The Clean Development Mechanism and Large Dam Development: Contradictions associated with Climate Financing in Cambodia

Abstract

Since 2000, the Kyoto Protocol's Clean Development Mechanism (CDM) has been facilitating climate change financing in support of large hydropower dam development. Although the CDM was designed to reduce greenhouse gas emissions and promote sustainable development, it has financed hydropower dams that have caused serious environmental and social impacts. We consider the case of the Lower Sesan 2 dam in northeastern Cambodia, the largest and most environmentally and socially damaging hydropower dam ever built in Cambodia. LS2 has not received climate change financing through the CDM, as four other large dams in Cambodia have, because the market price for carbon credits is too low to justify the expense required to apply for them. However, it could be registered to receive climate financing post-construction. We highlight the apparent lack of improvements in critical areas of the CDM despite years of criticisms and suggest that there are framing and structural issues that will make reforming the CDM difficult. This topic is particularly timely because the CDM is scheduled to end in 2020, after which time it will be replaced by a new but yet unspecified climate change financing mechanism.

Full text

Received: 20 February 2019 /Accepted: 20 November 2019 / Published online: 3 December 2019
#Springer Nature B.V. 2019
Climatic Change (2020) 161:365–383
https://doi.org/10.1007/s10584-019-02621-4
This article is part of a Special Issue, “Climate Finance Justice: International Perspectives on Climate Policy,
Social Justice, and Capital,”edited by Lauren Gifford and Chris Knudson
*Ian G. Baird
ibaird@wisc.edu
W. Nathan Green
wgreen@wisc.edu
1
Department of Geography, University of Wisconsin-Madison, Madison, USA
Abstract
Since 2000, the Kyoto Protocol’s Clean Development Mechanism (CDM) has been
facilitating climate change financing in support of large hydropower dam develop-
ment. Although the CDM was designed to reduce greenhouse gas emissions and
promote sustainable development, it has financed hydropower dams that have
caused serious environmental and social impacts. We consider the case of the
Lower Sesan 2 dam in northeastern Cambodia, the largest and most environmen-
tally and socially damaging hydropower dam ever built in Cambodia. LS2 has not
received climate change financing through the CDM, as four other large dams in
Cambodia have, because the market price for carbon credits is too low to justify
the expense required to apply for them. However, it could be registered to receive
climate financing post-construction. We highlight the apparent lack of improve-
ments in critical areas of the CDM despite years of criticisms and suggest that
there are framing and structural issues that will make reforming the CDM difficult.
This topic is particularly timely because the CDM is scheduled to end in 2020,
after which time it will be replaced by a new but yet unspecified climate change
financing mechanism.
Keywords Clean Development Mechanism .Hydropower dam .Lower Sesan 2 .Climate change
mitigation .Cambodia
The Clean Development Mechanism and large dam
development: contradictions associated with climate
financing in Cambodia
Ian G. Baird
1
&W. Nathan Green
1

1 Introduction
Since 2005, the Kyoto Protocol’s Clean Development Mechanism (CDM) has been facilitating
financial support for large hydropower dams, with the main goals being to reduce greenhouse
gas (GHG) emissions and promote sustainable development (UNFCCC 1998; Fearnside
2013). Although the CDM is supposed to contribute to social and environmental protection,
its financing of large-scale hydropower dams has contributed to other serious environmental
and social impacts not directly related to human-induced climate change (Erlewein and Nüsser
2011;Fearnside2013;Haya2009; Haya and Parekh 2011; Smits and Middleton 2014). Should
the reduction of GHGs occur even when it comes with other serious negative social and
environmental consequences?
In this paper, we investigate the use of the CDM in Cambodia to finance large hydropower
dams in order to interrogate some of the fundamental flaws associated with the CDM. In
particular, we use the case of the Lower Sesan 2 (LS2) dam in northeastern Cambodia to point
out key weaknesses of the CDM in Cambodia and beyond. Although the LS2 has not yet
received CDM funding, there is a strong historical precedent in Cambodia and elsewhere for
the dam to receive funding at a later date. In fact, the four other large hydropower dams in
Cambodia have all received CDM funding after their completion. By considering the case of
LS2 in the context of CDM-financed dam development in Cambodia more generally, this
paper investigates the contradictions between the environmental goals of the CDM and the
related environmental and social impacts of developing large hydropower dams. To do so, we
draw upon other research that has highlighted the inherent tension between the CDM’sglobal
environmental governance and local sustainable development goals (e.g., Käkönen and Thuon
2018; Newell and Bumpus 2012).
Specifically, we argue that CDM project financing of large hydropower dams in
Cambodia is not achieving the GHG emission reduction goals because there is no actual
additionality related to the hydropower CDM projects funded. Additionality refers to
when GHGs are reduced beyond what would have occurred without CDM support (Haya
and Parekh 2011). Furthermore, CDM’s support for large hydropower dams is causing
serious environmental and social impacts in Cambodia. This would especially be the case
if LS2 was supported by the CDM, due to it being extremely destructive, but it has also
occurred for other dams financed through the CDM in Cambodia. Finally, we contend
that the CDM is predicated on particular framings of climate change mitigation that lead
to destructive social and environmental impacts. Specifically, CDM has failed to deal
appropriately with the problem of additionality, the indeterminate meanings of sustain-
able development, and the unequal power relations within social-environmental assess-
ments. Based upon these arguments, we find that CDM financing for large-scale
hydropower achieves neither of its goals to reduce global GHG emissions nor contribute
to local sustainable development, and that it is unlikely to achieve such goals due to how
it frames climate change mitigation.
Importantly, the CDM-related problems that we have identified are not new. Indeed, some
were pointed out more than a decade ago (Paulsson 2009; Lovell and Liverman 2010). This
long-term awareness of the CDM’s problems is what makes our findings important; not
because they are particularly new, but rather because after many years of others making
similar points, there is no evidence in Cambodia that those who manage the CDM have
learned any lessons related to past concerns. Moreover, the global carbon credit market has
failed due to the market prices of carbon credits plummeting in recent years.
366 Climatic Change (2020) 161:365–383

