry associations further grease the subsidy mill, lobbying governments to come up with tax-breaks and other incentives, influencing environmental and labour regulations and guarding the industry's image from being tarnished by opponents, real or imaginary.

And then, of course, there are the Multilateral Development Banks - such as the World Bank - ever handy sources of yet further subsidies, advice and political muscle, not least in "tutoring" the water bureaucracies of Southern governments in the "need" to adopt dam-based development strategies. Since it was established in 1944, the World Bank alone has disbursed some $58 million to build 527 dams in 93 countries. As with bilateral loans, much of the money is actually spent in Northern countries, paying for consultants or the services of Northern-based construction and equipment suppliers.

In addition, the Bank offers massive indirect subsidies in the form of business opportunities identified through its country appraisal reports and through the research it finances. Companies regularly meet with employees to identify dam projects in the pipeline; invite project staff to their companies for seminars; and involve themselves as closely as possible in the project cycle. Those who do not have ready access to MDB officials are able to call upon the services of officials in trade ministries and embassies. In Britain, for example, the World Aid section of the UK Department of Trade and Industry (DTI), which helps bring World Bank business to UK companies, has a listing of 'agents' with access to Bank officials. The DTI also holds regular seminars for businesses wishing to win contracts with the Bank and other MDBs.

Question to the WCD:

Will the Commission investigate the political infrastructure that has been constructed in support of dam building?

Question to the WCD:

In fulfilling its mandate to examine the development effectiveness of dam, will the Commission document how companies, consultants, bureaucrats, richer farmers and the like have benefited from dam-based development strategies, how those strategies have proved effective for them, and the extent to which they have benefited? Will it, for example, document the sums that have been returned to northern countries in the form of contracts? Will it examine the profits made by shareholders in European dam companies? And if not, why not?

Question to the WCD:

Will the Commission be considering the equity implications of the development of the political infrastructure than supports dam building?

Will it examine how dam-based development strategies have skewed power in favour of certain groups?

Will it examine the role that dam-based development strategies - and the political infrastructure underpinning them - have privileged certain forms of expertise and institutional power over others? Will it document how this may have closed off alternative (and possibly more equitable) means of achieving various development goals?

Will it examine the role that dam-based development strategies have played in restructuring food production, consumption and distribution patterns - for example, through promoting a shift from production for local consumption and marketing to production for export to earn the foreign exchange to pay for irrigation schemes? Will it document for whom this development strategy has proved effective and for whom it has not?

Will it examine the role that dam-based development strategies have played in increasing the indebtedness of countries, in encouraging corruption and patronage politics? And will it examine who has benefited from these trends at whose expense?

What measures will the commission propose to address the imbalances of power that have emerged as dam-building?

Will it, in effect, deal fairly and squarely with the politics of dam building? Will it pass this litmus test of political credibility - or will it duck the issue and let those who have benefited from dams - for whom dams have proved a singularly effective development strategy - escape their responsibilities to those who have suffered at their expense?

Notes and references

1 ABB 1999a: 45.

2 Lohmann, L., 1999.