Brazil loses BRL 11.8 billion in social value with the construction of hydroelectric dams in the Tapajós, according to a study commissioned by WWF-Brazil

15 fevereiro 2024

Non-hydro renewable energy mix is the best option to meet Brazil's estimated energy demands
Brazil will lose at least BRL 11.8 billion in social value if the country decides to build the complex of hydroelectric plants in the Tapajós River Watershed, between the states of Amazonas and Pará. This is the conclusion of a study commissioned by WWF-Brazil, which questions the feasibility of these dams and aims to contribute to discussions on the adoption of parameters that measure the socioeconomic impacts of large infrastructure projects during the decision-making process. 

The amount of BRL 11.8 billion is conservative and weights only the standard result of the Socioeconomic Cost-Benefit Analysis (CBA), evaluating benefits and direct costs of the works and some externalities related to operational greenhouse gas emissions and loss of carbon stock, loss/gain of economic activities and some ecosystem services. When performance effects are considered in the risk analysis, such as over costs and delays typical of the sector and the effects of climate change on energy generation, the total loss to Brazilian society should exceed BRL 34 billion, still in conservative terms.  

In addition to following the Federal Government's CBA Guide to the letter, the study emphasizes the importance of the socio-economic evaluation of projects, an internationally established practice in the design and prioritization of projects, providing maturity and robustness to the choice. From the perspective of society, the socioeconomic evaluation differs from the financial evaluation of the entrepreneur, considering non-monetary benefits, externalities and contemplating socio-environmental and territorial impacts, performance risks, climatic and technological factors and compliance with socioeconomic projections, among other aspects. The CBA, therefore, is a strong and crucial tool to improve the investment decision-making process and determine the contribution of a project to the well-being of society as a whole. 

To project costs and benefits on a project, a CBA needs to include an alternative for comparison purposes. In the case of the study commissioned by WWF-Brazil, a base scenario was created consisting of a mix of non-hydro renewable energies capable of delivering 16.7 million MWh/year, the same expected to be generated and delivered to the National Interconnected System (SIN) by the Tapajós power plant complex and with the same reliability, in order to meet the energy demand projections of the Energy Research Company (EPE). 

The analysis is also based on a vast scientific literature that points to negative perspectives of impact on the production of energy by hydroelectric plants. The conclusion corroborates WWF-Brazil's view that it is necessary to expand energy production in the country from other renewable sources, truly clean and with less socio-environmental impact.  

Regulatory context of the CBA methodology in Brazil

Although Socioeconomic Cost-Benefit Analysis (CBA) is already widely used globally, its use in Brazil is new and has not gained traction in the government sphere. The method is still not being applied in investment decisions that are relevant to the country, even though various courts have indicated in resolutions and ordinances the importance of the CBA in decision-making, such as the Investment Partnership Program Council (CPPI), the Ministry of Integration and Regional Development and, above all, the Federal Court of Auditors (TCU). 

In 2017, the TCU had already expressed its opinion on the need for a more comprehensive systemic assessment of the feasibility of hydroelectric plants in the Amazon region. This would happen from a socio-economic approach that takes into account regional characteristics, including unique socio-environmental elements. The TCU's FISCOBRAS 2021 report reiterates the recommendation to use the CBA in the country's infrastructure planning.  

In 2022, the Federal Government published the CBA Guide, a methodological reference for cost-benefit analysis in Brazil, complemented by a toolbox that includes IPEA's Catalog of Parameters, sectoral manuals and specific recommendations for dealing with climate risk. The guide and the toolbox were essential for this study and are powerful tools, but they run the risk of being forgotten. The case of hydroelectric power plants in the Tapajós Basin represents a significant contribution to the application of CBA in the country, being a pioneering study of the application of the CBA Guide to a specific case. 

Download the full report on Socioeconomic Cost-Benefit Analysis in Infrastructure Decision Making from the download section on the side.

The study emphasizes the importance of the socio-economic evaluation of projects
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