Focus on Arts and Ecology

May 10, 2024 

An elderly Sichuan man called Mr Xue has been threatened with a large fine for burning stalks on his field.

Straw burning has long been controversial and is banned in China. It helps farmers but causes air pollution and carries a fine of CNY 500-2,000 (USD 69-276) in accordance with the national air pollution law.

Mr Xue ignited the stalks on 2 May so that he could plant corn the next day. The Songlin village authority said he would be fined the maximum amount, but in fact has no law-enforcement power. The town government then sent Mr Xue a notice requiring him to pay the minimum fine, and hoping to have a “deterrent effect” on other villagers.

The air pollution caused by straw burning can cause smog and harm health. In 1999, it was banned in some parts of China and in 2008 that ban was extended nationwide. The prohibition has always been controversial. Burning can remove crop pathogens, insect eggs and weed seeds, thereby reducing pests, diseases and the need for pesticides. Moreover, handling straw is a big burden for aged villagers whose younger family members may have migrated to the cities. Every year, villagers across the country take the risk and burn their fields anyway.

In recent years, some commentators have called for the government to reassess the ban, saying policies need to “strike a balance between benefiting agriculture and reducing environmental pollution.”

At this year’s Two Sessions, several representatives of the National People’s Congress proposed to “gradually relax the ban on straw burning”, China Reform Daily reported. Some provinces like Zhejiang, Guangxi and Hunan have also begun to study the pros and cons of the policy, and even allow villagers to burn straw in some areas under appropriate weather conditions.

(Sources: Dialogue Earth)

EV owners could profit from two-way charging, but many are wary, and the tech is currently expensive. 

By Niu Yuhan, May 9, 2024

In January, China’s biggest trial of two-way charging took place in Wuxi, Jiangsu. Across 30 minutes, 50 electric vehicles (EVs) discharged almost one megawatt-hour into the grid – enough electricity to meet the needs of 133 households for a day.

Such charging (also known as V2G, vehicle-to-grid) has the potential to contribute to the smoothing out of peaks and troughs in grid electricity demand.

By the end of 2023, China had over 20.41 million “new energy” vehicles on the road, the vast majority of which require electricity. This change is precipitating increasingly large spikes in energy demand, which strain the grid. There is therefore an urgent need for technological and pricing mechanisms that encourage owners to avoid charging at peak times.

As EVs’ share of the auto market expands, the batteries they carry may in fact be able to help meet peak electricity demand and absorb off-peak excess generation. This will become increasingly important as solar and wind power expands, because these energy flows are more difficult to adjust than, say, coal power. The combined battery capacity of all EVs sold in China during 2023 was 388 gigawatt-hours (gWh). In January, the Tsinghua University professor Ouyang Gaoming said the capacity of all EVs on the road in China is expected to exceed 20,000 gWh by 2040. That is equivalent to the current annual electricity demand in China. In the future, the V2G model will play a major role in short-term energy storage, Ouyang added.

EVs could make the grid more efficient and resilient, according to Plug In America. The thinktank has estimated that this extra efficiency and resilience could equate to benefits for the electricity grid of USD 1,867 per EV, based on 154,000 kilometres of driving across eight years.

A document on EV and grid integration issued in January by government bodies says EVs could support the operation of a modern electricity system: linking EVs to China’s grid, via charging and battery-swapping infrastructure, could enable them to help with load management and energy storage.

V2G trials have taken place in several other Chinese locations besides Wuxi. However, there are obstacles on the road to a widespread rollout: in short, EV owners are not keen and the infrastructure is expensive.

Managing demand

Two-way, also known as bidirectional, charging sounds like a win for both EV owners and grid managers: the average EV battery capacity is 70-80 kilowatt-hours (kWh), according to China Electric Power News; returning 20 kWh of this to the grid would net a driver CNY 16, based on a peak/off-peak price difference of CNY 0.8 per kWh; if an EV driver did that 100 times in a year, they would earn CNY 1,600 (USD 220).

