(September 18, 2009) The Chinese government is vastly underestimating the costs of the Three Gorges dam, says Probe International.

According to recent media reports, the government claims that the dam cost taxpayers 184.9 billion yuan (US$27.19 billion) to build—which it says is within the project’s budget.

But Probe International, in conjunction with Chinese environmentalists, says the final cost of the project is far higher. According to Dai Qing, one of China’s leading investigative journalists, the true cost of the dam might be as high as 600 billion yuan ($88-billion).

In a recent article Dai Qing also calls into question the government’s claim that the 184-billion yuan price tag is within budget, as officials originally claimed it would cost 57-billion yuan when it was approved in 1992. The official budget has been changed consistently upwards since then.

Dai Qing explains that throughout the dam’s construction, the project’s price tag has been determined by politics, not economics. In 1989 financial experts warned that the dam would cost 590-billion yuan, but government officials told the delegates to the National People’s Congress that it would cost one-tenth that sum in order to get the project approved. Shortly afterwards this number was revised upward to 75-billion, then 120-billion and now it sits at 184-billion yuan.

Critics claim that the government keeps the dam’s price tag low—at least publicly—by excluding costs. For example, the Chinese financial magazine Caijing recently reported that the Chinese government would have to spend an additional 100-billion yuan over the next ten years in order to pay for a number of social and environmental problems caused by the dam.

The government also no longer considers the cost of transmission as part of the Three Gorges dam—although it was included in the original budget. This, critics contend, is another reason why the official price tag cannot be trusted.

While the final cost of the dam is being debated, who’s been paying for it is obvious. Taxpayers across the country have been hit with additional taxes to help fund the massive project. According to Dai Qing, the government implemented the Three Gorges Construction Fund in 1993, which placed a tax on each kilowatt-hour of electricity purchased by national electric power users. The tax was initially set at 0.003 yuan per kilowatt-hour, but was then raised to 0.004 yuan in 1994 and then further raised to 0.007 in 1996.

Dai Qing estimates that as much as 90 billion yuan has been collected through the Three Gorges Construction Fund.

Dai Qing and Probe International have been calling for an independent audit of the Three Gorges dam that is publicly available to Chinese taxpayers. Until this happens, they say, the Chinese government will continue making up numbers for the cost of the dam and digging deeper into taxpayers pockets to pay for the real costs.

Brady Yauch, Probe International, September 18, 2009