Hydropower Criteria
Development of Eligibility Criteria for the
Climate Bonds Standard & Certification Scheme

Background Paper
March 2021
V ers io n 1 .0

Definitions
Accredited Assessor: An accredited assessor is an individual who has 1) Completed a programme of training
authorised by the Hydropower Sustainability Assessment Council, 2) Obtained a License which represents anagreement between the Accredited Assessor and the Hydropower Sustainability Assessment Protocol governancecouncil regarding the terms and conditions of their accreditation, and 3) Adopted a code of conduct and compliancewith all the terms of that License. The Climate Bonds Initiative is not engaged with this accreditation process.
Approved Verifiers: Organisations approved by the Climate Bonds Initiative to provide assurance services to issuersof Certified Climate Bonds. The duties of Approved Verifiers include providing assurance that the requirements of the
Climate Bonds Standard (including these and other sector specific Criteria) are met.
Certified Climate Bond: A Climate Bond that is certified by the Climate Bonds Standard Board as meeting therequirements of the Climate Bonds Standard, as attested through independent verification.
Climate Bond: A climate bond is a bond used to finance – or refinance - projects needed to address climatechange. They range from wind farms and hydropower plants to rail transport and building sea walls in cities
threatened by rising sea levels. Only a small portion of these bonds have been labelled as Green or Climate Bonds
by their issuers.
Climate Bonds Initiative (CBI): An investor-focused not-for-profit organisation, promoting large-scale investmentsthat will deliver a global low-carbon and climate-resilient economy. The Initiative seeks to develop mechanisms tobetter align the interests of investors, industry and government so as to catalyse investments at a speed and scalesufficient to avoid dangerous climate change.
Climate Bond Certification: allows the issuer to use the Climate Bond Certification Mark in relation to that bond.
Climate Bond Certification is provided once the independent Climate Bonds Standard Board is satisfied the bondconforms with the Climate Bonds Standard.
Climate Bonds Standard (CBS): A screening tool for investors and governments that allows them to identify Green
Bonds where they can be confident that the funds are being used to deliver climate change solutions. This may bethrough climate mitigation impact and/or climate adaptation or resilience. The CBS is made up of two parts: theparent standard (Climate Bonds Standard V3.0) and a suite of sector-specific eligibility Criteria. The parent standard
covers the certification process and pre- and post-issuance requirements for all certified bonds, regardless of thenature of the capital projects. The Sector Criteria detail specific requirements for assets identified as falling underthat specific sector. The latest version of the CBS is published on the Climate Bonds Initiative website
Climate Bonds Standard Board (CBSB): A board of independent members that collectively represents $34 trillionof assets under management. The CBSB is responsible for approving i) Revisions to the Climate Bonds Standard,
including the adoption of additional sector Criteria, ii) Approved Verifiers, and iii) Applications for Certification of abond under the Climate Bonds Standard. The CBSB is constituted, appointed and supported in line with thegovernance arrangements and processes as published on the Climate Bonds Initiative website.
Green Bond: A Green Bond is a bond the proceeds of which are allocated to environmental projects. The term
generally refers to bonds that have been marketed as “Green”. In theory, Green Bonds proceeds could be used for awide variety of environmental projects, but in practice they have mostly been the same as Climate Bonds, withproceeds going to climate change projects.
Hydropower assets and projects: Assets and projects relating to the construction, acquisition and/or managementof hydropower facilities and dedicated infrastructure. These facilities might include run-of-river, impoundment andpumped storage. Marine applications using similar technology are not within the scope of the document.
Industry Working Group (IWG): A group of key organisations that are potential issuers, verifiers and investors
convened by the Climate Bonds Initiative. The IWG provides feedback on the draft Sector Criteria developed by the
TWG before they are released for public consultation.
Technical Working Group (TWG): A group of key experts from academia, international agencies, industry andNGOs convened by the Climate Bonds Initiative. The TWG develops the Sector Criteria - detailed technical criteria
for the eligibility of projects and assets as well as guidance on the tracking of eligibility status during the term of thebond. Its draft recommendations are refined through engagement with finance industry experts in convened Industry
Working Groups and through public consultation. Final approval of Sector Criteria is given by the CBSB.

iTable of Contents
Definitions ............................................................................................................................... i
Table of Contents .................................................................................................................. ii
1

Introduction ..................................................................................................................... 1
1.1
1.2
1.3
1.4
1.5

Funding the goals of the Paris Agreement ............................................................................................................. 1
The role of bonds ................................................................................................................................................... 1
Introduction to the Climate Bonds Standard and the Climate Bonds Initiative ....................................................... 2
The development of Sector Criteria for Hydropower .............................................................................................. 3
This document and associated documents ............................................................................................................ 3

2 Sector Overview ................................................................................................................. 5
2.1 What is hydropower? .................................................................................................................................................... 5
2.2 The significance of hydropower .................................................................................................................................... 6

3 Objectives and Principles of the Hydropower Criteria ....................................................... 10
3.1 Guiding principles ....................................................................................................................................................... 10
3.2 Potentially eligible assets ............................................................................................................................................ 10
3.3 Aspects of climate performance to be assessed ......................................................................................................... 11
3.4 Other environmental and social impacts ..................................................................................................................... 16

4 Climate Change Mitigation Requirements......................................................................... 17
4.1 An overview of the Mitigation Component of the Hydropower Criteria ........................................................................ 17
4.2 GHG Assessment ....................................................................................................................................................... 18
4.3 Allocation of estimated GHGs ..................................................................................................................................... 24
4.4 Low GHG-Compatibility Test ...................................................................................................................................... 27
4.5 Predictive Screen ........................................................................................................................................................ 35

5 Mitigation Requirements for Special Cases ...................................................................... 41
5.1 Pumped storage.......................................................................................................................................................... 41
5.2 Cascade systems........................................................................................................................................................ 44

6 Adaptation and Resilience Requirements ......................................................................... 45
6.1 An overview of the Adaptation & Resilience Component of the Criteria ..................................................................... 45
6.2 Key aspects to be assessed under this Component ................................................................................................... 45
6.3 Practical requirements for this Component ................................................................................................................. 46
6.4 Existing tools and guidelines considered .................................................................................................................... 47
6.5 Proposal: leverage the ESG Gap Analysis tool........................................................................................................... 49
6.6 Performance level required to pass the A&R Component........................................................................................... 54
6.7 No predictive screen for the A&R Component ............................................................................................................ 56
6.8 Free, Prior & Informed Consent (FPIC) Requirement ................................................................................................. 58

7 Disclosure Requirements .................................................................................................. 59
Appendix 1: TWG and IWG members ................................................................................. 60
Appendix 2: The power sector GHG budget according to the IEA 2DS scenario: analysis for
the Low GHG-Compatibility Test ......................................................................................... 61
A2.1
A2.2
A2.3

Summary of the IEA Energy Technology Perspectives 2017 2DS Scenario ................................................... 61
Incorporating non-combustion emissions ........................................................................................................ 62
Implications for the power sector GHG budget ................................................................................................ 62

Appendix 3: Estimates of hydropower lifecycle emissions from the literature ...................... 65
Appendix 4: Environmental and Social Standards and Assessment Tools .......................... 69

The Climate Bonds Initiative gratefully acknowledges the Technical and Industry Working Group members who
supported the development of the Hydropower Criteria. Proposals were agreed by consensus in the Technical
Working Group, noting a variety of views on specific issues, and considering the feedback from the Industry
Working Group. Technical and Industry Working Group Members are listed in Appendix 1.

ii

1 Introduction
1.1

Funding the goals of the Paris Agreement

The current trajectory of climate change, expected to lead to a global warming of 2.7-3.1°C by 2100,1
poses an enormous threat to the future of the world’s nations and economies. The aim of the Paris
Agreement is to limit warming to a global average of no more than 2°C higher than pre-industrial
levels by the end of the century, and ideally no more than 1.5°C. The effects of climate change andthe risks associated even with a 2ºC rise are significant: rising sea levels, increased frequency andseverity of hurricanes, droughts, wildfires and typhoons, and changes in agricultural patterns andyields. Meeting the 2ºC goal requires a dramatic reduction in global greenhouse gas (GHG)
emissions.
At the same time, the world is entering an age of unprecedented urbanisation and related
infrastructure development. Global infrastructure investment is expected to amount to USD 90 trillion
by 2030, more than the entire current infrastructure stock.2
To ensure sustainable development and avoid dangerous climate change, this infrastructure needs
to be low-carbon and resilient to physical climate impacts, without compromising the economic
growth needed to improve the livelihoods and wellbeing of the world’s poorer citizens. Ensuring thatthe infrastructure built is low-carbon raises the annual investment needs by 3–4%.3 Climate
adaptation needs add another significant amount of investment, estimated at USD 280–500 billion
per annum by 2050 for a 2ºC scenario.4

1.2

The role of bonds

Traditional sources of capital for infrastructure investment (governments and commercial banks) areinsufficient to meet these capital needs; institutional investors, particularly pension and sovereign
wealth funds, are increasingly looked to as viable actors to fill these financing gaps.
Capital markets enable issuers to tap into large pools of private capital from institutional investors.
Bonds are appropriate investment vehicles for these investors as they are low-risk investments withlong-term maturities, making them a good fit with institutional investors’ liabilities (e.g., pensions to
be paid out in several decades).
Bond financing works well for low-carbon and climate-resilient infrastructure projects postconstruction, as bonds are often used as refinancing instruments. Labelled Green Bonds are bonds
with proceeds used for green projects, mostly climate change mitigation and/or adaptation projects,
and labelled accordingly. The rapid growth of the labelled green bond market has shown in practicethat the bond markets can provide a promising channel to finance climate investments.
The Green Bond market can reward bond issuers and investors for sustainable investments that
accelerate progress toward a low-carbon and climate-resilient economy. Commonly used as longterm debt instruments, Green Bonds are issued by governments, companies, municipalities,
commercial and development banks to finance or re-finance assets or activities with environmental
According to Climate Tracker, under current policies we could expect 2.7 – 3.1ºC: http://climateactiontracker.org/global.html
The Global Commission on the Economy and Climate (2018), ‘Unlocking the Inclusive Growth Story of the 21st Century: Accelerating
Climate Action in Urgent Times’: https://newclimateeconomy.report/2018
1

2 2

The Global Commission on the Economy and Climate (2016), ‘Better Growth, Better Climate’: http://newclimateeconomy.report/2016/wpcontent/uploads/sites/2/2014/08/BetterGrowth-BetterClimate_NCE_Synthesis-Report_web.pdf
4
UNEP (2018), ‘Adaptation Gap Report 2018’: file:///C:/Users/12035/Downloads/AGR_2018.pdf
31

benefits. Green Bonds are regular bonds with one distinguishing feature: proceeds are earmarked
for projects with environmental benefits. Green Bonds are in high demand and can help issuers
attract new types of investors.
A green label is a discovery mechanism for investors. It enables the identification of climate-aligned
investments even with limited resources for due diligence. By doing so, a green bond label reduces
friction in the markets and facilitates growth in climate-aligned investments.
Currently Green Bonds only account for less than 0.2% of a global bond market of USD 128 trillion.5
The potential for scaling up is tremendous. The market now needs to grow much bigger, and quickly.

1.3

Introduction to the Climate Bonds Standard and the Climate Bonds Initiative

Activating the mainstream debt capital markets to finance and refinance climate-aligned projects andassets is critical to achieving international climate goals. Robust labelling of Green Bonds is a key
requirement for that mainstream participation. Confidence in the climate objectives and the use offunds of Green Bonds is fundamental their credibility and ensuring they play a valuable role inbuilding a low-carbon and climate-resilient economy. Trust in the green label and transparency of theunderlying assets are essential for this market to reach scale; but investor capacity to assess green
credentials is limited, especially in the fast-paced bond market.
The Climate Bonds Initiative therefore created the Climate Bonds Standard & Certification Scheme,
which aims to provide the green bond market with the trust and assurance that it needs to achieve
scale. The Climate Bonds Initiative is an investor-focused not-for-profit organisation whose goal is topromote large-scale investments through Green Bonds and other debt instruments to accelerate a
global transition to a low-carbon and climate-resilient economy aligned with the goals of the Paris
Agreement.
The Climate Bonds Standard & Certification Scheme is an easy-to-use tool for investors and issuers
to assist them in prioritising investments that truly contribute to addressing climate change. It is
made up of the overarching Climate Bonds Standard detailing management and reporting
processes, and sets of Sector Criteria detailing the requirements that assets in different sectors mustmeet to be eligible for certification. The Certification Scheme requires issuers to obtain independent
verification, pre- and post-issuance, to ensure the bond meets the requirements of the Climate
Bonds Standard.
The goal of the Standard & Certification Scheme is to accelerate investment in a global transition toa low-carbon, climate-resilient economy. Certified bonds are required to be compatible with a highly
carbon-constrained world by linking to assets and projects generating little in the way of emissions.
This is referred to as ‘low carbon-compatibility’ (or ‘low GHG-compatibility’) throughout the
document.
Existing Sector Criteria cover solar energy, wind energy, marine renewable energy, geothermal
power, buildings, transport (land and sea), biofuel production, forestry, agriculture, waste
management and water infrastructure. In addition to hydropower, additional Sector Criteria currently
under development include Electricity Grids & Storage.
The Sector Criteria development process brings together technical and industry experts torecommend the eligibility Criteria for projects/assets that determine whether the related bonds are
certified under the Climate Bonds Standard. This helps drive higher climate standards, greatertransparency and better reporting for projects and assets linked to Climate Bonds.

5

https://www.icmagroup.org/regulatory-policy-and-market-practice/secondary-markets/bond-market-size

2

1.4

The development of Sector Criteria for Hydropower

Hydropower is recognized as having a prominent role in meeting a significant proportion of future
electricity needs. In their Nationally Determined Contributions (NDCs) submitted to the UNFCCC,
109 countries cited specific renewable energy targets, and hydropower accounts for nearly half ofthe technology-specific additional renewable capacity implied by NDCs6. In 2019, hydropower
generated 58% of the world’s renewable electricity.7 Hydropower dams and reservoirs often havemultiple purposes beyond hydropower generation, including water storage and supply for domestic,
industrial and agricultural use, and flood control.
In 2016, the Climate Bonds Initiative launched a group of experts (in a Technical Working Group, or‘TWG’) to develop the necessary and appropriate criteria for investments in hydropower. The aim
was to develop Criteria that can identify and monitor hydropower facilities that are low GHGcompatible, climate-resilient and meet environmental/social good practice, while also screening out
projects that may not meet these conditions for eligibility. These criteria therefore provide a tool forinvestors and issuers to determine whether bonds linked to hydropower assets are considered
consistent with a carbon-constrained world that limits warming to no more than a global average of
2°C higher than pre-industrial levels.
To support this effort, a Hydropower Industry Working Group (IWG) made up of potential bondissuers, investors, financial intermediaries and verifiers was also convened to provide input by
highlighting green investment opportunities in the sector and commenting on trends in the market,
scope, practicality and best practice.
One challenge to note is that, while the atmospheric science underlying climate change isincreasingly well understood, the science of the freshwater carbon cycle which hydropower projects
impact is still in its infancy. This makes it difficult to make firm predictions about the potential positive
and negative impacts of hydropower on GHG emissions and, in turn, to produce recommendations
accordingly. These concerns are outlined in more detail in Sections 3.3 and 3.4 below. Given thelimited science base, the TWG have taken a conservative approach.
Therefore, one of the recommendations made is that the Criteria will be reviewed within the next
three years to assess whether the scientific evidence around the freshwater carbon cycle hasadvanced such that it may allow for more accurate measurements of hydropower GHG emissions.

1.5This document and associated documents

This document supports the Hydropower Criteria. It captures the issues raised and discussed by the
TWG, as well as the arguments and evidence in support of the Criteria. It is structured as follows:
Section 2 provides a brief overview of the hydropower sector: its current status, trends and role inmitigating and adapting to climate change.
Section 3 outlines the objectives and principles of the Hydropower Criteria. It states that ahydropower asset must pass two sets of requirements to be eligible for certification: (i) mitigation
requirements and (ii) adaptation, resilience and other environmental and social requirements.
Section 4 describes the rationale behind the mitigation requirements.
Section 5 discusses any differences from the mitigation requirements for two special cases: pumped
storage and cascade systems.
6 International Renewable Energy Association (2017), ‘Untapped potential for climate action: Renewable energy in Nationally Determined

Contributions’: http://www.irena.org/publications/2017/Nov/Untapped-potential-for-climate-action-NDC
7
Renewable Energy Policy Network (2021), ‘Renewables 2020 Global Status Report’: http://www.ren21.net/reports/global-status-report/

3Section 6 describes the rationale behind the adaptation, resilience and other environmental andsocial requirements.
Section 7 provides a brief reminder of disclosure requirements.
As noted above, the Hydropower Criteria will be reviewed no later than three years after launch, or
potentially earlier if the need arises, at which point the TWG will take stock of issuances that arise in
the early stages, as well as any developments in improved methods and data, that have occurred in
the interim. More specifically, in respect of decarbonisation pathways for the power sector, CBI will
review the emissions intensity thresholds for all renewable energy sector criteria within 2 years of thelaunch of these Criteria.
As a result, the Criteria are subject to revision over time. However, Certification will not be withdrawn
retrospectively, and revisions made to the Hydropower Criteria will not be applied to existing
Certifications.

42 Sector Overview
2.1 What is hydropower?
2.1.1Types of hydropower
The IPCC classifies hydropower into three main categories8: run-of-river, storage (reservoir) andpumped storage. In addition, in-stream technology – a new and less developed technology represents a fourth category. All of these are within the scope of the Criteria in principle, althoughsome are more likely to be bond-financed than others.
Run-of-river
A run-of-river hydropower facility converts energy drawn from river flows to produce electricity. In a
run-of-river hydropower facility, a portion of the river water is diverted to a channel or pipeline(penstock) to convey the water to a hydraulic turbine. The hydraulic turbine is connected to a
generator to produce electricity. The electricity production profile will depend mainly on the local river
flow conditions, though short-term storage (hourly, daily) may be included to meet varying demand.
Smaller installed capacities are more likely to be run-of-river.
Storage (reservoir or impoundment)
A storage hydropower facility includes a reservoir with the capability of storing water for electricity
generation over weekly, monthly or seasonal time scales. The generating stations are located at thedam toe or further downstream and connected to the reservoir through tunnels or pipelines. The
design of the reservoir will depend on the landscape, which might be inundated river valleys, where
the reservoir will be an artificial lake, or high-altitude lakes. One power plant may be connected withseveral reservoirs as well as to neighbouring watersheds or rivers if applicable.
For clarity, this document will refer to storage (reservoir) hydropower as impoundment hydropower.
Pumped storage
A pumped storage hydropower (PSH) plant is essentially an energy storage system rather than anenergy source. In a typical pumped storage plant, water is pumped from a lower reservoir and stored
in an upper reservoir during off-peak hours, and then drawn from the upper reservoir to provide
peaking, ancillary and other services. Although the energy losses during the process of pumping canmake the pumped storage plant a net energy user, pumped storage facilities provide large-scaleenergy storage system benefits. In fact, pumped storage is the largest-capacity form of grid energy
storage now readily available worldwide and is predicted to grow significantly over coming years to
help manage increasing penetration of intermittent renewable technologies such as wind and solar.
In-stream/hydrokinetic technology
In-stream/hydrokinetic technology refers to turbines which convert energy from flowing water without
the need of a hydraulic head. Hydrokinetic technology is a less mature9 form of hydropower being
developed to capture energy from tides, currents, free-flowing rivers, pipes and engineered
waterways.
Note, however, that any applications of hydropower technology in marine rather than inland
waterway contexts are not within the scope of the Criteria and are instead covered under the Marine
Renewables Sector Criteria.

8

Kumar, A., T. Schei, A. Ahenkorah, R. Caceres Rodriguez, J.-M. Devernay, M. Freitas, D. Hall, Å. Killingtveit, Z. Liu (2011), Hydropower,
in IPCC Special Report on Renewable Energy Sources and Climate Change Mitigation, Cambridge University Press, Cambridge, United
Kingdom and New York, NY, USA
9 For this reason it will not receive much more attention in the document. We include it here for completeness.

5

While these categories are useful for illustrating the potential scope of the Criteria, it is a principle of
the Sector Criteria that different categories of hydropower should not be automatically assumed tohave a greater or lesser environmental and social impact, but rather should be assessed on a caseby-case basis.

2.1.2 Scale categories of hydropower
Hydropower is also often categorised by size, although there is no consensus on how to do so.
Small-scale is most commonly less than 10-50 MW and large-scale is often in the hundreds of MW.10
The International Commission on Large Dams defines a large dam as either: a dam with a height of
15m or greater from lowest foundation to crest; or (ii) a dam between 5-15m high impounding morethan 3 million cubic metres.11 Large dams have received a great deal of scrutiny and controversy formany years over their potential impacts on the environment and affected communities, from
disrupted hydrology to corruption and population displacement.12 Against this history, smallhydropower is often promoted as a low-cost technology suitable for remote, off-grid communities
with minimal environmental impact.13
A principle of the Sector Criteria adopted early on by the TWG is that there should be no distinction
made between large and small hydropower in the assessment, as it cannot be simply assumed that
small hydropower automatically has a lesser environmental and social impact. The impacts of abadly sited “small” dam can be significant, just as well-sited and well-designed large dams can have
limited impacts. In addition, scientists have raised the possibility that the cumulative ecological andhydrological impacts of many small facilities can be significant.14 The IPCC also states that general
concepts like “small” or “large” hydro are not technically or scientifically rigorous indicators of thecharacteristics and impacts of the hydropower plants.15 Hydropower is a highly site-specifictechnology, where each project is tailor-made for a particular location, within a given river basin, tomeet specific needs for energy and water management services.

