criteria and guidelines – applying the strategic priorities · required; for example, demand-side...

Criteria and Guidelines – Applying the Strategic Priorities

259The Report of the World Commission on Dams

Chapter 9:

Criteria and Guidelines –Applying the Strategic Priorities

Many technical guidelines for

the construction of dams

and their associated infrastructure

have been developed by professional

technical networks to ensure high

engineering and quality standards.

What is lacking is a comprehensive

and integrated framework for decision-

making on the provision of water and

energy services. The Commission’s

contribution is to provide a framework

that emphasises a structured process

incorporating the full range of social,

environmental, technical, economic

and financial criteria and standards.

Chapter 9

Dams and Development: A New Framework for Decision-Making260

The framework is built upon the sevenstrategic priorities described in Chapter 8and derives its strength from recognising therights and assessing the risks of all stake-holders in the process.

Social, environmental, governance andcompliance aspects have been undervaluedin the past. It is here that applying theCommission’s proposals will make a differ-ence. The framework identifies key decisionpoints and incorporates associated criteriathat translate the Commission’s policyprinciples into a programme for implemen-tation. Within this framework the Commis-sion proposes a set of guidelines firmlyanchored in examples of good practice fromthe Knowledge Base to describe how itspolicy principles can be realised. Theseguidelines add to existing decision-support

instruments and should be incorporated bygovernments, professional organisations,financing agencies, civil society and othersas they continue to improve their ownrelevant guidelines and policies over time(see Figure 9.1).

This chapter shows how implementing adecision-making process based on theCommission approach will safeguard rights,reduce the risk of conflicts emerging, andlower overall costs. The framework providesthe opportunity for agencies and communi-ties to screen out unfavourable alternativesat an early stage. It is intended to openchannels of dialogue between stakeholders,increase mutual understanding and helpdecision-makers, practitioners and affectedpeople assess whether needs have beenadequately addressed. Proposals for dam

projects that emerge from thescreening process will have greaterpublic acceptance.

Turning the strategic prioritiesand their underlying policyprinciples into reality requires anew focus for planning andmanagement in the water andenergy sectors. This chapterconcentrates on what needs tochange in the way water andenergy management plans aredeveloped and projects are de-signed and implemented. Bringingabout this change will require:

■ planners to identify stakehold-ers through a process thatrecognises rights and assessesrisks;

■ States to invest more at anearlier stage to screen outinappropriate projects andfacilitate integration across

Government

• Water and energy

policies

• Social and environment

policies

• Regulations and

standards

Civil society• Codes of practice

• Public information

• Social audit

International ag

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Professionalorganisations• Standards• Sector guidelines

Multilateral and bilateral

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WCDCriteria

andGuidelines

Figure 9.1 WCD Criteria and Guidelines strengthen other decision supportinstruments



sectors within the context of the riverbasin;

■ consultants and agencies to ensureoutcomes from feasibility studies aresocially and environmentally acceptable;

■ the promotion of open and meaningfulparticipation at all stages of planningand implementation, leading to negotiat-ed outcomes;

■ developers to accept accountabilitythrough contractual commitments foreffectively mitigating social and environ-mental impacts;

■ improving compliance through inde-pendent review; and

■ dam owners to apply lessons learned frompast experiences through regular moni-toring and adapting to changing needsand contexts.

The changes will involve reform of existingplanning processes and an emphasis on thekey stages where decision-makers andstakeholder groups can verify compliance.Among the multitude of decisions to betaken, five critical decision points havebeen identified as having a particularlystrong influence on the final outcome. Thefirst two relate to water and energy plan-ning, leading to decisions on a preferreddevelopment plan.

1. Needs assessment: validating the needsfor water and energy services.

2. Selecting alternatives: identifying thepreferred development plan from amongthe full range of options.

Where a dam emerges from this process as apreferred development alternative, threefurther critical decision points occur.

3. Project preparation: verifying thatagreements are in place before tender ofthe construction contract.

4. Project implementation: confirmingcompliance before commissioning.

5. Project operation: adapting to changingcontexts.

The contractual steps of signing agreementsand issuing licences are located within thisoverall framework. Although in these latterstages the Commission has focused on issuesrelated to dam projects, the principles andgeneral guidance presented here are alsorelevant to non-dam options for water andenergy services.

The five decision points are supported by aset of key criteria that describe the processesrequired for compliance. The criteria arepresented in the form of checklists for eachdecision point that provide a clear and openmechanism for determining whether theCommission’s recommendations have beenfollowed and the process can proceed to thenext stage of planning or implementation.

The criteria cover the full planning andproject cycles and include aspects related toexisting dams. There are alsomany dams currently in theplanning, design, or constructionstage. These ‘dams in the pipe-line’ should also be assessed toidentify improvements that canbe made. Practical steps areproposed to determine the extentto which such current projectscomply with the Commission’srecommendations, and to identifyhow any needed adjustments canbe made.

Recognising that guidelines areavailable from other sources, the Commis-sion focused principally on what needs to bedone differently. Introduction of a newdecision-making framework through appli-

Five critical decisionpoints have beenidentified as having aparticularly stronginfluence on the finaloutcome. They aresupported by a set ofkey criteria that describethe processes requiredfor compliance.

Chapter 9


cation of the criteria and guidelines will addsignificant value to existing processes andform a basis for good practice in water andenergy resource development. Taken togeth-er, the criteria and guidelines will improvedevelopment outcomes and minimiseproblems encountered in the past.

Five Key Decision Points:The WCD CriteriaAs noted, the Commission has identifiedfive key stages and associated decisionpoints for the energy and water sector. Themost fundamental of these is selection of thepreferred development plan. This deter-mines what options will be pursued to meetneeds and whether or not a dam is to bebuilt. This decision is only taken after needsand the available options to meet thoseneeds have been fully assessed. Each of thefive stages requires a commitment to agreedprocedures culminating in a decision pointthat governs the course of future action andallocation of resources (see Figure 9.2). Ateach decision point it is essential to testcompliance with preceding processes beforegiving authority to proceed to the nextstage. These points are not exhaustive, andwithin each stage many other decisions aretaken and agreements reached. The five keystages and associated decision points aregeneric and need to be interpreted withinthe overall planning contexts of individualcountries.

1. Needs assessment: validating the needs forwater and energy services. Confirmation isrequired that plans for water and energydevelopment reflect local and nationalneeds adequately. An appropriate decentral-ised consultation process is used to validatethe needs assessment and modify it wherenecessary.

2. Selecting alternatives: identifying thepreferred development plan from among the fullrange of options. The preferred developmentplan is selected through a participatorymulti-criteria assessment that gives the samesignificance to social and environmentalaspects as to technical, economic andfinancial aspects and covers the full range ofpolicy, programme, and project options.Within this process, investigations andstudies are commissioned on individualoptions to inform decision-making asrequired; for example, demand-sidemanagement studies or feasibility studies.

Where a dam emerges as a preferred option, thefollowing key decision points occur forproject preparation, implementation andoperation.

3. Project preparation: verifying agreements arein place before tender of the constructioncontract. The preparation stage coversdetailed planning and design. Licencesissued for development of a project incorpo-rate any conditions that emerge from theoptions assessment process. Tendering theconstruction contract is conditional uponreaching negotiated agreements for benefit-sharing mechanisms and for mitigation,compensation, development and compli-ance measures, in addition to technicalrequirements.

4. Project implementation: confirmingcompliance before commissioning. Theimplementation stage covers procurementand construction. Issuing the licence tooperate is contingent on implementation ofspecific benefit sharing and mitigationmeasures at various stages through theimplementation period. Compliance withall relevant time-bound commitments isrequired before commissioning the project.



5. Project operation: adapting to changingcontexts. Any decisions to modify facilities,operating rules, and licence conditions tomeet changing contexts are based on aparticipatory review of project performanceand impacts.

The five key stages and decision pointsprovide a framework within which decision-makers and stakeholder groups can beassured of compliance with agreed proce-dures and commitments. The benefits of thisapproach include lowering risks to liveli-hoods and cost escalation, reducing thenumber of disputes, and encouraging localownership. In the short term, additionalfinancial resources for needs and optionsassessment will be required to achievecompliance with the Commission’s policyprinciples, and efforts will be required tostrengthen institutional capacity. In thelonger term, the potential exists for majorcost savings and increased benefits.

The remainder of this chapter describes eachof the five key decision points and provides arelated list of criteria for checking compliance.Stakeholder involvement is central to theseprocesses. The composition of a forum ofstakeholder groups associated with each stageis different and evolves throughout the process(see Guideline 1: Stakeholder Analysis).

Figure 9.2 Five key decision points in planning and projectdevelopment

Identify the preferreddevelopment plan amongthe full range of options

Selecting Alternatives

Criteria 2

Investigative studies

Criteria 2A

Validate the needsfor water and

energy services

Needs Assessment

Criteria 1

Adapt tochanging context

Project Operation

Criteria 5

Confirm compliancebefore commissioning

Project Implementation

Criteria 4

Verify agreements arein place before tender ofthe construction contract

Project Preparation

Criteria 3

Policy, programme,projects

Assignresponsiblity forimplementation

DAM OPTIONNON-DAM OPTIONS

Chapter 9


Stage 1: Needs assessment: validating the needs forwater and energy services

A clear statement of water and energy servicesneeds at local, regional, and national levelsthat reflects decentralised assessments andbroader national development goals. Anassessment based on participatory methodsappropriate to the local context resulting in aclear set of development objectives that guidethe subsequent assessment of options.

Intended outcome

Determining needs and setting prioritiesbetween and within sectors are continuousprocesses specific to individual countries.The Commission’s policy principles describecharacteristics that should be reflected insuch processes and define a shift in emphasisto more open and inclusive procedures.Country-level responses are required toensure that priority setting embodies a fairrepresentation of basic water and energyneeds and provides the appropriate balancebetween local and national demands.

A country’s policy framework for water,energy, social issues and the environmentguides the whole planning process. Theopen and participatory approach to needsand options assessment envisaged by theCommission requires a review of thesepolicies to identify and address elementsthat may hinder its implementation.

The primary influence defining a country’sportfolio of development activities, is a setof development objectives that may beembodied in a five-year plan or in a regula-tory planning framework. Ensuring that theoutcome of the needs assessment for waterand energy services reflects stakeholderpriorities requires an entry point early in theplanning process. The Commission proposesa validation process to confirm the setting of

priorities and the formulation of develop-ment objectives.

An open and decentralised planning processprovides opportunities for public scrutiny. Insituations where this has not been imple-mented, a programme of national and sub-national public hearings, targeted communi-ty consultations, and field surveys can assessthe validity of the needs assessment. Thesubject of the consultations may relate to anoverall development strategy, master plan,sector plan, or basin plan, and the breadthof consultation can be determined accord-ingly. The WCD Knowledge Base demon-strates the need for such a review, sinceplans are often narrowly focused, reflectsocial and environmental impacts inade-quately, are weak in identifying affectedgroups, and fail to deal adequately with thedistribution of costs and benefits.

In countries where a large proportion of thepopulation does not have access to basicservices, a key parameter in the validationprocess should be the extent to which basichuman needs will be met. To ensure thatthese needs are given prominence, the processof validation should empower those who areleast able to influence planning systems.

Responsibility for this validation process restswith the State. Independent facilitation forconsultations and surveys and the presence ofcivil society groups will enhance confidencethat the needs of disadvantaged groups arebeing considered. Briefing materials, records ofmeetings, and results of the overall processshould be available in appropriate languages. Ifthe development objectives are not confirmedby the validation exercise, they should bereviewed and updated using processes consist-ent with the Commission’s policy principles.



Stage 1 Criteria Checklist

NEEDS ASSESSMENT Selecting alternatives Project Preparation Project Implementation Project Operation

Gaining Public Acceptance

■ A consultation plan was developed using astakeholder analysis to define the groups in-volved. The plan defines mechanisms for verify-ing needs at the local, sub-national and nationallevel (Guideline 1).

■ Verification of the needs for water and energyservices was achieved through a process of publicconsultation and the results of public consulta-tion were disseminated to stakeholders.

■ Development objectives reflect a river-basin-wide understanding of relevant social, economic,and environmental values, requirements, func-tions, and impacts that identifies synergies andpotential areas of conflict.

■ An appropriate process was established to addressany disparities between the needs expressedthrough the public consultations and the stateddevelopment objectives.

Comprehensive Options Assessment

■ Legal, policy and institutional frameworks werereviewed and any bias against resource conserva-tion, efficiency and decentralised options, andany provisions that hindered an open andparticipatory assessment of needs and optionswere addressed.

Addressing Existing Dams

■ Outstanding social and environmental impactsfrom past projects were evaluated and incorporat-ed into the needs assessment (see Chapter 8,policy principle 3.3).

Sustaining Rivers and Livelihoods

■ Ecosystem baseline studies and maintenanceneeds were assessed at a strategic level (Guide-lines 14, 15)

Needs assessments may have been conducted through a range of processes including national, regional, sector-specific, orbasin-wide plans. The verification process to be applied will need to be tailored to suit the particular circumstances.

Chapter 9


Stage 2: Selecting alternatives: identifying the preferreddevelopment plan

A major concern about past projects is thattoo limited a range of options was consid-ered before deciding to construct a dam. Toaddress this, the inventory of options mustrespond to the agreed development objec-tives (Stage 1) and explicitly identify thebeneficiary groups. The inventory of optionsneeds to be sufficiently diverse in terms ofpolicy, programme, and project alternatives,project scale, and geographic coverage.

Strategic impact assessments provide aninitial level of screening to remove alterna-tives that have unacceptable social andenvironmental consequences. They need toreflect the importance of avoiding adverseimpacts and the precautionary approach.The assignment of relative weights todesignate the importance of various parame-ters should be a participatory process andform the basis of a multi-criteria analysis toscreen and rank alternatives. For example,the gestation period in delivering benefits,the scale of adverse impacts and costs are allkey considerations.

The information available on each optionwill not be at the same level of detail.Decisions need to be taken during thescreening process on whether to commissionfurther investigations and studies on indi-vidual alternatives, while at the same timenot jeopardising or delaying alternatives

that can deliver benefits within the short-term.

