Investment |
Protecting hydropower: The role of cloud forests and bonds
Hydropower’s dependence on cloud forests, and the role they play in freshwater provision across 25 countries, has raised concerns about increasing vulnerability to deforestation and climate change. To help address this, a recent report has proposed mobilising cloud forest protection payments for hydropower projects and other users that benefit from such unprotected forests.
Above: Cloud Forest in Peru
Below left: Rainy day in tropical forests of Thailand – one of the 25 countries in the proposed Cloud Forest 25 Investment Initiative
Below right: Where cloud forests have been lost, drought risks have increased. Deforestation in Brazil
“MY INTEREST IN CLOUD forests was sparked many years ago in Costa Rica, where I learned that by capturing fog from the clouds, these misty mountain ecosystems were increasing the amount of water flowing downstream,” says Alejandro Litovsky, Founder and CEO of Earth Security, a global specialist in climate and nature-based asset solutions. “It struck me,” he continues, “that this function was so formidable, yet so little known, and that finding a way to finance the value of this water, which is used by hydropower dams, cities and farms, could, in addition to the carbon stored in these forests, provide a key to financing their protection.” A type of tropical high-altitude rainforest, cloud
forests are enshrouded in mist and situated on top of mountains, where they capture moisture from the air to provide fresh and clean water to the people and industries down below. In addition, they also offer the benefits of carbon capture and sequestration. Most of the world’s cloud forests are concentrated
in 25 tropical developing countries and are currently unprotected areas. However, as a recent report by Earth Security suggests, they should be protected,
“just as countries protect any other vital infrastructure”. In the face of growing economic challenges, especially when many of these countries are in debt distress or at risk of it, there is also concern that they will not only find it difficult to protect their forests but, without adequate finance, cannot be expected to fund and meet their own climate and nature commitments. As the Earth Security report, called Cloud Forest Assets: Financing a Valuable Nature-based Solution, estimates, the value of these forests in terms of the carbon and water services provided to existing hydropower plants amounts to a combined US$327 billion for the 25 countries over ten years. As the report authors state: “New systems need to be designed for countries to monetise the value of keeping their cloud forests standing.”
Hydro concerns The reason why this should be of interest to the
hydropower industry lies in the fact that of the 979 hydropower dams operating in these countries, more than half are depending on water from cloud forests. In addition, with more than 1000 other hydropower projects in some stage of planning or investment in the 25 countries, just over two-thirds of these will also rely on water from cloud forests. “We estimate that the total value of hydroelectricity that currently depends on cloud-affected forests across these 25 countries is close to US$118 billion over ten years,” the report says. “This increases to US$246 billion when hydropower plants currently being planned in these countries come online.” And as Litovsky adds: “This represents billions
of dollars of electricity production taking nature’s ecosystem services for granted.”
30 | February 2024 |
www.waterpowermagazine.com
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