Dams Could Win OECD Support
Sanjay Suri

BONN , May 13 (IPS) - The OECD took a controversial decision Friday to consider loans for large dams on favourable terms.

The Organisation for Economic Cooperation and Development (OECD), a grouping of 30 rich nations, took a provisional decision to consider loans for hydropower projects that could be repaid over 15 years in place of the present ceiling of eight-and-a-half years.

The OECD at present allows 15-year repayment for nuclear power projects. The decision Friday brings hydro projects on a par with repayment terms for nuclear projects.

The provisional decision is subject to discussions between OECD officials and experts from several disciplines over the next six months.

Non-governmental organisations want the experts and officials to particularly consider the recommendations of the World Commission on Dams (WCD).

There is no indication yet how far the proposed new repayment terms could come to mean more dams, and where.

Non-governmental organisations that had been pushing for more favourable terms for financing renewable energy projects were taken aback by the inclusion of hydro projects in renewable energy.

''We are concerned because of the large-scale damage dams can cause,'' Bob Thomson, facilitator of the International NGO Campaign on Export Credit Agencies in Paris told IPS.

''We are not anti-dam in a closed sort of way,'' Thomson said. ''But the OECD has hedged on dams; they need to define what the standards should be.''

There was no agreement that the criteria set out by the WCD will be taken into account, Thomson said. ''Many of the countries refused to have anything to do with the WCD criteria.'' The OECD decided therefore to leave any mention of the WCD out of the agreement.

"Large dams bring along massive environmental and social problems, including the forcible eviction of 40 to 80 million people,'' Thomson said in a statement earlier. "In addition, many hydropower projects, particularly those based on large tropical reservoirs, emit more greenhouse gases than comparable thermal power plants. Including hydropower in an attempt to encourage development of renewable energies turns a positive initiative into a Trojan horse for subsidising large dams."

NGOs insist that the OECD review of international best practices with respect to hydro dams over the next six months includes consultations with experts and governments which are now implementing the WCD guidelines.

They point out that the core values and strategic priorities of the WCD have been officially endorsed by the World Bank, other international organisations, governments, the main association of the hydropower industry, and civil society.

In addition, the European Union has determined that carbon credits from hydropower projects over 20 megawatts can only enter the European Trading System (ETS) if the projects respect the principles and guidelines of the WCD.

NGOs failed also to secure OECD support for higher local input in projects. The European Union (EU) had recommended that the OECD increase the maximum allowable local costs for export financing from 15 percent of the export contract value to 30 percent. NGOs had been demanding 50 percent, but had backed the EU move.

''This is just another form of tied aid,'' Thomson said.

A policy for more encouragement to local input ''would facilitate the transfer of technology and enhance the development impact of ECA (export credit agencies) financing, in keeping with the OECD's stated commitment to achieving the Millennium Development Goals,'' the Paris-based group ECA Watch said in a statement.

The group said that the OECD has announced the approval of de facto subsidies for large hydro projects.

The OECD is expected to take a final decision in November.