Studies are required to assess the extent towhich policy and programme options canmeet the development objectives. Thepolicy principles cover a number of suchareas, including:

■ optimising existing investments byincreasing operational efficiency andimproving productivity;

■ demand-side management assessment;

■ decentralised supply options and commu-nity-level initiatives; and

■ policy and institutional reforms.

Some options will need reconnaissance, pre-feasibility, and feasibility studies appropriateto the stage in the process and incorporatingsocial and environmental surveys andimpact assessments. The decision to allocatefinancial resources to such studies should betaken within the overall context of theoptions assessment process. For example, itmay have been agreed that detailed investi-gations of supply-side approaches shouldawait the outcome of demand-side studiesthat could influence the scale of any projectintervention.

Criteria relevant to project-related studiesare described as a subset of the process ofselecting alternatives (see Stage 2A). Thefindings of the studies are fed back into thescreening process for consideration with allother remaining options. This approachdeviates from existing practice in manycountries by cutting the direct link betweenthe feasibility study and project approval. Itencourages a broader consideration of allfeasible options in setting priorities.

A mix of alternatives that reflects the needsand meets the development objectives hasbeen selected through a multi-criteria assess-ment of the full range of policy, programme,and project alternatives and included in apreferred development plan.

Intended outcome




Gaining Public Acceptance■ Stakeholders participated in creating the invento-

ry of options, assessing options, and in negotiatingthose outcomes that may affect them (Guide-lines 1, 2).

■ An agreed dispute resolution mechanism fornegotiated processes was established with theparticipation and agreement of stakeholders(Guideline 2).

■ Indigenous and tribal peoples gave their free, priorand informed consent to the inclusion in thedevelopment plan of any planned option thatwould potentially affect them (Guideline 3).

Comprehensive Options Assessment■ Strategic impact assessments and life cycle analy-

sis were integrated and undertaken as an initialstep in the process (Guidelines 4, 7, 8, 14, 17).

■ A multi-criteria assessment was used to screen andselect preferred options from the full range ofidentified alternatives (Guideline 6).

■ The screening of options:■ covered all policy, programme, and project

alternatives;■ gave social and environmental aspects the

same significance as technical, economic andfinancial factors;

■ gave demand-side options the same signifi-cance as supply options;

■ prioritised consideration of improving perform-ance of existing systems;

■ considered river-basin-wide aspects andcumulative impacts;

■ took account of potential changes in climate; and■ reflected the precautionary approach.

■ Distributional and risk analyses were conducted atan appropriate level (Guidelines 9, 11) andenvironmental and social impacts were valuedwhere appropriate (Guideline 10).

■ Approval to proceed with any project-levelinvestigations was informed by a comprehensiveassessment of options (see Criteria Checklist 2A).

■ Rejection of any options was explained in anopen and timely manner.

Addressing Existing Dams■ Provisions were made for resolving outstanding

social and environmental impacts (see Chapter 8,policy principle 3.3)

Sustaining Rivers and Livelihoods■ An established policy exists to maintain selected

rivers with high ecosystem functions and valuesin their natural state.

■ Consideration of options took into account:avoiding dams on the main-stem of rivers wherev-er possible; avoiding or minimising negativeimpacts on endangered species, ecosystems,livelihoods, human health and cultural resources;and respecting the provisions and guidance ofrelevant international treaties.

Recognising Entitlements and SharingBenefits■ For any project option, stakeholders negotiated

the guiding principles and criteria for: benefit-sharing, mitigation, resettlement, developmentand compensation measures (Guidelines 2, 18,20).

Ensuring Compliance■ Sufficient institutional capacity exists, or will be

enhanced, to monitor and enforce commitmentsfor social and environmental components.

Sharing Rivers for Peace, Development andSecurity■ Any objections from riparian states were resolved

through good faith negotiations or independentdispute resolution procedures (Guideline 26).

Needs Assessment SELECTING ALTERNATIVES Project Preparation Project Implementation Project Operation

Chapter 9


Stage 2A: Investigative studies

The authority to proceed with a preparatorystudy for a dam project should not be a signalthat the project will be implemented. Rather,such a decision should be integrated into theoverall options assessment process. This willprovide a break in the traditional planningcycle to encourage more open decision-making. Viewing project options within theoverall framework of options assessment alsofacilitates the rejection of projects that fail tomeet social and environmental objectives infavour of better alternatives. The WCDKnowledge Base has demonstrated that morerigorous estimates of project costs are alsorequired as a part of such studies, and the riskof cost overruns must be fully considered inthe assessment process.

Meaningful participation in preparatorystudies is central to the success of theinvestigation and the ultimate outcome.Careful analysis to recognise the rights andassess the risks of stakeholder groups isessential. A forum of stakeholder groupsneeds to be identified based on projectboundaries. Agreement on the participatoryelements of the studies should be formalisedin a consultation plan.

The strategic impact assessment undertakenearly in the options assessment will haveoutlined the key unknowns and the areas to beinvestigated across all sectors. The issues willbe defined in more detail in the scoping stageof project-related impact assessments. On thisbasis, terms of reference and work plans for thediverse range of sector specialists can beintegrated. Project-related impact assessmentshave to go beyond environmental and socialimpact assessments to include health andcultural impacts. To be effective, they requirean improved level of baseline studies.

Preliminary negotiations with project-affected people, their community represent-atives, and other stakeholders are central tothe preparatory studies in consideringmitigation measures for any unavoidableadverse impacts and investigating benefit-sharing plans. By the time a study reachesfeasibility stage, the scope of such measuresshould be clearly defined in order to reducethe likelihood of protracted negotiationsand a breakdown of discussions later in theprocess. For the proposed project to be partof a preferred development plan, the accept-ance of the project affected people and theprior informed consent of indigenouspeoples should be obtained.

Ultimately the results of the study, includingany outstanding issues, will be fed back intothe screening and ranking exercise (seeCriteria Checklist 2) for comparison withremaining alternatives prior to any decisionto proceed further with detailed projectdevelopment. The following plans, withindicative budgets, need to be developed asa minimum requirement to act as a founda-tion for any further project planning:

■ an outline environmental managementprogramme, including provision for anenvironmental flow to maintain down-stream ecosystems;

■ an outline social mitigation, resettle-ment, and development plan; and

■ an outline monitoring plan, includingoutcome-based indicators.

A compliance plan will be required tocover these aspects and other regulatoryrequirements throughout subsequentstages of project planning, development,and operation.



Needs Assessment SELECTING ALTERNATIVES Project Preparation Project Implementation Project Operation

Stage 2A Criteria Checklist


■ Stakeholders participated in baseline, impact andinvestigative studies and the negotiation ofoutcomes that potentially affect them (Guide-lines 1, 2, 14, 17).

■ The studies and impact assessments were openand independent, and were preceded by a partici-patory scoping phase (Guideline 5).


■ The investigations were analysed on a river-basin-wide understanding of social, economic,and environmental values, requirements, func-tions, and impacts including cumulative impacts,and the precautionary approach was applied. (seeGuideline 5).

■ The recommendations of studies undertaken onresource conservation measures, demand-sidemanagement, local supply-side options andimprovement of existing systems were reflectedin the demand forecast for the sector.

■ Within-project alternatives were assessed using amulti-criteria approach (Guideline 6).


■ Studies examined possible synergies from interac-tive operation of related water resource infra-structure in the basin.


■ An environmental flow requirement to maintaindownstream species, ecosystems and livelihoodswas defined (Guideline 15).

■ Impacts on fish have been assessed and measuresto avoid or minimise impacts were considered,including an effective fish pass where feasible(Guideline 16).

Recognising Entitlements and SharingBenefits

■ Stakeholders negotiated agreements for com-pensation, mitigation, resettlement, develop-ment and monitoring measures affecting them,including draft contracts where necessary(Guideline 19).

■ Effective benefit-sharing strategies were identi-fied and agreed with people adversely affectedby the project (Guideline 20).

Ensuring Compliance

■ Institutional capacity to monitor and enforcecommitments for social and environmentalcomponents of the project was analysed andmeasures to strengthen capacity identified.

■ An independent panel reviewed the assessmentof impacts and the planning of social andenvironmental mitigation plans (Guideline 22).

Sharing Rivers for Peace Development andSecurity

■ Riparian states were notified of options affectingthem and agreed procedures for impact assess-ments. Objections were addressed through goodfaith negotiations and agreed dispute resolutionprocedures (Guideline 26).

Project-related pre-feasibility and feasibility studies need to meet the following criteria. Policy and programme relatedstudies may also be required, and are covered in Criteria Checklist 2.

Chapter 9


The responsibilities of the developer inrelation to mitigation, development ofaffected communities, and benefit-sharingwill be clearly reflected in the licence andthe compliance plan. The operation phaseshould be contingent on compliance withspecific commitments identified in thelicence. Conditions for impoundment andcommissioning should be explicitly stated.

If the tender cost estimate is substantiallyhigher than the feasibility study estimate,the choice of project should be reviewed tosee if it still meets the selection criteria. Asimilar check is required if needs havechanged substantially since the outset, or ifthe project scope has changed materially. Ifthe actual price of the lowest responsivetender exceeds agreed cost limits, procure-ment should be interrupted and optionsreviewed.

Social and environmental mitigationmeasures should be defined in the tender insimilar detail to construction elements,namely the ‘bill of quantities’. The tendershould clearly identify responsibilities of thecontractor, the developer, and the govern-ment in relation to:

■ the environmental management plan;

■ measures to mitigate adverse socialimpacts, including development opportu-nities for affected communities;

■ access to and management of newresources in the reservoir;

■ the construction method and schedule,and the construction camp;

■ impact monitoring and reporting duringthe operations stage; and

■ compliance instruments.

Stage 3: Project preparation: verifying commitments arein place before tender of the construction contract

The Commission considers that all large damsshould have time-bound licences. Where alarge dam emerges as a preferred option, alicence for project development should beissued to the developer by the appropriateregulatory agency. Project preparation contin-ues with detailed planning and design stages,including drafting of tender documents andplans for benefit-sharing and mitigation.Adaptation of the criteria described here maybe necessary where the design and construc-tion are part of a single package.

Negotiations with all project-affectedpeople, their community representatives,and other stakeholders will continue ingood faith based on the outline agreementsreached during the feasibility stage. Theywould cover all environmental and socialplans; development programmes, includingbenefit-sharing plans; and construction-related issues. A clear agreement with theaffected people on the sequence and stagesof resettlement will be required beforeconstruction on any project preparatoryworks begins, such as access roads or riverdiversion works. In cases where thesenegotiations stall, an independent disputeresolution process is required. The negotiat-ed agreements will result in signed contractsbetween the developer and affected commu-nities and individuals, with clear targets forassessing compliance.

Clearance to tender the construction contractis given by the relevant authority and includesconditions for the award of the contract andoperations. Mitigation and monitoringmeasures are formalised into contractsbetween responsible parties, and compliancearrangements are in place.

Intended outcome




■ Stakeholders participated in the project designand the negotiation of outcomes that affect them(Guidelines 1, 2).

■ Indigenous and tribal peoples gave their free,prior, and informed consent to the project asdesigned (Guideline 3).


■ The stakeholder forum participated in assessingalternatives for the detailed layout of the dam,associated infrastructure, and its operation.


■ Cumulative and interactive impacts of existinginfrastructure were addressed in the design of thedam and agreements reached with stakeholdersand operators to modify operating rules of exist-ing dams where needed.


■ Acceptable rules were developed for reservoirfilling, commissioning and operation.

■ The final design includes provisions foremergency drawdown and decommissioning andis sufficiently flexible to accommodate changingfuture needs and values, including ecosystemneeds and ecosystem restoration (Guideline 12).

■ An environmental management plan incorporat-ing environmental flows and other mitigationand enhancement measures was agreed withstakeholders and defines monitoring and evalua-tion programmes.

■ The developer provided sufficient evidence todemonstrate that proposed mitigation anddevelopment measures will be effective in meet-ing their objectives.


■ Mitigation, resettlement, monitoring, and devel-opment plans were agreed with affected groups,and relevant contracts signed (Guideline 19).

■ Detailed benefit sharing mechanisms, and themeans to deliver them, have been agreed and setin place with affected groups (Guideline 20).

Ensuring Compliance

■ Independent panels reviewed and endorsedmitigation plans (Guideline 22).

■ Provisional sums for mitigation are included in thetender, and their financing has been confirmed.

■ A Compliance Plan was prepared, presented tothe stakeholder forum and formalised. Individualcompliance measures include mechanisms fordispute resolution (Guideline 21).

■ The developer has allocated funds for an effectivemonitoring and evaluation system coveringproject performance, safety and impacts. Institu-tional capacity exists to monitor and enforceagreements effectively.

■ A transparent process for short-listing contractorsand selecting tenders is in place and contractorswith a record of under-performance or corruptionon past projects were identified and debarredwhere appropriate.

■ Relevant performance bonds have been secured,trust funds established and integrity pacts signed(Guidelines 23, 24, 25).

■ The licence for project development defines theresponsibility and mechanisms for financingdecommissioning costs.

Sharing Rivers for Peace, Development andSecurity

■ Resolution was achieved where affected riparianstates had outstanding objections (Guideline 26).


Needs Assessment Selecting Alternatives PROJECT PREPARATION Project Implementation Project Operation

Chapter 9


Stage 4: Project implementation: confirming compliancebefore commissioning

Issuing the licence to operate will be contin-gent on compliance with mitigation measuresin addition to technical requirements. Thelicence will contain a number of conditionsfor the operation stage, including compliancewith operating rules, public notifications, damsafety, monitoring and periodic review. Allcontingencies cannot be anticipated, and abalance should be struck on a case-by-casebasis between the necessary level of certaintyand sufficient flexibility to accommodateopen, transparent, adaptive management.

Phasing of resettlement is required wherethe reservoir is being impounded as the damis constructed. Special attention is necessaryto ensure that compensation and develop-ment measures are in place well in advance.