2.2 The significance of hydropower
2.2.1 Hydropower today
Hydropower is currently the world’s most significant renewable energy technology, contributing a fifthof global installed electricity capacity and approximately 16%of generation.16 Over a third of non-PSHhydroelectric capacity is found in East Asia and the Pacific; roughly similar amounts are found in therest of Asia, Europe, North and Central America, and South America; and only 3% in Africa.17 Latin
America is the most dependent region, with 52% of its generating capacity made up fromhydropower.18 Europe contains a significantly higher ratio of PSH to non-PSH capacity than other

10

Kumar, A., T. Schei, A. Ahenkorah, R. Caceres Rodriguez, J.-M. Devernay, M. Freitas, D. Hall, Å. Killingtveit, Z. Liu (2011),
Hydropower, in IPCC Special Report on Renewable Energy Sources and Climate Change Mitigation, Cambridge University Press,
Cambridge, United Kingdom and New York, NY, USA
11
http://www.icold-cigb.net/GB/dams/definition_of_a_large_dam.asp
12
Kumar et al. ibid; WCD (2000), Dams and Development: A New Framework for Decision-Making, the Report of the World Commission on
Dams, Earthscan Publications; International Rivers (2016), “Problems with Big Dams”, International Rivers website:
https://www.internationalrivers.org/problems-with-big-dams,
13 Liu, H., Masera, D. and Esser, L., eds. (2013). World Small Hydropower Development Report 2013. United Nations Industrial
Development Organization; International Center on Small Hydro Power. Available from: www.smallhydroworld.org
14
http://www.indiaenvironmentportal.org.in/files/file/environmental%20degradation%20&%20hydroelectric%20projects.pdf; Kibler, K.M.,
Tullos, D.D. (2013), “Cumulative biophysical impact of small and large hydropower development in Nu River, China”, Water Resources
Research 49(6):3104-3118
15 Kumar et al. ibid;
16
Renewable Energy Policy Network (2021), ‘Renewables 2020 Global Status Report’: http://www.ren21.net/reports/global-status-report/
17 IHA (2020), 2020 Hydropower Status Report, International Hydropower Association, available at: https://hydropower-assets.s3.eu-west2.amazonaws.com/publications-docs/2020_hydropower_status_report.pdf
18
Derived from US Energy Information Administration International Energy Statistics

6

regions.19 Currently, there is still large untapped potential remaining in South America, Africa andAsia. Table 1 presents some basic statistics for hydropower capacity and generation.

Table 1: Global hydropower in numbers (statistics for 2019)20
Global installed capacity

Non-pumped: 1,150 GW; Pumped: 158 GW

Global growth in capacity in 2019

Non-pumped: 18.5 GW; Pumped: (2.3) GW

Global generation

4,306 TWh/year; 17% of global electricity

Global technical potential

14600 - 16400 TWh/year

Average global load factor

38%

Proportion of world’s electricity
storage for grid systems

96%
China 356 GW
Brazil 109 GW

Top 5 countries, capacity

USA 103 GW
Canada 81 GW

Top 5 countries, growth in 2016

India 50 GW
China 11.4 GW
Brazil 6.3 GW
Ecuador 2 GW
Ethiopia 1.5 GWSouth Africa 1.3 GW

2.2.2 The role of hydropower in mitigating and adapting to climate change
Hydropower is likely to remain a prominent energy option in the global push to decarbonise, due toits potential scale, low GHG emissions, important role in grid support and energy storage capability.
While the issue of reservoir emissions has attracted increasing attention over recent years, evidence
indicates that on average, and acknowledging the highly context-specific nature of the technology,hydropower has one of the lowest GHG footprints of any electricity generation technology (seeSections 3.3 and 4 and Appendix 3).
Modelling suggests that near-total decarbonisation of the power sector by the latter half of the
century is required for a global emissions pathway consistent with a 2º scenario (see Section 4.4.3).
This implies a global average power sector emissions intensity (emissions per unit of output) well
below 100 gCO2e/kWh. Most of the world’s cleanest grids have a high proportion of hydropower(Figure 1). Historically, no country other than France has ever achieved a grid carbon intensity ofless than 100 gCO2/kWh without a significant amount of hydropower. France decided in the 1970s
to commit to nuclear power. Only one country in the world (Denmark) has lowered emissions below
200 gCO2e/kWh with almost no domestic hydropower or nuclear power, which it achieves partly
through imports from its major hydropower-generating neighbours, Norway and Sweden, when wind
19 IHA (2020), 2020 Hydropower Status Report, International Hydropower Association, available at: https://hydropower-assets.s3.eu-west-

2.amazonaws.com/publications-docs/2020_hydropower_status_report.pdf
20
IHA (2020), ibid.; IHA (2019), 2019 Hydropower Status Report, International Hydropower Association, available at: https://hydropowerassets.s3.eu-west-2.amazonaws.com/publications-docs/2019_hydropower_status_report.pdf IEA (2010), Renewable Energy Essentials:
Hydropower, International Energy Agency, available at:
http://www.iea.org/publications/freepublications/publication/hydropower_essentials.pdf. Kumar, A., T. Schei, A. Ahenkorah, R. Caceres
Rodriguez, J.-M. Devernay, M. Freitas, D. Hall, Å. Killingtveit, Z. Liu (2011), Hydropower, in IPCC Special Report on Renewable Energy
Sources and Climate Change Mitigation, Cambridge University Press, Cambridge, United Kingdom and New York, NY, USA

7speeds are low. Countries which have achieved ultra-low-carbon grids (< 25 gCO2e/kWh) in largepart through significant use of hydropower include Iceland, Ethiopia, Costa Rica, Norway, Paraguay,
Sweden, Switzerland and Tajikistan.

Figure 1: percentage of hydropower and grid emissions intensity of 136 countries

Source: CBI analysis; data from EIA International Energy Statistics and IEA ‘CO2 emissions from fuelcombustion’ (2017)

In addition to low GHG generation, depending on type, hydropower is able to provide flexible andfast-ramping generation, ancillary services such as frequency and voltage support, and storage. It is
increasingly recognized that large-scale deployment of renewable energy will require storage tocompensate for the variable generation of wind and solar resources. Pumped storage is currently themost proven and reliable form of large-scale electricity storage, providing 96% of the world’s storage.
While impoundment hydropower is also deployed to balance supply and demand, pumped storage
has the additional benefit of being able to reduce curtailment, Operational flexibility has the further
benefit of helping to reduce transmission congestion,21 improving the resilience of grids which may
be under stress from increased load, age or resource variability.
Dams and reservoirs have multiple purposes beyond hydropower generation, including water
storage and supply for domestic, industrial and agricultural use, and flood control. Along with gooddemand management and water governance, improved water storage can promote food security,
economic development and increased resilience in a changing climate.
Ultimately hydropower’s role in mitigating and adapting to climate change will require a balanced
appraisal of the advantages, disadvantages and trade-offs of each project. See Sections 3.3 and 3.4
for further discussion.

2.2.3 Looking forward for hydropower
Globally, hydropower installed capacity grew by 2.1% per year on average over the 2015-2019
period; in 2019, the growth rate was 1.2%.22, driven in part by increased demand for clean electricity
and water management services. Brazil and China led the way in new capacity added in 2019,accounting for 30% and 26%, respectively.23 Technological, economic and policy trends relevant to21

US Department of Energy (2016), ‘Hydropower Vision: A New Chapter for America’s Renewable Electricity Source’

22 IHA (2020), Ibid.
23 Ibid.

8

hydropower include:
•
•
•
•
•

A range of decarbonisation policy drivers worldwide, including targets, feed-in tariffs,
concessional finance, and future increased demand for offsets from carbon markets;
Increasing awareness of the need for grid infrastructure modernization and resilience;24
Long-distance, high-voltage transmission lines integrating hydropower into larger electricity
markets (for example, SIEPAC in Central America and CASA-1000 in Central Asia25);
Growing realization of the need for storage in low-carbon electricity systems, including thedevelopment of hybrid energy systems that integrate hydropower with variable renewable
technologies to offset their intermittency; andInnovations to improve the economics and range of locations for hydropower such as
modular systems, ultra-low-head turbines26 and hydropower in man-made conduits.27

24

US DoE ibid.
IHA (2015), 2015 Hydropower Status Report, International Hydropower Association, available at: https://www.hydropower.org/2015hydropower-status-report
26
Bishop, N. and Linke, D. (2015), New Pathways for Hydropower: Getting Hydropower Built—What Does It Take?, Report by the Hydro
Research Foundation with UT-Battelle for the US Department of Energy, available at:
http://www.hydrofoundation.org/uploads/3/7/6/1/37618667/new_pathways_for_hydro_final_ornltm2015_48-1.pdf; Hydro Green Energy(2016) company website: http://hgenergy.com
27
Bishop et al. ibid.; Leviathan Energy (2016), “Power from your pipes”, company website: http://www.benkatina.com/
25

9

3 Objectives and Principles of the Hydropower Criteria
3.1 Guiding principles
The objective of CBI has been to develop Hydropower Criteria that can maximize viable bondissuances with verifiable environmental and social outcomes. This means the Criteria need tobalance the following objectives:••

They form a set of scientifically robust, verifiable targets and metrics; andThey are usable by the market, which means they must be understandable for non-scientificaudiences, implementable at scale, and affordable in terms of assessment burden.

The Criteria should:• Enable the identification of eligible assets and projects (or use of proceeds) related tohydropower investments that can potentially be included in a Certified Climate Bond;• Deploy appropriate eligibility Criteria under which the assets and projects can be assessed
for their suitability for inclusion in a Certified Climate Bond; and• Identify associated metrics, methodologies and tools to enable the effective measurement
and monitoring of compliance with the eligibility Criteria.
Given that a number of protocols relevant to hydropower already exist (see Section 6.4 andAppendix 4), the TWG has taken care not to reinvent the wheel, but rather draw from these existing
protocols and guidance.
The highly context-specific nature of hydropower means that each asset or project should beassessed on a case-by-case basis. As mentioned in Section 2, a decision was made early on not toapply any automatic exemptions based on assumptions that certain types or size of a facility have alower impact than others.
The Criteria are made up of two components, both of which need to be satisfied for assets to beeligible for inclusion in a Certified Climate Bond.
These are:
1. Climate Change Mitigation Component – addressing whether the asset or project issufficiently ‘low GHG’ to be compliant with rapid decarbonisation needs across the power
sector - see Sections 4 and 5 for details.
2. Climate Change Adaptation and Resilience Component – addressing both whether the facility
is itself resilient to climate change and not adversely impacting the ability of affected
populations to adapt. This encompasses a broad set of environmental and social topics – see
Section 6 for details.

3.2 Potentially eligible assets
The following assets in the hydropower sector are potentially eligible for inclusion in a Certified
Climate Bond, subject to meeting the eligibility Criteria discussed in this document and summarized
in the associated Hydropower Criteria document.
• Power stations:o Run-of-rivero Impoundment
o Pumped storage• Applications of in-stream technology

10•

Dedicated infrastructure such as transmission lines

Although previously mentioned, for the further avoidance of doubt, the Criteria cover hydropower
facilities relating to inland waterways. They do not cover tidal power located in marine or estuary
environments (covered under the Marine Renewables Sector Criteria) or any other kind of marine
application.

3.3 Aspects of climate performance to be assessed
3.3.1 Overview
The primary climate-related issues which the Hydropower Criteria need to address are:••

Low GHG-compatibility: hydropower facilities affect the natural carbon cycle of the catchment
in which they are situated to greater and lesser extents, resulting in a net change in GHG
emissions which may be positive or negative and can range from negligible to (in rare cases)very sizeable. The question of when hydropower facilities can be regarded as low GHG
assets compatible with a low-carbon economy therefore needs to be addressed (Sections
3.3.2 and 4);
Adaptation & resilience: the extent to which hydropower facilities are (or can be made to be)resilient to changing hydrological patterns and/or can provide climate adaptation services.
There may also be concerns a project could exacerbate climate impacts for local or regional
populations, which should be assessed (Sections 3.3.3 and 6.2).

Low GHG-compatibility rests in the ability of hydropower to provide clean energy with lifecycle GHG
emissions well below those of fossil fuel power stations, particularly because, as a non-intermittent
source, hydropower is often favoured over other renewables. In fact, its reliability as a source ofpower is evidenced by the long list of countries, from Canada to Tajikistan, which use hydropower as
their main generating technology. Hydropower can also make a substantial contribution to integratingintermittent renewables into grid systems. However, the risk of high levels of GHG emissions
remains and needs to be tested, as a small minority of impoundment hydropower facilities have been
demonstrated to have very high life-cycle emissions of the same order of magnitude as thermal
facilities28 (see Appendix 3). This has been found geographically to be very context-dependent andtherefore the risk of high levels of GHG emissions needs to be tested on a case-by-case basis.
Climate adaptation services can include improved water supply, drought mitigation and flood
regulation by properly designed and sited dams and reservoirs. Poorly designed facilities could,
however, add to water and food insecurity as well as exacerbate flood risk. Water scarcity andextreme weather events may pose risks to the ongoing viability of hydropower in some locations,and prompt additional design and efficiency requirements.
The issues relating to adaptation, mitigation potential and certification differ according to the type of
facility. For example:• Run-of-river and in-stream facilities with little-to-no storage potential typically have morevariable generation profiles dependent on precipitation and seasonal variation, and may
experience greater challenges in adapting to changing hydrological patterns.
• Impoundment hydropower reservoirs are built for a range of purposes, such as irrigation anddrinking water supply; electricity generation may not be the primary purpose. This may
increase adaptive capacity, but also raises difficulty in establishing the proportion of lifecycle
emissions which can be attributed to electricity generation alone. As mentioned, someimpoundment facilities also run the risk of being significant emissions sources.
• Pumped storage can be viewed as a component of a broader storage strategy to smooth out
28 Bruckner at al. (2014), Energy Systems. In: Climate Change 2014: Mitigation of Climate Change. Contribution of Working Group III to

the Fifth Assessment Report of the Intergovernmental Panel on Climate Change. Cambridge University Press

11

intermittent generation from wind and solar and enable a higher proportion of suchintermittent resources to be integrated into supply grids.29
These issues are summarised in Table 2 and discussed in more depth in Sections 3.3.2 and 3.3.3.

Table 2: Summary of climate-related issues for different types of hydropower
Climate-related issue

Run-of-river

Impoundment

Pumped storage

In the majority ofcases, but depends ona range of factors
May require scrutiny
and depends on a
range of factors

Comparison is not always
appropriate given PSH’s
storage function

Mitigation
Lower lifecycle
emissions than thermal
Comparable or lower
lifecycle emissions thanother renewables
Ability to support
increasing variable
renewable energy
Adaptation & Resilience

Almost certainly

Almost certainly

Limited capability

Resilience

Most vulnerable towater stress

Adaptation services

Limited capability

Adaptation risks

Generally less likely
to exacerbate floodand ecosystemrisks, but should
nevertheless be
scrutinized,
particularly
cumulative impactsof multiple projects

Yes, compensation forvariable generation
Vulnerable to water
stress; resilience toextreme weather mostvital, for safety
reasons
Water supply and floodrisk regulation, if welldesigned and operated
Evaporative losses
can reduce water
availability. Poor
design and operation
could contribute towater and foodinsecurity, erosion, or
poor flood control.
Most potential
ecosystem and social
impact.

Comparison with other storage
options may be more relevant
Yes, compensation for variablegeneration and reduced
curtailment

Not vulnerable to streamflow
variation

Can add to water storage

Does not add to water scarcity
if using natural lake. Can add
to downstream erosion. Less
likely to increase flood risk.

The interrelationship between water and energy consumption and provision – the ʻwater-energy
nexusʼ -- has gained prominence in international policy dialogue.30 All forms of energy generation
require water, and it would not necessarily be correct to assume that a water-stressed area could
support a thermal or nuclear power station better than it could support a hydropower plant (seeSection 2.3.3 for further discussion). However, hydropower is far more constrained by geography,
and this may affect its resilience to changed hydrology more than other technologies.

3.3.2 Hydropower and climate change mitigation
Climate change mitigation potential rests in the ability of hydropower to provide clean energy withlifecycle GHG emissions well below those of fossil fuel power stations. The sources of hydropowerlifecycle emissions include reservoir emissions from the modification of the natural carbon cycle inthe catchment; production and transportation of materials; construction of dams, facilities and
29 Impoundment facilities can also assist in balancing the system by being on stand-by for periods of low supply, but they differ in that they

can store potential energy, but cannot convert electrical energy to potential energy as pumped storage can.
30
D. Glassman, M. Wucker, T. Isaacman and C. Champilou (2011), The Water Energy Nexus: Adding Water to the Energy Agenda,
World Policy Institute Policy Paper

12transmission lines; and operational emissions, such as energy used in pumping systems andbuildings.
While it is well known that there are GHG emissions from natural lakes and man-made reservoirs,
these are part of a larger freshwater carbon cycle which is still poorly understood. The emissions
derive principally from solid and dissolved organic carbon products that flow from the landscape into
watercourses and undergo a series of natural reactions that lead both to the sequestration of carbon
in sediments as well as to the generation of GHG emissions. Freshwater carbon flows also reach thesea where they undergo a similar set of marine processes.
While the presence of large water bodies (such as natural or manmade lakes) obviously affects
these processes, there is very limited scientific understanding of the overall freshwater carbon cycle.
However, it is agreed that there are substantial emissions of both CO2 and CH4 (methane) fromnatural freshwater systems of rivers, lakes and wetlands.
The GHG emissions from the freshwater carbon cycle are currently addressed through two dominantscience streams:
1) Extensive work has been done to measure emissions of GHGs (primarily CH4) from built
reservoirs and natural lakes and to model and predict their evolution. This sometimes considers thenature of the upstream catchment but is limited downstream to the point where water is discharged
from the reservoir, and associated degassing. It generally does not consider the quantity and fate ofcarbon flows and processes further downstream and how a reservoir may alter those dynamics.
2) Higher-level work is being undertaken on the overall freshwater carbon cycle at wholeriver/catchment scale. This considers overall sources, fluxes and processes of carbon along thelength of streams and rivers as well as the final discharge to the ocean (some work also considers
the fate of transported carbon in the ocean – and whether it is sequestered or remains active).
Work on hydropower has drawn primarily from the first stream and the consideration of hydropower
Criteria necessarily focuses on this dimension. The TWG did recognise the importance of the second
stream because it will enable a determination of the net impact of impoundment and its operation on
the overall freshwater carbon cycle. This will, in turn determine, the potential climate impact of any
water resource project. However, limited consideration has been given to the second stream as thisis considerably more complex and requires further scientific evidence.
Reservoirs and lakes are significant sources of emissions and it is these that are considered by the
Criteria. When land is flooded through natural flow variability or to create a reservoir, thedecomposition of flooded organic matter and soils releases CO2 andCH4, in addition to the CO2 andCH4 generated by organic matter from the upstream catchment. Carbon emissions fromwatercourses, including lakes, are thus a continuous feature of the freshwater cycle. Clear
accounting of the net change in these GHG emissions is vital to determine the impact of any water
resource investment and its compatibility with the policy ambition of reducing GHG emissions.
Emissions estimates are naturally highly specific to the geography and ecology of the area, as wellas to engineering design. It should also be understood that these are simply part of a larger process.
Many natural terrestrial habitats emit GHGs, so it is important to predict the net change, i.e., theimpact on GHG emissions throughout the freshwater system from the investment.
In the absence of sufficient scientific evidence or methodology to measure downstream impacts, aconservative approach considers simply the net emissions from changes to natural or manmadelakes. The key sources of variation in emissions per unit of reservoir surface area include:31:
31

Kumar, A., T. Schei, A. Ahenkorah, R. Caceres Rodriguez, J.-M. Devernay, M. Freitas, D. Hall, Å. Killingtveit, Z. Liu (2011),
Hydropower, in IPCC Special Report on Renewable Energy Sources and Climate Change Mitigation, Cambridge University Press; N.
Barros, J. J. Cole, L. J. Tranvik, Y. T. Prairie, D. Bastviken, V. L. M. Huszar, P. del Giorgio and F. Roland (2011), “Carbon emission fromhydroelectric reservoirs linked to reservoir age and latitude”, Nature Geoscience 4:593-596

13

•
•
•
•
•
•
•

Reservoir location, environmental conditions and climate
Temperature
Flow rate
Carbon stock and type of flooded area (for example, peatland or woodland would be higher
than grassland)
Depth, residence time of water, and depth of water intake structure
Water quality
Reservoir age

In addition, GHG intensity (gCO2e/kWh) estimates will depend on:• Power density (W capacity per m2 reservoir)• Load / capacity factor• Technological performance (turbine efficiency)
Also important to note is that hydropower can contribute further to reducing grid emissions byimproving the feasibility of intermittent renewables through grid reliability services: flexible
generation, ramping capability and energy storage. This can result in greater renewable generating
capacity and reduced curtailment than would otherwise be possible. Assessing where and whether
this is the case, though, poses a challenge.
See Appendix 3 for an overview of hydropower lifecycle emissions estimates from the literature.

