Applying a cost-benefit analysis model to the Three Gorges project in China

Abstract

The world's largest hydro project is now under construction in China. It is controversial as large environmental and social impacts are anticipated, although it is supposed to control the region's severe floods, to generate 18.2 GW of hydropower, and to improve river navigation. This study employs a quantitative approach to bring the major economic, environmental and social impacts of this massive project together. This comprehensive probabilistic cost-benefit analysis (CBA) model takes into account the project uncertainty, and its empirical application tries to deliver more robust and justifiable results than those produced by the more usual deterministic CBAs or multi-criteria analyses. This allows the distribution of the net present value to be calculated, and the most significant impacts to be identified. The mean and the 95th percentile of the cumulative net present value at a 5% discount rate estimated by the model will be positive, while the 5th percentile will be negative.

Keywords:

• CBA
• China
• dam
• energy
• sustainable development