Reservoir filling, commissioning of produc-tive capacity and the initial years of opera-tion are critical phases that require specialattention, intensive monitoring and contin-ued dialogue with stakeholder groups.Agreements on operating conditions arerequired for three stages of commissioning:

■ reservoir filling;

■ test operation; and

■ initial operation.

Full compliance with technical, environ-mental and social measures must be

Clearance to commission the project is givenby the relevant authority after all commitmentsare met. Relevant elements of performancebond sureties are released. The operatinglicence is confirmed, including specificrequirements for monitoring, periodic reviewand adaptive management.

Intended outcome achieved before the project is commissionedand enters full operation. This includes thebroad commitments of the project developeras laid down in the project licence, compli-ance plan, and related agreements, as well asthe commitments of the contractor acting asagent of the developer. Once the developerhas met specified staged commitments, theassociated financial sureties of any perform-ance bond or outstanding contractualpayments may be released.

Arrangements for public safety must be inplace in order to warn the downstreampopulation that sudden releases of watermay occur and may be dangerous. Compen-sation should be paid for any loss of liveli-hood, such as the loss of fishing opportuni-ties. If test operations cause downstreaminconvenience, compensation should alsobe paid – for example, if a test takes placeduring the dry season and damages recessionagriculture plots.

A range of agreements on initial and long-term operation should be incorporated inthe operating licence and provisions forimplementation verified. Licence periodsshould not normally exceed 30 years. Theyshould include:

■ agreement on environmental flow releasesto the downstream river;

■ releases to the downstream river for otherfunctions (navigation, water supply,downstream irrigation);

■ operating rules during normal and excep-tional floods;

■ procedures for opening spillway gates;

■ monitoring and publication of relevantoperation data; and

■ periodic review of operating rules.




■ Stakeholders participated in monitoring mitiga-tion measures and in negotiating outcomes thataffect them (Guidelines 1, 2).

■ Consultation mechanisms were agreed inadvance with stakeholders for any technical,social, environmental, or other problems thatmay be encountered during reservoir fillingand commissioning.

■ Contingency plans for emergency drawdown ofthe reservoir were agreed with stakeholdersbefore commissioning and were widelydisseminated.


■ Affected stakeholders have reviewed any changesproposed to the tender design that substantiallyaffect impacts, mitigation measures, benefitsharing, operational practices, or the monitoringprogramme.


■ Institutional co-ordination mechanisms thatrecognise interactive effects and cumulativeimpacts are in place to adjust operation ofexisting dams.


■ Required environmental mitigation measureswere implemented.


■ The mitigation, resettlement and developmentaction plan has been implemented and disputesresolved (Guideline 19).

Ensuring Compliance

■ An independent panel reviewed and endorsedimplementation of social, environmental, healthand cultural heritage mitigation measures (Guide-line 22).

■ Preparations have been made to implementlicence conditions for operations, implementcontinuing mitigation measures, undertakemonitoring and regular evaluation, and dissemi-nate information.

■ Monitoring of social, environmental and techni-cal aspects includes an intensive phase to coverthe rapid changes that occur in the impoundmentand commissioning period.

■ The developer has complied with pre-commis-sioning commitments as defined in the Compli-ance Plan (Guideline 21).

Sharing Rivers for Peace, Development andSecurity

■ Mechanisms were initiated for sharing monitor-ing information with riparian provinces or States(Guideline 26).


Needs Assessment Selecting Alternatives Project Preparation PROJECT IMPLEMENTATION Project Operation

Chapter 9


Stage 5: Project operation: adapting to changingcontexts

The objectives of dam management need tobe transformed from purely technical todevelopment-oriented goals that include socialand environmental considerations. This hasmajor repercussions for operation, monitoring,and evaluation of both existing dams anddams implemented in the future. Adaptivemanagement is needed to continuously assessand adjust operational decisions within thechanging context of environmental, social,physical and market conditions. This requiresa close relationship between the local commu-nity, other stakeholders and dam owners andoperators in order to minimise problems andquickly resolve any that do arise.

Monitoring programmes should:

■ include a full range of technical, environ-mental, social, and economic parametersdecided openly with the stakeholders;

■ have an intensive phase in the first fiveyears, or after a major change in operation;

■ feed back into project operations; and

■ be available to all stakeholders, perhaps inthe form of an annual report.

A comprehensive project evaluation isrequired three to five years after commission-ing and at regular intervals thereafter (everyfive to ten years is suggested). The evaluationis undertaken by the dam operator but is astakeholder-driven process and may draw onthe Commission’s case study methodology.

Conditions for operating under the licence arefulfilled and the licence conditions modified asnecessary to adapt to changing contexts.Monitoring programmes feed back into projectoperation. A process is initiated to decide onreparations, if necessary.

Intended outcome The evaluations would be:

■ comprehensive across all environmental,social, economic, and institutionalimpacts;

■ integrated to cover the interactionsbetween impacts;

■ long-term to consider impacts overseveral decades; and

■ cumulative to reflect impacts of otherstructural and non-structural measures inthe basin.

In addition to periodic evaluations, partiesother than the dam operator, or exogenousfactors may prompt re-planning studies. Forexample, a strategic or sectoral impactassessment may indicate the need for a re-planning exercise for a group of projects.Licence conditions should make provisionfor such studies and for any required changesto operating conditions through good faithnegotiations that recognise the rights of allparties. Any re-planning studies should bedone on the basin level.

Licences should specify transparent processesfor stakeholder participation in operations andprocedural requirements for monitoring andevaluation, safety inspection, contingencyplanning and information disclosure. Theregulatory authority or responsible govern-ment line agency must ensure compliancewith provisions of the licence. Non-commer-cial aspects of the licence should be madepublic. Re-licensing procedures should exam-ine present-day alternatives and be informedby an integrated review of project performanceand impacts. Impact assessments should beundertaken for all major changes includingdecommissioning where dams are no longerrequired or are too expensive to maintain.




■ Stakeholders are identified for consideration ofoperational issues and any proposed changes thatimpact on them or the environment (Guideline 1).


■ Periodic evaluations of all aspects of project opera-tion and performance are undertaken with theinvolvement of the stakeholder forum every 5 to 10years and agreements renegotiated as necessary.

■ Modernisation programmes and alternativeoperational regimes are considered as part ofperiodic reviews, replanning, or relicensingexercises through a participatory multi-criteriaapproach (Guideline 13).

■ Monitoring and evaluation programmes shouldexplicitly consider the influence of climatechange (namely increasing and decreasing rainfalland flows) on benefits and dam safety.

■ A full feasibility study, including analysis ofalternatives and impact assessment, is undertakenfor any proposal for any major physical change,including decommissioning.


■ Operations take account of environmental flowrequirements (quantity and quality) and ecosystemand social impacts are monitored (Guideline 15).

Recognising Entitlements and sharingbenefits

■ Detailed benefit-sharing mechanisms are modi-fied as necessary with the agreement of affectedgroups (Guideline 20).

Ensuring Compliance

■ Adverse social and environmental impacts andreparations issues are referred to the appropriaterecourse body (Guideline 19).

■ Annual reports of project monitoring pro-grammes, including social and environmentalaspects, are issued promptly and correctivemeasures are initiated to address issues raised inthe reports.

■ The requirements of remaining performancebonds or trust funds outlined in the CompliancePlan are periodically reviewed, and financialguarantees are released on satisfactory compli-ance with agreed milestones (Guideline 23).

■ Dam safety and inspection programmes areimplemented.

Sharing Rivers for Peace, Developmentand Security

■ Mechanisms exist to share monitoring informa-tion and resolve issues as they arise.


Needs Assessment Selecting Alternatives Project Preparation Project Implementation PROJECT OPERATION

These criteria are relevant to both existing dams (Chapter 8, Strategic Priority No.3) and the operational stages of future dams.

Chapter 9


A Special Case: Dams inthe PipelineThe strategic priorities and policy principlesoutlined in Chapter 8 are as relevant toprojects already at an advanced stage ofplanning and development as they are tothe selection of a project in the earlier

options assessment stage.Currently a large number of damprojects are at various stages ofplanning and development.While acknowledging thatdelays in implementation cancause unacceptable delays indelivering intended benefits, theWCD Knowledge Base has

demonstrated that it is never too late toimprove outcomes. On this basis, theCommission proposes an open and partici-patory review of ongoing and plannedprojects to ascertain the extent to whichproject formulation can be adapted toaccommodate the principles outlined in thisreport.

The essence of the process is that stakehold-er groups should have an opportunity todefine the scope of the review and topropose changes in keeping with the Com-mission’s recommendations. The extent ofany additional study or changes in projectconfiguration would depend on the stage ofplanning, design, or construction and bedetermined from a synthesis of the stake-holder consultations and, where appropriate,an inter-ministerial review. General actionsto guide the review for all projects wouldinclude:

■ undertake a stakeholder analysis basedon recognising rights and assessing risksto identify a stakeholder forum that isconsulted on all issues affecting stake-holders;

■ provide support to vulnerable anddisadvantaged stakeholder groups toparticipate in an informed manner;

■ undertake a distribution analysis to assesswho shares the costs and benefits of theproject;

■ develop agreed mitigation and resettle-ment measures to promote developmentopportunities and benefit-sharing fordisplaced and affected people;

■ avoid, through modified design, any severeand irreversible ecosystem impacts;

■ provide for an environmental flowrequirement and mitigate or compensateany unavoidable ecosystem impacts; and

■ design and implement recourse andcompliance mechanisms.

Governments may also use the review of‘dams in the pipeline’ as an opportunity tocompare the existing policy framework forplanning and implementation of water andenergy options with the criteria and guide-lines proposed by the Commission. This canserve to launch a process of internal reviewand modification of existing policies andlegislation, and reinforcement of appropriatecapacity that will facilitate implementationof the Commission’s recommendations infuture.

At specific stages of planning and projectdevelopment, regulators, developers and,where appropriate, financing agenciesshould ensure that the following project-related points are addressed:

Projects at feasibility stage

■ The stakeholder forum confirmed thatthe set of options considered was appro-priate, or identified other alternatives toconsider as part of the project impactassessment.

The Commission’sKnowledge Base has

demonstrated that it isnever too late to

improve outcomes.



■ Any bias in selection of alternatives isremoved or justified in a transparentfashion (for example subsidies to particu-lar sub-sectors or groups).

■ Demonstrated public acceptance existsfor the recommended options.

■ The assumptions underlying the econom-ic, financial, and risk analysis are justifiedand subject to sensitivity analysis.

■ Mechanisms for benefit-sharing areidentified.

■ An environmental flow requirement isdetermined.

Projects at detailed design stage

■ The stakeholder forum is consulted ondecisions related to project layout,operation and mitigation and develop-ment measures and relevant agreementsare negotiated with affected groups.

■ Environmental flow requirements aredetermined and incorporated into thedesign and operation rules.

■ A Compliance Plan is prepared, andrecourse mechanisms are identified.

■ Compliance mechanisms are providedfor in tender documents.

■ Benefit-sharing contracts are negotiatedfor displaced and project affected people.

■ A process for stakeholder involvementduring operation is established.

Projects under construction

■ The record of compliance is reviewedand a compliance plan is developed forremaining mitigation measures.

■ Existing commitments for resettlementand benefit-sharing are converted intoformal contracts.

■ An adequate social, environmental andtechnical monitoring plan is financed bythe developer.

■ The operating rules andcommissioning plan areagreed with a stakeholderforum.

■ A comprehensive post-project review is agreed fortwo to three years aftercommissioning, and everyfive to ten years thereafter.

This process of review impliesadded investigations or commit-ments, the re-negotiation ofcontracts and the incorporationof a Compliance Plan. As in the case ofinitial planning, the additional financialcosts incurred will be recouped in loweroverall costs to the operator, to government,and to society in general as a consequence ofavoiding negative outcomes and conflicts.

Governments may alsouse the review of ‘damsin the pipeline’ as anopportunity to comparethe existing policyframework for planningand implementation ofwater and energyoptions with the criteriaand guidelinesproposed by theCommission.

Chapter 9


A Set of Guidelines forGood PracticeThe guidelines outlined here describe ingeneral terms how to assess options and planand implement dam projects to meet theCommission’s criteria. The 26 guidelinesadd to the wider range of technical, finan-cial, economic, social and environmentalguidelines. They are advisory tools tosupport decision-making and need to beconsidered within the framework of existing

international guidance and current goodpractice. Further information is available onmany of these aspects in the WCD Knowl-edge Base.

The guidelines are presented under the samesub headings as the Commission’s sevenstrategic priorities. There are clear linkagesbetween individual guidelines and crossreferences to them are given in the criteriachecklists for the key decision points of theplanning and project cycles.

Strategic Priority 1: Gaining PublicAcceptance

1 Stakeholder Analysis

2 Negotiated Decision-Making Processes

3 Free, Prior and Informed Consent

Strategic Priority 2: ComprehensiveOptions Assessment

4 Strategic Impact Assessment for Envi-ronmental, Social, Health and CulturalHeritage Issues

5 Project-Level Impact Assessment forEnvironmental, Social, Health andCultural Heritage Issues

6 Multi-Criteria Analysis

7 Life Cycle Assessment

8 Greenhouse Gas Emissions

9 Distributional Analysis of Projects

10 Valuation of Social and EnvironmentalImpacts

11 Improving Economic Risk Assessment

Strategic Priority 3: AddressingExisting Dams

12 Ensuring Operating Rules Reflect Socialand Environmental Concerns

13 Improving Reservoir Operations

Strategic Priority 4: SustainingRivers and Livelihoods

14 Baseline Ecosystem Surveys

15 Environmental Flow Assessment

16 Maintaining Productive Fisheries

Strategic Priority 5: RecognisingEntitlements and Sharing Benefits

17 Baseline Social Conditions

18 Impoverishment Risk Analysis

19 Implementation of the Mitigation,Resettlement and Development ActionPlan

20 Project Benefit-Sharing Mechanisms

Strategic Priority 6: EnsuringCompliance

21 Compliance Plans

22 Independent Review Panels for Socialand Environmental Matters

23 Performance Bonds

24 Trust Funds

25 Integrity Pacts

Strategic Priority 7: Sharing Riversfor Peace, Development, andSecurity

26 Procedures for Shared Rivers

Chapter 9


Guidelines for Good Practice



1. Stakeholder AnalysisThe absolute value and the relative signifi-cance of ‘stakes’ vary, especially in whatthey represent for the interested party.Stakeholders have unequal power and thiscan affect their ability to participate in andinfluence decisions. A stakeholder analysisbased on recognising rights and assessingrisks should be used to identify key stake-holders for planned activities. The analysiswill also seek to understand and addresspotential factors that may hinder theirinvolvement. The analytic approach caninvolve stakeholder workshops, community-level surveys, key informant surveys, andliterature review.