3.3.3 Hydropower and climate adaptation and resilience
There is increasing awareness of the dependence of all forms of electricity generation on adequate
water resources.32 Changed precipitation, glacier cover and hydrological patterns pose a particularrisk to hydropower.33 Significantly reduced streamflow in some locations could negatively impact thecapacity and/or storage of a hydroelectric power station, or in extreme cases render it inoperable. In
regions that are prone to sedimentation, climate change could exacerbate the management of
sediment inflow to hydropower projects.
Instances where drought has had severe impacts on hydropower generation have occurred recently
in Tasmania,34 Kenya35 and Venezuela.36 Drought events have in the past led to electricity rationingin Brazil, with a severe impact on industry and efforts to diversify its energy mix.37 Many of theworld’s most water-stressed river basins, such as the Balkhash and Sirdaryo in Central Asia,38
contain or are planning hydroelectric facilities.
A recent study in Nature Climate Change employing a hydrological-electricity system model39

M. T. H. van Vliet, D. Wiberg, S. Leduc and K. Riahi, “Power-generation system vulnerability and adaptation to changes in climate andwater resources”, Nature Climate Change 6:375-381
33
ADB (2012), Climate Risk and Adaptation in the Electric Power Sector, Asian Development Bank
34
Harris, M. (2016), “Falling reservoir levels strain Hydro Tasmania's supply”, HydroWorld.com, available at:
http://www.hydroworld.com/articles/2016/03/falling-reservoir-levels-strain-hydro-tasmania-s-supply.html
35
DFID (2009), Water storage and hydropower: supporting growth, resilience and low-carbon development, a DFID evidence-into-action
paper, UK Department for International Development36
Hambling, D. (2016), “Hydro power falters in persistent drought”, The Guardian, available at:
http://www.theguardian.com/news/2016/mar/30/weatherwatch-hambling-venezuela-hydroelectric-dam-guri-dry-reservoirs-colombia37
CEE (undated), Brazil’s Power Market Crisis, Case Study, Center for Energy Economics, Jackson School of Geosciences, University ofTexas at Austin; Poindexter, G.B. (2016), “2016 drought eases and continues in Brazil, affecting hydroelectric power generation”,
HydroWorld.com, available at:
http://www.hydroworld.com/articles/2016/03/2016-drought-eases-and-continues-in-brazil-affecting-hydroelectric-power-generation.html;
Luomi (2014), ‘Sustainable Energy in Brazil: Reversing Past Achievements or Realizing Future Potential’, Oxford Institute for Energy
Studies38
WRI (2013), Aqueduct country and river basin rankings: a weighted aggregation of spatially distinct hydrological indicators, World
Resources Institute Working Paper December 201339
van Vliet et al. ibid.
32

14

concluded that 61-74% of the world’s hydropower stations40 are located in regions expected to face“considerable declines in streamflow” by the period 2040-2069, resulting in a potential loss of overall
capacity of 1.2-3.6% by the 2050s, and monthly maximum reductions of 9.6-17%. These figuressuggest potentially serious seasonal impacts in some regions. The study predicted “consistentincreases in annual mean streamflow for high-latitude regions” and “consistent decreases instreamflow” for “the United States, southern and central Europe, Southeast Asia and southern partsof South America, Africa and Australia.”41 Good quality hydrological modeling, streamflow monitoringand improved forecasting techniques are therefore essential elements of making hydropower
climate-resilient.
The study concluded that a 10% increase in the efficiency of hydropower could offset the impact ofwater constraints in most regions. While most of the more recently-built large hydropower projects
will operate at close to their theoretical limit for efficiency in optimal conditions,42 there is potential for
improved efficiency in many existing facilities. As an additional resilience strategy, this could include
a variety of improved efficiency options such as re-turbining existing hydropower facilities with more
efficient units.
In addition to drought, hydroelectric infrastructure will also need to be resilient to extreme weather
and flooding, illustrated by the difficulties facing the Oroville Dam in California after heavy rains in
February 2017. Options include physical infrastructure enhancements such as increasing damheight, dam design, improved spillway design, turbines resilient to maximum water speeds andsediment loads, improved planning and maintenance, and overall flood management strategies suchas upstream afforestation and enhanced forecasting methods.43
The need for hydropower not to exacerbate climate change impacts for external stakeholders also
needs to be considered. In some cases, over-exploitation of hydropower, or poorly planned andmanaged hydropower, could do so by restricting flow, damaging ecosystems and reducing water
quality. Hydropower in the Yongding basin in China is thought by some to have contributed to thedramatic decline of a river which was once an important source of water to Beijing.44 Deforestation,eroded riverbanks and high sediment loads caused by hydropower facilities and other dams havebeen linked to serious flooding in India.45
While hydroelectric facilities do not consume water in the sense that a thermal power station
consumes fuel, “water consumption” or the “net water footprint of hydropower” is nevertheless aphrase which crops up in discussion of the environmental impacts of hydropower, referring toevaporative losses from the reservoir.46 This could potentially reduce the water available todownstream users, adding to any climate-induced water stress.
Natural ecosystems play a role in regulating water flow and avoiding siltation. As a consequence,protecting ecosystem services may be seen as an adaptation strategy relevant to hydropower. At thebroadest scale, some academics and conservationists argue that evapo-transpiration by the Amazon
rainforest is regionally important in maintaining rainfall patterns,47 which would be relevant to mostSouth American hydropower.
40

Note that hydropower facility capacities vary enormously, so this percentage does not necessarily reflect the percentage of capacity
affected.
41
The study examined a range of global mitigation scenarios (Representative Concentration Pathways) as set out in the IPCC Fifth
Assessment Report.
42
Kumar et al. ibid.
43
ADB (2012), Climate Risk and Adaptation in the Electric Power Sector, Asian Development Bank
44
South China Morning Post (2011), "Future sold down the river”, available at: http://www.scmp.com/article/988561/future-sold-down-river45
Wikes, T. and Asokan, S. (2014), “Hydro-power plants blamed for deadly floods in India”, Reuters, available at:
http://in.reuters.com/article/uk-india-flood-idINKBN0DF10F20140429
46
Hogeboom, R.J., Knook, L., Hoekstra, A.Y. (2018), ‘The blue water footprint of the world’s artificial reservoirs forhydroelectricity, irrigation, residential and industrial water supply, flood protection, fishing and recreation’, Advances in Water Resources
113 (2018) 285–294
47
Fearnside, P.M. (2004), “Environmental Services as a Basis for the Sustainable Use of Tropical Forests in Brazilian Amazonia”, in
Ortega, E. & Ulgiati, S. (editors): Proceedings of IV Biennial International Workshop Advances in Energy Studies, Unicamp, Campinas,
SP, Brazil; Mulligan, M., Rubiano, J.R., Burke, S. & Van Soesbergen, A. (2013), Water Security in Amazonia, Report for Global Canopy
Programme and International Center for Tropical Agriculture as part of the Amazonia Security Agenda project15

In terms of adaptation services, water scarcity will be perhaps the foremost concern as the world
adapts to climate change. Water management infrastructure which helps populations adapt is seen
as key to avoiding future conflict,48 increasingly reflected in the investment priorities of international
financial institutions. Impoundment facilities could potentially aid adaptation by regulating watersupply. Well-designed reservoirs can store excess rainfall and release water during drier periods,
mitigating both drought and flood risk.

3.4 Other environmental and social impacts
Large dams have generated considerable controversy over a number of decades. The landmark
World Commission on Dams Report of 200049 emerged from worldwide growing opposition to dams
on environmental and social grounds.
The social, environmental and governance problems associated with large dams have included:50
•
•

•

•
•
•

•
•
•
•

Population displacement and loss of livelihood due to flooding of houses and farmland
Ecological impacts of both the reservoir and modification of river flowo barriers to fish migration and population fragmentation of all types of species
o eutrophication and algal blooms
o loss/damage to riparian ecosystems and downstream wetlands
Downstream impacts on water quantity and quality, particularly trans-boundaryo reduced water security
o water scarcity exacerbating conflict risko loss of livelihood
Loss of amenity and cultural heritage
Sediment redistribution, leading to upstream flood risk and downstream erosion
Public health impacts
o opportunities for disease vectors to breed and pathogens to spreado loss of food security (agriculture and aquaculture)o reduction in water quality
Corruption and human rights violations
Inequitable distribution of environmental/social cost and economic benefit
Poor financial performance of public investment
Cumulative impacts from multiple dams in a catchment

The potential scale and seriousness of these impacts, and the sensitivities around them, arerecognized and are addressed clearly by the Hydropower Criteria. Note that:• In the case of hydropower, we view adaption, resilience and other environmental and social
issues as being particularly closely interlinked. For this reason, the Criteria include acomprehensive assessment procedure to address all these issues in tandem (see Section 6.2).
• We do not make the assumption that any particular type or size of hydropower project is likely or
unlikely to have significant environmental or social impacts and emphasise the need to assesseach project in its own context.

48

Kumar et al. ibid.
WCD (2000), Dams and Development: A New Framework for Decision-Making, the Report of the World Commission on Dams,
Earthscan Publications, London and Sterling, VA
50
Kumar et al. ibid.; WCD ibid.; DFID ibid.; International Rivers (2016), “Problems with Big Dams”, International Rivers website:
https://www.internationalrivers.org/problems-with-big-dams; IFC (2015), Hydroelectric Power: A Guide for Developers and Investors,
International Finance Corporation
49

16

4 Climate Change Mitigation Requirements
4.1 An overview of the Mitigation Component of the Hydropower Criteria
Figure 2 below summarises the decision tree for the Mitigation Component of the Hydropower
Criteria for all facilities. Additional considerations for pumped storage facilities are addressed
separately in Section 5.1 given their additional services and impacts.
The Mitigation Component comprises:
1. A Predictive Screen based on power density: designed to identify facilities that are highly
unlikely to generate problematic emissions. Such facilities pass the Mitigation Component
with no further steps.
2. A GHG Assessment of emissions intensity. Those facilities which do not pass the Predictive
Screen move onto a GHG Assessment, a desktop methodology for predicting the GHG
emissions due to the facility compared to a ‘no project’ counterfactual, based on sitecharacteristics. Here, GHG emissions are expressed as an intensity in units of gCO 2e per
kWh of electricity produced.
3. A Low GHG-Compatibility Test. The emissions intensity derived from the GHG Assessment
is compared to a threshold to determine whether it has a sufficiently low GHG footprint.
Facilities whose estimated emissions intensity falls below the Low GHG-Compatibility Test
threshold pass the Mitigation Component of the Hydropower Criteria with no further steps.
a. Allocation: Many hydropower facilities are incorporated into dams and reservoirs
which were built primarily for water storage or other purposes; therefore, it isreasonable to consider that a hydropower facility in this circumstance would be
accountable for only a proportion of the emissions of that dam or reservoir. For
simplicity, the Low GHG-Compatibility Test initially assumes 100% of the emissions
are allocated to the hydropower facility. If the facility does not pass the Low GHGCompatibility Test on this basis, an allocation assessment is completed; that is, theportion of emissions apportioned to hydropower rather than to other services isdetermined – and the Low GHG-Compatibility Test is applied to only this allocatednumber. Facilities whose estimated allocated emissions and associated emissions
intensity fall below the Low GHG Compatibility Test threshold pass the Mitigation
Component.
b. Demonstration: G-res or Onsite Specific Assessment: To demonstratecompliance with the GHG emissions intensity threshold, issuers must estimate GHG
emissions from either:i. The use of the G-res tool; OR
ii. A full on-site specific assessment.

17

Figure 2: Decision tree showing steps that determine whether a facility passes or fails the Low GHGCompatibility Test of the Hydropower Criteria [This includes additional considerations for pumped
storage facilities which are covered in detail in Section 5.1]

The remainder of this Section summarises the discussions and recommendations of the TWG
relating to each of these components.
Note that while this section uses terminology in places which is particularly applicable toimpoundment facilities, the Mitigation Component applies to all types of hydropower and not justimpoundment facilities.

4.2 GHG Assessment
4.2.1 Purpose of the GHG Assessment
The purpose of the Climate Bonds Standard is to screen and certify only those ‘low-carbon assets’compatible with an energy mix which stays within at least the 2º warming limit set out by the Paris
Agreement (and ideally within the 1.5º warming limit).
Whether or not an electricity generation asset or technology is low-carbon is gauged by its emissions
intensity, that is, the quantity of GHGs it emits for each unit of electricity generated (gCO2e/kWh).
This approach allows not only ready comparison between different energy sources and technologies,
but also helps form our understanding of the energy mix compatible with scientific analysis of the
global GHG budget given projections of electricity demand.

18

The purpose of this GHG Assessment, therefore, is to estimate the GHG emissions for which thehydropower facility is responsible, expressed as an average emissions intensity over the asset’s
lifetime (i.e., gCO2e per kWh generated), that can be used to check is falls under the appropriate
GHG emissions intensity threshold (i.e., the Low GHG-Compatibility Test; Section 4.4).
This is fundamentally different to the purpose of other methodologies and tests designed to quantify
the amount of mitigation an asset or technology achieves compared to a business-as-usual scenario.
For example, the UNFCCC CDM estimates emissions reductions of a facility compared to a
counterfactual where the facility does not exist, and other capacity is built in its place. For this, it has
to make comparisons with the historic carbon intensity of the grid and make assumptions about its
carbon intensity going forwards.
Alternatively, energy efficiency driven GHG Assessments aim to assess the additionality impact ofgreen finance being deployed. If it is financing an improvement over business as usual, regardless ofthe size of that improvement, it would be deemed green.

4.2.2 Boundary of the GHG Assessment
In practice, this means that the GHG Assessment for the Climate Bonds Standard needs to estimate
the GHG footprint of the hydropower facility as a whole, including the reservoir and upstream anddownstream impact and not just the incremental footprint of any specific investment (see Box 1).
For the purposes of clarification, this means that in the case of a retrofit or the addition of a new
turbine to an existing facility, the GHG Assessment would estimate not just the incremental impact of
the investment, but the new footprint of the whole facility post-investment, to see if post-retrofit, thefacility is producing sufficiently ‘low-carbon power’ to qualify for certification under the Climate Bonds
Standard.
However, the assessment should include only those emissions associated with and allocated to thehydropower function, which means the following are excluded:
1. The GHG emissions associated with any pre-existing natural water body; and2. The GHG emissions associated with the broader range of services that the facility might provide.
Box 1: Defining the scope of the facility, its footprint and the GHG Assessment
There are two distinct concepts in determining the scope of the application of these criteria:
1. The facility boundary: we take this here to mean the “unit of development” where the investment
takes place: any dam, reservoirs, engineered structures, engineered changes to watercourses,
equipment for the generation of electricity and transmission lines.
2. The facility footprint: refers to the set of impacts that the facility may have, including within thefacility boundary, upstream or downstream impacts.

4.2.3 Emissions scope of the GHG Assessment
GHG accounting procedures acknowledge three different ‘scopes’ or sources of emissions which
may be enumerated in any assessment of the climate impact of a technology51:

51 http://www.ghgprotocol.org/calculation-tools/faq

19

•
•
•
•

Scope 1: Direct GHG emissions resulting from on-site processes52
Scope 2: Indirect GHG emissions from consumption of purchased electricity53
Scope 3: Other indirect emissions resulting from activities elsewhere in the value chain, suchas fuel and material extraction, manufacture, transport, etc.
As a fourth category, we also discuss below the indirect mitigation impacts that hydropower
can offer through its support of intermittent renewables at scale in the grid.

Below is discussed which ‘scopes’ or sources of emissions are included in the GHG Assessment.

Scope 1The Scope 1 emissions from hydropower – that is, reservoir emissions – have naturally received themost attention in climate finance/policy discussions. This reflects the fact that reservoir emissions
have the potential to be highly significant. These emissions are due to biophysical and biochemical
processes engendered by alteration of the natural state of the water body, i.e., decomposition ofinundated vegetation, silt build-up across the catchment area, etc. Carbon dioxide, methane andnitrous oxide are GHGs that are released as a result over the full lifecycle of the reservoir. This
represents the alteration of the natural carbon cycle, and it is appropriate given the potential scale ofthese emissions to include them in the scope of the GHG Assessment.
However, natural water bodies also emit GHGs, so it also seems appropriate that any assessment ofreservoir emissions following impoundment needs to be compared to the pre-existing situation. Thatis, that the GHG emissions associated with the pre-existing natural water body and terrestrial
landscape are netted off in the GHG Assessment.
In summary then, Scope 1 emissions due to any disruption of the natural watercourse should beassessed (i) on a whole-catchment level, (ii) as the net difference compared to the previous state,and (iii) over the full lifetime of the reservoir.

Scope 2For all facilities except pumped storage, Scope 2 emissions from electricity use are treated as
negligible. Therefore, it is not proposed that Scope 2 emissions are included in the GHG
Assessment for facilities. See Section 5.1 for further discussion on this issue with respect to pumped
storage.

Scope 3
Scope 3 emissions in the case of hydropower mainly take the form of emissions released in the
production of materials used to construct dams, in particular cement and steel. Evidence from thelimited literature available suggests that on a per kWh basis these are typically small; large dams
tend to support large amounts of electricity generation. We note that, even for large dams,
construction emissions tend to be low on an emissions intensity basis, though with some outliers.54
Given this uncertainty, in the interest of keeping the GHG Assessment as simple as possible, it is
proposed that Scope 3 emissions associated with dam construction are not included. This is also
compatible with other Climate Bonds Standard Sector Criteria, where embedded emissions are
currently excluded.

Other i.e., indirect impacts (grid support, balancing, reserve services, other renewables integration)

Note that Scope 1 often refers to ‘smokestack’ combustion emissions. Here we take any emissions which are released directly to theatmosphere on-site to be Scope 1 emissions.
53 Or, less often, from heat or steam.
54 Figures compiled by the IPCC suggest that the median of construction and operation emissions is 4 gCO e/kWh. See Appendix 3. Other2
studies suggest they are typically low (< 10 gCO2e/kWh). Refs: Kumar et al. ibid.; Hertwich et al. (2015), ‘Integrated life cycle assessmentof electricity supply scenarios confirms global environmental benefit of low-carbon technologies’, PNAS May 19, 2015. 112 (20) 62776282; Raadal, H., Gagnon, L., Modahl, I., & Hanssen, O. (2011). Life cycle greenhouse gas (GHG) emissions from the generation of windand hydro power. Renewable and Sustainable Energy Reviews, 15(7), 3417-3422.
52

20

The electricity-related benefits of hydropower include the capacity to provide both baseload andpeak generation together with ancillary services provided through fast-responding, flexible
generation to compensate for load variations over many time scales. In addition, hydropower can
provide flexible energy storage to balance intermittent renewable technologies, ensuring grid stability
and frequency control, as well as (in the case of pumped storage) reduce curtailment.
Therefore, the TWG has explored ways in which the further CO2 avoidance that the facility may
make possible indirectly in the grid through its support for intermittent renewables could be taken into
account and netted off from the calculated Scope 1 emissions. Unfortunately, no straightforward,
robust method to do this was identified.
One approach discussed was to model the power system as a whole and determine the direct andindirect impact of hydropower on that full system. This is the approach taken by the World Bank for
its economic analysis of hydropower projects. However, there is no standardised model or method
for this that can be co-opted at this stage for use by an individual bond issuer who is not experienced
at such an in-depth, systems-based assessment.
Additionally, exploratory analysis was undertaken to determine whether and how the indirect
mitigation impact of any facility could be estimated, drawing on discussions and examples ofassessing the impact of large-scale renewables on system reliability55 in order to consider the
additional output from renewables enabled by hydropower and use this in a calculation of revisedemissions intensity. However, an appropriate level of confidence that the proposed approach isrobust was not reached.
Due to these challenges in establishing a robust, user-friendly methodology, at this stage, otherindirect impacts via support to an intermittent grid are not proposed to be included in the GHG
Assessment.

In summary•••

It is proposed that the GHG Assessment should include only Scope 1 emissions, assessedover the asset lifetime.
Scope 2 and 3 emissions on a per kWh basis are likely to be immaterial, and this is backed
up by the lifecycle analysis literature.
Other indirect impacts via support to an intermittent grid will not be included in the GHG
Assessment at this time due to the lack of a straightforward but robust methodology for
issuers to follow.

4.2.4 Approved assessment methodologies and associated reporting requirements
As detailed above, unless the facility is exempted via the Predictive Screen based on the power
density, potential bond issuers seeking certification will need to estimate and report on reservoir
GHG emissions by assessing the net change in catchment emissions for which the hydropower
facility has been/is likely to be responsible.
Measuring emissions of existing reservoirs on-site is time-consuming and expensive, although
guidelines do exist. Estimating the emissions of planned reservoirs is even more difficult given thenumber of factors involved (Section 2.3.2).
Despite this, it is important for issuers not to have to ‘reinvent the wheel’ and for results to becomparable across facilities and bonds. The Criteria therefore require a standardized methodology
Karier, T. and Fazio, J. (2017), ‘How hydropower enhances the capacity value of renewables and energy Efficiency’, The Electricity
Journal 30 (2017) 1–5. And, Tande, J.O.G. and Korpas, M. (2012), ‘Impact of Offshore Wind Power on System Adequacy in a Regional
Hydro-based Power System with Weak Interconnections’, Energy Procedia 24 (2012) 131 – 142
http://www.nrel.gov/docs/fy15osti/63038.pdf http://www.science.smith.edu/~jcardell/Courses/EGR325/Readings/ieee-capacity-value.pdf
55

21

for assessing emissions in order to be both streamlined and fair, and to make certification practicallyfeasible.
The G-res tool has been developed through collaboration between the International Hydropower
Association and the UNESCO Chair for Global Environmental Change. This web-based tool allows
the estimation of the net change in GHG emissions attributable to the introduction of a reservoir in alandscape, whether for an existing or planned reservoir. Following the new framework proposed byPrairie et al. (2017),56 it also presents the net emissions for the complete lifetime (100 years) ofreservoirs and not only for specific years as obtained with field measurements. Using publicly
available data on reservoirs and their catchments, the G-res tool provides an easier method toassess GHG impacts than large-scale field measurement campaigns and multi-year studies.
Like all estimation tools, it has limitations and some imprecision. Estimating emissions from diverse
natural ecosystems and water bodies requires some simplification of the complex processes that
occur in nature. However, as a desktop model utilizing the latest science it is accepted by the TWG
to represent the best available tool currently available to estimate the GHG emissions associatedwith a reservoir or group of reservoirs, while recognizing that further fieldwork and assessment isalways encouraged in case of high predicted emissions.
For this reason, in order to demonstrate compliance with the climate impact threshold, it is proposedthat issuers estimate GHG emissions from either:
(i)
(ii)

The use of the G-res tool; OR
A full on-site specific assessment.

It is envisaged that most would prefer the option of using the G-res tool, as this will be considerably
less expensive than a full on-site specific assessment, but the option of using a bespoke on-site
assessment is also offered for those that have already undertaken such assessments or intend to doso for other purposes.
Box 2 provides further information on the G-res tool. Box 3 provides further information on therequirements for a site specific assessment.
Box 2: GHG estimation using the G-res tool
Available online at: www.hydropower.org/gresObjectives of the tool: The G-res tool provides a web interface to estimate the net GHG footprint of areservoir based on the best current scientific knowledge and reasoning. This tool aims to be
sufficiently flexible to assess reservoirs in any location where data on local environmental conditions
modulating GHG fluxes (climate, land coverage, nutrient status, geographic characteristics) can beobtained.
Development: The tool is an output of a joint IHA/UNESCO research project. Building on a newconceptual framework57 developed in cooperation with researchers from the University of Quebec at
Montreal (UQÀM), the Norwegian Foundation for Scientific and Industrial Research (SINTEF) andthe Natural Resources Institute of Finland (LUKE), and approved by the scientific community, thetool uses a series of models based on over 500 published empirical measurements from more than
200 reservoirs worldwide.