Such earnings might not be tempting enough to encourage participation, however. Dialogue Earth consulted Zheng Ying, a special researcher for the China Carbon Neutrality Forum: “I’ve asked a number of taxi drivers if they’d be willing to take part in this demand-response mechanism and found the main factor for them is the price gap. Earning a few mao [1 mao = CNY 0.10] per kWh isn’t enough motivation for them to take part.”

The amount EV owners earn is determined by the size of their batteries and the difference between local peak and off-peak electricity prices. The peak/off-peak price gap has been widening in recent years. By the end of 2023, it stood at over CNY 0.70 per kWh in 23 provincial-level administrations, reaching CNY 1.69 in Shanghai. “The gap is biggest in cities on the eastern coast, so owners there are more motivated to take part,” explains Zheng.

Unfortunately, due to trading-power difficulties between provinces, China’s east still relies on fossil fuels for much of its electricity generation. Most EV owners live far from where renewable energy is generated, in the west. According to Zheng, “more time and research are needed to find if demand response helps reduce carbon emissions when renewable energy isn’t available.” She says EVs would need to discharge power during the evening peak (approximately 5-10pm) to play a useful role in demand management. Owners could then charge their vehicles overnight for morning journeys. But, as Zheng points out, solar cells don’t generate electricity overnight. Such habits could therefore result in fossil-fuelled power being activated.

“Ideally”, adds Zheng, “owners would keep enough electricity in their EVs for their morning commute and then charge up through the day, when there’s plenty of sunshine for solar power.”

A 2022 Stanford University study into the situation in the US came to a similar conclusion. One of its authors, Ram Rajagopal, told the Washington Post that after 11pm there is little renewable energy available to EV owners. If owners delay charging until this time, it could therefore lead to increased carbon emissions or the need for more grid storage capacity. One of the paper’s proposed solutions is the encouragement of daytime EV charging, using work-based or public charging facilities.

Plug in America’s policy director Ingrid Malmgren tells Dialogue Earth that school buses are particularly suited to the V2G model. They have large batteries and the US has thousands of them, all typically sitting idle in the middle of the day when solar power generation is most likely to exceed demand.

Owner anxiety

A 2023 survey of Chinese EV owners detected a common concern that bidirectional charging accelerates battery degradation. Currently, researchers are not in agreement on whether this concern is correct.

Generally, an EV battery is no longer considered fit for purpose when its capacity has degraded by 20%. In 2017, a University of Hawaii study concluded that two-way charging degrades lithium-ion batteries. The research was conducted by charging and then using batteries twice a day. Some batteries were discharged via V2G, while a control group of EV batteries were used as normal. It was found that V2G accelerated battery capacity loss by 75% after five years.

During the same year however, researchers at the University of Warwick said V2G can extend EV battery lifespan – under the right circumstances. The study found that if somewhere between 21% and 38% of an EV battery’s charge is used every day, alongside a discharge of between 8% and 40%, the battery’s “capacity fade” was actually cut by 6% across three months.

Examples from real life may be more persuasive. During a 2019-2022 trial in New York state, three all-electric school buses drove their usual routes and discharged to the grid in-between. The study discovered these discharges degraded the batteries the same amount as driving. It was therefore concluded that it may be necessary to extend warranties or replace batteries earlier if bidirectional charging was adopted.

So far, there has not been much research on the impact of two-way charging on EV battery lifespan in China. Earlier this year, Li Jianbo, the vice-president of the Chinese EV-charging infrastructure firm Teld, said EV owners go through about 50 charging cycles (empty to fully charged) per year. Or, 500 cycles during a vehicle’s average 10-year lifespan. But the battery will last much longer than the vehicle: around 2,000 charging cycles, according to conservative estimates. This suggests more than 1,000 charging cycles could be used for V2G provision.

Even on Li Jianbo’s figures, V2G use will usually have only a limited impact on battery lifespan. However, consumers worry manufacturer warranties will not allow for bidirectional charging. Gong Huiming, the senior director of Energy Foundation China’s transportation programme, underlined this issue while speaking to Southern Finance in 2023: “We’ve only seen widespread use of EVs for coming up to a decade. More time is needed to consider battery reliability. Once the vehicle realises V2G functionality, will its battery warranty terms remain the same?”

