Value of Environmental Protection and Compensation Costs
Attributes
Medium: Animals, Plants and/or Others
Country: Vietnam
Analytical Framework(s): Other
Study Date: 2000
Publication Date: 2002
Major Result(s)
| Category | Resource/Environmental Good | VND, million currency units (2000) |
VND, million currency units (2014)1 |
USD, million currency units (2014)2 |
|---|---|---|---|---|
| NPV | Net present value of YHPP3 | 2,268,590.00 | 4,747,841.27 | 222.25 |
| Environmental Cost | Meteorology4 | 26.24 | 54.91 | 0.00 |
| Environmental Cost | Hydrology | 4,021.45 | 8,416.33 | 0.39 |
| Environmental Cost | Water Supply | 236,677.00 | 495,331.83 | 23.19 |
| Environmental Cost | Erosion and Sedimentation | 90.99 | 190.42 | 0.01 |
| Environmental Cost | Land Use | 16,224.20 | 33,954.98 | 1.59 |
| Environmental Cost | Forestry | 224,060.00 | 468,926.21 | 21.95 |
| Environmental Cost | Watershed Management | 907.94 | 1,900.19 | 0.09 |
| Environmental Cost | Fauna | 3,053.13 | 6,389.77 | 0.30 |
| Environmental Cost | Water Quality | 75.13 | 157.24 | 0.01 |
| Environmental Cost | Reservoir-induced Seismicity | 734.13 | 1,536.43 | 0.07 |
| Environmental Cost | Public Health | 242,498.00 | 507,514.36 | 23.76 |
| Environmental Cost | Compensation and Resettlement | 314,645.00 | 658,507.93 | 30.82 |
About the Inflation Adjustment: Prices in Vietnam (VND) changed by 109.29% from 2000 to 2014 (aggregated from annual CPI data), so the study values were multiplied by 2.09 to express them in 2014 prices. The study values could be expressed in any desired year (for example, to 2025) by following the same inflation calculation and being sensitive to directional (forward/backward) aggregations using your own CPI/inflation data.
Study Note: The main policy recommendations are: Government regulations should require that the financial analysis and appraisal of all future electricity sources include the full cost of these schemes, including not only direct costs but also environmental costs related to preventing or mitigating the environmental impact caused by them. The electricity pricing policy applied to all future electric power sources should be based on the principles of full cost pricing and user pays for environmental costs caused by them. This should be applied to all fuels and energy sources, not only hydro-electricity. Among other things, this will encourage electricity consumers to implement energy saving measures and to eradicate the current subsidized electricity pricing mechanism of the electricity sector. An appropriate financial mechanism should be established to allocate the revenue from full cost electricity pricing to a fund to cover the environmental protection and compensation costs.
Study Details
Summary: In published environmental and financial studies of YHPP, the original financial analysis ignored a wide range of environmental costs in determining the most important indices of financial viability namely, its net present value and electricity price. As a result, the full cost of hydropower generation scheme is understated. Thus the calculated price charged for electricity generated by the plant did not cover the full cost of electricity production, and the estimated net present value of the plant did not reflect its real value. The purpose of this study is to estimate the monetary value of the main environmental protection and compensation costs of YHPP and to incorporate them into the financial viability indices of the plant, namely its net present value and electricity price. The study was carried out through the following steps: Analyze environmental data from published environmental impact assessments of YHPP and undertake additional on-site surveys where necessary. Estimate the costs of preventing and mitigating environmental impacts and those of compensation for the relocation and resettlement of residents affected by the plant. Incorporate these costs into the main indices of financial viability of the plant, namely its net present value and electricity price. Recommend polices that would apply the principles of full-cost pricing and user pays for environmental costs in pricing the electricity generated by YHPP. This should ensure sufficient revenue to cover all costs of electricity generation, including environmental protection and compensation costs.
Site Characteristics: The Yali Hydropower Plant (YHPP) is located on the Sesan River in the West Highlands of Vietnam's Central region. It has an installed capacity of 720 MW and an energy output of 3,600 GWh per annum. Construction of the plant began in 1993 and was completed in 2000. Inundation of the reservoir led to the flooding of 1,933 ha agriculture-based land and the relocation of 1,149 households living in 26 villages.
Comments: The central assumption of the study is that the ecosystem and its inhabitants should be restored to the state of environment and health that they enjoyed before the dam was constructed. The present study has not attempted a cost-benefit analysis of any of the mitigation measures to see whether or not the benefits the people and ecosystems would receive are large enough to justify the cost of mitigation.