These issues are particularly relevant given that there are ongoing debates over a new
climate mitigation financing scheme to replace the CDM in 2020 under the Paris Agreement
(Carmichael et al. 2015). The Paris Agreement is embedded within the United Nations
Framework Convention on Climate Change (UNFCCC) and is intended to reduce GHG
emissions, as well as address issues related to migration, adaptation, and finance. Details of
the agreement were negotiated by 196 state representatives during the 21st Conference of the
Parties of the UNFCCC, which was held at Le Bourget, near Paris, France. It was adopted by
consensus on December 12, 2015. So far, 195 UNFCCC members have signed the agreement,
and 186 have become party to it. Notably, the USA announced its intention to withdraw from
the Paris Agreement in June 2017.
Moreover, the international community continues to support the financing of environmen-
tally destructive hydropower dams in the name of climate change mitigation. For example, the
International Hydropower Association held its biannual meeting in Paris in May 2019, as part
of aggressive efforts to promote hydropower dam development as a way to meet obligations
associated with the Paris Agreement.
1
However, according to Horstmann and Hein (2017),
there is relatively little empirical research on the effects of the CDM on sustainable develop-
ment. Our research thus provides additional evidence from Cambodia that is highly relevant
for rethinking the CDM under the Paris Agreement. It will certainly be challenging to create a
new, better iteration of the CDM that is fully responsive to past criticisms, especially with
strong lobbying from the hydropower industry.
In the next section, we outline the methods used to conduct this study. We then provide
important background information regarding the CDM generally, and the CDM’s support for
large hydropower dams around the world. We then move to the CDM’s specific history in
Cambodia, including its support for hydropower development. We then provide background
information about the recently constructed Lower Sesan 2 dam, which is located in Sesan
District, Stung Treng Province, northeastern Cambodia. We consider potential links between
the CDM and LS2, including the CDM’s potential support for the project, and additionality
concerns associated with potential CDM support for the dam. We discuss the inherent
contradictions associated with the CDM and large hydropower dam development before
offering some final concluding remarks that are relevant for thinking about the prospects for
developing a new version of the CDM as part of the Paris Agreement.
2 Conducting the research
The Lower Sesan 2 (LS2) dam has a 400 MW capacity, is located 1.5 km from where the
Srepok River discharges into the Sesan River, in Sesan District, Stung Treng Province, and is
25 km upstream from the provincial capital, Stung Treng Town (Baird 2009)(seeFig.1,map
of Cambodia). The first author conducted the first independent study of the proposed LS2 in
2009, long before project construction began (Baird 2009). He also conducted research related
to the dam during its construction phase (Baird 2016). Therefore, choosing to focus on LS2
provides a chronological look at a dam before, during, and after construction. Instead, LS2 is
the largest and most environmentally and socially destructive hydropower dam built in
Cambodia to date (Chu 2017;Baird2016; Ziv et al. 2012), and was therefore selected
1
https://www.hydropower.org/, accessed May 28, 2019.
Climatic Change (2020) 161:365–383 367

specifically to examine both the role of the CDM in financing destructive hydropower dams
and the problem of additionality.
LS2 has the potential to receive CDM funding in the future, even though the owners of the
dam have so far not applied for registration. Historically, many projects have been registered
for CDM financing after being built (Haya and Parekh 2011). This is also true for the other
four dams in Cambodia that have so far been CDM registered, although applications for CDM
support in those cases began before construction (Käkönen and Thuon 2018). Nevertheless,
approval came after dam completion, which is against the rules. Crucially for this paper,
officials at the Climate Change Department within the Ministry of Environment in Cambodia,
which is the country’s Designated National Authority (DNA) for the country’s CDM program,
stated that they would recommend LS2 for CDM registration if an application was submitted
because the dam has a government approved Environmental Impact Assessment (EIA).
2
Given
that projects requesting CDM financing after being constructed have been registered in the
past, and the Cambodian government’s willingness to support LS2 for CDM registration,
investigating LS2 makes sense, particularly for understanding the contradictions between the
CDM and large hydropower dam development.
Fieldwork included 20 key informant semi-structured interviews with government officials,
non-government organization workers, and villagers impacted by LS2 between July 1 and 14,
2018, in the capital city of Cambodia, Phnom Penh, and in Stung Treng and Ratanakiri
Provinces, in northeastern Cambodia. We investigated how LS2 fits into the CDM, and CDM’s
links to hydropower dam development globally and particularly in Cambodia. We were
Fig. 1 Map of Cambodia, including the hydropower dams discussed in this article
368 Climatic Change (2020) 161:365–383

particularly interested in the dam’s impacts on fish and wild-capture fisheries, and more
broadly in other parts of Cambodia, and also in Laos and Thailand.
3 Critiques of the Clean Development Mechanism and hydropower dams
First introduced under the 1997 Kyoto Protocol, the CDM was intended to be a flexible,
market-based mechanism that would both reduce global GHG emissions, and with much less
of an emphasis, promote sustainable development (UNFCCC 1998, Article 12). The CDM
initially allowed governments and companies in industrialized countries (Annex 1) to purchase
certified emission reduction (CER) credits on a carbon market in order to meet their emission
reduction targets set out in the Kyoto Protocol (Newell 2012). CER credits were produced by
projects in developing countries (non-Annex 1) that had no emission reduction targets under
the Kyoto Protocol, but lacked the capital needed for investment in sustainable development.
However, since 2012, only countries characterized as least developed countries (LDCs) have
been eligible for CDM support. These CER credits are only supposed to be granted to projects
that reduce emissions in comparison with a business-as-usual emission baseline scenario,
which is often considered to involve the use of fossil fuels to produce energy (Newell and
Bumpus 2012).
CDM-registered projects started being approved in 2005. The CDM has since become the
single largest source of climate mitigation finance available to developing countries, with the
CDM having been estimated to have raised about US$18 billion in direct carbon revenues
between 2001 and 2012 (Newell 2012). Initially, the majority of CDM projects were industrial
gas projects. However, since 2007, wind and hydropower dams have become dominant. The
vast majority of CDM projects are located in just three countries: China, India, and Brazil.
Entities in the European Union have been the largest purchasers of CDM carbon credits
(Newell et al. 2013). Although the Kyoto Protocol’s first commitment period ended at the end
of 2012, at the 18th Conference of Parties in Qatar, it was renewed until December 31, 2020
(Carmichael et al. 2015). Crucially, national development strategies have been emphasized
within the CDM, as it is imagined that future fossil fuel-induced growth will be limited. This is
part of the reason why national governments have been given considerable discretion within
the CDM process (see Athanasiou and Baer 2002).
The CDM has given a new lease on life to hydropower dam development throughout the
world. At a time when major donors like the World Bank were pulling out of hydropower,
largely as a result of the World Commission on Dam (WCD) report published in 2000 (WCD
2000), the CDM recognized hydropower as a sustainable solution to climate change mitiga-
tion. The European Union has, however, brought in rules that state that carbon credits are only
supposed to come from hydropower dams that are WCD compliant, but in reality, this rule has
not had much of an impact.
3
Hydropower dams make up one of the most funded types of
projects under the CDM, with 1482 dams approved and 840 dams in the CDM“pipeline”as of
2012 (Fearnside 2013, 681). At one point, wind and hydropower projects accounted for 50%
of all CDM projects worldwide (Haya 2009). The vast majority of hydropower dams that have
received CDM funds have been built in mountainous parts of India and China, which account
2
The UNFCCC does not appear to have any particular requirements regarding EIA processes. They appear to
leave that up to the DNA.
3
Mira Kakonen, pers. comm., February 26, 2019.
Climatic Change (2020) 161:365–383 369

