Case Presentation: Law for Benefit sharing on hydropower projects in Viet Nam - & - Linking national benefit sharing to Transboundary benefit sharing

Transcription

1 Case Presentation: Law for Benefit sharing on hydropower projects in Viet Nam - & - Linking national benefit sharing to Transboundary benefit sharing Transboundary Cooperation Workshop Vientiane January 2010 Presentation by Lawrence J.M. Haas MRCS Consultant Initiative on Sustainable Hydropower (ISH)

2 General Aspects Different levels of benefit sharing i. Transboundary Context (among States) ii. National to provincial /or state; iii. National to local community Variety of types and mechanisms: i. types benefit sharing (resource use allocations, monetary revenue sharing, non-monetary) ii. financing and delivery mechanisms

3 Mekong context for transboundary benefit sharing The 1995 Mekong Agreement of the 4 Member States Focus on mutually beneficial water and related resource development and utilization reasonable and equitable utilization Spirit of cooperation, joint planning and information sharing Based on rights, interests and responsibilities of riparian states for water utilization

4 Dams on the mainstream Mekong Upper Mekong 8 existing or planned Lower Mekong 12 proposed Also different groups that have similar characteristics Dams on Mekong Tributaries Existing and planned 94 (only hydro dams does not include irrigation dams 4 ICEM and MRC - SEA of hydropower on mainstream Mekong River

5 Benefit sharing on hydropower dams in developing countries: National to basin and local communities Brazil - Constitution (1988) taxes water use to generate electricity. 45% of income from the water-use tax goes to municipalities losing land; 45 % to the provincial authorities; and 10% to finance power sector regulatory functions. Columbia - legislation stipulates 3% of hydropower revenue transferred annually to watershed agency to fund watershed management with the basin communities (income raising). China 2007 Permanent Reservoir Area Reconstruction and Development Funds plus 20-year PAP compensation paid by project revenue. Nepal 1% of project revenue paid into development budget of affected vilages via the regulatory agency (representing up to 80% of budget).

6 Examples of use of Revenue Sharing Funds: Developing countries Grants for measures preferred by beneficiaries made through different funding windows: e.g. Local development initiatives (CDD approaches), like: Village scale infrastructure Agriculture extension services Skills and local entrepreneur development Rural credit programmes (revolving funds) Local expenditures on health services, Communications, rural roads etc. Youth programmes etc. Bottom up local development Income raising actions for environment and water resource protection, like: Catchment management measures e.g. headwater forests; adopting soil conservation and erosion control measures Improving local capacity for managing ecosystem services Payments for ecosystem services

7 Use of Funds: OECD Examples Delivery of benefits program at the basin level The Columbia Basin Delivery of Trust Benefits in British Programme Columbia, Canada in the Columbia Basin in Canada Mature basin-level benefit sharing mechanism Canada - USA Provincial Columbia Basin Trust Act in 1995 Community Equity Share in Projects Community Elected board

8 Simple categorization of a few country examples - Benefit sharing in water resources and hydropower / power sector National To Local Benefit Sharing Mechanism Yes No Vietnam - pilot China Nepal Thailand Norway Argentina Many Countries No explicit policy - May have some elements Canada Columbia Basin Brazil Nile Initiative? Mekong? Zambesi? No Partly Yes Transboundary Benefit Sharing Mechanisms

9 What forms of National-Local Benefit sharing exist in the Mekong Via - Power sector and sustainable hydropower lens Thailand - EGAT has introduced a community development fund for benefit sharing with local communities (revenue sharing) for all power projects. Vietnam - New electricity regulatory authority (ERAV) finalizing a Decree on benefit sharing on hydropower projects. Encompasses three forms of benefit sharing on new and existing projects (i) equitable access to electricity services (iii) equitable natural resource access, and (iii) revenue sharing. Lao PDR and Cambodia - express interest in benefit sharing for hydropower. MRCS is providing technical advice through the Initiative on Sustainable Hydropower. China - introduced benefit sharing will local communities on hydropower projects in form of long-term reservoir community development funds financed from power revenue and extending PAP compensation to 20 years.

