WIT Press

Applying A CBA Model To Assess The Three Gorges Project In China


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WIT Press


R. Morimoto & C. Hope


The world’s largest hydro project in China is currently under construction. The project is controversial as large environmental and social impacts are anticipated despite the fact that the project 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 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 cost benefit analyses or multi criteria analyses. The mean and the 95 th percentile of the cumulative net present value at a 5% discount rate estimated by the model are to be positive, whereas the 5 th percentile is to be negative. Sensitivity analysis shows that the variables with the largest contribution towards the uncertainty in the cumulative net present value are the benefits of power generation, the associated economic growth, the benefits of clean hydropower, and the costs of construction, resettlement and archaeological loss. However, these results obtained by the model need to be treated carefully, as they are sensitive to the valuation methods, the choice of discount rates, and the large project uncertainty. Keywords: CBA, China, dam, energy, sustainable development. 1 Introduction The most environmentally controversial project in China today is the construction of the world largest dam, the Three Gorges project (TGP) on the Yangtze River in western Hubei province. It is currently under construction and


CBA, China, dam, energy, sustainable development.