New legislation instructing U.S. government officials to reject the construction of large dams financed through international financial institutions is being celebrated by environmental activists who say such dams cause severe damage to aquatic and riparian life, negatively impact human settlements, and release large amounts of greenhouse gases.

The new policy took effect Jan. 17, when President Barack Obama signed the 2014 Consolidated Appropriations Act, which funds discretionary government spending. A provision of the act states that “it is the policy of the United States to oppose any loan, grant, strategy or policy” for construction of large hydroelectric dams, defined as 15 meters high or taller.

The act also requires U.S. directors of the World Bank and Inter-American Development Bank (IADB) to report on implementation of a 2010 reparations plan for inhabitants of Guatemala’s Chixoy river basin. Some 3,500 residents of the basin were forced from their homes when the Chixoy Dam was built there in the early 1980s. More than 400 indigenous Maya Achi who resisted resettlement were allegedly kidnapped, tortured and killed by government and paramilitary forces. The IDB and World Bank had provided financing for the dam.

Sending signal

“This law creates a strong precedent that reparations must be made if harm is caused by a hydroelectric project, as happened in Guatemala,” says Brent Millikan, Brazil-based representative of International Rivers, an environmental and human rights group. “It also establishes that there are much better solutions for meeting energy needs than large dams.”

The legislation comes as the U.S. government is trying to burnish its credentials as a promoter of clean energy sources such as solar and wind power. Many environmentalists do not consider large hydroelectric plants clean-energy sources because they produce methane, a potent greenhouse gas generated when vegetation covered by reservoirs decomposes.

Nonetheless, it may be too early to determine the impact of the legislation on dam construction worldwide, experts say. Virtually all of the more than 20 large hydroelectric dams currently slated for construction in the Brazilian Amazon are being funded by the Brazilian government. Brazil also is funding dam projects on the Marañón River in the Peruvian Amazon, and China has become a key player in the financing and construction of dams in Ecuador and other Latin American countries.

The new U.S. policy cannot block those projects, but it does force U.S. officials to oppose multilateral-bank financing for large dams such as Amaila Falls, the 200-foot-high, 165-megawatt dam currently being planned for Guyana’s Amazon region. While the United States does not command a majority vote at the World Bank or IADB, it has more votes than any other country in the two institutions.

“This legislation will hopefully force institutions like the World Bank and IADB to impose standards that ensure human rights, the prior consent of affected communities and environmental sustainability are taken seriously when dam projects are planned and executed,” Milliken says. “That might, in turn, affect the standards of regional institutions, like the Brazilian National Development Bank (BNDES). The legislation also could help support a shift away from large dams toward truly sustainable energy solutions, like smart grids and decentralized solar.”

Controversial dam

The most immediate impact of the new act will be on the victims of the 275-megawatt Chixoy Dam. That dam, intended to provide some 60% of Guatemala’s electricity and an impetus for exploitation of mineral and oil reserves, was completed in 1982 in the central department of Baja Verapaz. It led to both horrific violence and severe environmental damage, including flooding, erosion, loss of soil fertility and the destruction of fisheries, according to a 2009 report by representatives of the Guatemalan government, affected communities and the Organization of American States.

Those issues were supposed to be resolved when victims agreed in 2010 with the Guatemalan government to a package of reparations that called for US$154.5 million in indemnities for affected communities. The package included land and housing for the displaced, as well as reforestation and other measures to guarantee adequate quantity and quality of water supplies in the Chixoy basin. The Guatemalan government has refused until now to pass a law that would put the reparations plan into effect. But international development experts say that the new legislation encourages the Guatemalan government to stop stalling, as U.S. support for Guatemalan projects in multilateral institutions could be affected in the future.

“We are very happy with this law because it will pressure the Guatemalan government to follow through on a plan that will affect 50,000 people in the Chixoy basin,” says Carlos Chen, legal representative of the nonprofit Association for the Integral Development of the Victims of the Violence in the Verapaces, Maya Achi (Adivima).