56

Prairie, Y.T., Alm, J., Beaulieu, J., Barros, N., Battin, T., Cole, J., del Giorgio, P., DelSontro, T., Guérin, F., Harby, A., Harrison, J.,
Mercier-Blais, S., Serça, D., Sobek, S., Vachon, D. (2017), ‘Greenhouse Gas Emissions from Freshwater Reservoirs: What Does the
Atmosphere See?’, Ecosystems https://doi.org/10.1007/s10021-017-0198-9
57 Prairie, Y.T., Alm, J., Beaulieu, J., Barros, N., Battin, T., Cole, J., del Giorgio, P., DelSontro, T., Guérin, F., Harby, A., Harrison, J.,
Mercier-Blais, S., Serça, D., Sobek, S., Vachon, D. (2017), ‘Greenhouse Gas Emissions from Freshwater Reservoirs: What Does the
Atmosphere See?’, Ecosystems https://doi.org/10.1007/s10021-017-0198-9

22

A modelling framework was developed putting together all the available data to create models thatwould allow anyone having access to the predictive parameters to estimate the GHG emissions of a
freshwater reservoir. The G-res results were validated based on unpublished measured data
provided by the industry.
Accessibility: The tool was launched in May 2017 as a fully integrated web-based tool. It has been
designed to use only easily available and accessible data on climate, catchment and the reservoir.
The user interface automatically populates the input tables with values adopted from global
databases for existing reservoirs. For proposed projects, it also contains a complementaryfunctionality that helps populating all the required parameters to run the G-res, if they were notavailable.
Scope: In determining the net impact of introducing a reservoir, G-res distinguishes among four
carbonic GHG emission pathways: diffusive CO2 emissions as well as diffusive, bubbling anddegassing CH4 emissions. It also integrates the GHG balance of the landscape prior to the project
and takes account of displaced emissions (where some natural emissions that would have occurred
regardless of the presence of the network are displaced at the surface of the reservoir). For diffusive
emissions, it estimates the net impact of introducing a reservoir into a catchment over the complete
lifetime of a reservoir (using 100 years as the default value for a lifetime).
It also accounts for the emissions from the reservoir surface resulting from human activity occurring
within or outside the reservoir, which are unrelated to the creation of the reservoir itself, known as
Unrelated Anthropogenic Sources (UAS). In addition, the framework includes an optional module toestimate emissions associated with the construction phase of the dam. It also includes a method forapportioning the net GHG footprint among the services that the reservoir provides. Thisapportionment is discussed more in Section 4.3.
Improvement over existing estimation methodologies: In the past, estimating the GHG footprint ofreservoirs where there were no direct measurements was generally done by applying averages
obtained from measurements of nearby systems or reservoirs of the same climate type (or latitude).
However, these proxies may not be representative and do not account for the specific environmental
conditions of individual reservoirs. In addition, this approach assumes that GHG emissions areconstant in time, when there is considerable evidence that they significantly decrease in the earlyyears following impoundment (e.g., Teodoru et al. 2012).
Limitations: Although G-res improves our modeling approach for GHG emissions, it has some
limitations associated with current available data and scientific knowledge. For example, G-res is notable to adequately describe cascading systems (unless very simple), where one reservoir receives
water from one or multiple upstream reservoirs. At the present time, the G-res tool considers
reservoirs in a cascade as independent, a limitation arising from a lack of scientific data on thesubject.
Moreover, again due to lack of data, G-res currently evaluates only carbonic GHG emissions and not
N2O. However, the few reservoir N2O measurements available suggest that it represents only asmall fraction of GHG emissions in most reservoirs.58
The tool also does not account for the potential beneficial impact of reservoirs on hydrologicalemissions elsewhere, such as the extent to which emissions from seasonal flooding of wetlands isoften reduced by reservoirs.
In this context, the G-res tool should be viewed largely as a flag determining whether the potential
emissions of a reservoir are likely to be important or not.

58

Bridget R. Deemer, John A. Harrison, Siyue Li, Jake J. Beaulieu, Tonya DelSontro, Nathan Barros, José F. Bezerra-Neto, Stephen M.
Powers, Marco A. dos Santos, J. Arie Vonk; Greenhouse Gas Emissions from Reservoir Water Surfaces: A New Global Synthesis,
BioScience, Volume 66, Issue 11, 1 November 2016, Pages 949–964

23

Oversight of the assessment: When a user overrides any default value when using G-res, it will be
flagged in the final emissions report. If the user wants to make a claim using the results from the tool,
its results will be reviewed by the G-res team (currently IHA, UQAM, UNESCO). This would confirm
the accuracy of the results obtained and act as an approval stamp attesting the quality and rigour of
the use of the G-res tool.
Further technical information:
G-res User Guide: https://www.hydropower.org/publications/the-ghg-reservoir-tool-g-res-user-guideG-res Technical document: https://www.hydropower.org/publications/the-ghg-reservoir-tool-g-restechnical-documentation
User guidelines for the Earth Engine functionality: https://www.hydropower.org/publications/the-ghgreservoir-tool-g-res-user-guidelines-for-the-earth-engine-functionality

Box 3: On-site assessment
For issuers evidencing their emissions intensity via an on-site assessment, it is required that theassessment be carried out in line with the IEA Hydro Framework as described in ‘Guidelines for the
Quantitative Analysis of Net GHG Emissions from Reservoirs,’ issued in two volumes:- Volume 1: Measurement Programmes and Data Analysis. These guidelines provide best practices
that aim to assist the reader to measure, analyze data and model net GHG emissions frommultipurpose reservoirs.
- Volume 2 – Modelling: Guidelines for Quantitative Analysis of Net GHG Emissions from
Reservoirs. This defines procedures and best practices for the modeling of GHG Emissions from
Freshwater Reservoirs. From this framework, readers can undertake sufficient analysis and study
to understand the process of GHG emissions from an existing or planned reservoir correspondent
to long-term horizons.
These Guidelines are compatible with the G-res tool methodology,
For further information see: http://www.ieahydro.org/annex-xii-hydropower-and-the-environment

4.3 Allocation of estimated GHGs
4.3.1 Overview
Reservoirs often provide a range of services and economic benefits other than hydroelectricity,
including regulating flows for water supply, flood control, drought support, irrigation, fisheries andrecreation.59 In many cases, generating hydroelectricity is not the primary purpose of the reservoir.
While of course hydropower can be pivotal to the economic justification for the reservoir, it may not
be, and it should be acknowledged that some reservoirs might still be built even if there were nohydropower element. Figure 3 illustrates the mix of single and multipurpose reservoirs globally,
based on a sample of 498 reservoirs from IHA/UNESCO’s G-res database.
It is arguable, therefore, that it is not justified to apportion all the emissions to hydropower in a multipurpose reservoir.
To address this, it is proposed that a hydropower facility should be deemed to meet the Low GHGCompatibility Test so long as the emissions apportioned or allocated to hydropower fall below thethreshold (even if the full, unallocated scope 1 emissions do not).

59 UNESCO/IHA, ibid.

24

To apply this approach, an allocation method is needed to determine the relative importance ofdifferent reservoir services and allocate emissions to them proportionally. The G-res tool includes
such an allocation mechanism, and given the proposed use of the G-res tool for assessing GHG
emissions in total, for simplicity and consistency it is proposed that this allocation methodology be
used to determine the allocated emissions for a hydropower facility for the purposes of the Low
GHG-Compatibility Test.
For issuers undertaking a GHG Assessment via an on-site assessment, the methodology of the
Allocation Module in the G-res tool (using the Operating Regime variant), should be replicated toallocate the estimated unallocated emissions to the multiple services that reservoir may provide.
The rationale for this is given in the section below.

Figure 3: Mix of single and multi-purpose reservoirs globally in sample of 498 reservoirs

Source: UNESCO/IHA

4.3.2 The allocation methodology in the G-res tool
The G-res tool includes a module to allocate the net GHG footprint of the reservoir to the various
reservoir services. The following eight services have been included for allocation:• Flood control• Fisheries• Irrigation• Navigation• Environmental flow
• Recreation• Water supply• Hydroelectricity
The UNESCO/IHA consortium explored three different approaches to how GHG emissions would beallocated across these services. These are based on, respectively, the economic benefit ofhydropower as a share of the overall economic benefit of the reservoir; the volume of water released
by hydropower compared to other services; and the hierarchy of services detailed by the operating
regime. These are described in Table 3 below.

25Under the operating regime approach, GHG emissions are allocated based on the hierarchy ofservices in the operating regime, i.e., the operational prioritisation of the services. Operating regimes
could be informed either by explicit prioritisation (as in some countries such as India, Turkey orPakistan) or by Operating Rule Curves (ORCs).

Table 3: Approaches to allocation
ApproachPrinciple

Inclusivity

Implementation

Economic

GHG emissions are allocated basedon relative economic benefit provided
by the service. In principle, we
consider this approach to be mostconceptually robust, as decision
making is normally based on theeconomic merits of a project whichcaused the resultant GHG emissions.

This approach should bepossible for all
reservoirs. We currently
have devised simple
methods of including thefour most common
services.

This approach is themost data intensive,
however we havedeveloped a simplified
method which we believe
is a robust andimplementable tier 1
solution.

Volumetric

Allocation based on the changes involume of water of the reservoir
required to fulfill the service. The mainconceptual issue is that water isconsumed by some services(irrigation) and not by others where thewater is only moved from thereservoir.

There are difficulties inincluding flood control,
recreation andcommercial fishingwithin this approach.

Data requirements ofwater use over long
periods of time may beavailable to operators.

OperatingregimeApproach based on the hierarchy ofservices in the operating regime. The
principle encounters issues for somereservoirs in which hydropower is amajor service, but the operation isdominated by irrigation needs.

Should be able toinclude all services.

Operating hierarchy
should be known tooperators.

Source: UNESCO/IHA, ‘The Scientific Basis of the G-res Tool’
ORCs are derived through the use of sophisticated multi-objective optimisation techniques whichprescribe a target reservoir level at specific times over the year as a guideline for operators.
Operators will therefore release or store water to achieve the level prescribed by the ORC dependingon the circumstances at the time.
Therefore, the operational prioritisation of the services changes over time and so the length of time a
service is prioritised can be used for allocation.
To implement the operating regime approach, the user must identify the importance, or primacy, ofeach service. Identifying the primacy is performed using the criteria set out in Table 4 below.

26

Table 4: apportionment of GHG emissions under the UNESCO/IHA methodology
Serviceprimacy

Apportionmentof GHGemissionsPrimary

80%

Secondary

Tertiary

15%

5%

Notes

There may be up to
three services ineach level.
GHG emissions
are split equally
among the services
in each level.

Where there are no secondary
services, the apportionment (15%)
is split between the primary
services.
Where there are no tertiary
services, the apportionment (5%)
is split between the secondary
services.

Source: UNESCO/IHA
It is recognised that all three allocation approaches have weaknesses and drawbacks for practicalallocation. For this reason, there has been some discussion in the TWG about which allocation
methodology it would be best to adopt, or even whether one can be adopted at all. However, there
is a strong feeling that there is a need for allocation of emissions to hydropower, and therefore apreferred allocation methodology should be selected.
The UNESCO/IHA consortium recommended the allocation approach based on the operating regimeof the reservoir. The operating regime should be known by the user and therefore will be the mosteasily implementable of the identified approaches. The economic-based approach has conceptualrobustness; however, at this stage it would require further development to apply consistently andeffectively in practice.
Taking this into account, it is proposed that the operating regime approach be used to apportion
emissions for the purposes of the Mitigation Criteria.

4.4 Low GHG-Compatibility Test
4.4.1 Overview
As mentioned above, the purpose of the Climate Bonds Standard is to certify only low-carbon assets
consistent with achieving the target of limiting global warming to no more than 2ºC, and ideally 1.5º,as set out in the Paris Agreement. Therefore, the purpose of the ‘Low GHG-Compatibility Test’60 is todetermine whether a hydropower facility is consistent with the very tight GHG budget required toachieve at least the 2º goal.
To establish this, consideration has been given to:• What the modelling literature suggests the global power sector’s GHG budget might be;• What it means for an individual facility to be consistent with the overall global and power
sector-specific GHG budgets required to achieve a 2º scenario;• What this implies in terms of an emissions intensity benchmark for hydropower; and• The extent to which this is consistent with eligibility Criteria for other energy technologies
under the Climate Bonds Standard.
Note that where the modelling literature provides guidance on power sector emissions, this only
relates to direct combustion emissions of the power sector (as far as we are aware). Naturally, withhydropower, GHGs from biological processes are the primary concern. Any quantitative analysis
presented in this section based on modelling therefore requires adjustment to take this into account.
This document talks specifically about a ‘low GHG’, rather than a ‘low-carbon-compatibility’, test because methane is a potentially
important component of hydropower GHG emissions.
60

27

4.4.2 The basic form of the Low GHG-Compatibility Test
The Low GHG-Compatibility Test aims to set an eligibility threshold for hydropower facilities that arecompatible with the global power sector emissions envelope. The basic form of the test is:
Emissions intensity of the hydropower facility≤

A suitable emissions intensity thresholdwhere emissions intensity is expressed in terms of the average gCO2e/kWh electricity generated
over the asset’s lifetime.61 The net change in the pre-existing carbon cycle within the footprint of ahydropower facility is treated as analogous to the direct ‘smokestack’ emissions of a fossil fuel power
station and is referred to as its Scope 1 emissions (as explained in Section 4.2.3).
With this metric, the emissions can be compared directly with other types of generation. This isvaluable, as it enables us to explore the idea of a threshold for ‘low-carbon power’. All renewables
are not equal, with different emissions profiles, but with a common metric we can seek to promote a‘technology-agnostic’ approach, acknowledging that individual governments and operators determine
the preferred power mix within a local development, social and economic context.
As noted above, in contrast to other frameworks such as the Clean Development Mechanism, thepurpose of the Low GHG Compatibility Test is not to estimate the quantity of emissions reductions
which the asset achieves relative to a business-as-usual scenario, but rather to test consistency witha low emissions future.

4.4.3 Using climate models and scenarios to inform the Low GHG-Compatibility Test
It would be ideal to be able to derive a simple emissions intensity benchmark for the global power
sector from the Integrated Assessment Models (IAMs) used to model climate scenarios. It is notwithin the scope of this paper to provide a thorough overview of the IAM literature, but three papers
containing IAM meta-analyses were examined to see what guidance the literature can provide on thescale of decarbonisation required across the power sector.
A review of IAMs by Rogelj et al. (2015) states that “likely 2°C scenarios … emit almost zero carbon
emissions from electricity by 2050”.62 A synthesis of model results by Kriegler et al. (2014) indicateszero or even negative emissions by 2050 from the electricity sector to achieve a 450 ppm
atmospheric concentration scenario (a medium-likelihood scenario for achieving 2º).63 A modelintercomparison by Luderer et al. (2012) states that “the models consistently show an almost fullscale decarbonisation of the electricity sector by the middle of the 21st century.”64
These models have different results, and of course there is no single correct answer. However, they
corroborate the scale of power sector emissions reductions indicated by IEA modelling. The IEA’s
Energy Technology Perspecitives (ETP) model indicates that a Sustainable Development Scenario(SDS) requires a reduction in carbon intensity of electricity generation from 463 gCO 2/kWh in 2019
to below zero in net terms by around 2055.65
61

The emissions profile of the asset changes over time as there is less and less organic matter to degrade. Assessing over the lifetime of
the asset rather than using a snaphot gives a fairer reflection of its overall emissions intensity.
62
Rogelj et al. (2015), ‘Energy system transformations for limiting end-of-century warming to below 1.5°C’, Nature Climate Change 5:519538.
63
Krielger et al. (2014), ‘The role of technology for achieving climate policy objectives: overview of the EMF 27 study on global technology
and climate policy strategies’, Climatic Change 123(3): 353–367
64
Luderer (2012), ‘The economics of decarbonizing the energy system—results and insights from the RECIPE model intercomparison’,Climatic Change 114(1): 9-37
65
https;//webstore.iea.org/energy-technology-perspectives-2020; “The trajectory for emissions in the Sustainable Development Scenario
is consistent with reaching global net-zero CO2 emissions by around 2070.”

28

However, using any of these models as guidance for a hard-and-fast emissions intensity thresholdfor hydropower is problematic for the following reasons:
•
•

•
•

IAMs are subject to large uncertainties because by their very nature they are reducing acomplex real-world process with social, economic, technological and physical science
dimensions to a limited set of quantitative inputs and outputs.
Due to the uncertainties inherent in climate modelling, scenarios are generally presented ashaving a probability of limiting warming to 2ºC (or some other temperature). Generally, a 2°C
scenario is considered to be one that limits warming to below 2°C with a probability of at least
66%, though some models use a probability of at least 50%. Further, some scenarios do notmatch the objective of limiting warming to 2°C, but instead denote the degree of radiative
forcing or atmospheric concentration of CO2 which they result in.
The models do not disaggregate to the level of different technologies within the power sector
but provide indicators in the form of budgets or average carbon intensities across the power
sector more broadly.66
These indicators are at global levels. In reality, each country will have specific considerations
driving its optimal energy mix, and the associated emissions from that.

Because of this, the approach chosen has not been to pick a power sector emissions intensity
benchmark from any one IAM and use it as a rigid threshold for hydropower. Instead, the approachis guided by the sense of direction and scale of reductions in power sector emissions described byclimate models, while also recognising there may need to be some flexibility due to differing local
resource and political contexts.
The IEA’s ETP 2DS scenario is used in Appendix 2 to illustrate the scale of technological change
required in the global power sector to meet a 2º scenario. We underline that the numbers in thisanalysis should not be interpreted over-literally and encourage readers to view them as indicative.
But the main points from this analysis are as follows:
•
•
•
•

•

As mentioned above, the 2DS scenario indicates a required average emissions intensity acrossthe global electricity sector in 2050 of 35g CO2e/kWh, down from 519 gCO2e/kWh in 2014.
IEA analysis takes into account GHG emissions from fossil fuel combustion only and does notincorporate non-combustion emissions from hydropower and geothermal.
To adjust for this, our analysis maintains the fossil fuel intensity and overall energy mix from the
IEA 2DS but also incorporates emissions intensity factors for hydropower and geothermal from
non-combustion emissions.
With geothermal and hydropower together accounting for 20% of power generation in 2050 in
the 2DS scenario, by including estimates of their non-combustion emissions, the estimatedglobal emissions intensity in 2050 is revised to 43g CO2e/kWh – above the IEA’s 35g CO2/kWhaverage emissions intensity that is compatible with a 2DS scenario.
The vast bulk of emissions reductions needs to come from decarbonising fossil fuel capacity andswitching away from it to zero-emitting sources. However, small increments in hydropower
emissions intensity have a material impact on whether the sector can meet a target emissions
intensity. For example, in the analysis each increment in hydropower emissions intensity of 1g
CO2e/kWh implies a further 26.9 TWh of generation is required from zero-GHG sources to meet
the GHG budget in 2050. This is roughly equivalent to the current wind output of Canada. Thatis, the world’s GHG budget is so tight that it is reasonable to place precautionary limits on eventypically low-emitting power sources such as hydropower, particularly as they are so long-lived.

66

Many models do not disaggregate by technology; those that do often focus on primary energy supply, in which case fossil fuels used for
power generation are included in the same category as those for transport, industry, etc.

29

4.4.4 Proposed emissions intensity threshold for hydropower
Recognising the diversity of these models, their assumptions and known uncertainties, the adoptionof any one figure from any single study as a basis for a hard and fast emissions intensity thresholdwould show false precision. However, these models and analyses can still provide useful guidance
to assist in setting such a threshold. A number of clear and consistent messages can be taken from
them:
•
•
•
•

•

The GHG budget for the global power sector is very low, and this needs to be reflected by the
Criteria.
The models indicate a clear direction of travel for the global power sector, namely: drastic
and rapid decarbonisation across the sector within just three decades.
Reducing power sector emissions is often seen as one of the cheapest and most politically
acceptable mitigation options, hence power sector reductions are much steeper than for
global emissions as a whole.
This needs to happen despite increasing global demand for electricity. Low-carbon
technologies in the form of renewables, nuclear power and carbon capture and storage(CCS) need to expand rapidly not only to replace fossil fuels, but also to meet this increased
demand.
The vast bulk of power sector emissions reductions will obviously come from a switch awayfrom thermal energy sources. However, the tight GHG budget suggests a high degree of
ambition is required and it is reasonable to place precautionary limits on hydropower.

These precautionary limits need to strike a balance which sets us on the right path in terms of overall
decarbonisation, but allows flexibility due to the different political, technical and geographic
circumstances of individual countries.
To achieve this, a direct emissions intensity threshold of 100g CO2e/kWh for hydropower is
proposed for facilities initially operational prior to 2020, and of 50g CO2e/kWh for facilities initiallyoperational during or after 2020.67 This is based on the following reasoning:•••

An emissions intensity threshold is sought which will at least maintain, and ideally further
improve, the emissions performance of the hydropower sector as capacity expands.
A threshold of 100g CO2e/kWh would lead to the average sector performance improving,while not being so stringent as to produce the perverse result of discouraging a large numberof projects which would be preferable to thermal alternatives. However, given the longevity ofhydropower facilities (which can have operating lifetimes in excess of 100 years), it isdesirable to have a significantly lower threshold for new facilities given such construction iseffectively locking in energy generation for a very extended period.
More specifically:o Today, on average, hydropower is already a low-emitting source of electricity
generation. The state of scientific knowledge is evolving, and evidence to datesuggests a median direct emissions intensity across hydropower of 24-28g
CO2e/kWh68 compared to around 310-350g CO2e/kWh for even the most efficient
combined cycle gas turbine (CCGT) power station (see Appendix 3).69
o We expect by far the majority of hydropower projects to continue to fall well below
100g CO2e/kWh, and by discouraging high-emitting facilities, the average emissions
intensity of hydropower will decline.
o Given the distribution of emissions intensity, which is weighted towards lower values(e.g., see Figure 4a), this leaves room for (likely a minority of) hydropower facilities to67

It is noted that this member was not in agreement with the establishment of 10W / 50g thresholds for facilities becoming operational in2020 or thereafter.
68
The G-res database median is broadly in line but slightly lower than this once emissions have been allocated – see Section 4.4.5.
69
See Table A2 in Appendix 230

obe above the observed industry average, but not so far above that in aggregate theywould impact significantly on the average emissions intensity of the sector.
More specifically, IEA analysis has previously suggested average emissions intensityof new-build electricity capacity should be ~50 gCO2e/kWh over the period 20202040.70

On a case-by-case basis, such a threshold would then meet the main objectives of:••••

Reducing or limiting hydropower’s average emissions, thereby demonstrating a strong
contribution to reducing the global power sector GHG budget;
Being unlikely to result in instances of hydropower projects which are clearly preferable tofossil fuel alternatives being ineligible for certification;
Being unlikely to result in low-performing hydropower projects which would significantly raise
the sector average being certified; andBeing consistent with the mitigation criteria already adopted by the Climate Bonds Standard
for other forms of renewable energy (see Box 4).