for 78% of all CDM-registered hydropower dams. The number of CERs expected for the
2013–2020 period from hydropower projects approved through December 1, 2012, totaled
over 7 billion tons of CO2-e, which is more than all fossil fuel emissions in the USA in 2010
(Fearnside 2013, 682).
The CDM has long faced serious criticisms. One relates to the design of the CDM
registration process, and although it is not the main focus of this study, it is worth reviewing
the main concerns. In order to become registered as a CDM project, participants must seek
approval from the host country’s DNA. The DNA is generally a high-level government body,
such as the Ministry of Environment in Cambodia, and is responsible for ensuring that projects
are in line with the country’s development goals. The project participants must then prepare
and submit a project design document (PDD) to the United Nations FrameworkConvention on
Climate Change (UNFCCC) CDM Executive Board for approval. The PDD contains pertinent
information required to assess compliance with CDM requirements. It includes, among other
things, the proposed emission reductions of the project, proof of additionality, sustainable
development benefits, and stakeholder comments. Many projects receive CDM funds long
after they have completed construction. In this “retroactive crediting,”the CDM Executive
Board requires that a PDD include evidence that the CDM financial incentive was seriously
considered in the decision-making process for project construction. This practice is highly
contentious, because the majority of projects that receive CDM certification after construction
have not provided this information (Schneider 2007,8).
Second, critics have pointed out that there is inherent conflict of interest in the CDM
registration process, something that is also true for Cambodia (Haya and Parekh 2011;Mori-
Clement 2019). The DNA may have political and national interests in approving CDM
projects in order to increase investment in the country (Haya and Parekh 2011; Mori-
Clement 2019). The politicized nature of the DNA is indeed important. Specifically, the
DNA, which recommends projects to the UNFCCC,
4
must navigate national development
politics, which are often strongly influenced by powerful national, including government,
interests. In Cambodia, the Ministry of Environment officially has the power to refuse to
approve a development project’s EIA, but in reality, due to political pressure, it is often very
difficult for them to oppose the development goals of high-profile government leaders and
Vietnamese and Chinese-backed development projects (Hensengerth 2015).
Project participants must also hire a Designated Operational Entity (DOE), accredited by
the CDM Executive Board, to verify the PDD prior to submission to the UNFCCC. Given that
the DOE is hired by the project proponents, the DOE has incentives to approve projects and do
so for the least cost in order to have a good chance of being hired again (Erlewein and Nüsser
2011). This incentive has, according to critics, contributed to a “race to the bottom”in terms of
DOE validation and verification because of the high transaction costs associated with these
tasks (Schneider 2007).
Third, CDM has been criticized for failing to deliver on sustainable development benefits
(Cole and Roberts 2011; Subbarao and Lloyd 2011), an issue that is also of importance in
Cambodia. As already mentioned, the CDM under the Kyoto Protocol was originally con-
ceived as a way to achieve both global GHG reductions and provide capital to host countries to
invest in sustainable development. However, two primary problems with this goal have been
4
While the UNFCCC has rejected CDM project applications, primarily for failing to prove additionality (Xie
et al. 2014), in the Cambodian case, all CDM hydropower projects were approved despite their associated
environmental and social problems described above.
370 Climatic Change (2020) 161:365–383

