The current discussion about global warming and the possibility to reduce greenhouse gas emissions through hydropower has given a new turn to the debate about dams, resulting in the re-evaluation of this otherwise disputed technology. This trend materializes in the massive financial support that the United Nation’s carbon offsetting scheme Clean Development Mechanism (CDM) mobilizes for the construction of new hydropower plants in developing countries. As defined in the Kyoto Protocol, CDM projects are supposed to avoid greenhouse gas emissions while simultaneously contributing to sustainable development. The objective of this chapter is to analyze to what extent carbon-offsetting-dams are able to live up to this ‘win-win’ expectation. By identifying considerable challenges and constraints it is argued that the contribution of large hydropower projects to climate protection as well as their sustainability impact is in many cases highly doubtful. Given the controversial effects large dams may have on the local level it is discussed in which respect carbon-offsetting-dams constitute a form of ‘carbon colonialism’ that results in the exacerbation of one of the most problematic aspects of global warming: the asymmetries of problem causation and burdensharing.