The stakeholder analysis leads to theconstitution of a temporary stakeholderforum as a basis for participation and, whererelevant, negotiation processes throughoutthe planning and project cycles. A stake-holder forum is a dynamic construct and willneed to be applied to meet changing needsthrough the planning and project cyclesbeginning with needs assessment/verifica-tion and options assessment. The composi-tion of a stakeholder forum, the level ofrepresentation of various interests, and themeans of facilitating the process changesfrom stage to stage.

The stakeholder analysis will:

■ Recognise existing rights and those who holdthem. Those groups whose livelihoods,human rights and property and resourcerights may be affected by an interventionare major rights holders and thus corestakeholders in a stakeholder forumwithin which negotiated outcomesshould be achieved.

■ Identify those at risk through vulnerabilityor risk analysis and consider them as corestakeholders, including those who facerisk to their livelihoods, human rights,and property and resource rights. Specialattention should be given to indigenousand tribal peoples, women and othervulnerable groups as they may facegreater risks from development interven-tions (Guideline 3). In the case of a dam,the analysis should include those up-stream, downstream and in the proposedreservoir area. Relevant civil societygroups or scientists are included in astakeholder forum to ensure that environ-mental risks, for which there may be nochampion, are adequately reflected anddiscussed.

■ Identify constraints to establishing a levelplaying field for stakeholder involvement.The use of capacity building, institution-al strengthening, quota systems (forexample, to ensure proper representationof vulnerable groups such as women), orsupport mechanisms, such as NGOs orindependent facilitators to correct anyimbalance of influence should be ex-plored. Financial support may be neces-sary to ensure adequate participation.

The government planning body sponsoringthe planned interventions is responsible forinitiating the stakeholder analysis leading toconstitution of a forum and will participatein it. The final structure and composition ofa stakeholder forum should be decided in aconsultative process. The assistance ofindependent facilitators may be helpful inachieving this outcome.

A stakeholder forum is therefore formed ofindividuals representing various groups and

Chapter 9


interests. Such structures may exist alreadyand their capacity can be strengthened ormodified. Where such structures do not exist,a stakeholder forum is established as therepresentative body of the stakeholders. Theextent to which a stakeholder forum should beformalised to enable representation for thegroups identified through a rights-and-risksapproach will depend on country contexts.The status of a forum, and the selection of itsrepresentatives, should however ensureeffective participation for all interested andaffected parties and accommodate changesover time.

Effective participation in a stakeholderforum must be facilitated through timelyaccess to information and legal and othernecessary support. This is particularly thecase with indigenous and tribal peoples,women, and other vulnerable groups.

Sufficient time must also be allowed for thewider body of stakeholders to examineinformation and to consult amongst them-selves before decisions are made. Wheredispute resolution mechanisms are requiredfor negotiated processes, see Guideline 2.

2. Negotiated Decision-Making Processes

A negotiation process is one in which stake-holders – identified through the StakeholderAnalysis (see Guideline 1) – have an equalopportunity to influence decisions. Negotia-tions should result in demonstrable publicacceptance of binding and implementableagreements and in the necessary institution-al arrangements for monitoring complianceand redressing grievances. All stakeholderforum members should share a genuinedesire to find an equitable solution andagree to be bound by the consensus reached.

Attributes of a fair negotiationprocess

■ The Representation of Stakeholders in thestakeholder forum is assured through afree process of selection, ensuring theeffective and legitimate representation ofall interests.

■ The Integrity of Community Processesshould be guaranteed through assurancesthat they will not be divided or coerced,recognising that differences and internalconflicts may arise. The process and the

stakeholders should be as free as possiblefrom external manipulation. Communi-ties may legitimately decide to discontin-ue their involvement in the process iftheir human rights are not respected orin the event of intimidation.

■ Adequate time is allowed for stakeholdersto assess, consult and participate.

■ Special Provisions for Prior InformedConsent. In negotiations involvingindigenous and tribal peoples, mecha-nisms to resolve disputes should followprocedures recommended by the Com-mission (Chapter 8, Strategic Priority 1.4and Guideline 3).

■ Addressing Power Imbalances. Authoritiesshould make available adequate financialresources to enable stakeholder groupswho are politically or financially weak,or who lack technical expertise ororganised representation to participateeffectively in the process. These resourc-es may include financial support torepresentatives for logistics, for incomeforegone, for capacity building and forrequesting specific technical advice.



■ Transparency is ensured by jointly defin-ing criteria for public access to informa-tion, translation of key documents andby holding discussions in a languagelocal people can understand.

■ Negotiations are assisted by a facilitator ormediator, where stakeholders request it,selected with the agreement of thestakeholders.

For this to be a legitimate process, the stake-holders should:

■ agree on the appropriate structures andprocesses for decision-making, the requiredmechanisms for dispute resolution (includingany third party involvement), and the cir-cumstances in which they will be initiated;

■ agree that the interests at stake andlegitimate community needs are clearlyidentified, in particular on the basis ofrelevant rights and risks;

■ ensure that the available alternatives,their relevant consequences and uncer-tainties are given full consideration;

■ guarantee access to all relevant informa-tion to the stakeholder forum in anappropriate language; and

■ at the outset, agree on the timeframe forthe key milestones within the decision-making process.

Compliance with the process outlined abovewill be a fundamental consideration indetermining whether the negotiationsprocess was conducted in good faith.

When a negotiated consensus cannot beachieved through good faith negotiationswithin the agreed-upon timeframe, theestablished independent dispute resolutionmechanisms are initiated. These mayinclude amicable dispute resolution, media-tion, conciliation and/or arbitration. It isimportant that these are agreed upon by thestakeholder forum at the outset. Where asettlement does not emerge, the State willact as the final arbitrator, subject to judicialreview.

3. Free, Prior andInformed Consent

Free, prior and informed consent (PIC) ofindigenous and tribal peoples is conceived asmore than a one-time contractual event – itinvolves a continuous, iterative process ofcommunication and negotiation spanningthe entire planning and project cycles (seeChapter 8, policy principle 1.4). Progress toeach stage in the cycle – options assessmentincluding priority setting and selection ofpreferred options, and preparation, imple-mentation and operation of the selectedoption – should be guided by the agreementof the potentially affected indigenous andtribal peoples.1

Indigenous and tribal peoples are nothomogeneous entities. PIC should bebroadly representative and inclusive. Themanner of expressing consent will be guidedby customary laws and practices of theindigenous and tribal peoples and by nation-al laws. Effective participation requires anappropriate choice of community represent-atives and a process of discussion andnegotiation within the community that runsparallel to the discussion and negotiationbetween the community and external actors.At the beginning of the process, the indige-nous and tribal peoples will tell the stake-holder forum how they will express theirconsent to decisions including endorsementof key decisions (Guideline 1).

Chapter 9


An independent dispute resolution mecha-nism to arrive at a mutually acceptableagreement should be established with theparticipation and agreement of the stake-holder forum, including the indigenous andtribal peoples, at the beginning of anyprocess. It is inappropriate to set rigid

guidelines or frameworks, as these must benegotiated as the process proceeds. Theoutline presented in Guideline 2: NegotiatedDecision Making Processes is intended to offersome basic direction to those involved withsuch processes and independent disputeresolution bodies.

4. Strategic ImpactAssessment forEnvironmental, Social,Health and CulturalHeritage Issues

Strategic impact assessment (SA) is arelatively recent tool that can be used toprovide a new direction to planning process-es. It provides an entry point that defineswho is involved and maps out the broadissues to be considered. The Commissionproposes that the SA process starts by recog-nising the rights to be accommodated, assess-ing the nature and magnitude of risks to theenvironment and affected stakeholdergroups, and determining the opportunitiesoffered to these groups by different develop-ment options (Guideline 1). It should alsoidentify where conflicts between variousrights exist and require mediation.

SA takes the concept of project level impactassessment and moves it up into the initialphases of planning and options assessment.It is a broad assessment covering entiresectors, policies and programmes, andensures that environmental, social, healthand cultural implications of all options areconsidered at an early stage in planning. It isa generic term that includes a range ofplanning tools for example, sectoral envi-

ronmental assessments (EA), basin-wideEAs, regional EAs, and cumulative EAs.2

SA should be concerned with the uses andimpacts of existing water and energyprojects, as well as alternatives for meetingfuture needs. In practice, SA may havedifferent levels of detail, depending onwhere it is applied. At one level, the SAwould scan and identify priority issues to beaddressed subsequently in more detailedplanning exercises. For example, the SAwould identify whether evaluations ofexisting projects have been undertaken, orwhether outstanding social issues on specificprojects had been addressed. At this level,the SA would also assess whether a suffi-cient range and type of options are beingconsidered in the different planning process-es to meet future needs. In cases where theSA is more elaborate and detailed, theexercise may be extended to host a genericoptions assessment process using stakeholdergroups and multi-criteria formulations toscreen and rank options (Guideline 6).

The general goals of SA include:

■ recognising the rights of stakeholdersand assessing the risks;

■ incorporating environmental and socialcriteria in the selection of demand andsupply options and projects before major




funds to investigate individual projectsare committed;

■ screening out inappropriate or unaccept-able projects at an early stage;

■ reducing up-front planning and prepara-tion costs for private investors andminimising the risk that projects en-counter serious opposition due to envi-ronmental and social considerations; and

■ providing an opportunity to look at theoption of improving the performance of

existing dams and other assets fromeconomic, technical, social and environ-mental perspectives.

SA must be revisited at appropriate intervalswith periodic ‘state-of-the-sector’ reporting.Important variables determining the frequencyand intensity of this on-going process includedevelopments in the economy, in technology,in demography and in public opinion. Reviewof SA reports at the highest political level (forexample Parliament) is desirable.

5. Project-Level ImpactAssessment forEnvironmental, Social,Health and CulturalHeritage Issues

Project-level impact assessment (IA) isalready standard practice in many countries,and the term is used here to include envi-ronmental, social, health and culturalimpacts. Deficiencies in past implementa-tion have been identified and improvedprocesses are needed.3

The following changes are proposed to theway project level IAs are implemented:

■ Projects should be subject to a two-stageIA: the first is a scoping phase, includingfull public participation, that identifieskey issues of concern and defines theterms of reference for the second, assess-ment, phase (Guideline 1).

■ The timing of the IA should allow theresults to feed into the final design of theproject. There should be a total integra-tion of technical, environmental andsocial studies during the design stage.Although executed by different studygroups, these studies should run concur-

rently and interactively with regularexchange of information between allstudy groups.

■ IAs should be carried out independentlyof the interests of the project developerand financing mechanisms should reflectthis independence.

■ IA should include an EnvironmentalImpact Assessment, a Social ImpactAssessment, a Health Impact Assessment(see Box 9.1), and Cultural HeritageImpact Assessment (see Box 9.2) asexplicit components and comply withinternational professional standards. Theassessments should be sufficiently de-tailed to provide a pre-project baselineagainst which post-project monitoringresults can be compared.

■ An independent panel of experts (re-porting formally to the highest environ-mental protection authority) should beappointed to assist the government andthe developer in reaching sustainablesocial and environmental outcomes(Guideline 22). The developer mustrespond to all issues raised by the paneland explain how they will be addressed.The panel’s findings and the developer’sresponse are to be made public within a

Chapter 9


reasonable period (for example, sixweeks).

■ Developers should open a local liaisonoffice to ensure adequate access toinformation for local affected communi-ties in appropriate languages.

■ The IA process should culminate in aseries of written agreements with thosedepartments or organisations that arerequired to implement mitigation,development and compensation plans, orrespond to the impacts. The scope ofthese agreements must be fully definedprior to tendering for construction.

■ The IA process continues through andbeyond project construction and ade-quate institutional and financial arrange-ments for social and environmental auditand monitoring should be included inthe planned measures. Contracts withmonitoring agencies (for example researchinstitutes or NGOs) should be agreed priorto tendering for construction.

■ A redress procedure should be put inplace that provides mechanisms foraddressing grievances during the resettle-ment plan and following construction.

■ IAs should be public documents, postedon relevant websites, and disseminatedin appropriate languages.

■ IA should be guided by the precautionaryapproach.

The precautionary approach requires Statesand water development proponents toexercise caution when information isuncertain, unreliable, or inadequate andwhen the negative impacts of actions on theenvironment, human livelihoods, or healthare potentially irreversible. A precautionaryapproach entails improving the informationbase, performing risk analysis, establishingprecautionary thresholds of unacceptableimpacts and risk, and not taking actionswith severe or irreversible impacts untiladequate information is available or untilthe risk or irreversibility can be reduced,making outcomes more predictable. Nor-mally the burden of proof will be on thedeveloper.

Decision-makers are faced with the dilemmaof how to reconcile competing or conflictingrights and needs. The precautionary ap-proach forms part of a structured approachto the analysis of risk, as well as beingrelevant to risk management. Determiningwhat is an acceptable level of risk should beundertaken through a collective political

A health impact is a change in health risk reasonably attributable toa project, programme or policy. A health risk is the likelihood of ahealth hazard or opportunity affecting a particular community at aparticular time. Health Impact Assessment (HIA) is part of theoverall risk assessment process (economic, social and environmentalrisks) to assess the viability of a project.

The Health Impact Assessment has the following components.

■ Assessing the health condition of people in reservoir, infra-structure, downstream, resettlement, irrigation, and otherimpact areas. The assessment process should engage localpeople and resources. The parameters derived from theinformation collected constitute the baseline health situationof the population.