frequently identified. First, the definition of sustainable development is highly subjective
because there is no standardized methodology for assessing sustainable development benefits
like there is with quantitative emission reductions. Instead, as outlined in the 2001 Marrakesh
Accords, each CDM host country chooses their own sustainable development criteria and
assessments (Benites-Lazaro and Mello-Théry 2019; Mori-Clement 2019). In other words, it is
up to national level actors to determine if a project’s climate change mitigation and sustainable
development goals align (Horstmann and Hein 2017), a topic that we address below in relation
to Cambodia.
Fourth, there are no monetary rewards associated with providing sustainable development
benefits under the CDM (Paulsson 2009;Mori-Clement2019;Schneider2007; Subbarao and
Lloyd 2011), which notably differs from GHG reductions. Moreover, it could be considered
that sustainable development is the main benefit that dam-affected people can get from CDM,
but since those benefits are not incentivized and are thus neglected, one could argue that this is
happening on the backs of affected people. Indeed, there is a good reason for why sustainable
development objectives are not receiving much attention, and for why project owners tend to
prioritize quantitative emission reductions. These problems are exacerbated by the fact that
there are few mandatory global regulations for monitoring the sustainable development
benefits of CDM projects (Horstmann and Hein 2017;Mori-Clement2019). As such, projects
might receive CER credits without anyone monitoring whether they have delivered on their
promised sustainable development benefits, as outlined in the PDD (Käkönen et al. 2014).
Fifth, the lack of participation by people who are most impacted by CDM projects has been
criticized (Cole and Roberts 2011). The 2001 Marrakesh Accords required that CDM project
participants include a section with comments from community participants in the PDD
(Benites-Lazaro and Mello-Théry 2019). However, in reality, community participation varies
greatly depending upon the national context because each host country sets its own rules for
participation and consultation (Cole and Roberts 2011). Many studies have found that
consultations are conducted in a highly selective manner. Most participants from the commu-
nities are only local authorities or government officials, and critical voices are frequently either
underrepresented or silenced (Cole and Roberts; Käkönen et al. 2014; Kuchler and Lövbrand
2016;Schneider2007;SmitsandMiddleton2014).
Moreover, the DOE is the main organization required to verify stakeholder participation.
Given the power imbalances between developers and impacted communities of most large
projects, critics of the CDM have argued that the commitment to participation is difficult to
achieve. For example, Benites-Lazaro and Mello-Théry (2019) analyzed 625 CDM projects in
Brazil, Honduras, Mexico, and Peru and found that DOEs often just cut and paste comments
from separate projects into different PDDs, and that they pay little attention to stakeholder
participation.
The sixth and most trenchant critique of the CDM relates to the challenge of additionality.
Under the Kyoto Protocol, the CDM projects are, at least in theory, supposed to prove that they
would not have been implemented if not for CDM financing. Otherwise, if the project would
have been built without CDM funding, then the CDM is actually financing business-as-usual
emission rates (Haya and Parekh 2011). This can be considered to be fraud, as lack of
additionality means that not only are emissions not being reduced, but the profits from carbon
offsetting are effectively being fraudulently appropriated for the private benefit of developers.
Some even construe the CDM to be a new process for externalizing environmental costs (See
Bond and Dorsey 2010; Whitington 2012). No wonder much of the debate regarding CDM
has centered around proving additionality. The CDM Executive Board even introduced a new
Climatic Change (2020) 161:365–383 371

Additionality Tool in 2005 in order to help DOEs assess whether a project really meets the
criteria for being considered additional (Hayashi and Michaelowa 2013).
In fact, there are several kinds of additionality tests. The most common is an investment
analysis. Project participants must prove that a project would not be financially viable without
CDM funds. This financial analysis is based upon an internal rate of return: If the internal rate
of return of the project investment without the CDM is less than 10%, then the project qualifies
as contributing to additionality. Another kind of analysis relates to potential barriers faced by
project participants during the construction of the project. Barriers can include physical barriers
such as location and terrain, but also market and habitat barriers, which constrain the ability of
the project to succeed. Moreover, the investment analysis has been shown to be extremely
susceptible to technical manipulation to “prove”that the project would not be financially
viable without CDM support. For example, project participants might manipulate the internal
rate of return by not including state subsidies (Haya 2009).
Additionality tests have been heavily criticized. At the most general level, additionality is
based upon a counter-factual baseline scenario describing the amount of GHGs that would be
emitted if the project was not implemented (Paulsson 2009: 68). Baselines are based upon
highly subjective criteria that can be difficult to define given the complex dynamics of future
market and development scenarios. The barrier and common practice tests are even more
subjective, with many projects claiming that they are additional simply because they are
“unique”and have never been built in a particular location (Tanwar 2007). Due to these
shortcomings, in his review of the CDM, Schneider (2007:58–60) proposed a number of
solutions to these problems of subjectivity, such as the exclusion of company-specific barriers,
mandatory investment analysis for large-scale investments, and the inclusion of other CDM
projects in common practice analysis.
Many of the hydropower dams that have received CDM funding have proven to not be
additional because most would have been built without CDM support (International Rivers
2008). For many project developers, CDM funds are simply “icing on the cake”for projects
that have strong national and capital support (Newell 2012, 136). In Himachal Pradesh, India,
for example, Erlewein and Nüsser (2011) found that state-led development efforts are pushing
a steady growth in the supply of hydropower even in the absence of GHG mitigation policies.
In a review of wind and hydro projects in India and China, which together comprised a third of
all proposed and registered CDM projects at the time, Haya (2009) found that well over 50%
of projects were non-additional. Moreover, in his study of the Jirau Dam in Brazil, Fearnside
(2013) found that the investment analysis used by the company, based upon calculating the
internal rate of return for the project, was doctored so that figures were chosen to justify a
scenario of dependence on the CDM.
To make matters worse, significant social and ecological problems are associated with
large-scale hydropower dams, including impacts on river ecosystems and fisheries as well as
forced displacement of communities (WCD 2000). Moreover, hydropower dams in tropical
regions have been shown to produce large amounts of GHGs that are often not calculated in
CDM proposals, due to biomass decay in reservoirs but also from cement (Fearnside 2015;
Fearnside and Pueyo 2012). These omissions are a serious problem, because studies have
shown that dams with large reservoirs, especially in tropical climates, can produce more
emissions than their fossil fuel energy equivalents (Fearnside 1996).
Studies have shown that CDM-built hydropower dams are often no different than their non-
CDM counterparts, despite the CDM’s mandate to promote sustainable development
(Erlewein and Nüsser 2011; Fearnside 2013). In his ethnographic study of the Madushan
372 Climatic Change (2020) 161:365–383