Lastly, hydropower facilities provide critical storage services that indirectly help enable the mitigation
impacts achieved through the roll-out of intermittent renewables. As discussed in Section 4.2.3, wehave been unable to establish a robust methodology to account for this positive indirect impact.
Therefore, even a hydropower facility with an emissions intensity of 100 gCO2e/kWh or above basedon Scope 1 emissions only may well have a net emissions intensity below 100 gCO2e/ kWh, wereindirect mitigation impacts able to be robustly estimated and netted off.
Box 4: Consistency with mitigation criteria for other forms of renewable energy under the
Climate Bonds Standard
The most direct comparison for hydropower is the emissions threshold set for geothermal andbioenergy facilities. All these renewable energy sources have the potential for significant emissions
from biological or physical processes rather than from combustion. Discussions are ongoingregarding an appropriate emissions threshold for electricity from biomass. However, the eligibility
Criteria for Geothermal assets were approved in 2016.
These Geothermal Criteria require eligible facilities to be below an emissions threshold of 100g
CO2e/kWh. Emissions included in this assessment are the direct emissions of carbon dioxide (and toa lesser extent methane) resulting from the release of naturally-occurring, non-condensable gases(NCGs) from the geothermal fluid during the energy extraction process. Based on the available
literature, emissions from other elements of lifecycle emissions are immaterial on a gCO 2/kWh basis
and therefore do not need to be accounted for in assessing performance against this threshold.
Therefore, the focus of the Hydropower Criteria on Scope 1 emissions associated with the reservoir
is consistent with the approach taken with geothermal, and the same emissions threshold is
proposed for both sources of renewable energy. Historically, about two-thirds of global geothermal
capacity has released direct emissions of less than 100g CO2e/kWh.
CBI has also previously approved Criteria for Wind and Solar facilities. Both Wind and Solar havezero Scope 1 emissions, and therefore are automatically eligible for Certification, as long as they
have no fossil fuel back-up. The Solar Criteria state that solar (with concentrated solar thermal inmind) can have backup of up to a maximum of 15% of generation. This is also consistent with a
100g CO2e/kWh threshold in the vast majority of realistic cases.71

70

IEA (2015) Energy Technology Perspectives 2015

71 The threshold is consistent with direct emissions of up to 100/0.15 = 667 gCO e/kWh. According to the IEA’s ‘CO2
2 Emissions From Fuel
Combustion’, world average Scope 1 emissions are 449 gCO2e/kWh for gas-fired power and 793 gCO2e/kWh for oil-fired power. NREL’s
CSP database indicates that oil-fired backup is rare compared to gas, and molten salt thermal storage can in any case be used as a
substitute for either. Therefore it is technically possible that the Standard could certify a CSP plant with direct emissions exceeding 100
gCO2e/kWh, but this is an unlikely scenario.

31

For geothermal and hydropower emissions, the evidence suggests that Scope 1 emissions are very
likely to outweigh Scope 2 + 3 emissions, and these can be considered immaterial. For solar andwind, it should be borne in mind that Scope 3 emissions are not always insignificant. If we were toview 100g CO2e/kWh as an approximate ballpark for the lifecycle (rather than just Scope 1)
emissions of a low-carbon technology, the lifecycle analysis literature suggests that, with the
exception of a few outliers,72 wind and solar projects tend to fall below this threshold.

That said, as with all the Climate Bonds Standard Sector Criteria, but particularly perhaps forhydropower, where knowledge, tools and experience are developing rapidly, we will revisit ourassumptions, data and Criteria on a regular basis. In respect of decarbonisation pathways for the
power sector, CBI will review the emissions intensity thresholds for all renewable energy sector
criteria within 2 years of the launch of these Criteria.

4.4.5 Testing the implications of these thresholds
Use of the G-res data set
Observations from the G-res data set have been used to test the implications of these thresholds.
The IHA manages a data set of reservoirs with hydropower in all climatic zones, derived from the
IHA/UNESCO G-res tool (Box 2, Section 4.2.4 and Box 5 below). The robustness of the Low GHGCompatibility Test thresholds could theoretically also be tested similarly against other data points
from the literature, but inherent problems of comparability arise given (i) they will undoubtedly vary inwhat they are measuring (in terms of scope, emissions pathway, etc.) and (ii) they are snapshots
rather than lifetime averages. They are also usually given as flux estimates without accompanying
data on reservoir surface area and capacity factor.
Box 5: The G-res data set
Each reservoir used in the development of the model has an emissions estimate for one or more of
the four GHG emissions pathways (diffusive CO2, diffusive, bubbling and degassing CH4) describedin Box 2. The initial source for the GHG emissions data was a study by Barros et al. (2011).73 Those
data were revised by comparing with the information from the original sources and complemented bydata from more recent papers. After a complete review of the actual and past scientific literature on
CO2 and CH4 emissions from reservoirs, 275 field assessments of diffusive CO2 emissions, 197 ofdiffusive CH4 emissions, 57 of bubbling CH4 emissions and 51 of degassing CH4 emissions werecompiled from 223 reservoirs located in various regions of the world.
G-res Technical document: https://www.hydropower.org/publications/the-ghg-reservoir-tool-g-restechnical-documentation

Analysis
The median emissions intensity of the reservoirs in the G-res database is 19 gCO2e/kWh allocatedand 30 gCO2e/kWh unallocated (see Section 4.3 for explanation of these terms), but as expected,
this covers a large range of values. The data set is heavily weighted towards the lower end, with amuch smaller number of high emissions-intensity facilities raising the median. The median emissions
intensity of reservoirs below 100 gCO2e/kWh is 13.4 gCO2e/kWh (allocated).

72

These are: small scale crystalline silicon PV; PV with low insulation or manufactured in a country with a carbon-intensive grid; remoteonshore wind farms associated with high transportation requirements; and carbon-intensive land use change; concentrated solar thermal
at insufficient scale. See tables and references in Appendix 2.
73 N. Barros, J. J. Cole, L. J. Tranvik, Y. T. Prairie, D. Bastviken, V. L. M. Huszar, P. del Giorgio and F. Roland (2011), “Carbon emission
from hydroelectric reservoirs linked to reservoir age and latitude”, Nature Geoscience 4:593-596

32

When considering unallocated emissions, as in Figure 4a, 27% of the 498 facilities in the G-res
database would exceed the threshold of 100 gCO2e/kWh for facilities operating pre-2020. This
includes 21 single-purpose reservoirs (12% of single-purpose reservoirs) and 111 multi-purpose
reservoirs (35% of multi-purpose reservoirs).

Figure 4a: Emissions intensity of 498 reservoirs; unallocated emissions, full range

Source: IHA G-res database

Figure 4b: Emissions intensity of 498 reservoirs – unallocated emissions, below 400
gCO2e/kWh

Source: IHA G-res database33

Figure 5a: Emissions intensity of 498 reservoirs; allocated emissions, full range

Source: IHA G-res database

Figure 5b: Emissions intensity of 498 reservoirs – allocated emissions, below 400
gCO2e/kWh

Source: IHA G-res database34

When considering allocated emissions (allocated based on operating regime), as in Figures 5a andb, 16% of the 498 facilities in the G-res database would exceed the threshold of 100g CO2e/kWh.
This includes the same 21 single-purpose reservoirs but now only 58 multi-purpose reservoirs (18%of multi-purpose reservoirs). That is, using the allocation methodology, 12% of multipurpose
reservoirs that would otherwise not meet the threshold would now do so. These implications are
consistent with the intended rationale of the Mitigation Component of the Hydropower Criteria,
namely, to ensure multi-purpose hydropower facilities are only accountable for the emissions arisingfrom the hydropower service, and that the majority of certifiable facilities are low emissions to keep
the sector average down, with the inclusion of a few higher-emissions-intensity facilities to allow
flexibility according to local circumstances.

4.5 Predictive Screen
4.5.1 Rationale for the Predictive Screen
As illustrated above, the majority of hydropower facilities emit very little in the way of GHGs per kWhcompared to fossil fuel power stations. As GHG Assessments take time and resources, it would,
therefore, be preferable to waive the requirement for facilities’ emissions to be assessed if they arehighly unlikely to be problematic. This is decided via a ‘predictive screen’: a preliminary test which
determines which facilities can be assumed to have low emissions.
The ideal predictive screen is an efficient and accurate classifier, that is, a simple test using few
rules and readily available input data which (i) categorises high-risk facilities correctly 100% of thetime and (ii) categorises low-risk facilities correctly in as many cases as possible. While manydifferent factors are known to be determinants of hydropower emissions, if a clear statistical
relationship can be shown to exist between just one or two of these factors and emissions intensity,then this relationship can be used as the basis of a predictive screen.

4.5.2 Precedents
Predictive screens for hydropower have precedence in the work of UNFCCC and IEA.74 For
example, the UNFCCC chose a predictive screen based on power density (facility capacity /reservoir surface area) for the Clean Development Mechanism, using a threshold of 10 W/m2 (that is,reservoirs above this threshold were assumed to have zero emissions).

4.5.3 Proposed Predictive Screen for the Mitigation Component of the Hydropower
Criteria
A simple power density threshold of 5 W/m2 is proposed for facilities subject to a GHG threshold of
100 gCO2e/kWh and 10 W/m2 for facilities subject to a GHG threshold of 50 gCO2e/kWh.
The state of knowledge and the observations of reservoir emissions have moved on considerably
since the UNFCCC threshold was set 15 years ago. In the justification of the threshold proposed
here, a range of scientific literature has been reviewed, as well as observations from the G-res data
set. These references and observations suggest that these thresholds are feasible and likely to giveaccurate results. Incorporating other factors known to affect emissions is not practically feasible andwould not improve the screen’s accuracy or efficiency.

74

UNFCCC (2006), Thresholds and Criteria for the Eligibility of Hydroelectric Power Plants With Reservoirs as CDM Project Activities,
Annex 5 to CDM Board Executive Board Report (EB23), available at: https://cdm.unfccc.int/EB/023/eb23_repan5.pdf; IEA (2015),‘Guidelines for Quantitative Analysis of Net GHG Emissions from Reservoirs. Vol 2’

35

Why power density?
The scientific literature to date has suggested statistical relationships between emissions flux
(related to emissions intensity as described in Box 6) and various other factors. Barros et al. (2011)75
found dissolved organic carbon, reservoir age, depth and latitude to be significant factors, while
Deemer et al. (2016)76 suggested annual precipitation, primary productivity, nutrient load and age.77
Note that a statistically significant relationship need not be a strong relationship.
However, as noted above, the predictive screen needs to be simple and use only factors which
would be easy for an asset owner to determine, otherwise it does not fulfill its purpose of saving timeand resources. Factors which would need detailed and/or site-specific study, or would themselves be
uncertain, such as nutrient load, are inappropriate. The emissions intensity considered by the
Criteria is an average over the asset lifetime, therefore reservoir age is irrelevant.
One simple option could be to have a screen based solely on installed capacity. Indeed, many
screening tools used in the financial sector use capacity as the screening factor. However, as Figure
6a illustrates, installed capacity alone is not a good predictor of emissions intensity and many
facilities with relatively small installed capacities have an emissions intensity greater than 100
gCO2e/kWh. In fact, nearly a quarter of facilities less than 50 MW in size exceed the threshold (after
allocation).
Alternatively, the predictive screen could be based on latitude. Again, many financial screening tools
tend to label as higher risk facilities located in tropical zones. But only one of the studies referenced
above (Barros et al.) found latitude to be a consistently significant predictor of emissions flux while
the other (Deemer et al.) did not.78 That latitude is a weak predictor of emissions intensity is
supported by the dataset in the G-res tool. Figures 6b and 6c below demonstrate a wide range ofemissions intensity (using allocated emissions) across a range of climate zones. According to thisdataset, 27% of tropically-located facilities would not meet the 100 gCO2e/kWh threshold, but neither
would 15% of temperate-zone facilities, 20% of sub-tropical and 5% of boreal. Hence, like the CDM,
we have decided that latitude is not a sufficiently strong basis for a predictive screen.

75 N. Barros, J. J. Cole, L. J. Tranvik, Y. T. Prairie, D. Bastviken, V. L. M. Huszar, P. del Giorgio and F. Roland (2011), “Carbon emission

from hydroelectric reservoirs linked to reservoir age and latitude”, Nature Geoscience 4:593-596
76
Bridget R. Deemer, John A. Harrison, Siyue Li, Jake J. Beaulieu, Tonya DelSontro, Nathan Barros, José F. Bezerra-Neto, Stephen M.
Powers, Marco A. dos Santos, J. Arie Vonk; Greenhouse Gas Emissions from Reservoir Water Surfaces: A New Global Synthesis,
BioScience, Volume 66, Issue 11, 1 November 2016, Pages 949–964
77
Note that some of the factors mentioned here were found to be significant for some GHGs but not others.
78
The Deemer et al. paper mentioned above found that latitude was unrelated to CO2 flux; “only weakly” related to CH4 flux; and asignificant predictor of N2O flux in some but not all regression model formulations (which is in any case less material as N 2O is a moreminor reservoir GHG).

36

Figure 6a: Emissions intensity range – cut by installed capacity – based on emissions
allocated using operating regime methodology

Source: IHA G-res database

Figure 6b: Emissions intensity range – cut by climate zone – based on emissions allocatedusing operating regime methodology.

Source: IHA G-res database37

Figure 6c: Zoomed in emissions intensity range – cut by climate zone – based on emissions
allocated using operating regime methodology

Source: IHA G-res database

However, as Figures 6a-6c also illustrate, power density can be the basis of a simple and effective
screen, as it has a clear inversely proportional relationship to emissions intensity (see Box 6). It isalso the predictive screen used by the CDM assessment methodology.
Whether generation density (kWh/m2/year) could also be an appropriate predictive screen was also
discussed, but it was believed that this would be infeasible given the difficulty in forecasting capacity
factor in advance.
Box 6: Relationship between power density and emissions intensity
The power density of a hydropower facility is its nameplate capacity divided by the surface area of its
reservoir. It is related to emissions intensity as follows:
emissions intensity=

emissions (gCO2e/day)electricity generation (kWh/day)=reservoir area (m2)power (kW)=________1_______ __power density (kW/m2)

GHG flux (gCO2e/m2/day)
capacity factor x no. hours in dayxx

GHG flux (gCO2e/m2/day)
capacity factor x no. hours in day

GHG flux is a measure of the quantity of a gas moving through a square metre of the reservoir in a
day and is commonly used in scientific reporting of reservoir emissions.
The relationship between power density and emissions intensity shown above is a mathematicalrather than a statistical one. However, this is not to say that power density will always be precisely
inversely proportional to emissions intensity, because both GHG flux and capacity factor will varyfrom facility to facility. This introduces a statistical element to the relationship. GHG flux isdetermined by a variety of complex, site-specific factors which are still the subject of ongoing
scientific inquiry, as described in the text. Capacity factor is determined by efficiency, but also by the
purpose for which the facility is designed and operated. For example, a facility which is operated to38

provide baseload power will have a much higher capacity factor than one designed to provide
peaking and reserve power.
We should expect therefore the observed relationship between power density and emissions
intensity to be something like an underlying inverse relationship with some variation due to GHG fluxand capacity factor.
Figure 7: Illustration of the relationship between power density and emissions intensity:
Using hypothetical data points

Why 5 W/m2 for facilities subject to an emissions intensity threshold of 100
gCO2e/kWh and 10 W/m2 for facilities subject to an emissions intensity threshold of
50 gCO2e/kWh
While the CDM threshold figures of 4 W/m2 and 10 W/m2 are well-known, these were derived at atime when scientific knowledge of reservoir emissions was at a much earlier stage. The 5 W/m 2
threshold for facilities subject to an emissions intensity threshold of 100 gCO2e/kWh and 10 W/m2
for facilities subject to an emissions intensity threshold of 50 gCO2e/kWh have been derived basedon more up-to-date evidence and research as described below.
The choice of power density threshold is a trade-off between certainty that high-risk facilities will not
be misclassified, and the possibility that more issuers will be attracted to seek certification from astreamlined process. It also depends on the emissions intensity threshold chosen for the Low GHGCompatibility Test (see Section 4.4).
For any desired emissions intensity threshold, a power density value can be set above whichfacilities are assumed (or known) to have emissions below the threshold. The shape of theemissions intensity vs. power density curve is fairly flat at high emissions intensities. This means that
small increments in the power density threshold have the potential to place many high-emitting
facilities in the wrong or right category.
This is shown in Figure 8. The blue dashed line represents the power density threshold whichcorrectly categorises all facilities above the 100g emissions intensity threshold as at risk of being
higher-emitting. A small shift upward (top orange line) would have the effect, with more data points,of requiring a few more low-emitting facilities to undergo assessment. A small shift downward(bottom orange line) misclassifies several facilities as low risk. Correct classification of large
numbers of high-emitting facilities can therefore be fairly sensitive to a power density threshold whichis slightly too low.

39

Figure 8: Effect of small changes in the power density threshold on classification of moderate-tohigh emitting facilities

The optimal power density threshold can only be known over time from observation. The robustnessof the power density threshold could theoretically be tested against various data points from theliterature, but again, the G-res data set has been taken as a reasonable place to start theseobservations, for the reasons given in Section 4.4 above.
According to the statistical relationship between power density and emissions intensity observed inthis dataset, and as illustrated in Figures 4a-6c above, as expected there is a general inversely
proportional relationship between power density and emissions intensity that forms the basis of the
proposed predictive screen.

Stress testing - how well does it work – does it effectively ‘screen in’ high emission
intensity facilities?
Reviewing Figure 5b, assuming an emissions intensity threshold of 100 gCO2e/kWh, once allocation
has been taken into account, from the 498 data sets in G-res, no reservoir with emissions > 100
gCO2e/kWh has a power density > 5 W/m2. That is, no ‘high emissions intensity’ facility would havebeen screened out and exempted from a GHG Assessment, with a proposed power density screenof 5 W/m2.79 If the predictive screen were set at 4 W/m2, then one facility would be categorised as‘low emissions intensity’ when in fact it was not. Given the uncertainty inherent in these emissions
intensity estimates, this may be viewed as inconsequential. However, the threshold has been raisedslightly to 5 to be conservative as this provides a margin of error, bearing in mind the trade-off
mentioned above.

Stress testing - how well does it work – does it effectively ‘screen out’ all low
emission intensity facilities?
Figures 4a-5b show that there are likely to be large numbers of low emissions intensity facilities (withemissions intensities < 100gCO2e/kWh) that are not screened out by a predictive screen of 5W/m2,
and will therefore need to go through a GHG Assessment.
While we would prefer a screen that screened more facilities out in order to reduce transaction costs
for issuers, given the analysis of installed capacity and latitude above, we cannot find a factor which
would sufficiently improve the predictive power of the screen. For that reason, we have chosen to
stick with a single power density threshold set at 5W/m2 as based on the G-res data set on theunderstanding that this (i) categorises high-risk facilities correctly (with a margin of error) 100% of
the time and (ii) categorises low-risk facilities correctly in as many cases as possible.
The same rationale and results apply for the adoption of the 10W/m2 predictive screen for facilities
subject to the 50 gCO2e/kWh threshold.
79

Other data points from the literature could be derived and tested in this manner, but inherent problems of comparability arise given (i)they will undoubtedly vary in what (in terms of scope, pathway, etc.) they are measuring and (ii) they will be snapshots rather than lifetime
averages.

40

5 Mitigation Requirements for Special Cases
5.1 Pumped storage
5.1.1 Issues relating to pumped storage
Like other forms of hydropower, pumped storage can emit GHGs from its reservoirs. These shouldbe treated by the Criteria the same as other forms of hydropower. As it happens, the power densitiesof pumped storage facilities tend to be exceptionally high. Therefore, we expect the vast majority ofpumped storage facilities to be considered low risk, and to pass the predictive screen described in
the Mitigation Test described in Section 4.
However, it is also important to note that pumped storage varies in a number of key respects fromrun-of-river and impoundment hydropower. First, it plays an enhanced role in supporting the stabilityof the main grid through the storage, back-up and peaking services it provides. Compared to mostother energy storage technologies, pumped storage provides higher power ratings, larger energy
storage capabilities and better environmental performance.80 It is a proven, commercially available,
and reliable technology that compares favorably in terms of costs to most other energy storage
solutions. As of 2019, pumped storage constituted approximately 96% of the total energy storage
capacity in the world.81
As the penetration of variable renewable generation technologies has increased, pumped storage
facilities are increasingly used to help manage the variability and uncertainty associated with windand solar power generation (peaking and smoothing services), and also enable greater integration ofwind and solar resources into the system by reducing the curtailments of excess variable renewablegeneration (storage of surplus renewable electricity). The value of these services increases withincreasing penetration of renewables in the grid.
Therefore, pumped storage is often viewed as key supporting infrastructure for the roll out ofintermittent renewables. On this basis, pumped storage has been argued by some to be critical tosupporting a rapid transition to a decarbonised power sector.
However, on a facility-by-facility basis, there are two main challenges for certification of pumped
storage assets:(i) While recognizing the very important role that pumped storage is likely to play in supporting
grid decarbonisation, it cannot automatically be assumed that this is the case for any given
facility. In some cases, a facility may now and for the foreseeable future be supporting
thermal generation. If a certification decision rested on the argument that the pumped
storage facility contributes to the roll out of renewables, we would want to test this is indeed
the case.
One simple way to do this might be to look for trends in renewables deployment in the gridand set a threshold for renewables penetration. This is challenging as there can be achicken-and-egg situation. Often pumped storage might need to be built in advance of
renewables, incentivizing and enabling that roll out. Therefore, ideally, there would be a needto look forward to estimate, credibly, the likely future grid mix and emissions intensity todetermine whether the pumped storage will be part of a system that is rapidly transitioning to
renewables.
Exploring options or rules of thumb to do this have been challenging. Credible forward
projections of the grid mix are difficult to establish – policy objectives can change and be
Sternberg A. and Bardow, A. (2015), ‘Power-to-What? – Environmental assessment of energy storage systems’, Energy Environ. Sci.,
2015,8, 389-400
81 IHA (2020), 2020 Hydropower Status Report, International Hydropower Association, available at: https://hydropower-assets.s3.eu-west2.amazonaws.com/publications-docs/2020_hydropower_status_report.pdf
8041

delayed. Instead, it may be better to look for credible evidence of future deployment, either
through demonstration of PPA auctions and/or well-advanced programmes and projects to
install additional intermittent renewable capacity.
Even assuming future changes to the grid can be credibly demonstrated, there remains thechallenge for the Criteria of establishing a suitable threshold for the penetration of intermittent
renewables in the grid.
Two options have been explored:• Set a threshold for the carbon intensity of the grid, for example 400g or 500g CO2e/kWh. However, a grid made up of fossil fuels (mostly gas) and nuclear, with nointermittent renewables, could meet this threshold, so it is not a good indicator of thelevel of intermittent renewables in the grid.
• Set a threshold more specifically around the percentage of intermittent renewables in
the grid. Reviewing grid mixes, at present it seems that only a handful of countries
globally have more than 5% of intermittent renewable energy penetration in their grid,and the vast majority are well below 5%. A high threshold would exclude projects inmany countries, even if on close examination they were indeed supporting
renewables roll-out, unless alternative Criteria are also available.
(ii) While often assumed, it may not always be the case that the facility itself is carbon neutral or
beneficial, leading to carbon emissions savings. Studies in the United States havedemonstrated that pumped storage charged during off-peak hours when a significant amountof coal is deployed, coupled with relatively low renewables penetration, can actually increase
emissions compared to a no-storage case.82
However, this problem decreases and resolves at higher levels of renewables penetration.
So again, it would be important to understand the current and projected penetration ofintermittent renewables in the grid.
According to one study (Goteti et al., 2017), energy modeling techniques can predict the levelof intermittent renewables penetration at which the storage becomes carbon neutral(identified as 18% for the Midcontinent ISO in the United States), although this is sensitive toenergy market conditions. It is therefore highly case-specific and it is not practical to ask
issuers to commission case-by-case energy modeling studies to assess such questions.
Therefore, it is difficult to set an appropriate penetration rate that can be applied globally in
the Criteria.
Instead, we can ask in which circumstances a pumped storage facility would not be carbon
neutral. This could happen if the primary purpose of the pumped storage is to provide
economic peaking power, charging off-peak when electricity is cheap. This is illustrated by
Figure 9, a simplified version of a chart demonstrating the case of the Midcontinent ISO from
Goteti et al. It is similar to a merit order chart, which ranks the order in which different
resources are dispatched based on marginal cost. The x-axis shows the cumulative capacity
which would be deployed depending on demand. Whereas a merit order chart shows
marginal cost on the y-axis, Figure 9 shows the emissions intensity of the plant coming online
at each point.83 The vertical dotted lines show the sections of the merit order at which
pumped storage would be charged during off-peak hours (A) and discharged during peak
hours (B) if it were to be added to the grid. The pumped storage would be charged by off82

Goteti, N.S., Hittinger, E. & Williams, E. Energy Syst (2017). https://doi.org/10.1007/s12667-017-0266-4; Hittinger, E. and Azevedo,
I.M.L, ‘Bulk Energy Storage Increases United States Electricity System Emissions’, Environmental Science & Technology 2015 49 (5),3203-3210 DOI: 10.1021/es505027p; Michael T Craig et al 2018, ‘Carbon dioxide emissions effects of grid-scale electricity storage in a
decarbonizing power system’, Environ. Res. Lett. 13 014004; Argonne National Laboratory (2014), ‘Modelling and Analysis of Value ofAdvanced Pumped Storage Hydropower in the United States’: http://www.ipd.anl.gov/anlpubs/2014/07/105786.pdf. The Goteti et al. paper
is summarised in a web article here: https://theconversation.com/does-energy-storage-make-the-electric-grid-cleaner-90001
83
Typically in a merit order chart the y-axis shows marginal cost, and different plants coming online are displayed as discrete columns, but
in this simplified version we are using a continuous line.

