Blue Water, Green Energy, and Red China: Do China’s Hydro-Electric CDM Funded Projects Deliver Sustainable Development?

This paper will examine the process of project approval of a large segment of of the Clean Development Mechanism program, namely large-scale hydro-electric power projects in China. This grouping represents the largest single subgroup of projects both by funding and by emissions mitigation postulation. As such it is necessary to critically examine the methodology used for project evaluation. Currently projects are primarily evaluated on the basis of Carbon Emission Reductions (CER) and Internal Rate of Return (IRR). Despite the requirement for each project to be certified as “Sustainable Development “ , the lack of clear guidance on the measurement along this dimension has meant that nearly any effort to assert SD characteristics is taken as adequate for certification. Thus, while the primary goals of CDM may in fact be met, that of emission reduction and resource transfer, it is possible that the secondary goal of sustainable development may not best be served. For one part, this means that resources will be inefficiently allocated, achieving less development, less sustainability, and less emissions reduction per investment. Additionally, it means that national priorities which perhaps are not in alignment with some dimensions of SD may be funded at the expense of more holistically effective programs. To test this hypothesis, this paper will construct an alternative framework for project evaluation based on additional dimensions of SD. It will examine the large-scale hydro-electric projects which have been certified in China in light of this framework. It will then compare the results of this analysis to the results of other certified projects in China focusing on other technologies. The resulting differential will suggest the opportunity for more effective and efficient programs in the future when the successor to the CDM project is enacted in 2012. Relevance to Development Studies Living in a world of scarcity means that resources must be used with maximum efficiency to achieve maximum results. Nowhere is this more true than in the intersecting areas of the environment and economic development in the poorer parts of the globe. By examining the traditional means by which projects are evaluated and proposing an alternative, the false dichotomy between these two areas can be eliminated and more good can be done for more people, in shorter time, with fewer resources.