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Alessandro Palmieri

Environment Department, The World Bank

Dams and Development – The Evolving Role of the World Bank

1. INTRODUCTION

In preparation for the 1992 Earth Summit in Rio, a global consensus was developed on the principles which govern effective water management

Widespread adherence to the Dublin principles has revealed that everywhere, including in OECD countries, the principles have not been translated into policies. In even more cases, implementation lagged far behind policy.

The overriding challenge is, accordingly, not more principles but more action on the ground. While principles are an invaluable precondition for action, they are not a substitute for action.

The most difficult water resources issues (dams, inter-basin transfers, etc.) are highly contentious. All of the Bank’s borrowers have greatly valued the Bank’s advice on these, and have seen the Bank constantly promoting best practice. In recent years the transaction costs – for the Bank and borrowers alike – of Bank involvement in projects including these controversial issues have increased sharply.

2. Challenges and Opportunities

Good infrastructures stimulates regional development and widening opportunities for all. A broad based approach focused on increasing productivity and output has major benefits for the poor. The combination of direct and direct effects is a potent medicine for poverty reduction.

Dam building is a proven technology going back many centuries. At a latest count worldwide, there are about 50,000 large dams and countless smaller ones. There is no doubt that without these dams the counterfactual would be an incalculable reduction of human welfare due the inability to store and manage water for security and productive purposes. Water management, food supply and power supply remain important reasons for building dams when there is no better alternative for meeting these needs. These factors need to be remembered in the context of the debate about the environmental, economic and social trade-offs between competing interests that dam-building frequently involves.

As well, dam building will face a new set of environmental issues. Changes in the quantity and timing of precipitation will be one of the greatest impacts of global climate change, and will have profound impacts on the management of water resources. To date competing climate models predict widely different effects at the regional and sub-regional level. All scientific evidence, however, points to substantial changes in the timing of runoff with major implications for hydropower, irrigation, flood management, the environment. Climate change then, is going to bring major challenges to the fore for both our borrowers and the Bank. On the one hand it adds another powerful reason for developing more effective and adaptable institutional arrangements for managing water. It also means more attention to the long gestation planning and infrastructure requirements for dealing with greater variability. Storage has an "insurance role" with respect to such variability.

Figure 1 illustrates how such role is not equitably distributed among different countries. Investments in dams will (along with a host of institutional and soft investments) be essential for the storage deficient countries, normally the Bank’s poorest borrowers.

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In respect of electric power production, it is especially these borrowers, who have most of the World’s remainingundeveloped hydropower potential. Figure 2 shows the potential and the actual hydropower generation in different regions of the world (source: Hydropower & Dams World Atlas 2000).

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A number of small, poor, mountainous countries, such as Lesotho, Nepal, Bolivia and Laos, have untapped hydropower potential (Nepal for example has developed only 300 MW of an estimated 83,000 MW of potential). These countries also have large, more developed and energy-hungry neighbors. For these countries, export of hydropower offers one of the few resource-basedavenues for sustainable economic development.

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Figure 3 shows the large untapped hydropower potential of some African countries (source: Hydropower & Dams World Atlas 2000).


Modern electricity services can transform people’ lives for the better. No country has managed to develop much beyond subsistence economy without ensuring adequate energy supply. On average people in developing countries spend nearly 12% of their income on energy – more than five times the average for people in OECD countries.In very low income countries, electricity is needed mainly for lighting, prime movers and refrigeration, in homes, factories, health and education facilities, commerce and public administration. Substitutes to electricity are vastly inferior and more expensive in these applications.

Hydropower can make a major contribution to reducing the green house gas (GHG) density of energy production. The methodology and data for assessing the relative contribution to GHG by different energy sources are only now starting to emerge. What is clear is that most hydropower plants emit few GHG, the one important exception possibly being large flat reservoirs in heavily-vegetated tropical areas.

3. The evolving role of the Bank

Bank lending for dams has shown a continued decline in recent years. At the same time a growing portfolio for dam rehabilitation and safety is emerging. Figure 4 shows the amounts of World Bank loans going to dam components in Bank projects in recent years.

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It is fair to say that the Bank’s position on dams has been, and continues to be, one of the single greatest public relations issues for the institution in the past decade. Every dam that the Bank has been engaged with (and many that it has not) have led to fierce challenges to the institution.

