Hydropower in Armenia in "Damage Caused to Environment and Human Rights by Hydropower Sector in Caucasus and Central Asia" Report

Hydropower in Armenia in "Damage Caused to Environment and Human Rights by Hydropower Sector in Caucasus and Central Asia" Report

As the climate crisis urges a shift to more sustainable resources to meet growing energy needs in Central Asia and the Caucasus, a fast and fair transition to wind, solar and hydropower is needed. But a broken hydropower industry model allows companies and projects to create significant social and environmental costs with apparent impunity.

We have tracked publicly reported allegations of environmental and human rights abuses against companies planning or operating hydropower plants (HPPs) in Armenia, Georgia, Tajikistan and Kyrgyzstan. The evidence of human misery and environmental damage demands urgent attention from the international banks and investors backing these projects. Unnecessary harm linked to the hydropower industry calls for a transformation of approach by investors and lenders in the region, as well as companies. 

This briefing presents findings from data gathered over the last 10 years alongside illustrative case studies from the region. Key findings include:

- 265 human rights and environmental issues recorded relating to 32 hydropower projects in the four countries included in our analysis.

- Impacts on communities (98) were the most frequently reported issue.

- Sixty-seven environmental issues were recorded. Others raised include governance and transparency issues (55), impacts on human rights defenders (HRDs) and civil society (25), and impacts on labour rights (20).

- Of 32 hydropower projects assessed, 17 received funding from international financial institutions (IFIs).

- All of the investee companies have been linked to allegations of human rights and/or environmental abuses.

- None of the investee companies has a publicly available human rights policy.

The data demonstrates local communities are facing major risks amid increasing demand for hydropower. A considerable number of cases with impacts on the livelihoods of communities are followed by another problem – the issue of access to water. There is an urgent need to address the harms in this sector if a just transition to renewable energy is to mitigate the worst effects of the climate crisis. 

Not a single investee company has a publicly available human rights policy.

Over two-thirds (71%) of hydropower projects studied in Georgia are funded by the European Bank for Reconstruction and Development (EBRD). All were linked to issues with access to information and adverse impacts on community livelihoods.

Two-thirds (67%) of hydropower projects assessed in Armenia are funded by IFIs (EBRD, IFC, KfW). Seven out of eight faced issues related to access to water. Kyrgyzstan’s Toktogul HPP and Uch Kurgan HPP, for example, received rehabilitation funding from the Asian Development Bank (ADB) and the Eurasian Development Bank (EDB). The rehabilitation of the At-Bashi HPP is funded by the Swiss Government. The EDB is investing in the operations of Kambarata-2 HPP, which faces allegations of adverse impacts on environment, community health and safety, and access to information. Some IFIs are also examining the potential of investing in the construction of new hydropower projects in Central Asia. International finance institutions and development banks have human rights responsibilities under international standards and the UN Guiding Principles on Business and Human Rights (UNGPs). Most also have their own social, environmental and human rights standards. Financing irresponsible or harmful projects constitutes a failure to uphold these responsibilities. The evidence demands a transformation of approach by hydropower companies and those investing in them. To avoid further human rights abuse and environmental harm, companies and investors should:

Insist on companies developing robust human rights policy and practice, with strong board responsibility for oversight, rigorous reporting standards and transparency.

Ensure effective human rights and environmental due diligence for every project, with strong community and worker engagement, to identify human rights and environmental risks in their operations and supply chains. Design effective action plans to mitigate or eliminate risks identified.

Publish and implement a clear and publicly available policy on access to remedy, complemented with no-reprisal and whistle-blower policies to protect human rights and environmental defenders.

Investigate co-ownership and co-benefit models to prevent abuse and bring strong benefit to both companies and communities through greater stability and security.

Armenia has two large HPPs and approximately 189 small HPPs with operation licenses (as of October 2021) plus an additional 23 small plants under construction. The number of small hydropower plants (SHPPs) has rapidly grown over the past decade, largely due to the adoption of a new law in 2001 requiring Armenia’s Electric Networks of Armenia CJSC – the country’s sole electricity distribution company – to buy up all electricity generated by SHPPs in their first 15 years of operation. The business became attractive to investors not only due to guaranteed full repayment of loans, but also due to lack of competition in the electricity consumption market, coupled with relatively high electricity tariffs. Overall, HPPs generate 28% of Armenia’s electricity, with SHPPs contributing 10% of total energy generated.

State regulation of the operation of HPPs is not effective. In 2021 alone, the scale of damage caused by 17 hydropower plants was over 626 million Armenian Drams (approx. USD 1.5 million). Non-compliance with regulations has been exacerbated in the past decade as officials – from local government to top political figures in the country – are among SHPP owners.

The hydropower sector causes environmental havoc by disrupting ecosystems, causing loss of biodiversity, declining water quality and quantity in rivers, and deforestation. Worsening water quality also leads to socio-economic harm for communities, who face difficulties accessing water for agriculture and recreational use. Often, there is no local participation in decision-making regarding the development of SHPPs. Local inhabitants do not benefit from electricity generated in their communities, as price tariffs are not lower for local residents. Companies rarely provide socio-economic assistance to communities where SHPPs operate. Their operations often do not comply with Armenia’s Environmental Impact Assessment (EIA) requirements, and other laws, such as the Water Code, Forest Code, Law on Specially Protected Nature Areas, and laws on Flora, Fauna, Lake Sevan are often violated.

IFIs had shown great interest in providing loans for many of the SHPPs in Armenia, specifically the EBRD, KfW, and the International Finance Corporation (IFC). These financial institutions provided loans through local commercial banks in Armenia such as Ameriabank and Cascade Bank.

Case study: Yeghegis river

Around 17 SHPPs operate on the Yeghegis river and its surrounding streams, causing stress for the ecosystem as well as for nearby communities. Monitoring has shown communities such as Shatin and Yeghegis, located on the banks of the river, have problems with access to water for irrigation and livestock, which began after operations commenced at the nearby “Nane” SHPP, built by Arates Energy LLC on a tributary of Yeghegis and owned by the deputy head of the Yeghegis community. Elsewhere, “Yegheg” SHPP, operated by a company of the same name, was met with opposition when Shatin community members raised concerns over a lack of proper public hearings and consultations. Communities residing near the Yeghegis river have raised concerns about changes in local climate, reporting hotter summers and lack of moisture resulting in drying of flora and shrinking fish populations. Livelihoods have been affected by cases of SHPP pipeline explosions which flooded community land, leaving areas unfit for further cultivation.

Yeghegis wildlife sanctuary is a habitat and migration corridor for animals listed as threatened species by the International Union for Conservation of Nature (IUCN), such as the bezoar goat, Armenian moufflon and Caucasian leopard. Armenian law bans the construction of SHPPs in protected areas. As a result, Armenia’s laws “On Flora”, RA Law “On Fauna”, and the UN Convention on Biological Diversity are violated. Despite projects contravening their own socio-environmental regulations, including the provision on public participation in decision-making, as well as responsibilities outlined in the UNGPs, IFIs have invested in some of these SHPPs: EBRD sponsors the “Yeghegnadzor” SHPP, owned by Mina-Maya LLC; KfW funds “Yegheg”  SHPP, owned by Yegheg SHPP LLC.

July 08, 2022 at 15:13