■ Predicting changes in health determinants that can bereasonably attributed to the project and that could affectpeople during each stage of the project. The changes, takentogether, produce health outcomes or changes in healthstates. These are expressed in a minimum of three ranks: nochange, increased health risk, and health enhancement.Factors determining health outcomes in past projects involv-ing comparable social, economic and environmental condi-tions can be used to enhance predictability.

■ Assessing the cost of preventing and mitigating the potentialhealth impacts in the overall cost assessment of the project.

■ Developing measures to prevent, minimise and mitigatehealth impacts with the participation of the potentiallyaffected people and incorporating these into contractualimplementation arrangements with adequate financialprovision.

Source: WHO, 1999, WCD Working Paper

Box 9.1: Health impact assessment



process. The process should avoid unwar-ranted recourse to the precautionary ap-proach when this can overly delay decision-making. However, decision-makers facedwith scientific uncertainty and publicconcerns have a duty to find answers as longas the risks and irreversibility are consideredunacceptable by society.

6. Multi-Criteria AnalysisMulti-criteria analysis (MCA) processes use amix of qualitative and quantitative criteria toassess and compare options that may bepolicies, programmes, or projects. Stakeholder-driven MCA processes are flexible and open,based on the concept of a stakeholder forum(see Guideline 1). Their primary purpose is toprovide a structured process to screen and rankalternatives and help understand and resolvedifferences between groups of stakeholdersinvolved in development decisions.4

The multi-disciplinary planning team with atime-bounded mandate supports all phasesof the MCA process. The results at eachstage should be made available to thestakeholder forum and for widerpublic review. A public hearingshould be held on the outcome ateach stage if the significance ofthe process warrants it. If theMCA process cannot resolve allconflicts, the use of MCA maystill assist in identifying policyscenarios and the way differentgroups and interests perceive them.There are many ways of presentingthe results of the MCA. One ofthem is the preference matrix,which demonstrates the equalemphasis given to social, environ-mental, technical and economicparameters (see Figure 9.3).

Figure 9.3 Preference matrix for ranking options

Envi

ronm

enta

l and

Soc

ial P

refe

renc

e(C

ompo

site

Env

ironm

enta

l/Soc

ial S

core

)

Low High

High

0 50 100

Technical Preference(Composite Technical/Economic Score)

Cultural heritage resources are the cultural heritage of a people, a nationor humanity as a whole, and can be on the surface, underwater orunderground. They comprise:

■ Cultural practices and resources of current populations - religions,languages, ideas, social, political and economic organisations, andtheir material expressions in the forms of sacred elements of naturalsites, or artefacts and buildings;

■ Landscapes resulting from cultural practices over historical andprehistoric times; and

■ Archaeological resources, including artefacts, plant and animalremains associated with human activities, burial sites and architecturalelements.

Cultural Heritage Impact Assessment (CHIA) requires adequate time forsuccessful completion and should be looked at in two stages. Firstly,where regions and river valleys are known to be rich in cultural resources,landscapes, or archaeological resources, consideration of these elementsshould be included in Strategic Impact Assessments (Guideline 4) andused as a criterion in selecting options and avoiding impacts. Secondly, aproject level mitigation plan is developed where a dam option proceedsto full feasibility phase.

The following procedural aspects need to be considered:

■ financial resources should be specifically allocated to CHIA;

■ the assessment team should include archaeologists and, if necessaryarchitects and anthropologists;

■ where cultural assets have significant spiritual or religious significance allactivities should be planned with the consent of relevant communities;

■ assessments should culminate in a mitigation plan to address thecultural heritage issues identified through minimising impacts, orthrough curation, preservation, relocation, collection or recording; and

■ a separate report should be produced as a component of the overall IAprocess.

Source: Brandt and Fekri, 2000, WCD Working Paper

Box 9.2: Cultural heritage impact assessment

50

100Attractive Projects

to Proceed toFurther Study or

Development

Projects Droppedfrom Further

Consideration

Chapter 9


Attributes and steps of MCA processes toselect the best mix of options are:

Step 1:

The sponsoring agency prepares terms ofreference for the overall process and a stake-holder analysis, and establishes an informationcentre. Representative stakeholder groups arecontacted, and the general public is informedthrough print and electronic media.

Step 2:

A stakeholder forum is formed and repre-sentatives of stakeholder groups identifiedsubject to public review and comment. Amulti-disciplinary planning team is formedto support the process and assembles aninitial inventory of options.

Step 3:

Public comment is invited on the optionsinventory including proposals for additionaloptions to be considered. The stakeholderforum confirms the comprehensiveness andadequacy of the options inventory. Wherenecessary, additional steps are taken toexpand the inventory.

Step 4:

The stakeholder forum decides on the criteriafor screening the options and criteria forcoarse and fine ranking of options are estab-lished with input from the planning team.

Step 5:

Options are screened by the planning teamaccording to the agreed criteria, results arepresented to representatives of the stakeholdergroup for approval and subsequently an-nounced for wider public review or comment.

Step 6:

Sequential steps of coarse and fine rankingof options (where the number of options islarge) are prepared by the planning teamand submitted to the representatives of thestakeholder forum at each stage. The list ofoptions at each stage is made public and anadequate period for comment is providedbetween each stage. Public hearings may beheld at each stage if appropriate.

Step 7:

The final selection of options that wouldform the basis for detailed planning ispresented to agencies, communities, orgroups responsible for the detailed planning.

These steps lead to preparation of a limitedset of diverse development plans comprisinga range of options emerging from thescreening process. The multi-criteria exer-cise may be repeated to evaluate thesealternative plans and select a preferreddevelopment plan.

7. Life-Cycle AssessmentLife-cycle assessment (LCA) is an optionsassessment procedure used in the energysector to compare ‘cradle-to-grave’ perform-ance, environmental impacts, and marketbarriers and incentives for different demandand supply options. LCA is located at thefront end of the planning cycle. Its resultsmay be fed into multi-criteria screening andranking processes, which are a basis for

deciding which options to include insubsequent stages of planning. Alternatively,the information generated by LCA is usedto develop regulatory policies, for examplepolicies addressing barriers limiting themarket penetration of options otherwiseconsidered to be in the interest of society.5

LCA assessments can be simple and genericor exhaustively detailed, data-rich, andelaborate. LCA procedures that quantify the



potential impacts of different options onland, air and water resources, includinggreenhouse gas (GHG) emissions, can betransferred and adapted to differentcountries. The analytical framework used toassess the direct, indirect, and hiddenincentives and market barriers for differentoptions through the full chain ofdevelopment is also transferable.

LCA would typically include:

■ categorisation of the different stages inthe life cycle of each option where theimpacts and effects are relevant (forexample from resource extractionthrough transport, manufacturing,building, operation and refurbishment todecommissioning);

■ identification of the material flows andresource impacts at each stage andcomparison of each option using a set of

indicators (for example net efficiencies,the consumption of resources, or theimpact per unit of output of the option –such as land use, water use, GHG emis-sions, and other gaseous, liquid or solidpollution streams); and

■ identification of the range and magni-tude of the direct, indirect, and hiddensubsidies, external factors and incentivesacross each stage of the life cycle of eachoption.

The most advanced use of LCA is in thepower sector, where it is particularly usedto consider the GHG emissions of variousoptions. These factors are becoming theprime driving force behind energy andpower sector policies in many countriesincluding Europe, Australia and Canada,and reflect the Kyoto Protocol (Guideline8).

8. Greenhouse GasEmissions

Recent research indicates that reservoirs canemit greenhouse gases. Precise assessmentsare especially important to assist in selectingclimate-friendly options and if hydropowerprojects seek to benefit from any form ofcarbon credit. The emissions from thenatural pre-impoundment state should beincluded in the comparison with otheroptions. Good field studies with modellingpredictions of emissions should be anexplicit component of relevant feasibilitystudies.6

Procedures to calculate emissions for con-ventional and renewable options are wellestablished and available but are continuallyevolving. An expert workshop convened bythe Commission and held in Montreal in

February 2000 decided that net emissionsfrom reservoirs above baseline emissions arethe appropriate estimates. To calculate netemissions, the planner must:

■ assess the carbon (CO2, CH4) andnitrogen cycles (N2O) in the pre-im-poundment watershed context – thisinvolves establishing a carbon budget,including description of flow rates,concentrations, residence time and otherrelevant measures;

■ assess future changes to carbon inputs inthe watershed from various activities,including deforestation;

■ assess the characteristics of proposedreservoir(s) and inundated area(s) thatwill change the carbon cycle, includingsize, temperature, bathymetry, primaryproductivity and other relevant measuresafter dam completion; and

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■ assess the cumulative emissions frommultiple dams on a watershed basis incases where a dam and its operations arelinked to other dams.

More baseline measurements are required onreservoirs on existing projects to extend

understanding of the scale of GHG emis-sions to temperate and semi-arid regions ofthe world and to catchments with largeurban populations. Such data will provehelpful in taking informed decisions onenergy options and climate change.

9. Distributional Analysisof Projects

Distributional analysis provides stakeholdersand decision-makers with information onwho will gain and lose from a project and isan essential tool in promoting more equita-ble distribution of benefits and costs.7 Thesegains and losses may be expressed in eco-nomic or financial terms, or they may bemore simply expressed as changes in physicalquantities. In some cases only the direction ofa specific impact may be discernible.

Integrated distributional analysis requiresassessment of the full range of projectimpacts including financial, social, environ-mental and economic aspects assessed eitherin a qualitative fashion, quantified in non-monetary terms, or valued in financial oreconomic terms. A number of methodsfocusing on specific aspects of distributioncan be used within the overall approach atdifferent stages of the planning cycle.

■ Equity (or poverty) assessment comprisesan assessment of the impacts (in economicor non-economic terms) and risks of aproject on specific sub-populations orgroups of concern.

■ Macroeconomic or regional analysisincludes an analysis of the wider economicimpacts using either a simple economic orfiscal impact analysis or a formal regionalor macroeconomic model.

■ Economic distributional analysis includesan explicit analysis of distribution of the

direct costs and benefits of the project,including those external social and envi-ronmental impacts that are to be valued(Guideline 10). This builds on the finan-cial and economic cost-benefit analyses.

Selecting options: Integrated distributionalanalysis at a preliminary level should beinitiated during the early stages of screeningand selecting options as part of the strategicimpact assessment. It can be carried forwardat an increasing level of detail for projectsthat emerge for further consideration fromthis process. At the preliminary level ofanalysis, a matrix is prepared to identify thegroups that will either receive benefits orbear the costs of the project and indicate theapproximate scale of such costs or benefits.A qualitative equity assessment should alsobe undertaken and inform the screeningprocess about the comparative impacts ofalternatives on vulnerable groups in society.

Feasibility stage: A more detailed and inte-grated distributional analysis should beundertaken during the feasibility study andinclude both an economic distributionanalysis and equity assessment. The use of amacroeconomic or regional analysis isrecommended for projects with a significantirrigation component or inter-basin transferwhere there are broader objectives in termsof redistributing income between regions ormaking a sustained contribution to themacroeconomy. The distributional analysisshould be undertaken in full consultationwith project stakeholders.



10. Valuation of Social andEnvironmental Impacts

The methodologies and applications tovalue environmental and social impacts ofdams can be used to ensure that impacts areinternalised in the economic analysis whereappropriate and possible (see Table 9.1).Where it is undesirable or not possible toexpress such impacts in economic terms,they should be considered separately asparameters in the multi-criteria analysis (seeGuideline 6).

Expertise and experience with these meth-ods in industrialised countries are wide-spread, and many examples exist of theirapplication to the impacts of dams.8 Typi-cally, valuation of the impacts of new damsor the decommissioning of old dams in suchcountries deals with recreation, tourism,fisheries and, increasingly, people’s prefer-ence for healthy ecosystems.

A range of methods is available, includingthose based on observed market behaviour,the stated preferences of individuals, ormodelling of choices made by respondentsin market surveys. Their purpose is to valuepreviously hidden costs and benefits andmake them explicit in decision-making.Whatever the context, the derivation ofmonetary values for the unmitigated envi-ronmental and social impacts of projects isnecessary when it assists the transparent,participatory, and explicit examination ofproject and policy alternatives. Whetherthese include the valuation of cultural,biodiversity or other intangible values inmonetary terms will depend on the localcontext and on stakeholders’ views. Asnoted, such aspects are often better ad-dressed as an individually weighted compo-nent in a multi-criteria analysis.

Many of these valuation methods areequally applicable in the developing worldand capacity to apply them increased rapidlyin the 1990s. They have been adapted tothe rural, developing context, particularly incombining participatory approaches withvaluation methods and integrating econom-ic valuation into multi-criteria analysis.Many of the external impacts of large damsaffect household livelihoods and thus shouldbe assessed using relatively straightforwardmarket or revealed-preference methods. Inparticular, a series of relatively straightfor-ward methods such as productivity andsubstitute-goods methods may be applied toestimate how changes in water quantity,quality, and flow regime affect householdproductivity and consumption. Thesemethods also apply to the impact of changesin water flows on downstream communitiesand their natural resources, as well as impactson major ecosystem functions and serviceswhere these provide an economic good. Forexample, sediment flows and deposition alongthe coast, which if interrupted, may lead to aneed for erosion control measures.

Studies of this nature should involve at leastthree steps:

■ a scoping exercise to identify and selectimpacts to be valued;

■ valuation studies; and

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■ public meetings to report back to thestakeholder forum on the results of thestudies.

The scoping exercise may be incorporated intothe initial stage of project impact assessment

11. Improving EconomicRisk Assessment

All infrastructure projects and commercialundertakings involve risk, uncertainty andirreversibility. Project risk assessmentsgenerally take into account technical,economic and financial aspects.9 TheCommission recognises the nature of socialand environmental risks and that these canbe addressed through other mechanisms(Guidelines 4, 5, 18).

The following are recommended as a generalapproach for technical, financial andeconomic risk assessment:

■ the assessment of risks should be includ-ed in all steps of the planning cycle;

■ identification and selection of risks forassessment should be undertaken as partof the larger stakeholder and multi-criteria processes;

■ past performance of large dams should beused to identify likely ranges for thevariables and values to be included inrisk and sensitivity analysis; and

■ sensitivity analysis should be complement-ed by a full probabilistic risk analysis.

