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Environmental costs and their impact on the net present value of a hydro-electric project in Kerala, India

Published online by Cambridge University Press:  23 April 2003

V. Santhakumar  and
Achin Chakraborty
V. Santhakumar
Affiliation:
Centre for Development Studies, Prasanthnagar, Ulloor, Thiruvananthapuram – 695011 Kerala, India. E-mail: santhakumar@cds.ac.in
Achin Chakraborty
Affiliation:
Centre for Development Studies, Prasanthnagar, Ulloor, Thiruvananthapuram – 695011 Kerala, India. E-mail: achin@cds.ac.in
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Abstract

This paper presents the operational procedures involved in incorporating the environmental costs in the cost–benefit analysis of a hydro-electric project. The proposed project, if implemented, would result in the loss of 2,800 hectares of tropical forests and dislocation of two settlements of about 200 families who are currently dependent on the forests for their livelihood. The forests are mainly used for extracting reed – a material used both by traditional artisans and the paper-pulp industry. The potential environmental costs and benefits of the project are identified and approximate estimates of some of these costs are made for items such as carbon sequestration, bio-diversity, and so on, based on similar estimates made elsewhere. These estimated environmental costs are incorporated into the analysis, and the hypothetical estimate of the non-use value, which would make the project's net benefit zero, is estimated under different discount rates. The analysis brings into sharp focus some crucial factors that have a direct bearing on the social trade-off involved in the project choice.

Type
Policy Options
Information
Environment and Development Economics , Volume 8 , Issue 2 , May 2003 , pp. 311 - 330
Copyright
© 2003 Cambridge University Press

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Footnotes

The authors wish to acknowledge the comments received on this paper from Partha Dasgupta, D. Narayana, John Kurien, P.S. George and three anonymous referees. We received excellent research assistance from K.A. Anil Kumar. However, the usual disclaimers apply.