The hydroelectric dam, a low wall of concrete slicing across an old farming valley, is supposed to help a power company in distant Germany contribute to saving the climate ?while putting lucrative ?arbon credits?into the pockets of Chinese developers.
But in the end the Xiaoxi dam may do nothing to lower global-warming emissions as advertised. And many of the 7,500 people displaced by the dam still seethe over losing their homes and farms.
?obody asked if we wanted to move,?said a 38-year-old man whose family lost a small brick house. ?he government just posted a notice that said, ?our home will be demolished.?
The dam will shortchange German consumers, Chinese villagers and the climate itself, if critics are right. And Xiaoxi is not alone.
Similar stories are repeated across China and elsewhere around the world, as hundreds of hydro projects line up for carbon credits, at a potential cost of billions to Europeans, Japanese and soon perhaps Americans, in a trading system a new US government review concludes has ?ncertain effects?on greenhouse-gas emissions.
One US expert is more blunt.
?he CDM??the four-year-old, UN-managed Clean Development Mechanism ??s an excessive subsidy that represents a massive waste of developed world resources,?Stanford University? Michael Wara said.
Forced relocations have become common in China as people in hundreds of communities are moved to clear land for factories and other projects, provoking anger and occasionally violent protests.
But what happened here is unusual in highlighting not just the human costs, but also the awkward fit between China? authoritarian system, in which complaints of official abuse abound, and Western environmental ideals.
Those ideals produced the CDM as a market-based tool under the Kyoto Protocol, the 1997 agreement to combat climate change. The CDM allows industrial nations, required by Kyoto to reduce emissions of gases blamed for global warming, to comply by paying developing nations to cut their emissions instead.
Companies thousands of kilometers away, such as Germany? coal-burning, carbon dioxide-spewing RWE electric utility, accomplish this by buying carbon credits the UN issues to clean-energy projects such as Xiaoxi?. The proceeds are meant to make such projects more financially feasible. As critics point out, however, if those projects were going to be built anyway, the climate doesn? gain, but loses.
Such projects ?ay allow covered entities??such as RWE ??o increase their emissions without a corresponding reduction in a developing country,?the US Government Accountability Office (GAO) said in its December review.
The system? defenders call it essential for industrialized nations to meet their Kyoto quotas, and say the CDM? standards are being tightened.
?t? not as if we?e printing money in a garage,?UN climate chief Yvo de Boer said of the credits. ?ots of legitimate questions are being asked,?but ?hat? why I? happy we have a transparent process.?
That transparency ?online project documents and a UN database ?allowed the Associated Press to analyze in detail this exploding market, which attracts projects ranging from small solar-power efforts in Africa, to emissions controls on giant chemical plants in India and China.
The AP has found that hydroelectric projects, whose climate impact is most widely questioned, have quickly become the No. 1 technology in the CDM, and China in particular is rushing in to capitalize.
The Chinese now have at least 763 hydro projects in the CDM approval pipeline and are adding an average of 25 a month. By 2012, those projects alone are expected to generate more than 300 million ?ertified emission reductions,?each supposedly representing reduction of 0.9 tonne of carbon dioxide. Even at recent depressed market prices, those credits would be worth US$4 billion.
If the US enters the Kyoto system, as proposed by President Barack Obama, it would be the biggest player in a market expected to be worth hundreds of billions a year by 2030.
Here in central China? Zishui River valley, evicted farmers worry not about carbon-market billions, but about the thousands of yuan doled out to compensate them for lost homes and farmland.
Xiaoxi residents said that when they were evicted in 2005 to make way for the dam and its 10km?reservoir, officials paid too little for the homes and forcibly removed owners who held out for more.
They said payments for losing their rights to state-owned land, where they grew beans and squash, were far below China? legally required minimum, which they said requires payment of the value of at least five years?harvests.
Residents spoke on condition their names not be used.
The dam? state-owned builder, Hunan Xinshao Xiaoxi Hydropower Development Co, defended its dealings with the people of Xiaoxi.
?he compensation standard we adopted was relatively high compared with similar projects and was in accord with government regulations,?said Wang Yi, assistant to the company? general manager.
For their homes, people said they were paid government-set prices of 320 yuan (US$4.60) to 390 yuan per square meter. But such payments didn? go far, even in this remote town surrounded by small tin mines and steep, wooded hills.
?hat I got certainly was not enough to buy a new place. We had to borrow more,?said a man who stood holding his one-year-old grandson in a street lined with new apartment buildings where some relocated families have moved.
He said officials refused to discuss compensation for thousands of yuan he had spent to fix up his family? house.