In 2022, Nissan became one of the first companies to allow US drivers to use two-way charging without invalidating their warranty. However, this only extended to certain vehicle models using certain chargers. No Chinese manufacturers have made similar arrangements. But with increasing numbers of manufacturers adding V2G functionality, there is a need for clarity over warranty terms.

Bottlenecks

It seems there is some way to go before EVs are fully integrated into China’s grid.

High costs will hamper the roll-out of V2G charging infrastructure. Operators of one-way charging infrastructure already struggle with high installation and maintenance costs, and long payback periods.

V2G charging posts cost two or three times more than conventional posts, according to Wang Wen, deputy general manager of Chinese company State Grid Smart Internet of Vehicles. Therefore, operators already struggling to make a return on their investments are unlikely to choose further upgrades. If these costs are to shrink, it will come down to economies of scale.

Firms including State Grid Smart Internet of Vehicles, Nio and Teld are starting to build V2G stations and charging posts, and experimenting with “battery swop” services.

Last year, one EV driver in China described exchanging her 95%-charged battery for an almost-empty, 15%-charged alternative at a Nio station. That was enough power to get her home, where she recharged. Nio paid CNY 0.70 for each of the 60 kilowatt hours that were stored in the 95% battery, which netted her CNY 40 (USD 5.5). In addition, the swop approach eliminates battery lifespan and warranty worries.

Zheng Ying thinks an extensive battery-swop rollout will require governmental support for consumers. But that does not mean Zheng thinks subsidies are a magic wand for promoting V2G. She says the onus should be on companies to innovate their business models.

Ecuador’s free trade agreement with China has met a mixed reception. As a new era begins, experts reflect on the FTA experiences of its neighbours and lessons for the country. 

By Allen Panchana, April 19, 2024

China has established a strong presence in Latin America in recent decades, becoming the region’s second most important trading partner, and for some countries, such as Chile and Peru, the number one. Looking ahead, during the next decade, the volume of trade between the regions could double compared to 2020 levels, according to projections by the Atlantic Council.

With its enormous production capacity and an ever-expanding domestic market, China is consolidating its position as an economic superpower. Almost all of China’s imports from Latin America are of raw materials or related to natural resources, including oil, copper, and agricultural products such as soybeans. In 2022, raw materials accounted for 95% of the region’s exports to China, the Economic Commission for Latin America and the Caribbean reports.

To date, China has signed off on free trade agreements with 29 countries, under both bilateral and regional pacts, including many partners in Latin America: Chile, Peru, Nicaragua and Ecuador have already signed and ratified their FTAs; Honduras is reportedly in the process of negotiations, while Uruguay and Panama are in earlier stages of discussions. 

Ecuador was the latest Latin American country to approve its FTA with China, after it passed through the national assembly in early February. But its reception has not been entirely smooth: even before negotiations concluded in May 2023, several organisations and experts in the country raised concerns over the potential risks and impacts that the treaty could bring for local business and the environment, with many of them remaining unconvinced.

We spoke with experts in Ecuador to discuss these concerns, as well as voices from Chile and Peru to hear of their countries’ experiences of FTAs with China, and lessons for their South American neighbour as its new era of trade begins.

Chile: Fruitful, but concerns over dependency

Francisco Urdinez

Associate professor at the Pontifical Catholic University of Chile, and director of the Millennium Nucleus on the Impacts of China in Latin America and the Caribbean (ICLAC)

In 2005, China signed an FTA with Chile, its first with a Latin American country. It came into force a year later and, since then, investment and trade between the two countries has soared. Between 2006 and 2018, their trade increased by 345%, Chile’s Undersecretary for International Economic Relations reported in 2019.

As of 2018, China became Chile’s main trading partner. However, what could be seen as positive is not entirely positive: almost 40% of Chile’s exports go to China, which creates a very high level of economic dependence. It is one of the highest levels of export concentration with China in the world. In the event of a possible cooling of the Chinese economy, Chile would be very exposed.

Trade between Chile and China experienced solid growth between 2017 and 2022: there was an average annual increase of 14% in the countries’ trade, a 16% increase in exports from Chile, and a remarkable average annual increase of 25% in its exports of services. The main products that Chile exports to China are copper-related, followed by lithium carbonate, cherries, iron ore, and paper and pulp products.