42

peak sources which are naturally cheaper and lower down in the merit order than the sources
they would displace. In this example, the pumped storage would be charged by off-peaksources which are higher-emitting than the sources they would displace. This could happen,
for example, if cheap coal were deployed during off-peak hours and more expensive gas
were used for peaking.
The question remains, then, on how to identify this situation. Ideally it would be identified bycomparing off-peak and peaking grid intensities. However, international data is not available
on how grid intensities typically vary over the day.
Figure 9: Simplified scenario where addition of storage to a grid will result in higher emissions,
adapted from Goteti et al. (2017)

Marginal emissions

A. Plant used B. Plants
to charge
displaced by
PSH
PSH

Capacity deployed

These issues are likely to be considered further by the Climate Bonds Electricity Transmission,
Distribution and Storage Technical Working Group and will be kept under review.

5.1.2 Mitigation Criteria for pumped storage
While case-by-case detailed modelling for pumped storage is not possible, some practical rules of
thumb can be devised which rule out the cases which are at the highest risk of not being GHGbeneficial. Taking into account the challenges outlined above, the following Mitigation Criteria are put
forward for pumped storage facilities:
1. The facility is demonstrably being purposefully built in conjunction with intermittent
renewables, as in the Hatta Dam project in the United Arab Emirates, for example. This
captures those cases where there is high certainty that the pumped storage is facilitating theroll-out of intermittent renewables.
OR
2. The facility is contributing to a grid which already has a share of intermittent renewables
deployment of at least 20% OR has credible evidence of programmes in place that will
increase the share of intermittent renewables to this level within the next 10 years. Evidenceof such credible programmes might be the current development of renewable energy facilities
that are due to come online in the near term, or the auction of PPAs for renewables. This
captures those cases where renewable penetration is already, or soon will be, sufficiently
high that it is highly unlikely that pumped storage is being charged, on average, with highGHG-intensity sources.
OR
3. The facility can credibly demonstrate that the pumped storage will not be charged with an offpeak grid intensity that is higher than the intensity of the electricity that it will displace when it43

is discharged. For example, by demonstrating that there is no combination of the following in
the merit order: (i) mid-merit coal and (ii) gas used at times of peak demand.
AND
4. Must pass the same reservoir emissions criteria as other facilities, as described in Section 4.
As political and other circumstances can change, compliance with such criteria would need to be
kept under regular review.

5.2 Cascade systems
As noted in Box 2, cascading systems, where one reservoir receives water from one or multiple
reservoirs upstream, are not directly integrated in the current version of G-res for lack of detailed
information on their GHG emissions as a system, although very simple systems could be assessed.
This issue will be kept under review as use of the Criteria develops.

44

6 Adaptation and Resilience Requirements
6.1 An overview of the Adaptation & Resilience Component of the Criteria
This section describes the Adaptation & Resilience (A&R) Component of the eligibility Criteria forhydropower assets and projects under the Climate Bonds Standard. This component of the Criteria
views the potential climate adaptation and resilience impacts/benefits of hydropower as inextricably
linked to a broad range of environmental and social issues and proposes to assess these in theround.
Section 6.2 below describes the scope of this component in terms of the key factors that need to beassessed to ensure that Certified Climate Bonds are delivering on key climate outcomes in line withthe overall objectives of the Standard. Section 6.3 describes practical aspects of this component, toensure that any transaction burden for issuers is minimised, while maintaining rigour and robustness
in assessment. Section 6.4 describes existing tools. Section 6.5, 6.6 and 6.7 then describe theAdaptation and Resilience Component of the Hydropower Criteria that it is believed balances theseneeds, leveraging these tools where appropriate.

6.2 Key aspects to be assessed under this Component
As noted elsewhere in this document, much attention has been paid to potential negativeenvironmental and/or social impacts of hydropower dams and establishing appropriate safeguards tominimize or eradicate the likelihood of those negative impacts. However, multi-purpose hydropower
reservoirs often deliver a number of services relevant to adaptation, such as water storage, flood
prevention, etc., which should also be acknowledged.
That said, the A&R Component focuses on safeguarding against negative outcomes. The Criteria do
not extend to assessment of the full range of potential and actual adaptation services delivered.
Adaptation services that could or should be delivered are highly case-specific. Therefore, it would be
exceptionally difficult to establish simple Criteria for expected adaptation services that could or
should be delivered.
The proposed assessment methodology nevertheless includes a minimum bar, namely that anassessment has been done of the facility’s potential adaptation services and its fit with national and/or regional policies and plans for adaptation. More information on this is given in Sections 6.5 & 6.6
below.
In terms of which of the many complex and interconnected environmental and social issues should
be assessed under these Criteria, the following points are noted:•

The Climate Bonds Standard is focused on climate impacts – including low GHGcompatibility (mitigation) and also climate adaptation and resilience. Defining resilience canbe challenging. However, it is clear that many topics which have been a part ofenvironmental and social assessments for a number of years overlap significantly with theresilience of affected populations and ecosystems and their ability to adapt to climatechange.
The most obvious example is the potential impact of climate change on hydrologicalconditions, and consequently water supply and local livelihoods. Another is climate change
exacerbating ecological problems such as impaired species migration and algal blooms.
Environmental and social impacts such as these, already complex and interconnected,
become more so when climate change impacts and risks are taken into account, and there isa logic to addressing all key environmental factors, rather than trying to separate them out.

45

The Climate Bonds Standard does not usually address primarily social impact issues, andthere has been debate about whether they are within scope, but as this is particularly aknown, longstanding concern in the case of hydropower, it has been considered necessary toinclude them. On a more practical basis as well, the tools explored for these assessments(more detail below) intrinsically encompass social factors in any case.
•

One of the goals of the Climate Bonds Standard is to bring transparency and consistency tothe evaluation of Green Bonds. By including these factors in the Criteria for hydropower
assets, we can ensure these outcomes are delivered, and investors and other stakeholders
are not in the position of attempting to independently access and interpret issues using ESG
frameworks of varying and/or unknown quality and completeness in respect of these highlyinter-connected and complex factors.

The A&R Component therefore takes a broad interpretation of resilience, encompassing a range ofenvironmental and social aspects. Its concept of climate resilience is explicitly not limited to theresilience of the hydropower facility itself to climate change, but rather also encompasses thefacility’s impact on the resilience of affected ecosystems and populations.

6.3 Practical requirements for this Component
Leverage existing tools
The potential adaptation and resilience impacts of hydropower is a vast topic and the A&R
Component will require consideration of a highly complex and varied set of issues across theenvironmental and social spectrum with a long history of assessment by project developers andfunders. There is no value in Climate Bonds Standards reinventing the wheel on any of these issues.
The A&R Component therefore needs to leverage an existing set of guidance which is robust andhas widespread recognition amongst a diverse set of stakeholders.
However, it should be noted that existing tools and standards do not always fully or explicitly cover
the additional, often interrelated impacts connected to climate adaptation and resilience. Many of therisk assessments and management processes specified by existing ES guidelines will be aprerequisite for identifying A&R risks, but more may be needed to fully address them given that thisis an emerging topic.
Minimise the assessment burden
In addition, there needs to be a balance between rigour and practicality. Any Criteria with aprohibitively expensive assessment burden will discourage certification. Any methodology adopted
therefore need to avoid this.
A binary ‘pass’/’fail’ outcome rather than scores or grades
Certification decisions under the Climate Bonds Standard are binary – bonds are either certified ornot. Therefore, the A&R Component needs to be framed in terms of pass/fail thresholds. Where an
assessment tool provides scores or grades for a facility, consideration has been given to whatthreshold ‘score’ or result should represent a pass for the purposes of Climate Bonds Certification.
Retrospective application
Hydropower-related bonds may raise finance for new, greenfield facilities, for retrofits or upgrades toexisting facilities, or they may be a straight refinancing of an existing facility. Indeed, this latter
option is most likely given that bonds are primarily a refinancing tool. Therefore, any proposal andassociated approved assessment tool under this Component needs to be usable for both new andexisting facilities.
This is not a straightforward issue; as in the case of refinancing, the facility may have been operating
for a number of years. It may have been compliant with best practices in place at the time of its
implementation, but may not meet current best practice requirements. The selected methodology

46

and tool will therefore need to be able to address and resolve any ‘legacy issues’ that may be
identified.

6.4 Existing tools and guidelines considered
Appendix 4 summarises a range of existing tools and guidelines which the A&R Component of theHydropower Criteria could potentially have drawn from.
Of these, those with the most potential to be leveraged for the Hydropower Criteria are listed below,
with a brief indication of whether they were taken forward for further consideration or not.
•

The World Commission on Dams (WCD) Report of 200084 emerged from worldwide growing
opposition to dams on environmental and social grounds. It set out a number of strategic
priorities and principles for minimising environmental and social risks and impacts. These
have been extremely influential but are generally perceived as direction-setting rather thansetting verifiable operational standards.85•

The Low Impact Hydropower Institute Certification Programme is relevant for hydropower in
the USA. However, the programme does not address climate change and social issues.

•

The Rapid Basin-wide Hydropower Sustainability Assessment Tool has been developed by
the Mekong River Commission, Asian Development Bank and WWF to assess hydropower
development in a basin-wide context. It is believed the guidance it provides is nottransferable to other geographical contexts.

•

In addition, all the Multilateral Development Banks have generic environmental and social
guidelines for their projects. The IFC’s Environmental and Social Performance Standards are
frequently used as a benchmark for other guidelines and assessment tools. However, again,
while they are extremely influential, as guidelines, they do not constitute a set of verifiable
operational standards.

•

The Hydropower Sustainability Assessment Protocol (HSAP) builds on the work of the World
Commission on Dams. It offers a way to assess the performance of a hydropower projectacross more than 20 sustainability topics against international best practice. Assessments
are based on objective evidence and the results are presented in a standardised way,
making it easy to see how existing facilities are performing and how well new projects arebeing developed. Further information on the HSAP is given in Box 7.

•

The Hydropower Sustainability Environmental, Social and Governance Gap Analysis Tool
(hereafter the “ESG Gap Analysis Tool”) has recently been developed under the same
governance framework and body as HSAP. It is in essence a streamlined version of HSAP,
focusing on a narrower set of ESG topics, and includes a new topic on climate change
mitigation and resilience. It evaluates against international good practice. Again,
assessments are based on objective evidence and the results are presented in astandardised way. Further information on the ESG Gap Analysis Tool is given in Box 8.

•

The IFC’s Hydroelectric Power: A Guide for Developers and Investors strongly overlaps with
the HSAP in some areas but has more emphasis on technical aspects and financial
performance, and less on environmental and social issues.

84

WCD (2000), Dams and Development: A New Framework for Decision-Making, the Report of the World Commission on Dams,
Earthscan Publications, London and Sterling, VA
85
IIED (2014), ‘Watered down? A review of social and environmental safeguards for large dam projects’, International Institute forEnvironment and Development

47

•The World Bank developed and piloted Hydropower and Dams Sector Climate Resilience
Guidelines in conjunction with Mott MacDonald; the tested guidelines were launched in May
of 2019. With its climate resilience focus, this is highly relevant to the A&R Component.

48

6.5 Proposal: leverage the ESG Gap Analysis tool
It is the requirement of the A&R Component of the Hydropower Criteria that a facility seeking
inclusion in a Certified Climate Bond has undergone an assessment under the ESG Gap Analysis
Tool. The rationale for this is given below. Whether the performance of the facility under thatassessment is sufficient for certification is determined by the scoring/threshold methodology
described in Section 6.6.
There is agreement among the technical experts consulted that the HSAP is the most thorough andwidely-accepted environmental and social assessment framework for hydropower. Further andsignificantly, it is more than a set of guidelines, instead establishing a standardised assessment
framework and process. While it is not a ‘pass’/’fail’ test of whether a facility is sustainable, it
provides a way of assessing and grading it over a wide range of topics, including those identified as
needing assessment prior to certification under the Climate Bonds Standard. It also benefits fromwide stakeholder engagement and support in its development and implementation (including theInternational Hydropower Association, governments, NGOs and multilateral and commercial financial
institutions), and by an objective, managed deployment process, where assessments are carried out
by accredited assessors.
However, it is considered that, for the purposes of encouraging certifications under the Climate
Bonds Standard, assessment under the full HSAP may be viewed as too onerous and costly bysome developers given that the scope of an HSAP assessment goes beyond standard
environmental, social and governance aspects (for example, economic viability) and looks at provenbest practice as well as basic good practice. Given the above, insisting upon use of the HSAP in the
Hydropower Criteria might deter certifications.
It is therefore proposed to leverage the streamlined ESG Gap Analysis Tool under the HSAP, withthe understanding that:•

This tool matches the needs of the Climate Bonds Standard for a comprehensive adaptation
and resilience scope, addressing key environmental and social topics, as well including a
new section explicitly addressing the impacts of climate change in terms of ensuring
adaptation and resilience. In particular:oAll but one of the topics included in the ESG Gap Analysis Tool are drawn acrossfrom the full set of HSAP topics, and therefore have been subject to robust
development, testing and consultation during the development of the HSAP.

o

The only exception is the new Climate Change Mitigation and Resilience section
included in the ESG Gap Analysis Tool, which is still in the process of being added to
HSAP. However, that section draws on the existing implicit considerations of climate
resilience in the HSAP (where resilience has been embedded in each topic area,rather than previously being explicitly identified in its own topic area). It also draws on
criteria to assess the climate resilience of hydropower facilities in guidelines recently
completed by Mott McDonald for the World Bank. The requirements relating to
Climate Change Mitigation drew from the technical discussions of the experts
assembled for the purposes of developing the Hydropower Criteria, and therefore aresupported by the analysis and views presented in Section 4 of this document. The
ESG Gap Analysis tool therefore has the advantage compared to other systems ortools of explicitly integrating climate resilience aspects into the assessment, taking
into account the latest developments and findings.

oThose topics included in the HSAP but not included in the ESG Gap Analysis tool arethose that are not critical to the Climate Bonds Standard, given its climate and49

environmental focus, and therefore this streamlining to key ESG issues isadvantageous for the purposes of the Standard. For example, topics included in the
HSAP but not in the ESG Gap Analysis tool include integrated project management,
asset reliability and efficiency, and economic viability.
oHaving noted above that the A&R Component does not seek to establish required
adaptation services that any facility must deliver to be eligible for certification, there is
still a minimum bar in the ESG Gap Analysis Tool relating to adaptation services. Thisis that it requires an assessment to be carried out regarding the facility’s potential
adaptation services and fit with national and/or regional policies and plans foradaptation.

•

The focus of the ESG Gap Analysis Tool is identifying ‘significant gaps’, that is, instanceswhere the project falls short of international good practice. A performance of no significant
gaps compared to good practice within a topic is equivalent to Level 3 in the full HSAP,
whereas a performance deemed to be consistent with international best practice is equivalent
to Level 5 of the full HSAP. Box 9 gives a summary of what a performance in line withinternational good practice would represent. Significantly, a useful comparison of HSAP andWorld Bank Safeguards with the WCD strategic priorities is presented in a report by the
IIED.86 The key takeaways from this are that the HSAP and the WCD are overall in broadalignment, recognizing that as distinct processes they do not overlap 100%. The HSAP, andby extension, the ESG Gap Analysis Tool go further on many topics, though there aredifferences in some technical details of the processes recommended by the HSAP and theWCD.87 Given this broad alignment between the HSAP level 3/‘no significant gaps’ in the
ESG Gap Analysis Tool, and the WCD strategic priorities, using the ESG Gap Analysis tool
rather than the full HSAP has been deemed appropriate for the purposes of assessing an
acceptable level of performance for hydropower facilities – subject to the precise
performance requirements as described in the following section.

•

The streamlined nature of the ESG Gap Analysis Tool is expected to minimise transaction
costs for the issuer seeking certification compared to requiring assessment under the HSAP,
while still ensuring consistency and comparability of all applications for certification. At thisearly stage of development and roll-out of the ESG Gap Analysis tool, it is difficult to estimate
the likely cost of assessment but based on pilot assessments done to date it is estimated thatit might be in the range of US$30,000 - 40,00088 (perhaps more or less depending on thecomplexity or otherwise of the project). For example, if many aspects of the assessment are
not applicable for a particular project, the assessment cost should be lower. In addition, if
facilities are located in the same basin, then there is the potential to evaluate them under one
assessment, or at least use shared information across two assessments, again potentiallylowering the cost. This compares favourably with an estimated cost which can surpass US$
100,000 for assessment under the full HSAP.

•

The Tool is applicable to the full range of hydropower facilities (run-of-river, impoundment
and pumped storage) at various stages of development, from preparation to implementation
to operation. The only caveat is that projects will need to be well advanced in the preparation

86

IIED (2014), Watered down? A review of social and environmental safeguards for large dam projects, International Institute forEnvironment and Development
87
The potentially most significant of these is grading the explicit inclusion of human rights in ES impact assessment at Level 5 rather thanLevel 3. HSAP does, however, address human rights implicitly in its coverage of resettlement, indigenous people and labour and working
conditions.
88
The cost of the management plan to address any gaps would depend on their number and how much capacity building is required toaddress them.

50

stage, as feasibility studies and other documentation will be needed as evidence. However,this caveat is an advantage to the Climate Bonds Standard as it minimises the risk thatfacilities will be certified on the basis of very preliminary feasibility assessments. For
example, for assessments in the project preparation stage, pre-existing environmental/social
impact assessments and management plans, resettlement plans, stakeholder engagement
plans, and feasibility studies would be considered key documents.
•

Likewise, the ability to carry out an assessment on an operational project is advantageous forthe bond market, where it is likely that many bonds will relate to refinancing of existing
facilities. What is being assessed here is the ongoing impact of that facility in operation. The
assessor should consider any legacy issues, including those arising from the project’s
original development. The HSAP Background Document provides guidance on how legacy
issues should be addressed under various relevant topics.

•

The Tool has the same strong governance framework as the HSAP, with broad stakeholder
representation involved in the development and management of the Tool and assessments
carried out using it, including industry representatives, governments, NGOs, multilateraldevelopment banks and commercial banks. Broad support for any Criteria is critical, butparticularly for hydropower, which can be a contentious area.

•

The Tool has a strong, in-built assessment framework, utilising the accredited assessors’
programme used by the full HSAP. Under this approach, there is oversight and training ofassessors and their resulting assessments, giving valuable credibility to the results. This
framework is also advantageous to the Climate Bonds Standard as it takes the burden ofassessment off the Climate Bonds Standard approved verifiers.

Box 8 provides further detail on the ESG Gap Analysis Tool to support these views.
One point of clarification:•

If a facility has already undergone assessment under the full HSAP, then the results can betranslated into the necessary scoring methodology described in the next section, given thecloseness of the ESG Gap Analysis Tool and the HSAP. Therefore, there is no additional
requirement for that facility to also undergo an assessment under the ESG Gap Analysis
Tool. There would however still be a need for a management plan and an assessment under
the new Climate Change Mitigation and Resilience section if not previously undertaken.

Box 7: The Hydropower Sustainability Assessment Protocol (HSAP or ‘the Protocol’)
http://www.hydrosustainability.org/Protocol.aspx
Origins: The Protocol was developed through 30 months (2008–10) of cross-sector engagement,
including a review of the World Commission on Dams Recommendations, the World Bank Safeguard
Policies and the IFC Performance Standards. During this period, a multi-stakeholder forum jointly
reviewed, enhanced and built consensus on what a sustainable hydropower project should look like.
A draft of the Protocol was released in 2009, was trialed in 16 countries across six continents andsubjected to further consultation involving 1,933 individual stakeholders from 28 countries. The final
version was produced in 2010.
Purpose: The Protocol is a framework to assess the sustainability of a hydropower project andpromote the continuous improvement of performance. It includes over 100 definitions of basic goodpractice and proven best practice across a range of topics. It can be used in multiple ways, including
the independent review of sustainability issues, guiding appraisal of sustainability issues, andcomparison with international best practice.