dam along the Red River in Yunnan Province of China, for example, Rousseau (2017)argues
that there were no sustainable development benefits for the Handai communities downriver
from the dam. In fact, in terms of access to livelihood assets, this CDM-sponsored dam had the
same problems as other non-CDM dams in the region. Likewise, Smits and Middleton’s
(2014) study of hydropower CDM in Vietnam shows that dams there failed to meet either
sustainable development or additionality objectives. Given these problems with sustainable
development and additionality, many critics have argued against using the CDM to finance any
large hydropower dams (Haya and Parekh 2011). However, the climate justice movement has
not sufficiently criticized hydropower dam development as a solution to climate change,
instead focusing on other issues (see Bond and Dorsey 2010), with some suggesting that
given the right conditions, hydropower has the potential to address the problem of climate
change (Bumpus 2011).
4 The CDM and Cambodia
Although Cambodia first joined the UNFCCC in 1996 (Kingdom of Cambodia 2015), the
CDM did not become operational in Cambodia until 2006. In Cambodia, the Ministry of
Environment serves as the only Designated National Authority (DNA).
5
Within the Ministry
of Environment, the Climate Change Department is the Secretariat for the DNA. In other
words, all CDM applications made in Cambodia have to pass through the Cambodia’s
Ministry of Environment and its Climate Change Department specifically.
The Cambodian government has identified hydropower as a central pillar of their climate
change mitigation strategy, and hydropower is included in Cambodia’s nationally determined
contribution under the Paris Agreement. Moreover, in the country’s Climate Change Strategic
Plan 2014–2023—the primary policy document describing how climate change factors into
the country’s development priorities—the government argues that “Cambodia is short of
energy, which is one of the reasons for its low level of industrial development. Consideration
should be given to more eco-friendly energy sources such as hydropower”(NCCC 2013, 7). In
2012, the Ministry of Environment published a report that identified hydropower as a
“cornerstone of Cambodia’s energy policy”because it produces low-cost energy and is climate
friendly. The document states that hydropower contributes to a “green growth low carbon
emission path with 68 percent of electricity generation in 2024 planned to be provided by
hydroelectric plants”(cited in Hensengerth 2015, 516). Due to these views on hydropower, the
CDM has been incorporated into the country’s National Strategic Development Plans (Royal
Government of Cambodia 2010; Royal Government of Cambodia 2015).
Cambodia now hosts the second largest number of CDM-registered hydropower dams of
any least developed country (Käkönen and Thuon 2018). Of the 12 CDM projects approved in
Cambodia since 2006, four are large hydropower dams.
6
They include the Kamchay, Stung
Tatay, Stung Atay, and Lower Stung Russei Chrum dams (see Table 1). According to the
Climate Change Department, any project is eligible for CDM credits if it has the potential to
reduce GHG emissions by at least 5000 tonnes/year. Dams are also supposed to meet
5
Leang Sophol, Head of GreenhouseGases Office, Climate Change Department, Ministry ofEnvironment, pers.
comm., Phnom Penh, July 4, 2018.
6
Leang Sophol, Head of GreenhouseGases Office, Climate Change Department, Ministry ofEnvironment, pers.
comm., Phnom Penh, July 4, 2018.
Climatic Change (2020) 161:365–383 373

sustainable development requirements, although this was not mentioned when we met the head
of the Greenhouse Gases Office of the Climate Change Department.
7
The government of
Cambodia claims that since 2013, companies operating in the country have received between 2
and 2.3 million tons of carbon credits per year from the CDM and other mechanisms like
REDD+ (Royal Government of Cambodia 2015).
It is important to recognize that all of the CDM-registered hydropower dams in Cambodia
received their CDM agreement after construction was finished. For example, construction on
the Stung Tatay and Stung Atay dams both began in 2008, but the CDM carbon credits for
both projects were not approved until late 2012, once the dams were already completed
(Strangio and Rith 2009). Similarly, construction of the Lower Stung Russei Chrum dam
began in 2010 (Constructing Cambodia 2014), but CDM credits were not approved until
August 2012. Finally, the Kamchay dam was close to being complete in late 2012
(Constructing Cambodia 2012), but it did not become registered to receive CDM carbon
credits until October 2013. This retroactive crediting is in violation of the stipulations laid out
in the Kyoto Protocol unless projects can demonstrate that they calculated CERs into the
project financing before the dam was built. However, many have pointed out that even this
situation likely entails that the dams would fail to meet additionality requirements (e.g.,
Schneider 2007).
Moreover, in each case in Cambodia, these dams claimed additionality for displacing fossil
fuel energy sources under a normal baseline scenario. Yet it is unclear which fossil fuel sources
were displaced, and according to Käkönen and Thuon (2018: 11), there is some indication that
additional coal-power plants were built “to level seasonal fluctuation in the dams’power
production.”Finally, except for the Kamchay dam, none of these CDM projects accounted for
GHG emissions from their reservoirs when calculating emission reductions in their PDDs.
All of the hydropower dams that have received CDM approval have been variously
criticized for causing social and environmental impacts. For example, the Kamchay dam
located in Kampot Province was built inside a National Park with important biodiversity
values (Sullivan 2015; Hensengerth 2015). In addition, the dam has caused downstream
flooding, which has seriously disrupted the livelihoods of large numbers of people living in
the impacted area (Chakrya and Strangio 2009).
Dams have caused similar environmental and social problems in southwestern Cambodia’s
Cardamom Mountains. The Lower Stung Russei Chrum dam negatively impacted a previously
important undammed river in Koh Kong Province. The Stung Tatay and Atay dams have also
negatively impacted a previously free-flowing river. Furthermore, the downstream impacts of
these dams were either not taken into consideration during the EIA process, or only minimally.
For example, the Stung Tatay dam’s EIA did not include downstream impacts on fisheries or
local livelihoods, even though 1000 people living along the river rely upon fishing for their
livelihoods. The Russei Chrum dam’s EIA did assess a limited zone downstream, but it was
found that less than one-tenth of affected people below the dam were included in the
assessment process (Käkönen and Thuon 2018).
Aside from downstream impacts, these dams also flooded forested areas rich in biodiver-
sity. For example, the Stung Tatay dam’s reservoir, in Koh Kong Province, inundated over
2000 ha of good condition forest in the Cardamom Mountains, and its original 2007 EIA
predicted that the dam would cause “significant”hydrological changes and a deterioration in
7
Leang Sophol, Head of GreenhouseGases Office, Climate Change Department, Ministry ofEnvironment, pers.
comm., Phnom Penh, July 4, 2018.
374 Climatic Change (2020) 161:365–383

