Discussion Paper

Benefit-sharing in dam projects on shared rivers

Hensengerth, Oliver / Ines Dombrowsky / Waltina Scheumann
Discussion Paper (6/2012)

Bonn: German Development Institute / Deutsches Institut für Entwicklungspolitik (DIE)

ISBN: 978-3-88985-549-7
Price: 6 €

In recent years, the concept of benefit-sharing has been proposed as a means of fostering the cooperative use of international rivers. Most of the relevant literature focuses on opportunities for the generation of net benefits from cooperation; however, little attention has so far been paid to specific mechanisms for benefit-sharing applied to the specific case of dams on international rivers. This study therefore fills this gap and asks both what incentives can be offered to encourage benefit-sharing and what benefit-sharing mechanisms can be identified. As a first step, it develops a conceptual framework for benefit-sharing in dam projects. The second step is to test this framework at existing dams on the Rivers Senegal, Columbia, Orange-Senqu, Nile and Zambezi and to explore the benefit-sharing mechanisms used by undertaking an extensive review of the literature. As its third step it analyses factors that influence benefit-sharing on the basis of a review of the literature and the insights gained from the cases analysed.

The paper finds that the opportunities for deriving benefits from cooperation depend on the alignment of hydrological and political boundaries and the location of the dam in relation to them (hydro-political constellations) and on the aims and external effects of the individual dam. Incentives to cooperate on dams on shared rivers exist if: (i) cooperation will enable economic or financial limits to unilateral action to be overcome (Senegal); (ii) altering the design of a dam upstream will increase aggregate net benefits (Columbia); (iii) locating a dam upstream will increase aggregate net benefits (Orange-Senqu); (iv) compensating for negative externalities upstream will preclude conflict (Nile); and (v) a joint dam on a border river will produce mutual benefits (Zambezi). The case studies show that various benefit-sharing mechanisms are possible: (A) costs are shared in relation to benefits where dams are jointly owned (Senegal, Zambezi); (B) the party altering its unilateral dam design is compensated for any losses it incurs as a result of this alteration and net benefits of cooperation are shared (Columbia); and (C) the downstream state convinces the upstream state to build a dam, covers the cost and shares the net benefits derived from the dam (Orange-Senqu). The study further shows how political and institutional factors and the process influence the likelihood of the benefits of dams on shared rivers being shared. It also indicates that the neglect of negative environmental and social concern may lead to conflict and lengthy renegotiations at a later stage. These initial findings may provide guidance for riparian states engaged in and donors facilitating negotiations on dam projects on international rivers. From a scientific point of view, the typology developed should be tested further in additional case studies.