Implementation of climate finance / Transparency

How climate projects can lead to human rights violations: the case of the Barro Blanco hydroelectric dam

Barro Blanco

Local communities flooded by the Barro Blanco hydroelectric dam. Photo: M10

Climate finance is supposed to fund projects in developing countries that support the path towards limiting global warming to 1,5°C – a goal that was confirmed in the Paris Agreement in December 2015. For this it needs a paradigm shift to low-emission and climate-resilient development as the statute of the Green Climate Fund (GCF) states. At the same time, projects funded under climate finance should not hamper development or lead to the violation of human rights. Climate finance can therefore not only focus on the environmental aspects of the investments funded, but also needs to be incorporated into the wider context of development, as i.a. the Sustainable Development Goals (SDGs) are reflecting.

This does not only apply to bilateral development cooperation of countries like Germany. It also applies to actors like the German development bank DEG, whose loans towards climate mitigation projects are also accounted for under Germany’s contribution to international climate finance. To date little is known which of the projects funded by DEG represent climate finance and should thus be in line with Germany’s international obligations. Yet in order to be able to track the social and human rights records of climate finance, it needs more transparency also on the contribution of development banks.

How climate projects can potentially harm the local population can be illustrated by the case of a project in Barro Blanco. The large hydroelectric dam project Barro Blanco sits on the Tabasara River, in the Province of Chiriqui, partially in indigenous lands, in Western Panama. With financed from the German and Dutch national development banks (DEG & FMO) as well as the Central American bank for Economic Integration (CABEI) the project was a registered project under the United Nations Clean Development Mechanism until November 2016 when Panama withdrew its approval as a CDM project.

Human rights violations

Local Ngäbe communities have opposed to Barro Blanco since inception in 2008 and continue to do so, as the project is likely to flood at least six hectares of their land, including homes, agricultural fields, a school and sacred petroglyphs. As indicated in two letters sent to the CDM Board in 2011 and as confirmed by the then-UN Special Rapporteur on the rights of indigenous people James Anaya, the affected stakeholders were neither  adequately informed nor adequately consulted prior to the project and have never given their consent to it.

These findings constitute a violation of international human rights standards, which stipulate that indigenous peoples have the right to consultation and free, prior and informed consent (FPIC) as well as to adequate housing, to possess, use, and freely enjoy their traditional lands and territories, and to not be forcibly removed from them.

The dam’s construction has proceeded despite of widespread opposition, with the continued support of the financing banks and the Panamanian administration.

Acknowledgment of Barro Blanco’s flaws

In February 2015, the newly elected Panamanian government temporarily suspended the construction of the almost completed dam on the grounds that the project failed to comply with its environmental impact assessment (EIA).

International lenders opposed this decision in a letter sent to the government expressing “great concern and consternation” and warning that “actions such as the one taken against Genisa [the project developer] may weigh upon future investment decisions and harm the flow of long term investments into Panama.”

While Barro Blanco clearly violates international laws, European banks “have insisted on continuing construction, as stopping the project […] would cause serious financial losses,” according to the Dutch NGO Both ENDS.

The positions of the banks is also in conflict with the   Independent Complaints Mechanism (ICM) of the Dutch and German banks involved. The ICM found that “significant issues related to social and environmental impact and, in particular, issues related to the rights of indigenous peoples were not completely assessed prior to the [loan] agreement.” Responding to the ICM’s finding, the banks only committed to “extract lessons learned from the ICM report”.

Moreover, as a result of relentless campaigning and advocacy work, the Panamanian government also withdrew the CDM host country letter of approval for Barro Blanco effectively deregistering the project in 2016. With this action, the government of Panama set a precedent as it was the first time  in UN climate history that a host country has taken such action. This means that the project will not generate credits to offset emissions produced elsewhere. The de-registration sends a strong message that human rights violations are not tolerated in activities labelled as “climate friendly”. Unfortunately, the decision did not stop the project from going ahead, nor have the banks withdrawn their support.

Flooding after project restart

In the meantime, the Panamanian Environment Ministry after fining the project developer $775,200 for failing to find an agreement with the Ngäbe and for the violation of their social and cultural rights, lifted the temporary suspension.

A test flooding of the dam reservoir began in June 2016, directly affecting three local Ngäbe communities who to date have not received adequate compensation for the damage caused by the flood waters. Several houses have been flooded and, as a result, families have been forced to move to higher ground. As shown in this video shot in the beginning of January 2017, the stagnant lake is seriously affecting their health as well as their food and water resources. Informed of the test flooding, banks continue to support the dam operation.

Non-governmental organizations (NGOs) thus:

  • call on the development banks to show that they do not accept the human rights abuses by their counterparty and ask them to halt the project until a consultation process has been carried out correctly and the affected communities have received fair compensation.
  • demand a disclosure of which projects funded by development banks like the DEG are accounted towards international climate finance.
  • ask for the implementation of ambitious safeguards for international climate finance channeling tools such as the Green Climate Fund (GCF) or a future Sustainable Development Mechanism (SDM) as well as all actors of bilateral climate finance.

Pierre-Jean Brasier, Carbon Market Watch
Christine Lottje