water quality, with possible effects on wildlife and humans. The study also predicted negative
effects on fish migration (Strangio and Rith 2009).
There have also been complaints regarding the Stung Atay dam, in Pursat Province. For
example, in 2009, a villager impacted by the project stated, “We rely on forest products to
make a living, but since the government allowed the Chinese company to develop the Stung
Atay dam our livelihoods have been reduced”(Chakrya and Strangio 2009). Furthermore, in
March 2012, the Stung Atay dam partially broke, killing a number of workers (Hydro Review
2012).
For these dams, there was only limited consultation and participation of impacted people
prior to CDM registration (Käkönen and Thuon 2018). As part of the EIA process, which is
paid for by the investors but overseen by Cambodia’s Ministry of Environment, impacted
villagers are supposed to be consulted prior to construction. Consultations for the Russei
Chrum dam included only local authorities rather than villagers. When villagers participated
for the Stung Tatay dam, they were only invited one time and their critical questions were
discouraged. In the case of the EIA for the Stung Atay dam, the EIA was only finished after
construction for the dam had begun. Finally, in each of these dams’PDD for the CDM, EIAs
were selectively copied and pasted in a way that made it difficult to interpret public comments
(Käkönen and Thuon 2018).
5 Lower Sesan 2 background
The Lower Sesan 2 dam was first envisioned in 1998 as part of an Asian Development Bank
(ADB)–supported study regarding hydropower dam development in three river basins in Laos,
Table 1 Hydropower dam projects already financed through the CDM in Cambodia
Project Developer Province Capacity Annual GHG
emission
reductions (t
C02e)
Credit buyer CDM agreement
(period of
agreement)
1 Kamchay Sinohydropower,
China
Kampot 193 MW 281,348 N.A. October 8, 2013
(September 1,
2013–August
31, 2020)
2Stung
Tatay
Cambodia Tatay
Hydropower
Limited
Koh
Kong
246 MW 563,074 Netherlands via
Gazprom
Marketing and
Trading
Singapore
December 14,
2012
(September 1,
2013–August
31, 2020)
3Stung
Atay
C.H.D.
Hydropower
Development
Co.
Pursat 100 MW 266,472 Sweden via
Tricorona
Carbon Asset
Management
Sweden
December 19,
2012 (March 1,
2013–February
29, 2020)
4Lower
Stung
Russei
Chru-
m
China Huadian Koh
Kong
338 MW 701,199 Switzerland via
Vitol SA
August 21, 2012
(January 1,
2013–December 31, 2019)
Climatic Change (2020) 161:365–383 375

Vietnam, and Cambodia, with the primary goal of supporting energy development to maxi-
mize economic benefits. LS2 was, from the outset, expected to cause serious environmental
and social impacts and offer only marginal economic benefits. Although it did eventually
emerge as one of the recommended projects for Cambodia (Halcrow 1999), the ADB chose
not to fund the project due to these projected serious impacts.
On June 15, 2007, the Cambodian government, represented by the Ministry of Industry,
Mines, and Energy, granted permission for Electricité du Viet Nam (EVN) to conduct a
feasibility study regarding LS2 (Baird 2009). EVN appointed Vietnam’s Power Engineering
Consulting Company 1 to conduct the feasibility study for LS2 between September 2007 and
March 2009 (Baird 2009). Importantly, the Ministry of Environment delayed approving the
initial EIA for LS2, but in November 2010, NguyễnTấnDũng, the Prime Minister of Vietnam,
publically requested that Prime Minister Hun Sen of Cambodia speed up the project’sapproval
process. Not long afterwards, the EIA was approved (Baird 2016: 8), indicating how political
decisions regarding dam development tend to be.
The project was immediately controversial, but EVN continued to pursue it. However,
EVN was heavily in debt and because of its expected environmental and social impacts, the
project struggled to attract multilateral funding support. Finally, in January 2011, the Cambo-
dian Royal Group agreed to assume a 49% share in the project (Baird 2016). Rumors
nonetheless continued to circulate that EVN was trying to sell its shares even after the
Cambodian government’s cabinet finally approved the project on November 2, 2012. It
eventually emerged that EVN had sold controlling share in the project to China’s Huaneng
Group, whose subsidiary is Hydrolancang International Energy. As such, China’s Huaneng
Group now holds a 51% share in the project, with the Royal Group owning 39%, and EVN
retaining a 10% share in the project in lieu its initial work studying the project. LS2 reportedly
cost US$781 million (Baird 2016). Financing mainly came from Chinese banks, and has been
developed as a build-operate-and transfer (BOT) project, with the dam being scheduled to be
handed over to the Cambodian government after a 40-year period (Lipes 2017).
LS2 has performed poorly with regard to local consultations. On the one hand, the 5000
people scheduled to be relocated from the dam’s reservoir area were only visited a few times.
This is one of the reasons why a large number of people oppose the project. Many local people
refused to accept the resettlement program, which they felt did not address their livelihood
concerns. They did not want to relocate to areas with poor soils and water sources (Baird
2016). Thus, many have elected to find their own resettlement sites (Sen 2017,2018;May
2018).
For people living outside of LS2’s reservoir area, the situation has arguably been even
worse, as there have been no consultations between the project developers and the Cambodian
government and local people at all (Baird 2016). One villager living in a community upstream
of the LS2’s reservoir, in Voeunsai District, Ratanakiri Province said, “We have been waiting
for the company [that is building the dam] to come to see us, but they never have.”This lack of
consultation is a cause for concern as the project has long been expected to cause serious
negative environmental and social impacts upstream and downstream of the project’sreservoir,
especially as a result of fisheries losses but also due to hydrological and water quality changes.
LS2’s most serious potential environmental impact is caused by blocking various important
fish migrations that seasonally move between the mainstream Mekong River and the Sesan
andSrepokRivers(Baird2009,2016; Ziv et al. 2012). A small fish ladder was added to the
project (see Gätke et al. 2013), but during fieldwork, local people reported that only a portion
of the fish that migrate upriver have used it, and that large fish species have not been able to
376 Climatic Change (2020) 161:365–383