Major imports into Chile include passenger cars and smartphones. This sustained growth in trade and investment between Chile and China illustrates the importance of economic relations between the two countries in recent decades.

The relationship has been fruitful and we continue to learn from this great experience. However, as a country we must see more economic alternatives that do not make us so dependent on the Asian country.

Jorge Heine

Former Chilean ambassador to China, and professor in the Global China Initiative at the Boston University Global Development Policy Center

As a result of Chile’s FTA with China, the value of bilateral trade increased from USD 8 billion in 2005 to USD 55 billion by 2021.

Over this 19-year journey, many things have happened. Perhaps one of the most important to highlight was the updating of the FTA to broaden its approaches. For example, since 2017, a protocol has been agreed that addresses cutting-edge disciplines such as e-commerce, government procurement and competition policy.

Several countries in the region are following the pioneering path led by Chile in signing an FTA with China – the world’s first individual country to do so – and which has brought it so much success. More countries are now looking to an FTA with China, and to extend ties with the Asia-Pacific as much as possible.

Today, trade between Chile and China has increased sevenfold, despite the geographical distance between the two countries: Chile has a high volume of trade with China, even higher than its direct neighbour, Pakistan. In 2016, China became the number one market for Chilean wine in the world, displacing traditional markets such as the United Kingdom and the United States. In the same year, Chile became the world’s second largest exporter of fresh fruit to China. [Editor’s note: Vietnam overtook this position in early 2024.]

Peru: Trade surplus, textiles complaints

Ciro Salazar Valdivia

Consultant, Foundation for Conservation and Sustainable Development (FCDS)

Judging Peru’s FTA, the balance is positive in terms of trade, but nil in terms of productive diversification. Since the FTA began in 2010, on average we have had a trade surplus with China, and our exports have increased fivefold. By 2022, 96% of our exports to China were raw materials. The sectors that have benefited are mainly mining and fishing.

Peru was one of the first destinations for Chinese direct investment abroad, with the acquisition of the Shougang iron ore mine in 1992. Since 2015 there has been a growing trend of Chinese investment in the infrastructure and energy sectors, in particular, including a greater participation of Chinese companies contracted by the state in public infrastructure works.

On the other hand, almost from the beginning of the FTA with China, Peru’s textile sector has complained about the massive entry of garments at below-market prices. The sector estimates that more than 90,000 small businesses have been affected.

But it is the port of Chancay that will probably mark a turning point in the economic life of the country, and geopolitics in Latin America. One of China’s overseas ambitions is to improve logistical resilience, under the framework of its Belt and Road, to better face potential disruptions in the supply chains due to climatic factors, but also due to geopolitical and geostrategic factors. Chancay provides China with a faster route for its imports of copper from Peru and Chile, as well as soybeans and iron from Brazil. Likewise, Chinese exports to the region can be strengthened.

Monica Nuñez Salas

Peruvian consultant on environmental law and Chinese investment

From the environmental sector, one of the most criticised points of Peru’s FTA with China is that it has not included an environmental chapter. This is something that has been requested for a long time, and should not be difficult to achieve: Peru has an environmental regulatory framework that should apply to all investments in the country, and it is this legislation that applies to investments under the FTA; China also has sustainability guidelines for its trade relations. Although these are not binding, they should be used as a reference to strengthen the environmental side of the trade relationship between the two countries.

In the same way, the constant political crises that Peru has experienced in recent years have not allowed governments to follow consistent objectives to improve our relations with China, such as directing and disciplining Chinese capital and local companies to diversify the export and import offer of both countries. I believe this is very necessary. We urgently need to strengthen capacities within the executive branch to steer national development plans.

However, despite everything that needs to be improved, it is undeniable that a group of small and medium-sized Peruvian companies have taken advantage of the FTA, due to the low tariffs. According to figures from foreign trade association ComexPeru, by 2020, ten years since its entry, around 1,400 new small and medium-sized companies had exported to China.

So, one reflection we should have is that, if we have clear objectives to boost innovation and provide greater productive capacity to these companies, the benefits could be considerable.

