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As the storm surrounding HFC credits rumbles on questions are starting to be asked about other offset credit types. In a short report entitled ‘[Hydro CERs and the EU ETS 2009](/site_media/pdfs/reports/Hydro_CERs_and_EU_ETS.pdf “”)’ Sandbag takes a brief look at another credit type and one which is already subject to additional quality criteria, Hydro CERs.

Article 11b paragraph 6 of the EU ETS directive sets out that Member States shall ensure hydroelectric power production exceeding 20MW adhere to relevant international criteria and guidelines approved, including those contained in the November 2000 World Commission on [Dams report](http://www.dams.org/report/ “”).

Based on this additional requirement Sandbag has made the distinction between credits from ‘large’ and ‘small’ hydroelectric power projects. In 2009 a total of 78.3 million CERs were surrendered for compliance in the EU ETS, 3% of that total came from hydroelectric projects (2% large and 1% small). This equates to 2.3 million (1.6m large and 0.8m small) hydro CERs being used for compliance in the EU ETS. This report pinpoints which EU Member States are surrendering the most, from which host countries they originate from and a more detailed look at the CERs from the lone [Gold Standard](http://www.cdmgoldstandard.org/ “”) project present.

The debate about the quality of offset credits that can be used in the ETS is already underway with the European Commission expected to publish recommendations for introducing more stringent quality criteria well before the start of the next trading period in 2013. These will apply to offset usage in the ETS only. Separate policy decisions would need to be reached to limit credits used by EU countries for their Kyoto compliance.

Two issues are central to this debate – whether the credits represent good value for money for the EU and whether the emissions reductions credited are genuine, additional and contributing to meaningful sustainable development in the host country. Some hydro projects can prove problematic in that in many countries they represent Business As Usual development patterns. In some cases they can also lead to very negative social and environmental impacts. Once built, however, they can also provide countries with a long lasting renewable source of reliable and low cost energy, with many advantages over alternative, fossil based development options.

It seems likely that in the future criteria based on size alone will not prove effective at distinguishing between ‘good’ and ‘bad’ hydro projects and the EU will need to develop its own comprehensive assessment criteria.