Measuring and Apportioning Rents from Hydroelectric Power Developments

This paper deals with economic rents
arising from the development of hydroelectric generation on
international watercourses. The paper briefly defines the
concept of economic rent and its application to
hydroelectric developments. It explores two areas of
precedents that shows how the concept could be applied in
developments on international watercourses. First, it looks
at international law on the ownership and rights of use of
such watercourses. Then it looks at past instances of
international watercourse development that have used the
idea of rent, or rent-like concepts, to determine how to
share the benefits from the development. The paper notes
that international convention and practice on this topic
expect that riparian countries will negotiate the sharing of
benefits from international developments. What the paper
then seeks is a guide to such negotiations. The paper also
devotes some attention to methods for quantifying the rents
generated by projects in various situations: where a
competitive market exists for the project's output;
where no market exists; or where the hydroelectric
development is part of a multipurpose project. In general,
the total benefit from a cooperative development of an
international watercourse is greater than the benefits from
separate independent developments. Each participant should
get from the cooperative development at least as much rent
as it could have obtained from an independent development.