ESIA and SEA for Sustainable Hydropower Development

The role of ESIA and SEA in mainstreaming biodiversity

December 2017

Decisions on many hydropower projects have been affected by controversies around environmental and social effects. The purpose of this case is to provide information on experiences in the use of environmental and social impact assessment1 (ESIA) and strategic environmental assessment (SEA) in supporting sustainable hydropower development at (inter)national and local levels.

For the time being, hydropower is the most widely used form of renewable energy, accounting for 16% of global electricity generation, expected to increase by approxi- mately 3% each year for the next 25 years. Over the last This document is relevant for: two decades the global hydropower generation has in- • Government authorities responsible for the energy creased by 50%. This includes all types and sizes of hy- sector; dropower, micro-hydro as well as large dams. • Regional development planning authorities in regions with prospected hydropower potential; While the role of ESIA in assessing, avoiding, mitigating • Authorities with responsibilities for protection of en- and compensating the impacts of large hydropower pro- vironment, biodiversity, human rights and social jus- jects is fairly well known, the positive role of SEA in devel- tice; oping a broader energy sector vision and in determining • International finance institutes and donors support- the role of hydropower within such sector vision, is only ing hydropower development; recently becoming visible. • Civil society organisations representing stakeholders and/or biodiversity (potentially) affected by hydropower activities; • Energy companies.

1 To emphasise the inclusive nature of impact assessment, social impacts are becoming increasingly important in impact assessment. Conse- quently, multilateral development banks, a growing number of countries and the NCEA have decided to use the term Environmental and Social Impact Assessment (ESIA). The term EIA is still used in most national legal contexts and in CBD texts.

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The role of ESIA and SEA in mainstreaming biodiversity

The hydropower sector by IFIs, to increase the environmental and social ac- Globally, around 20% of the technically exploitable hydro- ceptability of hydropower; power potential has been developed. Although climate • Social development, resettlement and biodiversity off- change may affect water resources and may lead to sig- sets are increasingly pivotal pillars in hydropower de- nificant variations of the potential for hydropower at velopment. country level, these variations are expected to level out at global scale, leaving the overall potential virtually unaffected. How- Biodiversity Convention perspective on biodiversity ever, how much of this untapped mainstreaming through ESIA/SEA technical potential is economically, environmentally and socially feasi- Mainstreaming. The CBD Conference of Parties decided to consider the ble is subject to time-dependent mainstreaming of biodiversity into the sectors of energy and mining, economic conditions, and depends infrastructure, manufacturing and processing, and health (Decision XIII/3). on sustainability concerns and re- From the perspective of the Convention, a key aim of mainstreaming lated policies. biodiversity in these sectors is to avoid, reduce or mitigate any negative impacts, while maximizing any potential benefits to biodiversity. Article 6(b) World Bank (WB) lending for hydro- of the Convention calls for Parties to “integrate, as far as possible and as power bottomed out in 1999 due to appropriate, the conservation and sustainable use of biological diversity into growing opposition from non-gov- relevant sectoral or cross-sectoral plans, programmes and policies”. ernmental organisations (NGOs) and donor responses to inadequate ESIA and SEA. Two of the most important tools for addressing the impacts dealing with social and environ- from the infrastructure, energy and mining sectors, and to a lesser extent, mental risks. In response to contro- the manufacturing and processing sectors, are environmental and social versies the following mechanisms impact assessment (ESIA) and strategic environmental assessment have been adopted by international (SEA)(CBD/SBSTTA/21/5). Convention Article 14 asks for the use of impact finance institutions (IFIs), the pri- assessment, elaborated in “Voluntary Guidelines on Biodiversity-Inclusive vate sector and countries in order to Impact Assessment” (Decision VIII/28), further detailed for marine and avoid, mitigate and compensate coastal areas in Decision XI/18. those effects: • ESIA is conditional for environ- The 2030 Agenda for Sustainable Development includes a number of goals mental permitting of hydro- that are closely related to the above mentioned sectors. Given the indivisible power projects in nearly all nature of the 2030 Agenda, these goals and targets must be achieved while countries. also achieving the goals for biodiversity, climate action, as well as multiple • SEA is adopted by a growing targets for sustainability. ESIA and SEA are internationally practised, often number of countries to support legally embedded, instruments capable of assessing the consequences of more sustainable planning, in- policies, plans programmes and projects from an integrated SDG cluding hydropower planning; perspective. • Safeguards such as ESIA are con- An evaluation of the application of the World Bank safe- ditional for funding by international finance institutes guard policies concluded that in practice the safeguard (IFIs); SEA is increasingly adopted by those institutes; mechanisms are not always fully applied due to the fol- • Equator Principles, comparable to the IFI requirements, lowing interlinked factors: are applied voluntarily by commercial banks who are

signatory to these principles; • Within the World Bank group there is no full support of • The International Hydropower Association, a private the safeguards as they are perceived as costly and time sector branch organisation, has developed a protocol consuming. that aims to measure and improve performance in the • In client countries the rule of law is weak due to cor- hydropower sector; ruption and lack of transparency and accountability. • Payment for ecosystem services (PES) mechanisms are • At project level the opportunity to study alternatives increasingly adopted by countries and recommended (e.g. siting, capacity) is limited because decisions have

