China has approved construction of one of its tallest dams, a 239-metre (784-foot) hydroelectric structure on the upstream section of its longest river, the Yangtze, the state planning agency said on Tuesday.

Hydropower is a clean and renewable source of energy but large-scale construction in southwest China has sparked accusations of damage to fragile ecosystems and inadequate compensation to thousands who have lost their homes.

As concern grows over the social and environmental costs of large hydroelectric dams, China has become more cautious of approving new projects in recent years.

"Great importance must be attached to environmental protection and migrant resettlement work during the construction," the state planner, the National Development and Reform Commission, said in a notice.

The reservoir of the Lawa hydroelectric project will submerge nearly 12 square miles of forest and farmland on the Jinsha branch of the Yangtze on the border between Sichuan and Tibet.

The project is envisaged to eventually consist of four turbines with a total capacity of 2 GW.

That compares with China's total hydropower capacity of 350 gigawatts by the end of last year, with about 270 GW contributed by large-scale projects, an industry group said last week.

State power giant Huadian Group will hold a stake of 48 percent in the project, with local firms holding the rest.

Planned total investment of 30.97 billion yuan ($4.59 billion) will include 2.19 billion yuan to cover the costs of relocating and compensating people displaced by construction.

Industry advocates say big dams are the most efficient way of bringing electricity to remote and undeveloped regions, and China has promised to improve the way it compensates displaced residents.

In its notice, the NDRC also said it would look at ways of using the new project to boost local income.

It has also launched a campaign to clear up "disordered" small-scale hydropower on the Yangtze, with an audit last year putting the number of projects along the river and its tributaries at 24,100.

Many new facilities are located in remote regions of Tibet, and the southwestern Sichuan and Yunnan provinces, where relocation and environmental costs can be minimised.