51

The ‘spider diagram’ below shows the environmental, social, technical and economic topics which
are included. Within these, the Protocol also includes ‘cross-cutting issues’ such as climate change
and human rights, which feature in multiple topics.

What can be assessed: The Protocol has been designed to work on projects and facilities anywherein the world. It can be used to evaluate run-of-river, impoundment and pumped storage facilities atany stage of project development, from preparation to implementation and operating stage. It
includes:- The early stage tool, a screening tool for potential hydropower projects- The preparation tool, which covers planning and design, management plans and commitments- The implementation tool, used through the construction phase- The operation tool, used on working projects
Output: For each sustainability topic, performance is scored from 1 to 5. Five represents provenbest-practice, 3 represents international good practice. Box 9 gives more detail on what level 3
implies.
Governance: The Protocol is governed by a multi-stakeholder body, using a consensus
approach. This body includes representatives of social NGOs (Oxfam, Transparency International)
and community organisations, environmental NGOs (WWF, The Nature Conservancy), developed
and developing country governments (China, Zambia, Iceland, Norway), commercial anddevelopment banks (the World Bank), and the hydropower sector. It meets four times a year to guidethe Protocol’s work programme. The IHA is responsible for the Protocol’s day-to-day operations, aswell as other tasks such as overseeing training and accreditation, liaising on assessments, andcoordinating governance activities.
Assessment methodology: To ensure high quality assessments, all commercial use of the Protocol iscarried out by accredited assessors. These assessors are required to have significant experience inthe hydropower sector or relevant sustainability issues and have passed a rigorous accreditation
course. An official assessment delivers a substantial report of more than 100 pages backed up withappendices citing verbal, documentary and visual evidence. Publication is required for any claims to
be made against the assessment result. In such cases the draft final report is published online with a
60-day period for comments.
Alignment with other assessments: The Protocol is aligned with the World Commission on Dams
Recommendations, the World Bank Safeguard Policies and the IFC Performance Standards.

52

Box 8: The ESG Gap Analysis Tool (‘The ESG Tool’)
Origins: The ESG Tool has been developed out of, and based on, the HSAP, focusing on a
streamlined set of topics and sub-topics from the Protocol. The Tool was developed throughout
2016 under the oversight of the Protocol Governing Committee and has been pilot tested. It was
released for use in July 2018.
Scope: The tool has 12 sections, focused on a range of ESG factors, to be used to assess projects
for significant gaps against international good practice. It does not include those elements in the
Protocol that relate to broader factors beyond ESG, e.g., economic viability. It also includes a new
section, not previously included as its own section in the Protocol: ‘Climate Change Mitigation andResilience’. For details on the 12 sections of the ESG tool, see the “ESG Gap Analysis Tool”
document. For detail on how each element will be assessed, please see the corresponding
documentation for the Protocol.
Output: For each section of the assessment, the number of significant gaps against international
good practice is recorded. ‘No significant gaps’ is equivalent to international good practice, i.e., ascore of 3 in the Protocol. See Box 9 for more information on what a score of 3 or ‘no significant
gaps’, implies.
What can be assessed: Like the HSAP, the ESG Gap Analysis Tool can be used at any stage ofhydropower development, from the preparation stage to the implementation or operating stage. It
has been designed to work on projects and facilities anywhere in the world. It can be used toevaluate run-of-river, impoundment and pumped storage facilities.
Governance: The ESG Tool is managed and governed by the same governing body as the Protocol(see Box 7 above).
Assessment methodology: As with the full Protocol, to ensure high quality assessments, allofficial/commercial use of the Protocol is carried out by accredited assessors. These assessors havesignificant experience of the hydropower sector or relevant sustainability issues and have passed arigorous accreditation course. The same rules apply regarding publication as for the full Protocol.
Alignment with other assessments: The ESG Tool is aligned with the new World Bank Environmental
and Social Framework, which was launched in October 2018,, and existing IFC Environmental andSocial Performance Standards.

Box 9: What does a Level 3 score under the Protocol imply‘No significant gaps’ under the ESG Gap Assessment Tool has been deemed to represent a level of
performance in line with international good practice. It is equivalent to a score of Level 3 under the
HSAP. The following is the explanation within the HSAP document for what a facility needs to do ingeneral to obtain Level 3.
Assessment: Suitable, adequate and effective assessment.
This would typically encompass (as appropriate to the topic and lifecycle stage) identification of thebaseline condition, including relevant issues, appropriate geographic coverage, and appropriate datacollection and analytical methodologies; identification of relevant organisational roles andresponsibilities, and legal, policy and other requirements; appropriate utilisation of expertise andlocal knowledge; and appropriate budget and time span.

53

At Level 3 the assessment encompasses the considerations most relevant to that topic but tends tohave a predominantly project-focused view or perspective and tends to give stronger emphasis to
impacts and risks than it does to opportunities.
Management: Suitable, adequate and effective management processes.
These would typically encompass (as appropriate to the topic and lifecycle stage) development andimplementation of plans that: integrate relevant assessment or monitoring findings; are underpinnedby policies; describe measures that will be taken to address the considerations most relevant to that
topic; establish objectives and targets; assign roles, responsibilities and accountabilities; utilise
expertise appropriate to that topic; allocate finances to cover implementation requirements withsome contingency; outline processes for monitoring, review and reporting; and are periodicallyreviewed and improved as required.
Stakeholder engagement: Suitable, adequate and effective assessment.
This would typically encompass (as appropriate to the topic and lifecycle stage) identification of thebaseline condition including relevant issues, appropriate geographic coverage, and appropriate datacollection and analytical methodologies; identification of relevant organisational roles andresponsibilities, and legal, policy and other requirements; appropriate utilisation of expertise andlocal knowledge; and appropriate budget and time span.
At Level 3 the assessment encompasses the considerations most relevant to that topic but tends tohave a predominantly project-focused view or perspective and to give stronger emphasis to impacts
and risks than it does to opportunities.
Stakeholder support: There is general support amongst directly affected stakeholder groups for theassessment, planning or implementation measures for that topic, or no significant ongoing oppositionby these stakeholders.
Outcomes: As appropriate to the topic and the lifecycle stage, there may be exhibited avoidance ofharm, minimisation and mitigation of negative impacts; fair and just compensation; fulfillment of
obligations; or effectiveness of implementation plans.
Compliance: No significant non-compliances or non-conformances.

6.6 Performance level required to pass the A&R Component
As noted above, a key requirement under the A&R Component is for the hydropower facility to beassessed against the ESG Gap Analysis Tool by an accredited assessor. This assessment will
identify any significant gaps that the facility demonstrates against international good practice acrossthe full range of topics. If any significant gaps are identified, an Environmental and Social Action Plan
(ESAP) must be established to address those gaps, including details on how and when these gaps
will be closed.
However, in order for the facility being assessed to pass the A&R Component, it is necessary thatthe following level of performance (as verified by the accredited assessor) is demonstrated:•

The assessment must demonstrate:o

No more than 10 significant gaps in total across the assessment of the full range of
ESG topics. N.B. If some section(s) are not deemed applicable for a particular facility,54

oand no assessment is made for that section(s) then this maximum gap threshold will
be reduced accordingly89; ANDNo more than 2 significant gaps in each topic assessed;

AND•

The resulting ESAP to address any significant gaps must demonstrate that:ooThe majority (i.e., more than 50%) of significant gaps identified will be closed within
12 months; AND
All remaining significant gaps will be closed within 24 months.

AND•

The issuer commits to re-engage the accredited assessor immediately following these 24
months to confirm that these gaps have indeed been closed within the timeframe(s) specified
in the ESAP.

If any of these conditions are not met, the facility will not pass the A&R Component of theHydropower Criteria and will not be eligible for inclusion in a Certified Climate Bond.
Of course, however credible the plans to close any identified gaps, there is always a risk that issuers
may not be able to close them in the stated timeframe(s). If an issuer is unable to close any identified
gaps within the stated timeframe(s), certification under the Climate Bonds Standard will bewithdrawn. Although issuers would have already obtained the capital raised under that bond, thiswould affect their green credibility and therefore any investor take-up of future Green Bondissuances.90
It is believed that this combination of performance metrics represents a strong, reinforcing set of
requirements, and therefore a relatively high bar for performance. Together, the requirements aim toensure that the facility, while it may not be perfect (as few are), is nonetheless very close tointernational good practice (with respect to both each topic assessed and also overall at the time ofcertification) and will be fully in line with international good practice in all respects within a realistic
but relatively short timeframe.
At this time, it is difficult to say what proportion of facilities would meet these requirements, as the
ESG Gap Analysis Tool is very new.
Reading across from the 29 assessments91 that had been done prior to February 2018 under the
HSAP, taking into account only those aspects that are assessed under the ESG Gap Analysis Tool,
it is estimated that 17 (or 63%) of the 27 assessed facilities would pass these performancethresholds. Of these, 9 were deemed to have zero significant gaps, and an additional 8 weredeemed to have fewer than 10 gaps with credible plans to close all of the gaps within the maximum
allowed 24-month period.
However, it should be noted that:• These 29 assessments did not include the elements assessed under the new Climate
Change Mitigation and Resilience section of the ESG Gap Analysis Tool. As this is a newcomponent, it is possible that a number of facilities will be deemed to have some significant
gaps under this section. Therefore, the numbers above could over-estimate likely pass rates.
• Those seeking assessment under the HSAP to date are likely to be those facilities thatconsider themselves to be above average in terms of performance, and likely to score
relatively highly. Therefore, as a sample set it could be skewed towards higher performers
89

For example, if only 80% of the sections are deemed applicable, there should be a maximum of 8 significant gaps.
However, assessment is performed on a particular bond and associated asset. Therefore an issuer is always free to apply forcertification for a second bond regardless of the outcomes of the first.
91
This includes one project on which the ESG Gap Analysis Tool was tested and excludes ‘early stage’ assessments which do not involve
scoring.
90

55

•

(often with strong involvement from international financial institutions) and not entirely
representative of the full spectrum of hydropower facilities around the world.
In any case, this is a very small sample size representing 2% of the world’s installed capacity,and only experience will give a clear indication of actual pass rates. This will be monitored
on an ongoing basis.

One final, important point of clarification:
For the avoidance of doubt, it is stressed that the Mitigation Component of these Criteria as
described in Section 4 are an essential requirement for eligibility for certification. If the facility cannot
demonstrate the necessary power density or emissions intensity, it will not be eligible for inclusion ina Certified Climate Bond, even if the above performance requirements relating to the allowablesignificant gaps under the ESG Gap Analysis Tool are met.

6.7 No predictive screen for the A&R Component
As the types of assessments described above take time and resources, it would be preferable towaive the assessment requirements for facilities whose adaptation and resilience impacts areunlikely to be problematic. This could theoretically be decided via a ‘predictive screen’ analogous tothe one described in Section 4.5 for the Mitigation Component: a preliminary test which determines
which facilities can be assumed to have low risk of significant impacts.
However, it has not been possible to establish a predictive screen for the A&R Component. The
following options were explored but rejected for the reasons given:(i) Country-level exemption based on the strength of policy/regulation and enforcement of thoseregulations in that country. The logic was to follow the approach adopted by the Equator
Principles, where facilities in a list of ‘Designated’ countries simply need to comply withnational laws, regulations and permits, while facilities in ‘Non-Designated’ countries are
required to meet the stipulated requirements as described above.
This has intuitive appeal, and Box 10 below provides some arguments in support of thisapproach. However, no existing analysis was found to provide objective support to thisapproach in the context of the development of hydropower facilities. Furthermore, there will
also be inconsistency in the performance of hydropower projects under regulations indifferent jurisdictions and there is no guarantee that a project will perform well simply
because the country in which it is located is highly regulated.
(ii) Size-based or type-based exemption, where (very) small scale facilities or run-of-riverfacilities are exempt from the need to carry out the assessment outlined above. Thisapproach would be based on the often general assumption that larger hydropower projects
have greater impacts than small ones, which, if averaged over many projects would probably
be correct overall.
However, there is a strong feeling within the expert community and the experts consulted in
the development of these criteria that “even small hydropower projects can have significant
impacts if sited in sensitive locations or designed and operated in ways that increase rather
than minimise adverse project-specific impacts, or the cumulative impacts on the river basinsetting. Conversely, very large projects can also have minimal impacts if sited in uninhabitedareas with minimal local and downstream biodiversity. Project impact is always likely to be
dominated by site-specific considerations.”92

92

IIED (2014), Watered down? A review of social and environmental safeguards for large dam projects, International Institute forEnvironment and Development

56

Furthermore, the WCD did not identify size thresholds for considering environmental andsocial impacts of hydropower or other dams, but rather it indicates assessments needed tobe made in relation to a particular dam and river basin context.
For these reasons, no predictive screen is proposed for the A&R Component, and a uniform andfeasible tool to screen all hydropower assets and projects is preferred. Therefore, all facilities willneed to be assessed by the ESG Gap Analysis Tool and will be subject to the performance scoring
methodology described above.
Box 10: Arguments in support of a ‘Designated country’ approach to a predictive screen
As described above, one option for a predictive screen for the A&R Component is to remove theneed for a full assessment in countries with sound regulatory regimes and robust political processes.
These countries should not be viewed as having foolproof systems. However, several arguments
could be made in support of the idea that some regulatory regimes are sufficient:- There is considerable regulatory and industrial experience with hydropower within most of thesecountries.
- The EU has a robust regulatory framework. EU countries are regulated by both the Water
Framework and Environmental Liability Directives, as well as national legislation. The Water
Framework Directive requires surface waters to meet good ecological and chemical status, theassessment of which includes hydro-morphological status. It requires monitoring regimes, river basin
management plans, trans-boundary cooperation and public participation. The Environmental Liability
Directive requires operators to prevent or remediate any damage to the status of water bodies as
defined in the WFD. The European Commission has taken the Austrian government to court over ahydropower project which, in its view, infringes the Water Framework Directive.93- Similarly, the USA has a whole set of laws and agreements relevant to hydropower going backdecades. These include the Water Resources Planning Act (establishing river basin management),
Clean Water Act (banning the licensing of hydropower projects unless state authorities are satisfied
they will comply with water quality standards), the National Environmental Policy Act (requiring theFederal Energy Regulatory Commission to do an environmental assessment when licensinghydropower) and Endangered Species Act (requiring consideration of impacts on listed species inhydropower licensing).94- Countries with a robust democratic culture already have mechanisms in place to deal with
objections to hydropower projects, and a democratic culture allows for potential ES impacts to be
identified by stakeholders directly, without a formal assessment needing to raise them. For example,
the controversial HidroAysén project in Chile was cancelled in 2014 after years of protest regarding
its environmental impacts.
- Where relevant, these democratic mechanisms typically include indigenous groups who are often
vociferous about large infrastructure projects. Canada has a government department dedicated tomeeting the Government’s commitments to indigenous peoples. The US Government has recently
consulted on how the views of Native American tribes can be better incorporated into infrastructure
decisions.95
While these arguments were considered, they were ultimately rejected, and a decision made not toapply a ‘Designated country’ approach, for reasons explained in the text.

93

European Commission (2014), Environment: Commission takes Austria to Court over failure to protect water quality on Schwarze Sulmriver: http://europa.eu/rapid/press-release_IP-14-448_en.htm
94
Hydropower Reform Coalition ‘Laws Governing Hydropower Licensing’: http://www.hydroreform.org/resources/laws
95
US Department of the Interior, Tribal Input on Federal Infrastructure Decisions: https://www.bia.gov/WhoWeAre/ASIA/ORM/TribalInput/index.htm

57

6.8 Free, Prior & Informed Consent (FPIC) Requirement
Generally, Free, Prior & Informed Consent (FPIC) of Indigenous Peoples is considered to be outside
the strict climate change scope that we set for the Climate Bonds Standard. However, in the case of
the Hydropower Criteria, due to the nature of the assets being so interlinked with surrounding
communities where project activities may lead to the removal or relocation of habitation or significant
impact on their culture and livelihood, it was felt that the Criteria should have an additional
requirement that FPIC must be achieved in accordance with the UN Declaration of the Rights ofIndigenous Peoples.96 This Declaration recognizes the specific right of Free, Prior and Informed
Consent that pertains to indigenous peoples affected by a project.
To enable this, a working group of the Hydropower Sustainability Assessment Council (HSAC) wasestablished in late 2018 to review the current definition of this topic in the Hydropower Sustainability
Assessment Guidelines on Good International Industry Practice (HGIIP), which determines how the
topic is assessed in both the Hydropower Sustainability Assessment Protocol (HSAP) and also theHydropower Environmental, Social and Governance Gap Analysis (HESG) tools. Specifically, theobjective was to find stronger agreement on the language that defines good international industry
practice in the hydropower sector on this topic, and how this practice should be assessed at the
project level. The FPIC-WG was tasked to review the existing safeguards and standardsof various IFIs, and to commission a study on international law relating to FPIC.
The FPIC working group comprised representatives of each multi-stakeholder HSAC chamber andwas guided by an expert group including representatives of indigenous peoples, specialist
consultants and accredited assessors.
Their recommendations led to revisions in the HSAP and ESG Gap Analysis Tool to further
strengthen the provisions for FPIC in those tools. The amendments were approved by the HSAC
Governance Committee.

96

https://www.un.org/development/desa/indigenouspeoples/declaration-on-the-rights-of-indigenous-peoples.html

58

7 Disclosure Requirements
It is the intention of the Climate Bonds Standard to promote greater disclosure and transparency
around the use of proceeds generated through the issuance of Green Bonds, and the climate, green
and social impacts of these bonds. A high degree of transparency is critical to avoid greenwashing,
and thereby engender confidence on the part of investors and enable strong growth in the Green
Bonds market.
To this end, in order to be eligible for Certification, it is proposed that bond issuers are required tomake publicly available the information on compliance of underlying assets with the requirements
under the Hydropower Criteria. This includes: the power density and (if applicable) the GHG
Assessment; the accredited assessor’s report on the ESG gap analysis and associated plans toclose any significant gaps identified therein; and information on whether FPIC has been achieved.
We accept that some of the information in the ESG gap analysis may be subject to reasonable
commercial confidentiality considerations but urge as much disclosure as possible.
Certification under the Climate Bonds Standard exclusively relates to the attributes of the use ofproceeds of a designated debt instrument as set out under the applicable Sector Criteria. For the
avoidance of doubt, certification does not address any other aspect of the designated debt
instrument or the nominated projects and assets which are not covered by the Climate Bonds
Standard, such as compliance with national or international laws, broader ESG attributes, or
creditworthiness.
We further encourage disclosure of any identified impacts on protected areas such as Ramsar and
UNESCO World Heritage sites not already covered by the requirements of the ESG Tool.

59

Appendix 1: TWG and IWG members
TWG Members & Observers
TWG members:
Alliance for Global Water Adaptation - John Matthews
IEA Technology Collaboration Program on Hydropower – Niels Nielsen
IHE Delft - Miroslav Marence
IIED - Jamie Skinner
Independent Consultant and IHA accredited assessor - Joerg Hartmann
International Hydropower Association – Eddie Rich and formerly Richard Taylor and Cameron Ironside
IUCN - James Dalton(Former Commissioner) National Planning Commission, South Africa - Mike Muller
Norwegian Ministry of Petroleum & Energy - Oivind Johansen
RMT Renewables Consulting Ltd – Richard Taylor
State Secretariat for Economic Affairs (SECO) – Daniel Menebhi
TNC - Jorge Gastelmundi - David Harrison
Water Power & Law Group PC - Richard Roos-Collins
WWF - Jian-hua Meng

TWG observers:
Pravin Karki, Rickard Liden, Diego Rodriguez, of World Bank Group – acting in a personal capacity
CBI Technical Advisor:
Independent Consultant - Helen Jackson

IWG Members
Hydro Tasmania - Alex Beckitt
Brookfield Renewable (Brazil) - A Fonseca dos Santos
Amec Foster Wheeler - Murray Simpson
Hindustan Electric Power Ltd - Awadh Gir
Eletrobras - Pedro Luiz de Oliveira Jatoba
EDF - Alexandre Marty, Jean Copreaux
Mott McDonald - Bruno Trouille
CECEP (China) - Chang He, Wenqin Lu
EBRD - Christian Carraretto
FMASE (Brazil) - Philip Hauser
S&P Trucost - Derek Ip
ERM - Duncan Russell, Sarah Fee
M&G Investment - David Kemp
Citi - Courtney Lawrence
NAB - David Jenkins
JP Morgan - Charles Gooderham
DNV-GL - Mark Robinson
PwC (Canada) - David Greenall
EY (China) - Judy Li
Zhongcai Green Finance - Yang Yeo
EY (Aus) - Pip Best
Emergent Ventures India - Atul Sanghal
Kestrel Consulting - Monica Reid
Lianhe - Jingyun Liu
TUV Nord -Tahsin Choudhury

60Appendix 2: The power sector GHG budget according to the IEA
2DS scenario: analysis for the Low GHG-Compatibility Test
The purpose of this Appendix is to explore a single, well-known 2º modeling scenario and what it
implies for: (i) power sector technology choices; and (ii) hydropower emissions intensities that would
keep power sector emissions within the GHG budget implied by the scenario.

A2.1 Summary of the IEA Energy Technology Perspectives 2017 2DS Scenario
The International Energy Agency’s Energy Technology Perspectives series explores scenariosaligned with a reasonable probability of limiting global temperature increases by 2100 to various
increments. Historically, these have been 2º, 4º and 6º, respectively (the 2DS, 4DS and 6DS
scenarios), while the 2017 version explored the 2DS and a ‘Beyond 2DS’ scenario limiting
temperature increases to 1.75ºC. The IEA describes the 2DS scenario as follows:“The 2DS lays out an energy system deployment pathway and an emissions trajectory consistent
with at least a 50% chance of limiting the average global temperature increase to 2°C. The 2DS
limits the total remaining cumulative energy-related CO2 emissions between 2015 and 2100 to
1,000 GtCO2. The 2DS reduces CO2 emissions … by almost 60% by 2050 (compared with 2013),
with carbon emissions being projected to decline after 2050 until carbon neutrality is reached.”

