Two banks investing $50 million of Dutch and German taxpayers’ money in a Panamanian CDM project have admitted they fell short of their own environmental and human rights standards but refused to respond to local peoples’ demands to pull out of the deal.
Campaigners say the issue raises questions about how well the UN’s CDM and other internationally-driven climate finance ensures that projects respect human rights.
The Barro Blanco, a 29-MW hydroelectric power plant, is nearing completion but local indigenous Ngobe people are mounting a last-ditch effort to prevent it flooding the areas containing several of their villages and much of their territory.
In February Panama’s environment agency suspended construction after finding breaches including unclear agreements with affected communities, the lack of plans to protect archaeological findings and repeated failings to manage erosion.
The Netherlands’ FMO bank and Germany’s DEG, a subsidiary of KfW, admitted they failed to adequately assess the risks to local people or the environment when deciding in 2011 to put up $25 million each to private firm Genisa.
This was in response to independent expert review the banks ordered following a complaint from the Ngobe. The findings were was published last Friday and found the banks were not fully appraised of the risks at the time they made the commitment, but they were by the time of the first cash disbursal.
“DEG and FMO are committed to extract lessons learned from the report with the purpose of improving the quality of our appraisal and monitoring process of environmental social risks and impacts related to our investments,” the banks said in the response published on their websites.
They said they were receptive to the reviews’ recommendations and will strive for more elaborate expert opinions for future investments. But the banks offered little clarity on their ongoing role in Barro Blanco other than to support the current Panama government-led talks to resolve the issue.
“We fully support the current dialogue table and hope that all involved parties and stakeholders will reach out to achieve a constructive dialogue and a solution for a way forward. DEG and FMO will remain committed to contribute to this solution,” the banks said.
The project remains suspended, but the local communities have pulled out of the dialogue to resolve the dispute following conflicting statements from the government which first flagged improper conduct from Genisa but later insisted the company should be kept in charge.
The Ngobe community has set a final deadline for cancellation of June 15.
Despite concerns from local and international pressure groups, Barro Blanco was registered under the CDM in 2011 to enable it to earn saleable carbon credits for emission reductions generated by providing emission free electricity.
The CDM was set up under the UN’s Kyoto Protocol with the twin aims of helping industrialised nations meet emission targets using its credits and to contribute to sustainable development in the poorer nations that host the projects.
But campaigners argue that local people have had too little protection from project developers or host countries keen to attract foreign investment.
“As climate finance flows are expected to flow through various channels in the future, the lessons of Barro Blanco must be taken very seriously,” said Pierre-Jean Brasier, network coordinator at Carbon Market Watch.
“To prevent that future climate mitigation projects have negative impacts, a strong institutional safeguard system that respects all human rights is required. The opportunity to establish such a necessary safeguards system is now, ahead of the Paris agreement, to put the respect of human rights on top of the UNFCCC agenda.”
By Ben Garside – firstname.lastname@example.org