Given the need to construct dams to conserve as much water as possible for future demand, and the current lack of capacity to implement safeguard policies in some borrower countries, the Bank faces significant technical and public relations challenges in water sector development.

There is broad resonance with the Financial Times editorial (17 November 2000), which states that: … If the best social, economic and environmental assessments are undertaken ... governments have a right to build (dams).…..International financial institutions have a duty to support these projects. ….. A purpose of organizations such as the World Bank is to be an honest broker. Controversy is no excuse to wash their hands of dams.

The World Bank agrees that dams are important tools for growth and poverty reduction, and will continue to support dams that are economically well justified and environmentally and socially sound. At the same time, the above-mentioned challenges cannot be overlooked, and the need for a way out of this stalemate has been widely recognized. It is in this context that the World Commission on Dams initiative was conceived.

4. Dams and Development

The World Bank was instrumental in convening the World Commission on Dams (WCD). The WCD process was remarkable, and has correctly been hailed as a path breaking approach to dealing with complex development issues. The Bank supported the Commission, and rigorously respected its independence. The commission released its final report in November 2000, to very wide media coverage.

The WCD Report (Dams and Development, 2000) contains many suggestions and recommendations that can help move project development and operation in the right direction and gradually moderate the polarization on dams. It is a very well written report, but there is no way to grasp its message by reading the executive summary only. All 358 pages must be read. Figure 5 attempts to visualize the historical development of reservoir storage worldwide (ICOLD), along with expected trends (HR Wallingford, 2000), and put some of the WCD findings in perspective.

Figure 5: Storage Development Trends

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In the lower part of figure 5, trends on the environmental and social impact of dams (Dams and Development, 2000) are shown. As with other aspects of water management, there have been major improvements in recent years, but still there is a long way to go. The WCD found (see figure 5) that every decade has seen marked improvements in the way in which the environmental impacts of dams are addressed. However there are still inadequate environmental assessments for an unacceptably high one third of all dams. In recent decades there has also been growing recognition of the indirect costs of dams and other water infrastructure. Once again there has been marked progress in the participation of affected people in such projects in recent decades. The WCD found that effective participation of affected people rose from zero in the 1950s to about 60% of projects in 2000, but still affected people do not participate in the decision-making process for 4 of 10 new dams. The costs and the distribution of the costs and benefits of major water infrastructure is a highly contentious issue.

The upper part of figure 5 shows the evolution of the typical "Design Team" involved in dam planning and implementation (Goodland, 1997). It seems evident that, at this moment in time of the dam industry, the key issue is how to ensure that "affected people" (both positively and negatively affected) are an integral part of the planning and decision making process. There is a strong need to explain in simple, yet scientifically sound terms, decision-making tools that are becoming more and more complex and demanding (multi criteria analysis, non-market values, life-cycle assessments, etc.).Progressive scientists need to meet this demand, staying away from ideological standings and prejudices, and building efficient multi-disciplinary teamwork.

Enlarging the Design Team to include legitimate stakeholders is probably the most challenging task ahead for the dam industry.

The second challenge is that of Addressing Existing Dams. Dams have very long life duration, often over 100 years, much more than most other civil engineering infrastructures. During such long periods, it is reasonable to expect changes in the character of the demands that had originally motivated dam construction. Demand evolution should be monitored by the owner and translated into corresponding modifications of the operating rules, or even the purposes of the infrastructure. This may often require substantial investments to initiate a "new life" of the dam. In some cases, dam alteration or retirement could result as the preferable option.

The international dam community can do a lot for:

  • Improving performance of existing facilities,
  • Improving dam safety,
  • Promoting reservoir sustainability by sedimentation management

The last task represents a growing need at global level (see box).

 

In London at its launch, World Bank President James D. Wolfensohn welcomed the WCD Report and said that the Bank would review the report internally, and consult its shareholders on their opinions.

The Internal follow-up involved:

a) the formation of a Bank Group-wide Task Force, with staff from all relevant sectors and regions;

b) review and discussions with Senior Management; and

c) three discussions with the World Bank’s Board or committees of the Board (the Board is made up of the 182 governments that own the World Bank).

The External follow-up involved:

a) In-country consultations with seven client country governments;

b) participation in the February Asian Development Bank meeting which included 14 developing country governments;

c) receiving input from NGOs, professional associations (including ICOLD and IHA), and governments;

d) International Finance Corporation (IFC) meetings with private sector companies; and

e) participation in the WCD Stakeholders’ Forum in Cape Town (February 25-27, 2001).