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The role of ESIA and SEA in mainstreaming biodiversity

been taken earlier in the planning process, before displacement and negative impacts on livelihood, cul- safeguard policies are applied. ture and spiritual existence; • A fundamental problem remains that the capacity to • Numerous vector-borne diseases are associated with conduct sound ESIA and SEA is low. reservoir development in tropical areas, such as ma- laria, schistosomiasis river valley fever, Japanese en- Issues linked to hydropower cephalitis. Hydropower projects can range from micro-hydropower • Loss of cultural heritage facilities that hardly occupy land and have virtually no in- • Mismatch in the distribution of the gains and losses of fluence on river hydrology, to large mega-dams with res- a project across different societal groups. ervoirs covering hundreds to thousands of square kilome- tres. In this document we will focus on larger interven- A new three-tiered approach tions. The nature of the impacts of large dams on ecosys- A new approach has gradually evolved in the work of IFIs tems is generally well known. The World Commission on and the private hydropower sector, supported by NGOs Dams (2001) described the following categories of im- and some countries. This approach aims to embed hydro- pacts: power at country level in an environmentally sound, socially acceptable and economically viable energy strategy. Ecosystem impacts include: The three-step approach is characterised by a hierarchy of • Impacts of reservoirs on terrestrial ecosystems and planning and decision-making steps. Application of SEA biodiversity, leading to potentially irreversible loss of and ESIA at the consecutive steps can secure the quality, species populations and ecosystems; credibility and acceptability of these plans and projects. • Emission of greenhouse gases associated with reser- The approach is, however, not widely adopted yet by low voirs (believed to be much stronger in tropical areas); and middle income countries. • Impacts of altered downstream flows on aquatic ecosystems, on the natural flood cycle of downstream Step1: National energy plan, supported by SEA floodplains and on the salt/freshwater balance in es- In a national energy plan the energy demand and supply tuaries; of a country is estimated and decided upon for the long • Upsetting of sediment balance of rivers and coastal term. Such plan nearly always has an international com- ecosystems leading to coastal erosion; ponent as most countries import and/or export energy. • Barrier effect of dams on migratory species and fish- The plan provides information on the possible combina- eries in the upstream, reservoir and downstream ar- tion of energy resources (energy mix), including the esti- eas; mated contribution of hydropower, based for example on • Enhancement of ecosystem services through reservoir a general assessment of the technical hydropower poten- creation (e.g. fisheries, dry season agriculture); tial. SEA can make sure that the assessment of hydropower • Cumulative impacts of a series of dams on a river potential takes into consideration other national priorities, system. for example those related to biodiversity, cultural heritage and indigenous peoples, usually represented in a national Social and economic impacts include: biodiversity strategy and action plan (NBSAP). (See box 1 • Delay between the start of planning and (uncertain) for an example) construction makes governments, businesses, farm- ers reluctant to invest in potentially flooded areas. Step 2: (Inter)national hydropower plan, supported by • Temporary Influx of construction workers during con- SEA struction; related social tensions; A hydropower plan can be developed (i) on a national scale • Displacement of people and livelihoods: the larger the for all river basins located within the jurisdiction of one number of displaced people, the less likely it is that country, or (ii) on an international scale (transboundary) livelihoods can be restored; disruption of downstream for those countries that share a river basin. In a(n) (in- livelihoods through changes in provision of ecosys- ter)national hydropower plan, decisions are made on the tem services; basis of potential for hydropower development for the • Indigenous and tribal peoples and vulnerable ethnic short, medium and long term. In general, this plan will be minorities have suffered disproportionate levels of revised every 5 to 10 years.