Ecuador: Expectation and reservations

Sonsoles García

Minister of Production, Foreign Trade, Investment, and Fisheries of Ecuador

The FTA with China will potentially create more than 50,000 jobs with a growth in exports of as high as 32% [within the first five years]. What is essential is access to a market of more than 1.4 billion people, 1 billion of whom consistently engage with e-commerce.

The negotiation was technical and, in defence of local industry, 820 exclusions were set for sensitive sectors and long periods of relief of up to 20 years.

Products such as pitahaya fruit, which have previously entered the Asian market with a 20% tariff, will cease to pay it immediately, in addition to opening up markets for frozen meats, tea, blueberries, pineapple, oranges, coffee, guava, spinach and quinoa, among others.

Concerns about the impact this agreement could have on sensitive sectors of the Ecuadorian economy, such as local production and agriculture, are legitimate. For this reason, the production ministry has recognised that it is necessary to establish adequate protection mechanisms to avoid unfair competition and ensure that the benefits of the FTA are distributed equitably.

Diana Castro Salgado

Deputy director, Latinoamérica Sustentable (LAS)

This treaty was negotiated in a context of great secrecy. There was no invitation to environmental organisations to participate, as has been the case in the negotiation of FTAs with other countries. The feeling I have is that it has been a treaty negotiated, agreed and signed with the Ecuadorian population’s back turned.

This FTA will increase pressure for natural resource exploitation and food production in Ecuador: how much water, land, forests, mangroves will need to be sacrificed to export to China? It is an unequal agreement that could have huge environmental and social costs for Ecuador.

Two articles in the agreement acknowledge environmental measures and cooperation, including a call to refrain from relaxing environmental policy to encourage investment. But there are no specific provisions around extractive industries, and we remain concerned that the agreement could deepen these activities, including through favourable investment guarantees, legal security, and facilitation of project approval and licensing processes.

For example, there is the Mirador copper mine. After the Chinese-owned EcuaCorriente announced the expansion of the tailings dams, the project received a new permit for a new expansion. This could make them some of the highest tailings dams in the world, with technical characteristics that would not be permitted in China.

In the hydrocarbon sector, we have the case of Chinese companies operating through service contracts in the ITT block in the Yasuní National Park, which we documented in a recent report. At a time when the government is considering a moratorium to close down exploitation, the FTA could put pressure on the government to go against the results of a referendum in 2023, which called for an end oil extraction in the park, in favour of international investors.

Stalled for years amid financial and planning woes, Chile is pushing ahead with a dam that could pose risks to local communities and ecosystems. 

By Michael Lieberherr Pacheco, Catalina Barrios Benavente, April 25, 2024

On 21 November 2018, five families were forcibly evicted from their homes near San Fabián, a commune in the mountainous province of Punilla, in central Chile. Police arrived unannounced to inform residents of their fate, and guarded workers linked to the Italian construction company Astaldi, as heavy machinery reduced their houses to rubble.

These acts were in the name of Nueva La Punilla, a long-planned, multi-purpose reservoir project. Designed for hydropower and irrigation purposes, the Punilla reservoir could flood an area of 1,700 hectares behind a 136-metre-high retaining wall on the Ñuble River. Should it be realised, the project would also flood parts of the Nevados de Chillán-Laguna del Laja Biological Corridor, a Unesco Biosphere Reserve.

In December 2018, residents secured an injunction to suspend the eviction orders through an environmental tribunal in the city of Valdivia, in southern Chile, while a lawsuit was being prepared against the reservoir project. However, in April 2020, the same tribunal ruled in favour of Astaldi, finding no environmental damage or psychosocial impacts had occurred, and denying residents’ claims for reparations.

Astaldi had been granted the concession for the project by Chile’s public works ministry in 2016, and had an environmental impact study approved, but it is yet to break ground: Astaldi’s contract was cancelled in 2021 amid a financial crisis at the company, and the ministry’s miscalculation of the reservoir’s storage capacity. The Chilean state ultimately paid an unknown amount to Astaldi in compensation.