effectively negotiate the fish ladder. It remains to be seen whether the project will ultimately
result in a decline in Mekong fisheries throughout the basin of 9.3%, as predicted by Ziv et al.
(2012). These losses are expected to seriously affect the livelihoods and diets of hundreds of
thousands of people in the Mekong Basin, including southern parts of Cambodia and the Tonle
Sap Lake, and also parts of Vietnam, Laos, and Thailand, since fish migrate between those
countries and LS2 (Baird 2009).
Many people in Cambodia from different walks of life have been critical. For example, Son
Chay, a member of the opposition Sam Rainsy Party, stated that “There is no transparency in
almost all of the government’s hydropower dam projects and coal plant construction projects
because public bidding is never done”(Baird 2016, 8). Villagers in the project area have also
been critical. One man said, “The [LS2] dam is going to block important fish migrations that
have been coming up the Sesan and Srepok rivers for as long as anyone can remember.”
Despite totally ignoring other people living upstream and downstream from the reservoir, and
considerable regional and international negative media coverage, construction of the dam
started in February 2014. Although the dam was originally scheduled to be built by 2017
(Baird 2016), it was not actually completed until late 2018, with Prime Minister Hun Sen
officially opening the project in December 2018 (Lipes 2017).
6 CDM possibilities and the Lower Sesan 2 dam
The LS2 has not yet applied for CDM funding. It has not been done due to the failure of the
carbon credit market, according to Leang Sophal, the head of the Greenhouse Gases Office of
the Climate Change Department in the Ministry of Environment in Phnom Penh.
8
He
explained that while the CDM was still in place, for the last few years, the system had not
been functioning properly due to market failure. According to Sophal, “The price per tonne of
CO2 was US$5, but now it has dropped to US$0.50.”In fact, carbon credit prices have been
declining since 2008, dropping from a high of nearly US$35 per tonne to less than US$1 per
tonne by 2013 (Newell et al. 2013; Smits and Middleton 2014), and as low as US$0.10 in 2014
(Cheong 2014). The carbon credit market has not improved since then. This dramatic market
failure has been attributed to insufficient political and legal support for carbon credit trading,
leading to an oversupply of carbon credits on the market. Moreover, various weaknesses in the
carbon credit trading scheme have eroded support for the program (Cheong 2014). In any case,
according to Leang Sophal, the low carbon credit price has made it more expensive to hire
someone to prepare the paperwork to apply for CDM carbon credits than the actual benefits of
the credits. According to him, this has crippled the CDM-mandated carbon trading system in
Cambodia, although he still hopes that the market will improve and the CDM system will
become viable again.
9
Crucially for our argument, Leang Sophal informed us that if the market was to improve,
the owners of LS2 could apply for CDM carbon credits later. In addition to the history of
CDM-funded hydropower dams in Cambodia, Leang Sophal’s comments indicate that
additionality continues to not be a concern of the Cambodian government. However, we
8
Leang Sophol, Head of GreenhouseGases Office, Climate Change Department, Ministry ofEnvironment, pers.
comm., Phnom Penh, July 4, 2018.
9
Leang Sophal, head of Greenhouse Gases Office, Climate Change Department, Ministry of Environment,
Phnom Penh, July 4, 2018.
Climatic Change (2020) 161:365–383 377

would argue that is should be, as others have as well (Hayashi and Michaelowa 2013;Haya
and Parekh 2011; Yunna and Quanzhi 2011;Tanwar2007).
We asked Leang Sophal whether a project could be disqualified for CDM carbon credits
due to being considered unacceptable for causing excessive environmental or social problems,
in other words not meeting sustainable development standards. He initially responded, “We
need to check environment criteria.”But later in the same discussion, he clarified that, “All
projects are eligible, regardless of the environmental and social impacts. But a project must
have a Ministry of Environment-approved EIA.”
10
This has also been reported by Hensengerth
(2015: 513). The Cambodian government’s policy is to consider all of the sustainable
development criteria, but Leang Sophal made no mention of them, which indicates that the
Ministry is not taking the issue seriously. Moreover, it appears that at least some dams in
Cambodia were approved for CDM credits even before an EIA for the project was approved.
For example, the Kamchay dam was completely constructed prior to the EIA for the project
being completed, and yet it still received CDM financing (Hensengerth 2015).
7 Contradictions of CDM and large dams in Cambodia
Our findings support the observation that the CDM finances ecologically and socially harmful
projects in the name of GHG reductions. In Cambodia, like elsewhere (Fearnside 2013,2015;
Haya and Parekh 2011; Newell and Bumpus 2012), the CDM is focused primarily upon
registered emissions reductions, despite its dual goal of sustainable development. This point
was made obvious to us based upon our discussion with the staff at the Climate Change
Department, when they indicated that they do not see any conflict between granting LS2
carbon credits and the serious social and ecological problems associated with the dam. Based
upon the situation of the CDM in Cambodia, we therefore find that the CDM registration
process tends to exacerbate the contradiction between GHG reductions and hydropower dams’
local and regional impacts.
Part of the problem is related to the minimal political clout and technical capabilities of
Cambodia’s DNA. Other researchers have found that large hydropower dam developers
minimally communicate with the Climate Change Department of the Ministry of Environment
prior to being approved for carbon credits under the CDM (Hensengerth 2015; Käkönen et al.
2013; Käkönen and Thuon 2018). Moreover, the authority of the Ministry of Environment to
enforce the EIA is limited, due to budgetary, human resources, and especially political
limitations, which results in environmental assessment being relegated to a secondary concern
as compared with normative development imperatives (Hensengerth 2015, 518). As Käkönen
et al. (2013:54–55) report, “[S]taff of the Climate Change Department feel powerless vis-a-vis
large companies in ensuring that the promises of sustainability made in the Project Design
Document (PDD) are met, and little opportunities exist for staff to hold project companies to
account after the issuance of the Letter of Approval.”
In other words, government staff lack both the resources and the authority to monitor
projects after they have been approved for CDM certification. In their research, Käkönen et al.
(2014: 365) reported that the Climate Change Department has little communication with the
project developers after they have approved their CDM registration application. In Cambodia,
10
Leang Sophal, head of Greenhouse Gases Office, Climate Change Department, Ministry of Environment,
Phnom Penh, July 4, 2018.
378 Climatic Change (2020) 161:365–383