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The role of ESIA and SEA in mainstreaming biodiversity

with regard to hydropower develop- Box 1: SEA for National Power Development Plan in Vietnam ment. It is also their responsibility to The SEA provided a mechanism to assess and understand the full range of poten- take stakeholder needs seriously. tial risks associated with different types of power development for people and the environment. It provides a mechanism for identifying and assessing the most ef- An SEA can support the development of fective mitigation and compensation actions. The SEA started to internalize social, national as well as international hydro- environmental and human health costs into the assessment of the economic fea- power plans. In a consistency analysis sibility of power development schemes. This is an approach that balances eco- each potential site can be assessed nomic development, environmental sustainability, and social equity that has never against applicable national and inter- been done before in the implementation of a master development plan for the national policies and regulations. Envi- electricity sector in Vietnam. ronmental, social and economic values of the basin(s) are taken into consider- Hydropower is, after thermal power, the second largest source of power genera- ation. If an SEA process is executed in tion in Viet Nam. It has the potential to produce a number of adverse social and a participatory and transparent man- environmental impacts, including the loss of land and disruption of sensitive eco- ner, the ultimate decisions may be systems, the displacement of people and effects on the culture and livelihoods of more acceptable to affected stake- communities not physically displaced, disruption to hydrological systems and holder groups. (See box 2 for an exam- ecosystems that depend on them. One recognized positive impact of hydropower ple) is improvement to dry season water flows, leading to benefits in agricultural pro- duction over whole river basins. Step 3: (Inter)national hydropower projects, supported by ESIA The most dangerous threat to biodiversity is fragmentation and breakdown of the The above planning cycle has resulted ecosystem. The risks of such impacts can, however, be significantly reduced in the selection of sustainable, viable through the adoption of effective anticipatory mitigation measures, with the cost and feasible hydropower projects. ESIA of these measures internalized into the costs of power development. Such and its resulting environmental man- measures require much closer links to other agencies responsible for agriculture, agement plan can serve to apply inter- fisheries, protected areas, etc. The present management regimes are in general national best practice standards, in- single purpose: to maximise power generation, which can cause big losses. It is cluding: necessary to take into account common interests such as flood control, water  Compensation of affected per- supply for agricultural activities, and the need to ensure minimum environmental sons and communities for example flows if serious downstream impacts on ecosystems integrity are to be avoided. through payment for ecosystem ser- The analysis demonstrated the potential benefits in terms of flood protection and vices lost, establishing management improvements to dry season water availability that could be accrued if more ef- and tenure by affected people; fective multipurpose management regimes are adopted.  Compensation of biodiversity loss, for example through strengthen- In this (inter)national plan all potential hydropower sites ing or extension of existing protected areas and and capacities are identified and compared in a participa- conservation offset measures; tive process with all relevant stakeholders. Ideally, the hy-  Enhancement of environmental stability through soil dropower potential for each basin is developed as part of and slope conservation measures. a basin or catchment plan. Depending on the existing planning framework in a country, a basin plan can be To improve the credibility, acceptability and representa- developed as part of an integrated water resources man- tiveness of affected stakeholders, an independent panel agement (IWRM) plan, an integrated regional land use of experts can be established to advise on the quality of plan, or a regional development plan. the process and project documents.

For a growing number of transboundary river basins, river Compensation of impacts. Adverse environmental and basin authorities have been established representing the social impacts cannot always be avoided nor mitigated. It national authorities. They often have a mandate has therefore become good practice to compensate for to advise or decide on the allocation and use of water. In those impacts. A growing number of countries are adopt- addition, they ideally have a key role in decision-making ing compensation policies defining the rights of affected ESIA and SEA for Sustainable Hydropower Development ∙ 4

The role of ESIA and SEA in mainstreaming biodiversity

The latest development related to compensation is the use Box 2: Hydropower development in Georgia of the Payment for Ecosystem Services mechanism, known as PES. A well know example is the sustainable manage- In the first half of 2013, the NCEA was asked by the Georgian ment of natural resources upstream of reservoirs in order Minister of Environment to review the quality of the ESIA re- to secure the continued provision of water and to keep port for the 700 MW Khudoni hydropower project, located in sediment runoff under control. Custodians of these upper the Enguri Basin, a UNESCO World Heritage Site bordering parts of the basin are paid for not cutting forest, or for Abchazia in Western Georgia. The NCEA’s advisory report implementing more sustainable agroforestry practices. As was publicly discussed and has impacted decision making on a result the lifespan of a reservoir will be extended. The the Khudoni project. The project still causes a lot of discus- owner of the hydropower plant contributes to a fund that sion, especially in the area were people are planned to be is often managed by a local institution in charge of the resettled. payments. This is considered a win-win mechanism to a

more sustainable hydropower development, currently In its advisory report the NCEA provided project level and tested in many countries. strategic level recommendations. Given the ratio between loss of land and the potential power generation capacity, the dam site was considered very efficient. Yet, significant improvements in resettlement planning were needed. Also, the loss of biodiversity by the reservoir should be better com- pensated. The forested upstream parts of the basin were un- protected. Unsustainable activities in this area resulted in a significant flow of sediments into the planned reservoir. To compensate the loss of biodiversity and to curb the increas- ing erosion problem it was suggested to restore and protect the forested hillsides in the upstream catchment as part of the existing world heritage area. Funding should be guaran- teed by the hydropower project.