Chile’s public works ministry has since issued a new tender for the Punilla reservoir, initially setting a 19 April 2024 deadline for technical offers, but which has now been extended until December. As of August 2023, 21 companies had registered their interest, among them five Chinese companies, including the China Harbour Engineering Company and China Civil Engineering Construction.

In the meantime, those evicted from their homes find themselves in temporary accommodation, still awaiting a definitive solution.

Compensation lacking

“The mountain range for me is my life, it has given me everything. Once you’ve gotten old, it’s difficult to be taken away from where you’ve made your life,” says Héctor López Benavides, a 57-year-old livestock herder who has lived in San Fabián since his late twenties. He raised his family here and built a life raising cows, sheep and horses. During the evictions, his house was the first to be destroyed.

The evicted residents had rejected a displacement plan drawn up by the public works ministry in 2018. López says his community deemed the compensation offered to be insufficient. Months later, the expropriations went ahead.

“It has been five years since we were evicted and it has been hard,” says López. “It was a tremendous change because we had to start from scratch and manage on our own; there was no help from anyone to start our lives elsewhere.”

Currently, López works tending livestock at a farm in Laguna Las Truchas, over 40 kilometres east of his former home, and not far from Chile’s border with Argentina. Without land of his own, he says his typical way of life and income stream has become impossible.

Iván Labrín Villalobos says he has suffered similarly. Another local livestock herder, Labrín kept hundreds of goats before the evictions, which he was forced to sell; some were lost. He now lives with relatives.

López recounts the project’s citizen participation process: the public works ministry, he says, “thought we were ignorant people from the mountains, but I never allowed them to treat us like that.” During this consultation, the ministry collected livestock data to calculate compensation payments for their expropriation. According to those affected, they were awarded CLP 30 million (USD 30,600) per plot of land and CLP 18 million (USD 18,360) per house.

Miriam Fuentes Contreras, who was also evicted with her family, says the ministry’s plan did not include compensation for income losses; a “livestock plan” was mentioned but never realised. She says their housing payment was therefore not enough for her family to conserve their lifestyle. “We refused for a long time to sign the agreement to receive the amount they offered us,” she says. “We finally did it in 2022, out of necessity.”

Labrín says he recently signed the agreement for the same reason. Near the expropriated area, he now maintains a plot of land on a hillside behind his former home. He was told he could receive compensation to build a new house here, but on the condition that he self-fund the construction of an access road to the site. “I shouldn’t have to do that,” Villalobos points out. “It was up to them to relocate me.”

Legal proceedings and risks

After the Astaldi contract collapsed in 2021, the public works ministry assumed ownership of the project – the announcement of this year’s new auction was made by its minister, Jessica López. The official public details confirm the project to be fundamentally unchanged since its progress during Chile’s previous administration, under former president Sebastián Piñera (2018-2022).

This lack of change has disappointed local community advocates who hoped for something different under current president Gabriel Boric. “At the beginning we had high expectations with the new government,” confirms César Uribe, a spokesperson for Ñuble Libre. His organisation is one of the Ñuble River’s most active defenders. “We also had a lot of conversations: two ministers even came to San Fabián to meet with us.

“The government promised to generate a new analysis of the project, but in the end, there was never really an analysis.”

Uribe is deeply critical of the Punilla reservoir plan: “This project has been failing for a long time and its design is absolutely obsolete for today’s reality. We are talking about a project from the 1960s – that is, almost 70 years ago. In that sense, it obviously does not meet today’s standards and reality.”

In the aftermath of the Astaldi debacle, SMA, Chile’s environmental regulator, commenced proceedings to sanction the project. This process is considering 10 separate areas of investigation, three of which have been categorised as serious; these include the failure to update relocation plans for evictees and the failure to consider issues concerning livestock. The proceedings continue.

San Fabián lawyer Ricardo Frez Figueroa has guided the evictees through the SMA sanctioning process. Frez – who also directs Defensa Ambiental, an NGO dedicated to protecting the environment – says these sanctions may be passed on to whichever company is awarded the tender.

The incoming company will also have to tackle electricity transmission hurdles: the project requires a new 23 km power line to distribute an anticipated annual 525 GWh to the national electricity grid.