10 General Aspects - Conclusion Comprehensive approach to transboundary benefit sharing - needs benefit sharing at all levels Why? Mutually reinforcing Met all stakeholder expectations Consistent with sustainable infrastructure provision user pay principle in IWRM Local Basin Transboundary WCD Strategic Priorities (5) Recognizing entitlements and sharing benefits (7) Sharing rivers for peace, development and security Benefit sharing is a wider concept than sharing water allocations - need to be integrated with overall cross-boarder trade.

11 Vietnam Example National to Local benefit sharing Benefit Sharing Mechanisms for People Adversely Affected by Power Generation Projects in Viet Nam Electricity Regulatory Authority of Vietnam (ERAV) ADB TA-4689 (VIE) Benefit sharing with host communities on hydropower projects New and existing projects Electricity & resource entitlement access and revenue sharing Third National Consultation Workshop Work Plan for the BSM Pilot Test On A VuongA And completion of the TA FRIDAY 9 Nov Revenue sharing component Community development Funds / Fund Charter Grant application bottom up Start in 2011 $US20 million / yr at 2% gross revenue > expanding

12 Gia-Thu Bon basin In Central Highlands Figure 5: Location of hydropower projects in the Vu Gia-Thu Bon basin A Vuong Project 210 MW as Pilot

13 VN Policy review highlights 1. Principles already recognized in legislation / policies in power, water, forestry, and environment sectors. 2. Three generic forms in existing laws: Equitably sharing of electricity access & services Entitlements for enhancing resources access Revenue sharing 3. Introducing BSM complements key social policies (including Constitutional provisions): 4. Enhances comparative advantage of hydropower (via risk reduction for all stakeholders)

14 Number of Different stakeholder views had to be resolved Difference between compensation and resettlement? Who is eligible? Types of benefit sharing? Remittance Mechanism for revenue sharing and %? Profit sharing versus revenue sharing? Funds at Provincial / basin or project level? Linkage to water resource protection / environment funds? Applies to new and existing project? Transparency and social accountability?

15 Compensation vs Benefit sharing on Hydropower projects Construction Phase Compensation For land / property + resettlement support for displaced people Operation Phase Benefit Sharing with all adversely affected groups + communities hosting the project Short-term Project Commissioning Long-term Covered by Decree Any future revisions Covered by a new Decree for benefit sharing Financed by Project Capital Budget Financed by Share of Project Revenue (I.e. from tariff)

16 Who is adversely affected? Who is eligible? In VN 2. All communes bordering reservoir 1. Affected Commune(s) bordering on upstream river. EIA to confirm which communes on the basis of degree of resource access affected and contribution to catchment management of benefit to hydropower generation. Dam Reservoir reservoir Past Focus 3. Relocated people and Resettlement Community all Commune(s) involved as defined in RAP Powerhouse 5. Affected communes bordering river downstream of powerhouse 4. Every commune bordering dam, river diversion section, and powerhouse. how far downstream (i.e. cut-off) determined by EIA on basis of degree of resource access affected.

17 What Remittance Mechanism? Power Sector Arrangement MOIT ERAV Regulates Generation Entities Rules ~ Market Operator (All settlements) Central Reserve Fund (ERAV) ERAV (5-10 yr)? Start-up Buffer Support rollout QN basin Training ctr.? Spot Market Single Buyer Aspects - ERAV/MOIT sets Rules + Regulates - Revenue Sharing reflected in tariff - Revenue neutral for hydropower entities - Maintains competitive market for hydro Project-Specific Revenue Sharing Funds Provincial Jurisdiction 59 Provinces

18 C5 Plant Factor Tariff- is there room for revenue sharing? Competitive Threshold $/kw Present Room $US cents / KWh % average tariff Economic Rent Needed to Cover Revenue sharing + water resource fee + 2% environment protection fee? 50% 2, % 55% 2, % 60% 2, % 65% 2, % 70% 2, % 75% 2, % 80% 2, % 85% 2, % 90% 2, % Calculated with av. cost of marginal generator Without emission cost on thermal 10% Discoint Rate Average tarrif 890 VND Planned Room Increasing VN moving to international fuel price levels (gas & coal) Upward pressure on international energy prices Plus adding Thermal emission externalities Hydro ancillary benefits

19 Power Market Reform Opportunity 3 Stages of Regulatory Reform: Phase 1 ( ) Phase 2 ( ) Phase 3 (from 2022) competitive generation market in stages competitive wholesale market in stages Competitive retail power market Timeline to integrate Benefit Sharing with reform Guidelines / Draft Decree Pilot Test Decree Provisions Finalize legislation In effect Coincide with competitive generation market rules to be introduced in 2010