Good practice involves the use of probabil-istic risk analysis, a quantitative techniquethat employs the probability distributions ofindividual variables to produce a consolidat-ed single probability distribution for thecriteria of interest.

(see Guideline 5). Finally, the informationgenerated through valuation studies shouldhave an explicit role in informing not onlyapplicable cost-benefit and distributionalanalyses, but also the negotiations betweenstakeholders and decision-makers.

For example, in determining economic risk,the probabilities of different values forinflows and power generation can be com-bined with probabilities of cost overruns in acost-benefit analysis to result in a probabili-ty distribution of net returns. This providesa robust assessment of the risk of differentoutcomes (see Box 9.3). It introduces amore effective approach than the simplesensitivity analysis used to assess the effectof potential changes in important variableswhere the cost-benefit analysis may havebeen re-run for a number of individualscenarios. For example, the sensitivityanalysis is used to see whether the project isstill profitable when the planned projectcosts increase by 20%.

In implementing these general recommen-dations on economic risk analysis across theplanning cycle, a number of specific sugges-tions should be considered.

At all stages:

■ improved prediction of project costs byusing a frequency distribution of the costoverruns for similar projects.

At options assessment stage:

■ a simple sensitivity analysis using agreedvalue ranges for key variables; and

■ a qualitative comparison of optionsunder consideration in terms of theuncertainty associated with the cost andbenefit streams of each project.



At the feasibility stage

■ a full probabilistic risk analysis of eco-nomic profitability;

■ modelling of changes and variability inhydrological estimates that may resultfrom climate change and their effect ondelivery of services and benefit flows;and

■ investigation of the likely benefits of riskreduction measures and the costs thisentails.


12. Ensuring OperatingRules Reflect Social andEnvironmentalConcerns

Agreements on operating conditions shouldreflect commitments to social and environ-mental objectives in addition to the com-mercial interests. At all times the safety andwell being of the people affected must beguaranteed throughout the project cycle. Alloperating agreements should be available tostakeholder groups.

River diversion during construction

Emergency warning and evacuation plansare needed in the event of overtopping oftemporary diversion works. Licence condi-tions should assign responsibility for com-pensation to the downstream population forany damages that occur during such events.

The World Bank appraisal of the Ghazi-Barotha hydroelectric project inPakistan used a probabilistic risk assessment of the economic rate ofreturn (EIRR) of the power expansion programme, with the riskssummarised under four scenarios: demand uncertainties, cost profiles,schedule delay, and amount of additional capacity provided by privateprojects. Each scenario has three alternative states. Probabilities wereassigned to each scenario so that a weighted average EIRR could beobtained. This yielded 54 total possible outcomes. For each one theexpected value of the EIRR, calculated as probability times its ownEIRR, is then summed over all outcomes to give the expected EIRR. Aprobability distribution of EIRR was then calculated for the overallpower sector programme and for the project alone.

The results indicate that the risk-weighted EIRR on the overall invest-ment programme is 18.5%. This is lower than the Base Case estimate,but considerably higher than the opportunity cost of capital at 12%.The probability of the EIRR falling below the opportunity cost of capitalis estimated at 8%. The risk-weighted EIRR proved quite robust tochanges in the basic probabilities.

Source: World Bank, 1995.

Box 9.3: Ghazi-Barotha, Pakistan

The compensation would be limited tothose impacts caused by the breach, overand above the natural flood event.

Releases to the downstream river to satisfydrinking water and environmental require-ments should be maintained during riverdiversion. If, for technical reasons, flow isinterrupted, the operator must guaranteethat alternative supplies of drinking waterwill be made available to the downstreampopulation.

Reservoir filling

During the reservoir filling period, thereshould be releases of good quality water tothe downstream river to satisfy drinkingwater, irrigation, and environmental re-quirements. If the water quality is expectedto be poor, then – as with the agreement onriver diversion – alternative supplies of

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drinking water must be made available forthe downstream population.

Test operation

Test operation of the spillway (if gated), ofother outlet works, and of the turbines canlead to major sudden releases to the down-stream river, endangering human andanimal life. The operator will be responsiblefor warning the downstream population thatsudden releases may occur and may bedangerous. Local fishers will be compensatedfor days when fishing is impossible. If testoperation takes place during the dry season,people experiencing damage to recessionagriculture must be compensated.

Operation

A range of agreements on the operatingphase should be covered in the licence:

■ environmental flow releases to thedownstream river;

■ minimum technical releases to thedownstream river (for navigation, watersupply, downstream irrigation and so on);

■ maximum ramp rates for downstreamreleases (to avoid problems with naviga-tion and damage to the river banks);

■ water allocations during normal operation;

■ operation during normal and exceptionalfloods;

■ warning of people potentially affectedand rules for evacuation of people andanimals;

■ opening of spillway gates;

■ periodic safety inspection by independ-ent parties;

■ drawdown procedure if dam safety is indoubt;

■ monitoring of relevant operation data anddissemination of data to stakeholders; and

■ periodic review of operating rules.

13. Improving ReservoirOperations

A range of project specific non-structuraland structural methods to adapt, modify,improve, or expand operations of dams andassociated facilities may be considered atdifferent periods in time. Structural meas-ures may include modernising equipmentand control systems and improving civilstructures such as spillways, intakes andcanals. Non-structural measures generallyinvolve a change in reservoir operationpractices to optimise benefits, cater tochanging water use priorities, enhanceconjunctive operation, or improve sedimentmanagement. Dam safety improvement andupdating contingency plans for operation ofreservoirs in extreme flood events are otheraspects of adaptive management.10

Detailed technical guidelines are available onways to change reservoir operations either byadapting existing rule curves or introducingmore modern computerised decision supportsystems, including real-time data inputs,simulations and forecasting. In adaptingreservoir operations owners/operators should:

■ work with stakeholders to collect viewson current reservoir operations and viewson the need, concerns, and limitations ofpotential future changes in water releasepatterns, including downstream impacts;

■ confirm any change in the priority ofwater uses (such as environmental flows)and evaluate the scope to use flowforecasting to optimise reservoir opera-tion (Guideline 15);

■ use simulation models where feasible, toassess the scope for optimising the supplyof water and energy (for example timing,



quantity) into the system (for exampleirrigation canal system and conjunctive useof groundwater, power grid or waterdistribution system) to improve the overallvalue of the services in the system;

■ assess the ability to operate the reservoirto optimise delivery of services usingcomputerised models;

■ assess the scope to further optimiseinteractive operation of the reservoirwith other reservoirs, diversions orfacilities using basin-level decisionsupport systems;

■ provide clear responsibilities and proce-dures for emergency warning and improvedpreparedness of downstream countries,operator training and downstream evacua-tion in extreme flood events; and

■ ensure monitoring systems are in place andfeed into operational decision making.

Sediment management is one area whereincreased attention is needed. A sedimentmanagement plan would consist of:

■ monitoring sediment in the reservoir,including quantitative and qualitativeanalysis of sediment to verify propertiesand pollution levels;

■ minimising sediment deposition inreservoirs where possible by sluicing ordensity current venting;

■ removing accumulated deposits wherepossible by drawdown flushing (drawingthe water level down during high-flowseasons), and excavation of sediments;and

■ catchment management programmes toreduce sediment inflow to the reservoirwhere possible as part of a basin-wideplan.


14. Baseline EcosystemSurveys

The effectiveness of mitigation, enhance-ment, compensation and monitoring meas-ures require better baseline knowledge andunderstanding of ecosystems. Baselineassessments inform both the national policyon maintaining rivers and requirements forenvironmental flows and other compensa-tion and mitigation measures. They are notrestricted simply to an ‘impact statement’,but instead gather the necessary baselineinformation prior to alternatives beingassessed.11

The baseline surveys aim to establish thelink between the hydrological regime of the

river and its associated ecosystems. Baselinesurveys should gather relevant informationon:

■ the life cycle of important fish species(especially migratory species);

■ the distribution of habitat for threatenedor endangered species;

■ important areas for biodiversity; and

■ key natural resources for riverine com-munities.

The studies should explicitly identify wheremodifications to flow or water quality willhave significant impacts on biodiversity,habitats, or riverine communities andprovide the scientific basis for testing flowand quality scenarios against ecosystem

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responses (Guideline 15). Such studieswould normally be undertaken over severalseasonal cycles.

Appropriate research agencies staffed withspecialised scientists should undertake

baseline surveys, assisted where necessary byinternational networks. Enhanced local andregional capacity will help identify, under-stand and manage environmental impacts,hence improving environmental outcomesfor current and future dams.

15. Environmental FlowAssessments

Dams should provide for an environmentalflow release to meet specific downstreamecosystem and livelihood objectives identi-fied through scientific and participatoryprocesses. In some cases managed floods maybe necessary to maintain downstreamfloodplains and deltas. Several approachesare available for assessing environmentalflow requirements (EFR), ranging from‘instream flows’, which refer to within-bankflows, to ‘managed flood releases’ designedto overtop and supply floodplains and deltas.‘Environmental flow’ includes all of these andstresses the need to meet clear downstreamsocial and ecosystem objectives rather thansimply releasing a quantity of water.12

Environmental flow assessments (EFA) canbe done at several levels of detail, from asimple statement of water depth to providewetted habitat for a particular fish species toa comprehensive description of a flowregime with intra-annual and inter-annualvariability of low flows and floods in orderto maintain complex river ecosystems.Confidence in the suitability of an EFA tomeet its objective is linked to the level ofinvestment in appropriate specialist inputs.

Holistic methodologies contribute to adetailed understanding of the merits anddrawbacks of a series of competing waterresource options in terms of required river

flow, water available for off-channel use, andthe social and economic implications.Sophisticated habitat-modelling techniquesprovide additional detailed information onthe flows required for specific valued riverspecies or features, where the targeted riversare of high conservation importance or havea high likelihood of conflicts over water.

EFRs are an integral part of the impactassessment process (see Box 9.4.). Continualinteraction with the design team is essentialto ensure that the least damaging and mostflexible options are retained and that thedam design reflects the structural andoperational needs of the flow release.

The Knowledge Base provides guidance onthe following steps to informed decision-making leading from baseline surveys toenvironmental flows13 :

Step 1: Situation assessment

Identify the extent of the targeted riversystem likely to be affected by a dam –upstream, downstream, and in the reservoirbasin – and alert decision-makers to thelikely ecological and social issues that willneed to be addressed. This draws on data inthe baseline surveys, where these exist.

Step 2: Specialist surveys andidentification of ecosystemcomponents

A range of specialists (ecologist, geomor-phologist, sociologist, and resource econo-mist) undertakes field surveys to provide acomprehensive description of the affected



river. The studies link flow-related informa-tion with ecological and social values.

Step 3: Developing predictivecapacity on biophysical responses todam-related flow changes

The team develops data sets, models andvarious analytical tools that can be used inscenario creation to assist decision-making(Step 5). These may include, for instance,specifying conditions needed for a certainfish species to spawn, or how water qualitydiffers between the rising and falling arms ofa flood hydrograph, or how downstreamfisheries and pastures will be affected.

Step 4: Predicting social impacts ofthe biophysical responses

The present river use, exploitation of river-related natural resources, and health profilesof the affected people and their livestock arequantified, and possible flow-related healthrisks are identified.

Step 5: Creating scenarios

Scenarios are created that include social,biophysical, and economic parameters andpresent a series of future options for deci-sion-makers. Scenarios may be defined by:

■ the volume of water required as yield fromthe dam – the rest is allocated to the river;

■ protection of a valued species,community, or river feature, in whichcase a flow regime to achieve this wouldbe described;

■ a definition of the priorities of thecompeting users, and a description of theresulting flow regime and its effect onriver condition; and

■ river rehabilitation downstream of anexisting dam, in which case the best thatcan be achieved within the designlimitations of the dam is described.

In addition, the ‘no development’ scenarioshould always be included.

Step 6: Selection andimplementation of one scenario

This requires:

■ reflection of the chosen scenario in thedam design and the EnvironmentalManagement Plan; and

■ monitoring of implementation to ensurethat objectives are met

The EIA results for the Pollan Dam showed that migratory salmon werepresent upstream of the dam site, and that the dam would act as abarrier to salmon movements, affecting the fishery. The environmentalwater releases were designed to meet the seasonal needs of themigratory fish. Design modifications had major implications forstructures such as the concrete dam, spillway, and downstreamchannel. The capital cost of all environmental protection measures isestimated to have increased the total cost of the project by 30% (from$6 million to $8 million). The flows have been effective in maintainingthe salmon population and the recreational fishery.

Source: Smith, 1996; Bridle, pers. comm. 2000

Box 9.4: Design and cost of environmental flows - Pollan Dam,Ireland

16. Maintaining ProductiveFisheries

The impact of dams on fish and fisheries isof major concern in many parts of the world.Several issues need attention in order tomaintain productive fisheries (see alsoGuideline 15).14

Fish passes should be tested and shown to beefficient mitigation tools. Fish pass designhas focused on the needs of leaping salmo-nids that usually dominate fish communitiesin fast-flowing rivers in the industrialisednorthern countries. Yet many fish species inslow-flowing tropical rivers are unable to usethis kind of fish pass as they do not leap.

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Where fish passes exist, their effectivenessshould be measured and their design im-proved where efficiency is low. For newdams, proposed fish pass designs should betested hydraulically and their appropriate-ness for the target species explicitly assessed.(See Box 9.5.)

Where the reservoir fishery will be assessedas a project benefit, the proposal shouldexplicitly include regional experience ofsimilar reservoir fisheries, rigorous assess-ments of potential reservoir productivity,and proposals for the institutional mecha-nisms to manage the new fishery. Relevantcontracts should be established between the

project proponent, the agencies responsiblefor developing or managing the reservoirfishery, and the fishers, with priority givento affected people. Fisheries managementobjectives for dams include:

■ preventing the loss of endangered and/orcommercially important fish biodiversity;

■ maintaining fish stock abundance;

■ ensuring the long-term sustainability ofthe catch, employment and income; and

■ producing fish for local consumption andexportable fish products.

