Environmental Criteria for Hydropower in the Mekong Region - WWF

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The Current Status of Environmental Criteria for Hydropower Development in the Mekong Region: A litterature compilation permeated through all planning processes that result in modifying the water environment either in quantity or quality. Yet this is often not the case for hydropower projects and even for some non-hydropower projects under the direct responsibility of water resources line agencies. Hence the need to include water-related parameters in the proposed environmental criteria! Voluntary application is one approach and may be effective in the case of projects financed with external donor funds. To be effective, however, they would need to be anchored in procedural requirements of the subsidiary rules, regulations or guidelines prepared under either environmental or water laws of the respective countries. Given the emphasis on IWRM in national legislation, this would be a natural progression, for example through licensing requirements for water abstraction as in the case of Viet Nam and for participatory processes as required under the river basin management committees in Thailand. Other examples include the current initiative in Viet Nam to explore ways of sharing benefits with local communities and develop financing mechanisms to provide payments for environmental services such as watershed management and improving downstream management of ecosystem services transformed by hydropower operations. Requirements for river basin plans to incorporate SEA would also provide an entry point to ensure critical water issues related to environment and peoples’ livelihoods are addressed at an early stage, prior to approval of pre-feasibility studies or concession negotiations. Identifying appropriate environmental criteria is central to the next stage of this study process. Identifying the entry points through which they can be institutionalized, and by whom, are fundamental parts of this exercise. In doing so, consideration will need to be given to the full range of project development scenarios, public–private, national–bilateral-regional, national-international finance, among others. An important start is being made with the proposals for a protocol within MRC on transboundary EIAs. That will help frame the “goal” through which projects will ultimately have to pass. Developing linkages earlier in the process between water resources planning and hydropower planning, and across traditionally separate sectoral agencies, will help that ensure that projects emerging from the process do not miss that goal. 2.2 GMS and Mekong Hydropower Development Context 2.2.1 Policy framework and strategy Common themes in energy and hydropower policies of the GMS countries - One defining feature of energy policy in the GMS is the policy of restructuring the power industry, moving away from vertically integrated state monopolies responsible for generation, transmission and distribution to competitive power markets. This shift is embodied in the primary legislation in most GMS countries and is generally stated as pursuing a stable and orderly process of change. 24
The Current Status of Environmental Criteria for Hydropower Development in the Mekong Region: A litterature compilation Clearly the transformation of power service delivery will be different in Viet Nam, where 70% of households are electrified, than in Cambodia, for example, where only 15% of households have electrical services, limited mostly to the Phnom Penh area and the main towns. In PRC, the Energy Law (1995) initiated the market transition with steps toward a unified tariff and devolution of power planning responsibility from the centre to the provinces and, in parallel, changing previous government departments into power enterprises with separate governance arrangements. The SERC was the first regulatory body to be appointed in a public service sector in PRC. Its role includes issuing licenses to “environmentally qualified” projects and operators. 18 Among the main gains sought from the power sector reforms are, first, stepped improvement in the delivery of power services to underpin growth and modernization of the region’s economy, and second, mobilization of investment for power infrastructure development, well beyond the capacity of the state budgets. The strategies to raise and attract power investments vary depending on the country context. IPPs are allowed to raise their own equity and debt finance for generation investment (mostly thermal to date, but including hydropower) on the strength of longer-term power purchase agreements. Improved access to international loans is achieved by clarifying (lowering) market and investment risks through regulatory and tariff reforms. The reforms also aim to improve access to international equity and bond markets, similar to the way that power and water utilities in western economies raise investment funds. It is not just the need to diversify or unlock private investment that has motivated the ongoing reform process. Governments are generally seeking to use constrained state budgets for development in sectors less amenable to self-financing with market mechanisms. 19 More broadly, these power reforms are situated within a wider shift of the political economy of the GMS region, marking the transition from an agrariandominated society to one more economically diversified and reliant on regulated market mechanisms. The policy is clearly seen in the pace of equitization of state enterprises across all sectors and the rapid growth of tourism and industrialization in countries like Viet Nam and PRC, for instance, that has sent Gross Domestic Product (GDP) and year-on-year electricity demand growth above 10%, or more. Lowering the barriers between public and private investment in the power sector—not without controversial dimensions—implicitly embodies a shift in the rights and responsibilities of all actors in government, civil society and private sectors and 18 http://english.peopledaily.com.cn/200303/26/eng20030326_113981.shtml 19 Other factors include the need to instil public confidence in expenditures and the equitization arrangements to convert government departments or utilities to company status, to identify market mechanisms that distributed the costs and benefits of infrastructure development more equitably within society. How these factors are balanced in reaching decisions on power investments and hydropower development in particular is the subject of debate. 25
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Environmental Criteria for Hydropower in the Mekong Region - WWF

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