20 Chapters IN VN Decree Law Chapter 1: General Provisions Chapter 2: Objectives and Principles of Benefit Sharing Chapter 3: Equitable sharing of electricity access and services Chapter 4: Entitlements to restore and enhance natural resource access and livelihood opportunity Chapter 5: Revenue sharing Chapter 6: Procedures to introduce benefit-sharing at different stages of hydropower planning and management Chapter 7: General Implementation Provisions

21 Links national benefits to local benefits Chapter 1: General Provisions Article 1: Scope of the regulation This Decree provides for equitable sharing of benefits arising from sustainable development of the nation s renewable energy hydropower resources. The Decree establishes a long-term revenue sharing arrangement between the main consumers of electricity services in towns, cities and industry and the local communities hosting hydropower projects who are adversely affected by the project in their locality.

22 VN Decree Articles - Illustration Chapter 2 Articles: Chapter 1 Articles: Article 1: Article 2: Article 3: Article 4: Article 5: Article 6: Scope of regulation Subject of application Definition of key terms Objectives of benefit sharing General principles of benefit sharing Forms of benefit sharing encouraged on hydropower projects Article 7: Steps to factor benefit sharing into all stages of the project cycle Article 8: Procedures to adopt during strategic planning stages Article 9: Procedures to adopt during project planning and feasibility stages Article 10: Procedures to adopt during detailed project design and implementation stages Article 11: Procedures to adopt on existing hydropower projects Article 12: Fundamentals of arrangements for benefit sharing during operation phases Article 13: The role of river basin organizations in benefit sharing Chapter 3 Articles: Article 14: Costs for electrification of resettlement communities in project capital budgets Article 15: Targeting communities living in the project impact zone with rural electrification funds Article 16: Off-grid supply in areas uneconomical to connect to the grid Article 17: Additional measures to enhance electricity access for the poorest households Article 18: Organization for implementation of equitable electricity access at state and provincial levels Chapter 4 Articles: Article 19: Types of measures for enhancing resource access and livelihood opportunity Article 20: Procedures to identify local preferences for additional entitlements Article 21: Provincial level support to granting entitlements to enhance resource access and livelihood opportunity

23 Operating Project Revenue Sharing Funds Existing + New Remittances from power sector Provincial Peoples Committee Project Revenue sharing Fund Benefit Sharing Council (Charter) Fund Administration Coordination Appoints / Controls Council Rules - Some prescribed in Decree - Some for Council to set with PPC approval - other Funds - other Provinces - PMBs, etc Delivery mechanisms and measures preferred by beneficiaries e.g. - Allocation to different groups in the project impact area set in Charter - Allocation to different grant categories set annually by the Council - Grant application based system (Article 29) - Mechanism and roles in delivery of measures in Grants

24 Multi-year Roll-out of VN Benefit Sharing with Capacity Building Pilot Project Budget Project Objectives Stage 1 $300 k Field test & modify guidelines mnth Funded Stage 2 $.7 to $1.0 m Provide Capacity Building tools To scale-up nationally in a consistent way 2-3 yr Proposal Other Strategic Partner Contributions Enhance A Vuong social & environmental + sustainability From Start

25 Concluding Points Benefit sharing is key element in cooperation to achieve sustainable water development 1995 Mekong Agreement is a basis for transboundary benefit sharing make it explicit Comprehensive approach to transboundary benefit sharing needs national-local benefit sharing as a complement = strategies and entry points for benefit sharing at local, national and transboundary levels Concept is wider that water sharing Transboundary initiatives can build on the national initiative on BSM in the 4 riparian countries Only can be done through multi-stakeholder partnership approaches (public, private and civil society)

26 Opportunity Space For Transboundary Benefit Sharing Interpretation of Mekong Agreement? Coordination? Sharing carbon-financing revenue? Joint Study? Experience sharing on national-local Technical exchange on Themes? Other? Preparing Case Studies?

27 Thank you

28 Additional Slides

29 National Regulatory Systems Most mainstream proposals are here in the regulatory system MOUs / LOAs feasibility study and EIAs /SIAs Example of Lao PDR For tributary & Mainstream dams