Hydropower is a renewable low carbon source of electricity and an important component in reducing greenhouse gas emissions from energy production. The Prototype Carbon Fund (PCF) established by the World Bank in 1999 funds projects including hydropower projects that produce high quality greenhouse gas emission reductions that can be registered with the United Nations Framework Convention on Climate Change (UNFCCC) for the Kyoto protocol and its clean development mechanism. Emission reductions are calculated by offsetting grid electricity, which in most countries is generated by thermal fossil fuel-fired plants, and replacing it with a zero-emission source of power. To increase the likelihood that the reductions will be recognized by the parties of the UNFCCC, independent experts provide baseline validation and verification procedures for emission reductions. The Chacabuquito Small Hydropower Project made history as the first PCF project to become operational in 2002. The Chacabuquito Project, currently under implementation, is a run of the river hydropower project. Run of the river projects differ from conventional hydropower projects in that they require no water storage and are less likely to alter environmental flows. Run of river projects can be developed on appropriate sites with little, if any, negative impact on either aquatic or terrestrial habitat.