From our consultations, the message emerged to "Place the Discussion on Dams in Context".

There are striking differences among the needs of each country. For arid countries/states (such as Jordan and Northeast Brazil) dams are literally a matter of "to be or not to be" since without dams there is no permanent habitation. For countries prone to drought (portions of Brazil, China, Ethiopia, Jordan, Thailand) dams provide essential flexibility in managing highly variable

water flows. For low income countries with water and gravity (such as Ethiopia, Laos, Nepal) development of hydro potential is one of the few routes for economic growth. For other countries (notably China) a principal need is often flood protection.

A number of those consulted mentioned that it is very difficult to develop universal criteria for such a wide variety of circumstances. There is a point to this opinion – for example Figure 6 shows how criteria on dam safety (a relatively well understood subject) vary widely even in a mature dam setting such as Europe (Berga, 1998).

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There is broad agreement on the core values and strategic priorities promoted by the WCD. At the same time, reality is very far from these goals even within OECD countries and in the most advanced of our borrowing countries. As well, some noted that the objective of growth and development was missing from the WCD’s statement of core values and strategic priorities, and along with it was missing the evaluation of what the economic and social conditions in relevant areas would be under the counterfactual case without dams.

The Bank Group’s consultations also indicated considerable concern (both amongst governments and private industry) about the operational implications of the twenty-six guidelines the WCD recommended for achieving the core values and strategic priorities. They said that rigid application of these guidelines could stymie the development of even good projects that are badly needed. This is a special concern for attracting private sector investment in dam projects. Private sector interests expressed serious concern that aspects of the recommended process would expose the industry to open-ended, incalculable and unmanageable risk, thereby deterring participation. So there does appear to be some unfinished business about how to marry the laudable values and priorities of the report with an operationally practical process in which governments and the private sector will engage.

The Bank’s goal must be to assistborrowers to move in the right direction: – to stepwise help those that most need to improve commitment, skills and capacity to sound options assessment, decision-making, project implementation and operation as well as benefit-sharing with project affected peoples.

From the healthy debate generated by the WCD report, we have learned that the World Bank role of honest broker between governments and civil society is and will be more and more in demand. We have, therefore, shaped an Action Plan around this central objective, and we have started to implement it. The elements of our Action Plan are described in Annex A.

At the WCD Stakeholder’s Forum in Cape Town, the Bank stated its intention to use the WCD Report as a valuable reference to inform its decision-making processes when considering projects that involve dams. The position of the Bank is posted on the external web site (www.workdbank.org/water).

The World Bank’s performance will be judged on the results of its projects on the ground, as well as on the principles it follows. Therefore our Action Plan is operation-directed, with the main goal of further promoting good practice and supporting innovations in our lending and non-lending activities.

5. CONCLUSIONS

In the words of Mr. Nelson Mandela, at the launching ceremony of the WCD Report:

… the problem is not dams…

… it is hunger, thirst, darkness.…

… there is a real pressing need for power in every sense of the word...

‘It is one thing to find fault with an existing system. It is another thing altogether, a more difficult task, to replace it with an approach that is better’

The test for the WCD will not be on principles but on implementation. I believe this statement should be a guide to all people involved in the challenging field of dams and development.

Acknowledgements

It is a pleasant duty to acknowledge the valuable comments and advise provided by Mark Segal (Principal Economist, IFC) on the draft of this report.

References

R.J.A. Goodland (1997) "Environmental Sustainability in the Hydro Industry: Desegregation of the Debates" Workshop at IUCN, Gland, Switzerland, 10-11 April 1997

HR Wallingford, 2000 "Report SR566", March 2000

World Commission on Dams,2000 "Dams and Development – A New Framework for decision Making" Earthscan, November 2000

L. Berga 1998 "Dam Safety, 1998" – Proceedings of the International Symposium on New Trends and Guidelines on Dam Safety, Barcelona, Spain, 17-19 June 1998

R. White 2001 "Evacuation of Sediments from Reservoirs" HR Wallingford, T. Telford Ltd.

Hydro Quebec 2000 "Comparing Hydropower with other Power Generation Options" Hydro Quebec Direction Environnement, February 2000.