? refused their offer, but they forced us out and demolished it,?he said.
The dam company says local surveys found overwhelming support for the project, with 97 percent of 212 respondents saying they were satisfied with their compensation. But people interviewed in Xiaoxi said they were not contacted for such surveys.
The CDM money has spawned an industry of consultants who help Chinese companies assemble bids for emissions credits, and of UN-certified ?alidators,?firms that then attest that projects meet UN standards.
For Xiaoxi, the developer hired Germany? TUEV-SUED as validator, and then commissioned it again later to confirm that the project complied with EU and German government requirements on ?takeholder consultation??that local people approve of the project beforehand.
The TUEV-SUED report acknowledged ?he concerned villagers and their leaders were not involved in the decision process.?But it contended the guidelines??ssence?was fulfilled because those affected ?ave improved their living environment.?br />
The German Emissions Trading Authority approved Xiaoxi credits early last year, but that government agency? Wolfgang Seidel now said it is investigating questions newly raised about Xiaoxi.
RWE spokeswoman Julia Scharlemann said RWE also was ?aking our own inquiries?regarding Xiaoxi.
A key question from environmentalists, led by the US-based group International Rivers, is whether projects meet the CDM test of ?dditionality??that they contribute to making real reductions of greenhouses gases rather than be business-as-usual projects capitalizing belatedly on the CDM bonanza.
At Xiaoxi, construction began in 2004, two years before the developers applied for CDM credits, suggesting it would have been built without CDM money.
Wang said CDM money will help pay retroactively for expensive Italian technology needed to cope with the site? complex geology.
?ithout the money from trading emissions credits, the project would be unprofitable,?he said.
Environmentalists also point out that hydro power has long been a national priority in China. Since the 1990s the Chinese have added an average 7.7 gigawatts a year of hydro power, equivalent to six Hoover Dams annually, International Rivers reports. In other words, Chinese planners aren? suddenly replacing emissions-heavy coal-fired power plants with emissions-free dams.
The Xiaoxi project design document, in fact, says Chinese regulations would block the building of such a relatively low-output coal plant here. But that? how planners determined the ?missions reductions?from the US$183-million, 135-megawatt dam ?by calculating how much carbon dioxide a 135-megawatt conventional power plant would produce instead.
That bottom line ?some 408,233 tonnes of global-warming gases each year ?would be added to RWE? permitted emissions if it buys the Xiaoxi credits, at a current annual cost of US$8 million. And such calculations will be repeated at 37 other Chinese hydro projects where RWE will buy credits. All told, the 38 are expected to produce more than 16 million CDM credits by 2012, legitimizing 14.5 million tonnes of emissions in Germany, equivalent to more than 1 percent of annual German emissions.
At today? low market prices, those credits would be worth some US$300 million, paid to Chinese developers and presumably billed to German electricity customers.
Utilities from Italy? Edison to Tokyo Electric are making similar deals for hydro-project credits in a dozen other countries, from Peru to India to Vietnam.
Rather than reduce their own emissions, ?irms in developed countries are buying offsets that don? represent real behavioral change, real reductions in emissions,?Wara said.
The GAO investigators said they learned that middlemen sometimes manipulate project paperwork to show a need for CDM financing, and they believe ? substantial number?of projects have undeservedly received credits.
The CDM system ?an be ?amed?fairly easily,?said German expert Axel Michaelowa, both a critic and a CDM insider, as a member of the UN team that registers CDM projects.
But Michaelowa said the CDM remains ? crucial bridge between industrialized and developing countries.?
It has problems but they can be solved, he said.
Christiana Figueres, a Costa Rican ex-member of the board overseeing the CDM, echoed Michaelowa? view. She said it? crucial to encourage China in particular, whose coal power plants make it the world? biggest emitter of carbon dioxide, to build clean-energy facilities. And she counters critics who oppose dams in general because of their environmental impact.
?e cannot continue to demonize hydro,?Figueres said.
She and R.K. Sethi, the CDM executive board? chairman, both pointed to reforms since 2007: A reinforced UN oversight staff, a validators?manual with stringent standards and a growing number of reappraisals of validator findings.
In two recent dramatic steps, the board suspended the CDM? most active validator, the Norwegian firm DNV, questioning its assessments, and it rejected its first Chinese hydro project ?after registering 139 others for credits. The project wasn? ?dditional,?the board said, rejecting DNV? validation that it was.
But environmentalists say a total overhaul is needed, shifting from project-by-project assessments that invite ?aming,?to a negotiated regime whereby the developed world subsidizes emissions cuts in the developing world more broadly, industrial sector by sector.
Additional reporting by Patrick McGroarty
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