as elsewhere, the development of the hydropower sector is dominated by powerful private
interests from within and outside of the country, ones with strong connections to state power.
For example, Cambodia has developed a strong relationship with Chinese developers, which
exists at the highest levels of the government. Even if the Climate Change Department had the
resources to conduct more in-depth assessments for the CDM, it is unlikely that they would
report on issues that challenge the prospects of Cambodia’s hydropower dam development
goals.
Finally, in part because the DNA rubber-stamps CDM-proposed projects, the CDM
effectively contributes to the greenwashing of destructive hydropower dams. By
recommending that large dams in Cambodia become CDM registered, government and dam
developers can argue that they are supporting sustainable energy development. Even when
dams have been shown to negatively impact communities and rivers, such as LS2, these
projects can project an eco-friendly image with the support of the CDM (see NCCC 2013).
Consequently, with the Cambodian government willing to recommend dam projects in
Cambodia that have a proven track record of harmful ecological and social impacts, the
Cambodian government itself becomes complicit.
8Conclusions
We can draw two main normative conclusions from this research. The first is that the CDM, in
the name of protecting the environment through reducing GHGs, has inadvertently caused
other serious environmental and social problems by materially and discursively supporting the
development of large-scale hydropower dams. Specifically, the CDM has supported hydro-
power projects in Cambodia that do not meet the CDM’s own sustainable development goals.
Indeed, ample evidence has long been available that demonstrates that large hydropower dams
tend to cause many serious environmental and social impacts (Goldsmith and Hilyard 1984;
WCD 2000;McCully2001), and this has also been demonstrated more recently in Cambodia
(Wyatt and Baird 2007; Baird 2016).
Second, there is a serious problem of additionality when it comes to CDM support for
hydropower dams in Cambodia. This problem is true whether it relates to the approval of past
CDM hydropower projects in Cambodia or the potential for approving LS2 as a CDM project
in the future. Our findings suggest that much of the funding used by the CDM to support
hydropower dam development has been subject to fraud and has not actually contributed to
GHG reductions. In Cambodia, the dams that have received CDM support, or could receive
CDM support, such as LS2, would have been developed even without CDM support. This is a
crucial point because it suggests that the CDM isnot fulfilling its main mandate of contributing
to additional reductions in carbon emissions.
We contend that these conclusions can inform ongoing debates over a new climate
mitigation financing scheme under the Paris Agreement. We are not the first to point out the
serious flaws associated with the CDM’s support for hydropower dams (Smits and Middleton
2014; International Rivers 2008;ErleweinandNüsser2011; Cole and Roberts 2011;Hayaand
Parekh 2011; Haya 2009; Fearnside 2015), including in Cambodia (Hensengerth 2015;
Käkönen and Thuon 2018). However, we find that the past deficiencies of the CDM have
not been adequately addressed despite numerous critiques for years (Fearnside 2015;Hayaand
Parekh 2011;Paulsson2009; Newell and Bumpus 2012; Subbarao and Lloyd 2011), and in
some cases for more than a decade (Haya 2009; Schneider 2007;Tanwar2007). Given that a
Climatic Change (2020) 161:365–383 379

highly destructive hydropower project like LS2 dam in Cambodia could still potentially gain
CDM support—at least through the Cambodian government’sDNA—indicates that there
remains underlying problems with the structure and framing of the CDM mechanism itself.
As such, an improved climate mitigation financing mechanism that replaces the CDM will
need to address several issues. Most importantly, it will need to consider environmental and
social issues more holistically, deal with market failure problems, and include more stringent
measures to address the question of additionality. Without such structural reform, our research
aligns broadly with other critical research that has concluded there are limited chances for the
new version of the CDM expected to emerge after 2020 to be better than what exists now.
Moreover, based upon the Cambodian case, we conclude that without an overhaul of the CDM
structure, a new financially stable mechanism would likely continue to fund destructive
hydropower dams such as LS2.
Our assessment indicates the need to support other ways of reducing GHGs that contribute
to supporting more positive social and environmental outcomes, and are truly additional.
WWF (2016) has suggested that climate financing could be used to update old, inefficient
infrastructure in order to reduce energy demand and lower energy costs. Investing in improved
energy efficiency can also provide positive social and environmental impacts not just in
relation to reducing GHGs, but more broadly. Moreover, climate financing should be directed
towards alternative energy sources such as solar and wind connected to smart grids. However,
even these energy solutions must be democratically managed in order to not displace or
negatively affect local communities.
The failures of CDM can also be attributed to the indeterminate meanings of sustainable
development and social-environmental assessments. Indeed, while both these concepts are
intended to establish local-level community buy-in and consent to development initiatives, in
reality, they tend to privilege quantitative and large-scale techno-managerial approaches
towards achieving climate change mitigation and sustainable development. These approaches
perpetuate a reliance on particular regimes of technical expertise, which have the potential to
erase attempts by local actors to articulate pluralistic visions of economic well-being that are
incommensurable with abstract, technocratic framings.
These framings can be modified through careful consideration of how environmental and
economic change is known. Specifically, a future climate finance scheme to replace CDM
ought to consider how epistemological framings simultaneously produce and legitimize
specific governance approaches and policy responses that tend to benefit certain interests over
others. The environmental and economic knowledge that inform the bureaucratic practices of
accounting for the consequences of CDM-funded hydropower dams are not neutral and above
politics.For example, there are political reasons why CDM quantifies reductions in carbon
emissions (Cole 2012), but does not do so when it comes to sustainable development issues,
thereby privileging the former at the expense of the latter. In addition, given that EIAs attempt
to standardize understandings of local realities, it is necessary to make sense of what
information is privileged and what is obscured when these assessments are carried out and
used to justify CDM support for hydropower dam projects.
In sum, simply trying to tweak the present CDM system is unlikely to result in the intended
results. Instead, we need to learn to look outside the box and investigate other paradigms for
addressing climate change concerns and sustainable development challenges. Otherwise, the
next climate financing mechanism will likely adopt the type of simplistic and misdirected
climate mitigation strategies that the CDM is predicated on.
380 Climatic Change (2020) 161:365–383

Acknowledgments Thanks to Zhe Yu Lee and Mira Käkönen for the comments, and to Stepha Velednitsky for
preparing the map. Thanks also to the three anonymous reviewers for refereeing this paper.
Funding Information The Mellon Foundation–supported Humanities Without Walls (HWW) Initiative funded
project, Political Ecology as Practice: A Regional Approach to the Anthropocene, supported the research.
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