While the construction of this line had previously been approved, in February the environmental court of Valdivia annulled its environmental authorisation. The ruling cited concerns of possible impacts for the huemul deer, endemic to Chile and Argentina; the Ñuble region, of which Punilla is a part, is the species’ last remaining habitat in central Chile.

In addition to Nueva La Punilla’s reservoir and accompanying transmission line, another local project of concern is the Ñuble de Pasada reservoir, also known as Hidroñuble. Although construction of the project was started, works have been stalled for more than eight years because it will rely upon Nueva La Punilla’s transmission line. This state of play has led various organisations to call for the definitive closure of Hidroñuble.

Stifling biodiversity

The Punilla project’s other great environmental challenge is the Nevados de Chillán-Laguna del Laja Biological Corridor. The area became a Unesco Biosphere Reserve in 2011, with the aim of protecting the huemul deer.

Two forest biomes converge here, making the area particularly biodiverse: the sclerophyllous forest of Chile’s central region, which is adapted to drier conditions and home to hundreds of endemic species already threatened by urbanisation, agricultural expansion and fires; and the Valdivian temperate forests that stretch from the country’s south-west, one of Earth’s oldest forests and characteristically similar to a tropical rainforest. 

Intentionally flooding such a celebrated site has inevitably attracted controversy.

Bernardo Reyes, an ecologist and director of the Chilean NGO Ethical Foundation of the Forests (EEB), says the consequences of flooding this area would be manifold: “It’s going to be similar to a gigantic logging race across 1,700 hectares. This is a major impact that increases habitat fragmentation and therefore the fragility of many species that have conservation problems.”

In addition, Reyes says increasingly extreme, climate-driven disasters make the mitigatory qualities of biodiversity hotspots ever more crucial: “In Chile, we have increasingly intense droughts and fires, and these 1,700 hectares act synergistically with this, and can therefore have a much more intense impact on the biodiversity of the area.”

Meanwhile, others are highlighting how mega-dam projects can lead to greater water scarcity. According to the environmental public policy expert Pamela Poo, “you’re going to have water for some irrigation, but then what starts to happen is the expansion of the extractive frontier.” This is especially pertinent considering the nearly 15-year mega-drought affecting much of Chile that has brought consequences for Ñuble: the region is already subject to a water shortage decree, enforced by the public works ministry until at least April 2024, and which lays out a collection of special measures in an attempt to ease water scarcity.

Project beneficiaries

In the context of Chile’s mega-drought, the Punilla project is triggering important conversations about water use among affected communities.

Chile’s 1981 water code separated out the ownership of water from land, then gave full authority for water use to the state – it can grant water rights to private parties free of charge and in perpetuity. The code was reformed in 2022 and again in 2023, but the privatisation and commodification of Chile’s water remains a significant problem for many communities.

Alexander Pánez Pinto, a social sciences academic at the University of Bío-Bío, conducted a soon-to-be-published study into the water rights holders in the reservoir’s proposed location. In an advance copy seen by Dialogue Earth, the agricultural company Cruz del Sur is named as a major rights holder that consumes 294 litres of water per second.

Pánez says Chile has conjured a “perfect storm” between the overexploitation of watersheds for productive uses, the privatisation of water under the code, and the impacts of climate change.

Humberto Illanes Sepúlveda is the president of Mesa Punilla, a network of 16 rural and urban organisations that are based in the area of the Punilla project. According to him, the main beneficiaries of the project will be those with the water rights – large companies like Cruz del Sur. “The rest of us receive nothing, only damages,” he says. “We bear the sacrifices.”

In September 2022, Mesa Punilla submitted 299 petitions to the Ministry of Public Works regarding the Punilla project. Concerned with mitigation and compensation demands mainly related to water use, road designs and the future of the biosphere reserve, the petitions remain under evaluation and unresolved.

Illanes Sepúlveda says the project has “gaps everywhere” and is generating uncertainty. “We still don’t have concrete answers and we want legal certainty. We have been patient, prudent and flexible. But people have had enough and there is no more confidence in the ministry. We are at the end of our rope. The company that wins this project will also buy this conflict.”

The San Fabián provincial government and the Ministry of Public Works both declined to comment on the issues raised in this article.

Michael Lieberherr Pacheco