Overall, the 2DS scenario estimates a required average emissions intensity across the global
electricity sector in 2050 of 35g CO2e/kWh, down from 519g CO2e/kWh in 2014; a reduction of 93%,
while electricity demand increases by about 80%. This significant decarbonisation can only beachieved via a substantial shift from high emissions fossil fuels to low-carbon technologies.
Hydropower output nearly doubles by 2050 in the 2DS but hydropower generation retains a similar
overall share in the global technology mix, growing only 2% from 16% in 2014 to 18% in 2050.
The scenario is summarised in Table A1.
Table A1: Characteristics of the global electricity sector in 2014 and in 2050, according to theInternational Energy Agency’s 2DS Scenario
2014
2050 (2DS)
Generation
Fossil fuels w/o CCS
15,885 TWh
2,718 TWh(67% of global generation)

Hydropower (excl. PSH)
Geothermal
All other sources inc. fossil fuels with
CCS
Total global electricity generation(6% of global generation)

3,895 TWh

7,619 TWh(16% of global generation)(18% of global generation)

77 TWh931 TWh(~0% of global generation)(2% of global generation)

3,961 TWh

31,277 TWh(17% of global generation)(74% of global generation)

23,819 TWh

42,546 TWh775g CO2/kWh
519g CO2/kWh

583g CO2/kWh
35g CO2/kWh

Associated average emissions intensity
Fossil fuels w/o CCS1
Electricity sector overall

Source: IEA Energy Technology Perspectives 2017 model results download: http://www.iea.org/etp/etp2017.
1Figures in this row are calculated through the method set out in Box A1.

However, it is our understanding that this analysis takes into account GHG emissions from fossil fuelcombustion only and does not incorporate Scope 1 non-combustion emissions. That is, emissions
from reservoirs (for hydropower) and the release of non-condensable gases (for geothermal) are notaccounted for.

61

A2.2 Incorporating non-combustion emissions
This section estimates the GHG intensity which is implied by the technology choices in the 2DS
scenario if Scope 1 non-combustion emissions are included. The fossil fuel emissions intensity andoverall energy mix set out in Table A1 are maintained, but emissions intensity factors for hydropowerand geothermal are incorporated.
Although the state of scientific knowledge is evolving, a mean hydropower emissions intensity figure
has not been found in the literature reviewed for this document (see Appendix 3). Evidence to datesuggests a median direct emissions intensity of 24-28 gCO2e/kWh,97 and the median reported by
IPCC is 28 gCO2e/kWh. As the distribution of hydropower emissions intensities clusters at the lower
end with a long tail (see Section 4.4.5), the mean is probably a little higher than this. We use an
estimate of 30 gCO2e/kWh here. The mean emissions intensity of 122 gCO2e/kWh for geothermal istaken from the literature.98 Given the emerging state of scientific knowledge on both topics, thesefigures should in any case be viewed as approximate.
With geothermal and hydropower together accounting for 20% of power generation in the 2DS
scenario, by including estimates of their non-combustion emissions, the estimated global emissions
intensity in 2050 in the 2DS scenario is revised to 43 gCO2e/kWh.

A2.3 Implications for the power sector GHG budget
This section explores trade-offs in the power sector technology mix if an overall emissions intensityof 35 gCO2e/kWh is still to be attained when non-combustion emissions are included.
Figure A1 condenses these trade-offs into two dimensions: the average emissions intensities oftechnologies with Scope 1 emissions (fossil fuels without CCS, hydropower, geothermal) on the xaxis; and the percentage of generation from all other technologies (‘zero emissions technologies’) on
the y-axis. In this way we can plot lines of constant emissions intensity representing technology
choices between which we are indifferent in terms of emissions intensity alone. The dashed line
represents 519 gCO2e/kWh, and the solid line represents the target of 35 gCO2e/kWh.
The situation in 2014 is shown by the point in the bottom right corner. Point A shows the absolute
limit of what could be achieved by reducing the carbon intensity of fossil fuel power stations without
any further efforts to improve the share of renewables. Points B and C show what would be achieved
through the hydropower and geothermal shares (respectively) set out in Table A1. (Note that thisseems small because the share of these two resources has increased only a small amount while theabsolute amount they generate has more than doubled. It does not imply they have little to contributeto a low-carbon energy system).
Point D shows that after those steps, a target of 35 gCO2e/kWh can only be met by a very large
scale switch from fossil fuels to zero GHG sources.99 Point E is the same in all respects apart fromthe emissions intensity of hydropower doubling from 30 to 60 gCO2e/kWh. The figures for each point
are described in Table A2.
Points B and C illustrate that hydropower (and geothermal) emissions are relatively small in thescheme of things; the vast bulk of emissions reductions needs to come from decarbonising fossil fuelcapacity and switching away from it to zero-emitting sources. However, points D and E show that,even though hydropower is a relatively low-emitting technology, the GHG budget is so tight that theemissions intensity of hydropower can make a material difference. There is a trade-off. For point E to
The G-res database median is broadly in line with, but slightly lower than, this once emissions have been allocated – see Section 4.4.5.
Bertani, R., & Thain, I. (2002, July). Geothermal Power Generating Plant C02 Emissions Survey. IGA News, (49), 1–3.
99
Note that in this case, because the share of fossil fuels is now so much less than hydropower, the average emissions intensity ofemitting technologies is now substantially less than the theoretical minimum for a fossil fuel power station, odd though this may seem atfirst glance.
97
98

62

be on the curve, a further 1.9% of global generation capacity would need to be switched from fossil
fuels to zero-emitting sources. In fact, for every rise in hydropower emissions intensity of 1g
CO2e/kWh, a further 26.9 TWh of generation is required from zero GHG sources.100 This is roughly
equivalent to the current wind output of Canada.101 That is, the world’s GHG budget is so tight that itis reasonable to place precautionary limits on even low-emitting power sources such as hydropower,
particularly as they are so long-lived.

Figure A1: Trade-offs in the power sector technology mix

Source: CBI analysis

Box A1: Mathematics behind the analysis
The total emissions intensity of the electricity system et can be expressed as the weighted averageof the emissions intensities of component technologies as follows:et=Σ eipiwhere ei and pi are, respectively, the emissions intensity of generation source i and its proportion ofgeneration.
In ETP 2017, IEA states that in 2014 the average CO2 emissions intensity for the global power
sector was 519g CO2/kWh. Given that only CO2 from combustion is included in this figure, theaverage CO2 emissions intensity for fossil fuel generation alone can be derived as follows:e´t=e´ff pff +

e´opo

100

Note that this is the average over the increment in hydropower emissions intensity from 30 to 60g CO2e/kWh. Mathematically the
relationship is not a linear polynomial so the TWh of zero-emitting generation required to compensate for a 1g CO2e/kWh increment varies
over this range.
101 US Energy Information Agency International Energy Statistics

63

where e´ff and e´o = 0 are the average combustion emissions intensities of fossil fuel and all othergeneration, respectively; and pff, p0 are their proportions. A prime ´ is used to denote a combustion
emissions intensity and an e without a prime denotes an emissions intensity comprising all/any
sources of GHGs.
Rearranging:e´f’f=e´t/pff=

519/0.67=775g CO2/kWh=eff

As this analysis also considers non-combustion GHG emissions from the power sector, theemissions intensities of hydropower eh and geothermal eg are incorporated as follows:et=eff pff + ehph + eg pg =eepewhere ph and pg are the proportions of hydropower and geothermal in the generation mix
respectively; ee is the average emissions intensity of all emitting sources; and pe the proportion ofemitting sources in the generation mix.
pe = 1 – p0 can be substituted in the above to derive the trade-off curve presented in Figure A.2:
ee(1 – p0)=etp0 = 1 – et/ee

Table A2: Figures underlying the points in Figure A1
2014
Percentage of generation
Fossil fuels
67%
Hydropower
16%

A

B

C

D

E

67%

65%

63%

9%

9%

16%

18%

18%

18%

18%

Geothermal
~0%
~0%
~0%
2%
2%
2%
Zero emissions
17%
17%
17%
17%
71%
71%
Average Scope 1 GHG emissions intensity (gCO2e/kWh)Fossil fuels
775
307
307
307
307
307
w/o CCS
Hydropower
30
30
30
30
30
60
Geothermal
122
122
122
122
122
122
Emitting
631
254
247
242
122
141
technologies
Electricity
5241
210
205
201
351
41
sector overall
Source: see Table A1 for figures from IEA ETP 2017; 307g CO2e/kWh represents a CCGT power station
operating at 60% efficiency, based on the UK Department for Energy and Climate Change fuel conversion
factor for natural gas. This compares with a lowest empirical value of ~311g CO2e/kWh taken from Weisser D.
(2007) ‘A guide to life-cycle greenhouse gas (GHG) emissions from electric supply technologies’, Energy
Volume 32, Issue 9, 1543-1559; all other figures are calculated.
Notes: 1This figure is higher than that in Table A1 because it includes GHGs other than combustion emissions

64

Appendix 3: Estimates of hydropower lifecycle emissions from theliterature
Table A3: Hydropower lifecycle estimates in detail
Quantity

Estimate

Source(see
below table)

Total lifecycle estimates including reservoir emissions
All hydropower, range

0-2200 gCO2e/kWh3

1

All hydropower, interquartile1 range

3-185 gCO2e/kWh2

1

All hydropower, median

28 gCO2e/kWh

1Run-of-river, range

3-13 gCO2e/kWh2

2

Pumped storage, single study

5 gCO2e/kWh2

2

Impoundment, range

0-165 gCO2e/kWh2,4

2

Lifecycle estimates excluding reservoir emissions
Run-of-riveras above2

Pumped storage
Impoundment, range

as above
0-43 gCO2e/kWh2,3,4

2
2

Impoundment, interquartile1 range< 10 gCO2e/kWh2

2

Impoundment, median

4 gCO2e/kWh2

2

Impoundment, individual studies

2.9 gCO2e/kWh≤ 6 gCO2e/kWh production of bulk materials

3

Notes: 1 The 50% of studies closest to the median, between the 25th and 75th percentiles. 2 Estimated fromchart as actual figures not given in source. 3 Upper end of range is an extreme outlier. 4 Emissions are
assumed to be negligible in some cases where the primary purpose of the reservoir and dam is not electricity
generation.
Sources: 1. Bruckner T., I. A. Bashmakov, Y. Mulugetta, H. Chum, A. de la Vega Navarro, J. Edmonds, A.
Faaij, B. Fungtammasan, A. Garg, E. Hertwich, D. Honnery, D. Infield, M. Kainuma, S. Khennas, S. Kim, H. B.
Nimir, K. Riahi, N. Strachan, R. Wiser, and X. Zhang (2014), Energy Systems. In: Climate Change 2014:
Mitigation of Climate Change. Contribution of Working Group III to the Fifth Assessment Report of theIntergovernmental Panel on Climate Change; 2. Kumar, A., T. Schei, A. Ahenkorah, R. Caceres Rodriguez, J.M. Devernay, M. Freitas, D. Hall, Å. Killingtveit, Z. Liu (2011), Hydropower, in IPCC Special Report on
Renewable Energy Sources and Climate Change Mitigation; 3 Hertwich et al. (2015), ‘Integrated life cycle
assessment of electricity supply scenarios confirms global environmental benefit of low-carbon technologies’,
PNAS May 19, 2015. 112 (20) 6277-6282; 4 Raadal, H., Gagnon, L., Modahl, I., & Hanssen, O. (2011). Life
cycle greenhouse gas (GHG) emissions from the generation of wind and hydro power. Renewable andSustainable Energy Reviews, 15(7), 3417-3422.

65

Table A4: Lifecycle GHG emissions of different low-carbon technologies from the literature
Technology
Solar PV
(Utility scale estimatesassociated withdomestic-level
PV can be
much higher
and areomitted)Emissions intensity
estimate (gCO2e/kWh)
16-57

30
17-50

13-1309-60
48
18-180

Solar thermal

23, 3314-200
14-200Hydropower

Wind (onshore)Wind (offshore)

MarineGeothermal

Nuclear

6, 78
4-47
2-75
2-20
24
1-2200
8
5-46
5-124

3-41
11
7-56
11
5-13
5-24
12
8-35
15-23
10-50
17
6-28
15-53
11-78
38
6-79
3-35
12
4-110

Estimate explanation

Sourcelifecycle GHG, mid-points of ranges for different PV
technologies
amorphous Si
lifecycle GHG: mean from 3 studies
full range found in studies(this source is unclear about power rating and somehigher figures presented for crystalline Si systems
are omitted as they are assumed to be small-scale,in accordance with findings of 4)
lifecycle GHG range(outliers associated with low insolation or high gridemissions in country of manufacture)
lifecycle GHG range, amorphous & crystalline Si;cases where power rating > 10kW
lifecycle GHG: medianrange(the upper end of this range is a 3kW domestic
application)
lifecycle GHG, mid-points of ranges for trough andtower
lifecycle GHG: means found in 4 studies
full range found in studies(estimates for central receivers are at the lower end;
upper end cases are relatively small scale)
impoundment, lifecycle GHG, mid-points of ranges
for two types of reservoir (unspecified)
lifecycle GHG: means found in 10 studies
full range found in studies
lifecycle GHG range
lifecycle GHG: medianrange
lifecycle GHG, mid-point
lifecycle GHG: means found in 18 studies
full range found in studies(outliers associated with high transportation
requirements and carbon-intensive land usechange)lifecycle GHG range
lifecycle GHG: medianrange
lifecycle GHG, mid-point
lifecycle GHG: means found in 5 studies
full range found in studies
lifecycle GHG: medianrange
lifecycle GHG: means found in 4 studies
full range found in studies
lifecycle GHG: medianrange
lifecycle GHG: means found in 4 studies
full range found in studies
lifecycle GHG: medianrange
lifecycle GHG range
lifecycle GHG: median
range

1
2

3

4
5

1
2

1
2
3
5
1
2

3
5
1
2
5
2
5
2
5
3
5

66

Technology
Biomass

Emissions intensity
estimate (gCO2e/kWh)15-650Estimate explanation

Sourcelifecycle GHG, electricity only, full range found in
2
studies(highly dependent on feedstock)9-130
lifecycle GHG range
3
Sources: 1 Hertwich et al. (2015), ‘Integrated life-cycle assessment of electricity-supply scenarios confirms
global environmental benefit of low-carbon technologies’, PNAS 112(20) 6277-6282; 2 Amponsah et al. (2014),‘Greenhouse gas emissions from renewable energy sources: A review of lifecycle considerations’, Renewable
and Sustainable Energy Reviews 39:461-475; 3 Turconi et al. (2013), ‘Life cycle assessment (LCA) ofelectricity generation technologies: Overview, comparability and limitations’, Renewable and Sustainable
Energy Reviews 28:555-565; 4 Varun et al. (2009), ‘Energy, economics and environmental impacts ofrenewable energy systems’, Renewable and Sustainable Energy Reviews 13 (2009) 2716–2721; 5 Schlömer
S. et al. (2014), Annex III: Technology-specific cost and performance parameters. In: Climate Change 2014:
Mitigation of Climate Change. Contribution of Working Group III to the Fifth Assessment Report of theIntergovernmental Panel on Climate Change;

67

Table A5: IPCC reporting on GHG emissions associated with electricity generation
technologies
Life cycle CO2 equivalent (including albedo effect) from selected electricity supply technologies.
Arranged by decreasing median (gCO2e/kWh) values
Technology

Min

MedianMax

Currently commercially available technologies
Coal – PC

740

820

910

Biomass – co-firing with coal

620

740

890

Gas – combined cycle

410

490

650

Biomass – dedicated

130

230

420

Solar PV – utility scale

18

48

180

Solar PV – rooftop

26

41

60

Geothermal

6.0

38

79

Concentrated solar power

8.8

27

63

Hydropower

1.0

24

2200

Wind offshore

8.0

12

35

Nuclear

3.7

12

110

Wind onshore

7.0

11

56

Pre‐commercial technologies
CCS – Coal – PC

190

220

250

CCS – Coal – IGCC

170

200

230

CCS – Gas – combined cycle

94

170

340

CCS – Coal – oxyfuel

100

160

200

Ocean (tidal and wave)

5.6

17

28

Sources: IPCC (2014). IPCC Working Group III – Mitigation of Climate Change, Annex III: Technology specific cost and performance parameters; IPCC (2014). IPCC Working Group III – Mitigation of Climate
Change, Annex II Metrics and Methodology.

68Appendix 4: Environmental and Social Standards and Assessment
Tools
We reviewed a range of existing tools which the Hydropower Criteria could potentially have drawn
from in addressing ES issues. Table A6 summarises them and comments on their suitability.

Table A6: Summary of existing Environmental and Social Standards and Assessment Tools
Standard/tool
Financial institutions
Equator Principles
http://www.equatorprinciples.com/resources/equato
r_principles_III.pdf

Description and comments“The Equator Principles is a risk management framework, adopted byfinancial institutions, for determining, assessing and managing
environmental and social risk in projects. It is primarily intended toprovide a minimum standard for due diligence to support responsible risk
decision-making.”••

World Bank Safeguard Policies /New Environmental and Social
Framework
http://www.worldbank.org/en/ne
ws/pressrelease/2016/08/04/world-bankboard-approves-newenvironmental-and-socialframework
http://consultations.worldbank.or
g/Data/hub/files/consultationtemplate/review-and-updateworld-bank-safeguardpolicies/en/materials/the_esf_cle
an_final_for_public_disclosure_post_board_august_4.pdf‘World Bank Group
Environmental, Health and
Safety Guidelines (EHS
Guidelines)’
http://www.ifc.org/wps/wcm/conn
ect/554e8d80488658e4b76af76
a6515bb18/Final++General+EHS+Guidelines.pdf?
MOD=AJPERESEBRD Performance
Requirements
http://www.ebrd.com/what-wedo/strategies-andpolicies/approval-of-newgovernance-policies.html

requires conducting an ES assessment / ESIA
for Non-Designated countries refers to IFC PS and ‘World Bank
Group Environmental, Health and Safety Guidelines (EHS
Guidelines)’• Designated countries must meet local regulations, as well as ES
assessment, management system and plans, stakeholder
engagement and grievance mechanisms
Purpose is ‘to identify, avoid, and minimize harms to people and theenvironment.’
Appears to be a work in progress designed to supersede IFC
Performance Standards
Designed to be harmonised with IFC Performance Standards. Changes
compared to IFC are:
• Land Acquisition, Restrictions on Land Use and Involuntary
Resettlement• Indigenous Peoples/Sub-Saharan African Historically Underserved
Traditional Local Communities• New topic #9: requirement for financial intermediaries (FIs) to put inplace an environmental and social management system with associatedprocedures.
• New topic #10: Stakeholder Engagement and Information Disclosure
A new legal agreement called an ‘ES commitment Plan’#4 contains on Annex on safety of dams
Stipulation to obtain ‘Free, Prior, and Informed Consent’ of IP/SSA whena project will: (a) have adverse impacts on land and natural resources
subject to traditional ownership or under customary use or occupation;(b) cause relocation; or (c) have significant impacts on cultural heritage.
‘A set of general and industry-specific examples of Good International
Industry Practice (GIIP) as defined in IFC’s Performance Standard 3’‘provide performance levels and measures acceptable to IFC’
Cross-cutting issues are: Environmental (releases, etc.), OHS,
Community safety, construction and decommissioning
More technical detail about acceptable releases than safeguards. Manydifferent sector-specific guidelines, but none for hydropower.

Categorises projects according to their likely ES risks/impacts
Basically follows same structure as World Bank safeguards

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Standard/tool
IFC Environmental and Social
Performance Standards
Hydro-specificWorld Commission on Dams

Hydropower Sustainability
Assessment Protocol
IFC Hydroelectric Power: A
Guide for Developers andInvestors

World Bank Hydropower andDams Sector Climate Resilience
Guidelines
Low Impact Hydropower InstituteCertification Programme
RSAT (Rapid Basin-wide
Hydropower Sustainability
Assessment Tool)
http://www.mrcmekong.org/about-mrc/completion-of-strategiccycle-2011-2015/initiative-onsustainable-hydropower/rsatoverview-the-basin-widehydropower-sustainabilityassessment-tool/
Other
Climate Bonds Water Standard
https://www.climatebonds.net/files/files/Water_Criteria_of_the_Cli
mateBondsStandard_October20
16(1).pdf
Natural Capital Protocol Toolkit/
Finance Sector Supplement
http://naturalcapitalcoalition.org/
protocol/protocol-toolkit/
http://naturalcapitalcoalition.org/
wpcontent/uploads/2016/11/Financ

Description and comments
See World Bank Safeguard Policies / New Environmental and Social
Framework
The WCD Report of 2000 proposed a decision-making framework basedon core values of equity, efficiency, participatory decision-making,sustainability and accountability and strategic principles:• Gaining public acceptance• Comprehensive options assessment• Addressing existing dams
• Sustaining rivers and livelihoods• Recognising entitlements and sharing benefits• Ensuring compliance• Sharing rivers for peace, development, and security
While the WCD core values and strategic priorities have received wide
endorsement and landmark status, major financial institutions have by
and large considered the WCD Report framework as useful but nonbinding guidance. The HSA Protocol is widely viewed as a morepractical and detailed successor to the WCD Report.
See Box 7 in Section 6.5
Strongly overlaps with HSAP, but with more emphasis on technicalaspects and financial performance, and less on ES issues.
Thorough reference work on hydropower projects, rather than averifiable set of guidelines. For example, Table 12.1 in the chapter onenvironmental and social impacts provides a good summary of these
impacts with mitigation options for each, but no actual stipulations.
Refers to more generic guidelines such as the IFC’s PerformanceStandards and the Equator Principles.
Climate resilience focus

Only US facilities are eligible. Clearly developed in the context of a preexisting robust regulatory framework. Detailed specifics on fish passage,
watershed/shoreline, recreational resources.
Mekong River Commission. Backing of WWF & ADB
Focuses on the Integrated Water Resources Management principles andpractices in river basin planning and management across sectors andthe collection of basin-wide baseline data to inform planning anddecision making and monitor change.
We assume itis too specific to its geographical context to be applicablehere.
Has some topics which could be relevant for A&R: flood & droughtmanagement; specific fisheries management topic.
Detailed scorecard for assessing grey water infrastructure assets’vulnerability to climate change impacts. Questions relate to allocation
mechanisms, governance, technical diagnostics and ecologicalbaselines and impacts, monitoring and management.
If the vulnerability assessment finds climate change is likely tosignificantly impact the project, an adaptation plan is required.
“The Natural Capital Protocol, released in July 2016, is a decisionmaking framework that allows organizations to identify, measure andvalue their direct and indirect impacts and dependencies on natural
capital.”It is an environmental accounting tool for guiding internal decisionmaking, therefore not relevant.

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Standard/tool
e_Sector_Supplement_Briefing_
Paper-FNL-14-Nov-2016.pdf
International Association for
Impact Assessment Social
Impact Assessment Guidelines
https://www.iaia.org/uploads/pdf/
SIA_Guidance_Document_IAIA.
pdf

Description and comments
The Finance Sector Supplement is a work in progress. It is focused onproviding information at the level of financial products rather thanprojects/assets.
Guide to doing a Social Impact Assessment, not a set of requirementsthat projects should meet.

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