Hydropower development in the lower Mekong basin: alternative approaches to deal with uncertainty

Abstract

Governments in the Lower Mekong Basin (LMB) face decisions that involve trade-offs between the economic benefits from hydropower generation and potentially irreversible negative impacts on the ecosystems that provide livelihoods and food security to the rural poor. As a means of comparing these trade-offs, a sensitivity analysis of the benefit-cost analysis of certain Basin Development Plan (BDP) scenarios was undertaken. By changing some key assumptions in the BDP about discount rates, the value of lost capture fisheries, future aquaculture production in the LMB, and the value of lost ecosystem services from wetlands to reflect the full range of uncertainty, at the extremes, there could be a reversal of the Net Present Value (NPV) estimates of the scenarios from a positive $33 billion to negative $274 billion. This report recommends when dealing with large-scale, complex projects: a more comprehensive, integrated human and natural systems framework and adaptive management approach to LMB planning and development that deals with the entire watershed; a more comprehensive analysis and treatment of risk and uncertainty; a more thorough assessment of the value of direct and indirect ecosystem services; a broader set of scenarios that embody alternative models of development, broader stakeholder participation; and better treatment of the effects of infrastructure construction on local cultures and the poor.