At strategic level the NCEA recommended to develop a na- Advantages of the three-tiered approach tional hydropower plan and initiate a strategic discussion The use of SEA and ESIA within this new approach has sev- with all stakeholders at national level on the actual need for eral advantages: hydropower development, including a discussion on the • SEA: Better understanding of the cumulative impact of scale of interventions in the fragile Caucasus environment a series of individual hydropower projects, and pre- (e.g. assess the alternative of many small hydropower pro- venting costly and unnecessary mistakes; jects against one big project). The advice was based on the • SEA: Better insight in the trade-offs between environ- tiered approach as presented in this document. Based on mental, economic and social issues, enhancing the such national (hydro)power strategy, optimal choices can be chance of finding win-win options; made on project investments. In the second half of 2013, the • SEA: Easier ESIAs for hydropower projects because Ministries of Energy and Environment, supported by World strategic discussions, for instance about locations and Bank funding, jointly started the development of such plan, power generation capacity needs, have already been supported by an SEA. decided upon; • SEA & ESIA: More efficient assessments due to better stakeholders, including regulatory rules and a compliance alignment of decisions and specific information re- mechanism. quired; For the loss of biodiversity, the ‘no net loss principle’ is • SEA & ESIA: Enhanced credibility of the decisions in the usually applied. In case this loss is affecting protected ar- eyes of affected stakeholders, leading to more swift eas the adoption of additional conservation actions result- implementation; ing in a net positive impact has become best prac • SEA & ESIA: Easier government access to IFI funding (as tice. Compensation for biodiversity loss is illustrated by SEA/ESIA are part of their safeguard requirements). the figure.

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The role of ESIA and SEA in mainstreaming biodiversity

Main decisions Main issues Experiences with SEA and ESIA 2000 - 2014

National energy plan SEA International hydropower plans - SEA  Energy demand and  Scenarios • SEA Hydropower plan, Mekong River supply  Alternatives for composi- • SEA Sino-Russian hydropower development in the  Composition of the com- tion of the combination Amur basin bination of energy  Social cost benefit analysis • SEA Nile Basin Initiative, SESA of power development resources of alternatives options in The Nile Equatorial Lkes Region  Import and export of  Consistency analysis with • SESA for Eastern Nile joint multipurpose programme energy resources biodiversity, social and • (SEA Omo-Gibe, Ethiopia – Kenya) NOT YET  Social cost benefit other relevant policies

analysis (CBA) International hydropower projects - ESIA  Priority setting of invest- • ESIA Choru-Chorokhi, Turkey – Georgia ments • ESIA transboundary multi-purpose dam, Benin – National hydropower plan SEA Togo  Capacity to be developed  Alternatives for capacity for each river basin (macro to micro) location, National plans hydropower plans – SEA  Composition of the size and type for each • SEA National hydropower plan, Vietnam capacity divided in micro, river basin • SEA Quang Nam province hydropower plan, Vietnam small, meso and macro  Comparison of the se- • SEA Uttarakhand basin plan, India HPP. lected main alternatives • SEA National hydropower plan, Lao PDR  Preliminary selection of between the river basins • SEA Rio Madera, Bolivia sites for hydropower  Social cost benefit analysis • SEA N.W. province hydropower plan, Pakistan development for the main alternatives • SEA National hydropower plan, Georgia

Hydropower project ESIA National hydropower projects - ESIA   Capacity, location, type Alternatives • ESIA Nam Theun II, Lao PDR   Environmental and social Mitigation, compensation • ESIA Bujagali, Uganda impacts and offset measures • ESIA Mem’vele, Cameroun  Social CBA • ESIA Khudoni, Georgia • ESIA Inga III, Democratic Republic of Congo The NCEA The Netherlands Commission for Environmental Assess- In italics the SEAs and ESIAs in which the NCEA was ment is an independent body of experts. It advises na- involved tional and international governments on the quality of environmental assessment reports in order to contribute to sound decision-making. In addition, the NCEA supports the strengthening of EA systems in low and middle income countries and makes its extensive knowledge of environmental assessment available to all.

Contact Mr. Arend Kolhoff PhD, Technical Secretary NCEA [email protected] / +31-30-2347640 / www.eia.nl

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