Reservoir fisheries management concernsfocus on protecting spawning grounds inaffluent inflow areas, stocking to increaseproduction (for example, of a small pelagicfishery) and advice on management of thewater level to reduce impacts that harm fishstocks. Downstream river fisheries manage-ment focuses on aeration of anoxic dis-charge water from the dam, provision ofeffective fish passes, reduction of turbulencein the stilling pool, and mitigation of fishlosses on the downstream floodplainthrough flow releases.

In 1976 a pool-and-weir type fish pass was incorporated into a tidalbarrage on the Burnett River in SE Queensland, Australia. Assessmentof the fish pass in 1984 and 1994 showed it to be ineffective, with only2 000 fish of 18 species ascending over a 32 month period. The fishpass was modified to a vertical-slot design with low water velocity andturbulence. Over 17 months 52 000 fish of 34 species used the rede-signed fish pass. Non-leaping fish are now able to use the fish pass,benefiting the entire fishing community on the river.

Source: Flanders, 1999; env219, WCD Submission

Box 9.5: Benefits of improving fish passes

Recognising Entitlements and Sharing Benefits

17. Baseline SocialConditions

Constructing a social baseline is central tothe planning and implementation process. Itprovides key milestones against whichproject performance and positive andnegative impacts on people can be assessedthrough periodic monitoring and evalua-tion. It is also a key input to strategic socialimpact assessment (Guideline 4).15

Social baseline assessments should be doneat two stages in the planning process:

■ a low-intensity appraisal during optionsassessment, linked to Strategic ImpactAssessment; and

■ a more comprehensive baseline duringProject-level Impact Assessment once anintervention emerges from the optionsassessment process.

In light of the significance of the impactsthat can occur between the time a decisionis made to develop a project and its actualimplementation, the second baseline studymay need to be updated at the tender stage



of a project. Subsequent monitoring activi-ties can follow standard practice.

Baseline studies should be undertaken for allimpact areas, and in particular the areas andcommunities likely to be positively andnegatively affected by the project. Groups tobe considered include communities to bedisplaced, prospective host communities,downstream and upstream communities, andcommand area inhabitants (irrigationschemes, transmission line corridors, andother infrastructure areas). The socialbaseline study should be participatory andinvolve discussion and feedback throughstakeholders (Guideline 1). It should also beaccessible to the general public.

Some of the common techniques used toassess baseline social conditions combinegender-sensitive household surveys, commu-nity-level participatory appraisals, and other

methods such as key informants, oraltestimonies and preference assessment,direct observations and literature review. Forthe assessment of social processes, some ofthe participatory appraisal methods (such asthe Venn diagram of institutional processes)can be useful. Aerial photos, satelliteimagery, and geographic information systemscan be combined with participatory commu-nity resource mapping exercises.

The State is responsible for ensuring thatsocial baseline information is collected. Thetask should be carried out by independentinstitutions selected in consultation withthe stakeholder forum. Large projects shouldbe considered as an opportunity for buildinglocal capacity (in relevant governmentagencies, academic and research institu-tions, and civil society organisations) toundertake social assessment and monitoring.

18. Impoverishment RiskAnalysis

The impoverishment risks and reconstruc-tion analysis model for resettling affectedand displaced populations adds substantiallyto the tools used for explaining, diagnosing,predicting, and planning for development.This guideline should be read in conjunc-tion with Guideline 4: Strategic ImpactAssessment, Guideline 5: Project-relatedImpact Assessment and Guideline 17: Base-line Social Conditions. At the core of themodel are three fundamental concepts: risks,impoverishment and reconstruction. Impov-erishment risks are analysed by separatingout the components of the displacementprocess. They are landlessness; joblessness;homelessness; social, economic, and politi-cal marginalisation; food insecurity; in-creased morbidity and mortality; loss of

access to common property resources; and lossof socio-cultural resilience through a commu-nity’s inability to secure its interests.16

The internal logic of the model suggeststhat:

■ preventing or overcoming the pattern ofimpoverishment requires risk reversal;

■ explicit identification of risks in advanceis crucial for planning counter-riskmeasures; and

■ the transparent recognition of risks inadvance will allow planners and affectedpeople to search for alternatives to avoiddisplacement or to respond with mitiga-tion and development measures orstrategies and coping approaches.

The strategy to implement the impoverish-ment risk model includes the following:

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■ the baseline study covering such aspectsas numbers of affected people, availabili-ty and access to resources, sources oflivelihood and social, cultural, demo-graphic, economic and political condi-tions and processes (Guideline 17) –these studies must incorporate variablesto construct key elements of the riskmodel, in addition to collecting data onother aspects;

■ the baseline study providing informationto understand how social, economic andcultural networks, physical environmentand resources support the well-being ofindividuals, households and communi-ties; and

■ mitigation, development and benefit-sharing measures to improve the liveli-hoods and well-being of affected people,and to provide the social and physicalenvironment that would enable individ-uals, households and communities to

successfully overcome impoverishmentrisks.

A four stage, two-generation model thatwould enable affected communities to reachfull development includes17 :

■ developing benefit sharing, mitigation,and development plans with the partici-pation of the affected people;

■ enabling resettled people to cope andadapt following displacement, withcontinued support from the governmentand civil society groups;

■ supporting economic development andcommunity building within resettlementareas; and

■ hand over of resettlement sites andincorporation within broader social andpolitical institutions at a stage whenresettlement and development plans arefully realised and capable of sustainingthe gains for future generations.

19. Implementation of theMitigation,Resettlement andDevelopment ActionPlan

A mitigation, resettlement, and develop-ment action plan (MRDAP) is negotiatedbetween all affected peoples, the govern-ment and the developer. It generally has twoelements – a master contract and a perform-ance contract.18 The affected people wereidentified through an Impoverishment RiskAnalysis (Guideline 18). One component ofthe MRDAP may be a Project Benefit-Sharing Mechanism (Guideline 20). Theoverall obligations and responsibilities ofthe government and the developer will beincluded in the Compliance Plan (Guide-line 21).

A master contract ensures that the MRDAPprovisions and responsibilities are clearlyunderstood and assigned, while a perform-ance contract formalises provisions andcommitments with affected families andcommunities. These two legally bindingcontracts are found at the government anddeveloper level and the affected persons andcommunity level. Where governmentministries or departments act as the devel-oper, there may not be a need for a mastercontract, but their obligations in this regardshould be clearly stated in the MRDAP. Insuch cases, they will enter into agreementsdirectly with affected people throughperformance contracts.

At the government and developerlevel

The MRDAP should have legal status.Countries with resettlement and rehabilita-



tion acts or policies should make suitableamendments to ensure that contracts applyto all affected communities includingdownstream communities.

■ The master contract is concluded be-tween the developer (public corpora-tions, private, or joint) and the govern-ment. In the contract, the developeragrees to carry out all the actions set outin the MRDAP in a timely manner. Itspecifies government responsibilities forproviding support to acquire land, staff,schools and so on.

■ A private sector developer should sign aperformance bond supported by financialsecurity (Guideline 23).

■ Where the government undertakes toprovide other services (including landacquisition, road building and healthcare), the responsible line ministryenters into agreements with otherappropriate ministries to provide them.

The master contract:

■ specifies penalties, incentives, remedies,and other measures to facilitate compli-ance by the government and the devel-oper;

■ provides for the establishment of amitigation and development office forimplementation purposes. This is usuallystaffed by government officials drawnfrom various ministries supported by stafffrom the developer;

■ confirms the role of a multi-stakeholdercommittee as a subgroup designated by thestakeholder forum (including seniorgovernment officials, the developer, NGOsand affected peoples groups) to deal withgrievances and supervise the work of themitigation and development office;

■ empowers the mitigation and develop-ment office to monitor the implementa-tion of the MRDAP;

■ provides for continuous monitoring ofimplementation by an independent fieldmonitoring team, selected with theconsent of the affected people andreporting to the multi-stakeholdercommittee;

■ confirms the composition and role of apanel of experts for the implementationphase (Guideline 22), appointed by andreporting to the multi-stakeholdercommittee to assess whether the MR-DAP is being implemented correctly,rehabilitation objectives are beingachieved and project benefits are beingprovided to affected people; and

■ establishes a mechanism for disputeresolution – the multi-stakeholdercommittee is responsible for hearingdisputes and grievances related toexecution of the performance contractwhere the mitigation and developmentoffice has been unable to resolve issues.If the committee cannot resolve thedispute or grievance, the matter will bereferred to the appropriate judicial body.

At the community and affectedpersons level

Based on the provisions of the master con-tract, performance contracts are agreed withthe community and affected persons detailing:

■ compensation, resettlement, and devel-opment entitlements;

■ schedule and method of delivery;

■ institutional arrangements to deliver thecommitments;

■ obligations and responsibilities of theparties in the contract, namely affectedpeoples, community, government anddeveloper; and

■ recourse procedures.

The master and performance contracts haveto be agreed at the project feasibility stage

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and signed prior to tendering the construc-tion contract. The signing of the perform-ance contracts by the affected persons andcommunities signals their consent for

project implementation. The multi-stake-holder committee addresses all disputesrelated to performance contracts.

20. Project Benefit-SharingMechanisms

Adversely affected people are entitled toshare in project benefits. Beneficiaries andbenefits need to be identified and will formpart of the Mitigation, Resettlement andDevelopment Action Plan (see Guideline19). The nature of agreed benefits can takemany different forms.

Type of project benefits

Project Revenues-Related: A percentage shareof project revenues/royalties, the construc-tion budget and other profits. A jointenterprise with affected people having ashare of equity.

Project Benefit-Related: Provision of irrigatedland or an opportunity to purchase irrigatedland, access to irrigation water, provision ofelectricity supply, domestic water supplyfrom the project as appropriate. Right toreservoir fisheries, cultivation in the draw-down area of the reservoir, and contract tomanage recreational/water transport facilities.

Project Construction and Operation-Related:Employment in construction, plant opera-tion, and service sector of the project.Financial and training support for self-employment contract to provide goods andservices.

Resource-Related: Preferential access to, orcustodianship of, catchment resources fordefined exploitation and managementpurposes, catchment development such asplanting fruit trees or reforestation, access to

pumped irrigation from the reservoir, andbenefits from managed flows and floods.

Community Services-Related: Provision ofbetter and higher levels of service includinghealth, education, roads and public trans-port, and drainage; income support forvulnerable or needy households; agriculturalsupport services including preferentialplanting materials and other inputs; commu-nity forests and grazing areas; market andmeeting spaces.

Household-Related: Skills training andinterim family support; interest-free loansfor economic activities, housing improve-ments, provision of start-up livestock, accessto public works or work for wages, free orsubsidised labour-saving devices or productivemachinery, access to preferential electricityrates, tax rates, water and service charges.

Identification, assessment, anddelivery of benefits

Definition of Beneficiaries: Beneficiariesinclude all people in the reservoir, upstream,downstream, and in catchment areas whoseproperties, livelihoods, and non-materialresources are affected; and also those affect-ed by dam-related infrastructure such ascanals, transmission lines, resettlement, andother factors.

Identification of Beneficiaries: Baseline surveysmust establish the nature and extent of lossto livelihoods and enumerate all categoriesof adversely affected and displaced individuals,families, and communities. This will be donewith the participation of the affected people



Ensuring Compliance

and reflect a rights-and-risks approach (Guide-line 17).

Eligibility and Level of Benefits: All adverselyaffected people are entitled to benefits. Thelevel of benefits must be assessed, agreed uponby the parties involved (affected people,government, and developer/financier) andincluded in the performance contract.

Benefit Delivery and Redress Mechanisms: Themitigation and development office is responsi-ble for the delivery of benefits to the affectedpeople (Guideline 19). The multi-stakeholdercommittee will hear all representationsrelating to identification of beneficiaries,apportionment of benefits, performancecontracts, and delivery of benefits.

21. Compliance PlansThe preparation of an overarching Compli-ance Plan by the developer will addresstechnical, financial, social and environmen-tal obligations and commitments andprovide the means for the developer todescribe clearly how compliance will beensured for a particular project. The stake-holder forum will be able to monitor com-pliance against the plan, which will be apublicly available document.19

States are at different stages in the develop-ment of regulatory systems and institutionalcapacity. The range of tools selected toensure compliance for any particular projectwould vary from case to case. While varia-tions in systems and capacity will result inproject-specific Compliance Plans, the levelof compliance should be consistent.

In using Compliance Plans in connectionwith the construction of dams, a number ofissues will need to be addressed on a case-by-case basis, including the following:

■ The laws applicable to the construction ofdams. These will vary from country tocountry, and the Compliance Plan willneed to be consistent with local laws.

■ The use of voluntary measures. These willinclude tools such as comprehensivecompliance criteria and guidelines, ISOcertification, integrity pacts (see Guide-line 25) and the independent review ofinternal processes and commitments.

■ The level of in-country institutional capaci-ty. Where it is insufficient to meet therequirements of the plan, provision mustbe made for training and other technicalassistance, as required, to ensure suffi-cient capacity is put in place.

■ The use of performance bonds, supported byfinancial guarantees and trust funds. Theuse of one or both of these measures willbe needed to ensure sufficient funds havebeen set aside to secure performance.They will need to be developed andapplied in a manner that best suits theparticular circumstances (see Guideline23: Performance Bonds and Guideline 24:Trust Funds).

■ The cost of compliance. The cost ofcompliance will need to be built into theplan, the project budget and the evalua-tion process.

■ Performance indicators and benchmarksneed to be established against whichcompliance can be assessed.

Chapter 9


22. Independent ReviewPanels for Social andEnvironmental Matters

Independent review panels (IRP) should beestablished for all dam projects. They differfrom tribunals, commissions, judicial reviewsor other recourse mechanisms as theirprincipal task is reviewing assessment ofimpacts and the planning, design andimplementation of social and environmentalmitigation plans. In some countries theirrecommendations can be binding on allparties. In others they are only advisory. Thescope of the IRP powers is laid out in itsterms of reference. They report to theregulator, developer, consultants, affectedpeoples and financing agency to help ensurethe best possible social and environmentaloutcomes. The IRP is not a dispute resolu-tion mechanism, but may assist in bringingissues to the attention of the relevant bodyfor resolution.

IRPs offer independent assessments of theissues that should be dealt with in projectlevel impact assessments and project imple-mentation, while also providing a mecha-nism to transfer best practice from oneproject to another, both nationally andinternationally. IRPs further provide aquality control function to assure thedeveloper, regulator, financing agency andaffected groups that the necessary standardsare being met and that laws or guidelines arecomplied with, as laid out in the Compli-ance Plan. They usually perform functionsin the social and environmental domainsimilar to independent engineering inspec-tors for technical issues.

The composition and tasks of IRPs can beadapted to different stages of the projectcycle, although it will be useful to maintaincore members (normally one ecologist and

one social scientist) to ensure continuitythrough the different project phases. Plan-ning and appraisal may call for differentskills and composition to those needed formonitoring implementation of an environ-mental management plan or the resettle-ment and development programme.

In establishing an independent panel, Statesand financing agencies should consider thefollowing:

■ Project level IRPs should be establishedby the State (as developer or regulator orthe Ministry of Environment), in agree-ment with the stakeholder forum, assoon as the options assessment hasdecided on a dam as a possible option,and prior to project-level impact assess-ment beginning.

■ IRPs are funded by the State, the devel-oper or a financing agency according tolocal circumstances. The IRP forms anintegral part of project costs.

■ The primary reporting responsibility ofIRPs should be to the national govern-ment involved and more specifically theresponsible project agency and regulator.The IRP should include members able toeffectively address the major issues that areaddressed by state-of-the-art ecosystem,demographic, social and health assess-ments. They have the prerogative to addadditional members to deal with issues forwhich the IRP has insufficient expertise.

Panels should include at least one hostcountry national and at least one membersupported by any affected people. The IRP isindependent of all parties and its terms ofreference should allow the panel to lookinto any issues deemed important withoutthe need to justify such examination.

■ The developer ensures systematic infor-mation distribution to the IRP, which



has access to all project-related docu-mentation.

■ All reports following panel missions mustbecome public documents once thedeveloper or appropriate agency has hada reasonable time to comment (usuallyone month). Should the developer orother agencies request assistance on aconfidential basis then that is an issue forthem and the IRP to negotiate.

■ The developer has the obligation toshow how they are responding, or intendto respond, to the issues raised by theIRP.

■ Frequency of IRP visits to the projectarea should be flexible. In some phasesone per year may be sufficient, thoughonce construction starts, six monthlyintervals would be more appropriate.

23. Performance BondsPerformance bonds supported by financialguarantees provide a secure way of ensuringcompliance with commitments and obliga-tions (see Box 9.6). They are used by miningand environment protection agencies and inthe construction industry in many differentcountries. The bond is called upon, either inwhole or in part, to meet unfulfilled obliga-tions and commitments or is released whencommitments are met, either in whole or inpart, depending upon the circumstances.

Performance bonds have been used widelyin the construction industry to ensure thatwork is completed within the specified timeperiod and to specified standards (includingduring the construction of dams). They arealso used in relation to activities that carry ahigh risk to the environment; for exampleensuring that mine sites will be rehabilitated.

In applying the use of performance bonds tothe social and environmental mitigationmeasures related to the construction ofdams, a number of issues will need to beaddressed on a case-by-case basis, includingthe following:

■ The activities the bond will apply to. Thebond could apply to a wide range ofactivities, such as physical resettlementand provision of benefits, environmental

mitigation works, monitoring, auditingand decommissioning, or to aspects ofeach of these activities. Bonds should becarefully targeted to activities identifiedin an approved management plan and,preferably, should apply to the developerwho is ultimately responsible for theentire project. The developer may inturn enter into performance bonds withcontractors.

■ The form of security, including insurancecover, to be provided. A package ofmeasures can be used that collectivelyresults in providing sufficient financialassurance. The use of bank guarantees isa cost-efficient method of providingfinancial assurance, but there are manyothers, including insurance cover.

■ Who will hold the bond and hence determinewhether to release or use the security. Therelevant government agency (the envi-ronmental protection agency or minesdepartment) has been used in mostcountries where performance bonds havebeen used to date. However, a well-structured trust fund can also be used,particularly where the government is alsothe developer (Guideline 24).

■ The appropriate level of financial assurance.Considerations include the higher costto government to do the works, a contin-gency sum for high-risk activities,

Chapter 9


making provision for staged assurance,and providing a discount for qualitymanagement, good past practice, and/ora lower risk activity.

■ The stages of the development when thesecurity will be released. Partial releaseprovides a form of financial incentive tothe developer to discharge its responsi-bilities.

■ Regular review of the level of security toreflect the actual costs. A fall-back provi-sion is needed that allows the State toextract the difference from the developerwhere the level of security proves to beinsufficient.

The use of performance bonds supported by financial assurances hasnow been successfully applied in a number of different areas. Forexample, following a chemical waste management company becomingbankrupt and leaving the government with a potential liability todispose of abandoned waste, the Victorian Environment ProtectionAgency (EPA) required financial assurances from 38 companiesinvolved in the waste industry. The level of the financial assurance wasarrived at based upon the extent of the environmental risk – which hassince been reduced where improved environmental managementsystems have been put into place. While the EPA has not called on anyfinancial assurances to date, the programme has been successful inraising the performance of the industry overall and has protected thegovernment from financial risk. The programme is being extended tocover landfills and major petroleum product storage sites.

Source: Robinson, pers. comm. 2000

Box 9.6 Financial assurances and the Environment ProtectionAgency, Victoria, Australia

the project. This could include providing aneffective means for the collection anddistribution of royalties from dam-relatedactivities to fund ongoing initiatives.

The use of trust funds would be most appro-priate where the proponent is the State. Insuch cases, the concern is no longer one ofensuring that the risk is not passed from thedeveloper to the government, rather it isensuring that the risk is not passed from theState to the affected communities and tothe environment.

In using trust funds in connection with theconstruction of dams, a number of issues willneed to be addressed on a case-by-case basis,including the following:

■ The laws applicable to the establishment oftrust funds. These will vary from countryto country, and the trust deed will needto be consistent with local laws.

■ The content of the trust deed. This willneed to include an open and transparentprocess for appointing trustees andadministering the fund and for setting

24. Trust FundsTrust funds have been used over a longperiod of time, and in a wide variety ofsituations, to ensure that funds set aside fora particular purpose are used for that pur-pose (see Box 9.7). In recent years they havebeen applied to the establishment andongoing management of government-protected areas, through initiatives fundedby the Global Environment Facilityamongst others. There is scope to extendthese funds to other areas where there is aneed to set aside monies to be applied for aparticular purpose, such as benefit sharingand mitigation measures associated with theconstruction of dams. They could also beused for decentralising responsibility toaffected communities for planning andimplementing their own mitigation, devel-opment and resettlement programmes.

Trust funds could be effectively used, eitheralone or in conjunction with bonds, tosecure the financing of ongoing obligationsin relation to monitoring and auditing –activities that must continue for the life of



out the activities the funds will beapplied to, such as resettlement, environ-mental mitigation, monitoring andauditing. The deed must be publiclyavailable.

■ The trustees of the fund. The trustees willneed to be sufficiently independent fromthe developer and have the confidenceof stakeholders.

■ The role of affected people. Their role inmanaging trust funds in relation tomitigation, resettlement and develop-ment needs to be defined.

25. Integrity PactsIntegrity pacts relate to the procurementprocess, namely the supply of goods andservices. (See Box 9.8 and Chapter 8Strategic Priority 6: Ensuring Compliance)They are voluntary undertakings aimed atreducing corruption and founded on con-tractual rights and obligations. They can beused as one component of a CompliancePlan. Integrity pacts are of particular use insituations where regulatory systems andinstitutional capacity are weak, but theyhave universal application.20

Integrity pacts in various forms have nowbeen tried and tested in many countries.

In applying the use of integrity pacts to theconstruction of dams, a number of issues willneed to be addressed on a case-by-case basis,including the following:

■ The form and content of the pact. Theform and content of the pact mustcomply with accepted internationalmodels and past applications.

■ The level of in-country institutional capaci-ty. Where this is insufficient to meet therequirements of the integrity pact,provision must be made for training andother technical assistance, as required, toensure sufficient capacity is put intoplace. This should be covered in theCompliance Plan (Guideline 21).

In 1998, the Government of Suriname announced the creation of theCentral Suriname Nature Reserve, a protected area that covers 10% ofthe country. The ongoing maintenance of this protected area issecured through the Suriname Conservation Foundation Trust Fundannounced in April 2000, which will ultimately administer a $15-millionendowment. This sum will be invested in the fund through contribu-tions from numerous donors. The fund will be used for long-termmanagement support, ecological surveys, conservation awareness andeducation, and ecotourism as a conservation enterprise. The fund’strustees are drawn from government, sponsoring institutions, theprivate sector, and indigenous peoples.

Source: Famalore, pers. comm. 2000

Box 9.7 Suriname Central Nature Reserve

The Provincial Governor of Mendoza Province, Argentina decided in1997 to amend procurement rules to include an Integrity Agreementbetween the Government of the Province and companies interested inbidding for government contracts. Government commitments underthis agreement include providing full transparency in relationships withsuppliers, ensuring that employees will not accept or demand anybribes, informing the State Prosecutor of any violations, requiring a bidbond, excluding violators from future contracts, and having the StateProsecutor oversee implementation of the policy.

Source: Wiehen, 1999

Box 9.8 Mendoza Province, Argentina

Chapter 9


Sharing Rivers for Peace, Development, and Security

26. Procedures for SharedRivers

A basin-wide perspective is promoted foropen discussion of the issues, negotiation onsharing the benefits, and the mitigation ofany adverse impacts. The procedures forequitable and reasonable utilisation, nosignificant harm, prior notification, impactassessment, and dispute resolution will buildon provisions of the UN Convention on theLaw of the Non-Navigational Uses ofInternational Watercourses and otherinternational agreements. Such provisionsare also relevant to rivers within a countryshared between a number of sub-nationalentities.

Prior notification

States considering options that may have asignificant impact on other riparian Statesshould notify those States at various stagesand establish an effective channel of com-munication between all potentially affectedparties. Notification should occur:

■ at an early stage of planning, as part ofthe strategic impact assessment, andshould allow potentially affected riparianStates at least three months to identifyrelevant issues for inclusion in subse-quent preparatory studies and impactassessments;

■ during the scoping stage of impact assess-ments, to allow agreement on mechanismsfor sharing technical data and information,and for participation in project-relatedimpact assessments – potentially affectedriparian States should respond within threemonths of the notification;

■ prior to selecting an option on a sharedriver as part of a preferred developmentplan – potentially affected riparian states

should receive adequate technical informa-tion about the proposed project and theresults of any impact assessments, andshould respond in writing within sixmonths of the notification with theirfindings and response to the proposedproject; and

■ as required to cover any additional dataand information that is available andnecessary for an accurate evaluation byany potentially affected riparian States.

In the event that properly notified riparianStates do not respond in a reasonable andtimely manner, the notifying State wouldproceed with planning and development,subject to its observance of the relevantinternational law principles and the Commis-sion’s strategic priorities and policy principles.

In the event that a State fails to notifyanother riparian State which could poten-tially suffer significant harm by the proposedaction, the potentially affected State shouldbe able to request and receive information,make their views known, including propos-ing modifications, and be part of a negotiat-ed settlement before any action to constructthe dam is taken. If this opportunity isdenied, remedies should be available throughthe International Court of Justice (ICJ), orother appropriate mechanisms. Any externalfinancing for the dam should be conditionalupon resolution of the issue as described inChapter 8 (see policy principle 7.5).

Basin-wide impact assessment

The Commission’s Guidelines on StrategicImpact Assessment and Project-Level ImpactAssessment, taken together with prevailingregulatory requirements, provide the frame-work for a basin-wide assessment of impacts.



Impact assessments designed to suit context-specific situations need to:

■ include a participatory basin-widescoping phase;

■ take into consideration the submissionsof riparian states and affected communi-ties; and

■ be subjected to review by an independ-ent panel agreed upon by all potentiallyaffected riparian states.

All states should give the independent panelaccess to all necessary information.

Dispute resolution

In the event a dispute cannot be resolvedwithin six months, either through good faithnegotiations or independent dispute resolu-tion, it should be referred to a fact-findingcommission as detailed in Article 33 of theUN Convention on the Law of the Non-Navigational Uses of International Water-courses. Failing resolution through thisbody, the dispute should be heard by the ICJeither through case specific agreement orthrough compulsory jurisdiction in Article36 of its statute.

Endnotes

1 WCD Thematic Review I.2 Indigenous People.

2 WCD Thematic Review V.2 Environmentaland Social Assessment; WHO, 1999, WCDWorking Paper on Human Health; Brandtand Hassan, 2000, WCD Working Paper onCultural Heritage Management.

3 WCD Thematic Review V.2 Environmentaland Social Assessment; WHO, op cit; Brandtand Hassan, op cit.

4 WCD Thematic Review V.1 Planning.

5 Ibid.

6 WCD Thematic Review II.2 Global Change.

7 WCD Thematic Review III.1 EconomicAnalysis, Chapter 9.

8 WCD Thematic Review III.1 EconomicAnalysis, Chapter 4.

9 WCD Thematic Review III.1 EconomicAnalysis, Chapters 2, 6, 7, 8.

10 WCD Thematic Review IV.5 Operations.

11 Brown and King, 1999; Brown et al, 1999,Contributing paper for WCD ThematicReview II.1 Ecosystems.

12 WCD Thematic Review II.1 Ecosystems.

13 Brown and King, op cit; Brown et al, 1999,Contributing paper for WCD ThematicReview II.1 Ecosystems.

14 Bernacsek, 2000, Contributing paper forWCD Thematic Review II.1 Ecosystems.

15 WCD Thematic Review V.2 Environmentaland Social Assessment.

16 WCD Thematic Review I.3 Displacement;Cernea, 2000.

17 Scudder, 1997c.

18 WCD Thematic Review I.3 Displacement.

19 WCD Thematic Review V.4 Regulation.

20 Ibid; Wiehen, 1999.

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