2nd „ Water Science meets Policy“ Event

1. 2nd „Water Science meets Policy“ Event Economic valuation of dike relocation at the German Elbe An ecosystem services perspective Implementation of the WFD: when ecosystem services come into play 29-30 September 2011 Volkmar Hartje, Malte Grossmann TU Berlin

2. Topics • Decision-making situation and concept • Evaluation of ecosystem services of riverine floodplains • 2.1. Flood protection services: avoided damages • 2.2. Nutrient retention: replacement costs • 2.3. Biodiversity: Benefit Transfer • 3. Summary

3. Background • Presentation is the result of a study funded by the German Federal Agency for Nature Protection (BfN) • During the debate about flood protection strategy in Germany dike relocation vs. dike strengthening + creation of controlled storage • Study proposed to contribute by assessing two alternative strategies with ecosystem services approach as a means to value multifunctional effects • Study was not included in planning for WFD programme of measures for German part of Elbe

4. Status of riverine floodplains and potential measures Map of lowland stretch of Elbe with historical and current floodplains

5. Conceptual approach: Function, Use, Value Logic of the value of ecosystem services FUNCTIONS OF RIVERINE LANDSCAPES Structure Processes USES OF RIVERINE LANDSCAPES Goods & Services (hydrological, biogeochemical, biotic) VALUES OF RIVERINE LANDSCAPES Direct Use values Indirect Use Values Non-Use Values  = Total Economic Value

6. Coverage of wetlands ecosystem services

7. Cost benefit analysis • Valuation of marginal changes in the relationship of diked to active floodplains • On the basis of the total economic value of ecosystem services • Covered categories of costs and benefits • Investment costs • Changes in rehabilitation costs • Changes in maintenance costs • Changes in agricultural and forestry productive value • Changes in biodiversity benefits • changes in benefits from nutrient retention • changes in flood protection benefits

8. Cost benefit analysis • Measures included in analysis

9. Flood protection service

10. Valuation method: avoided flood damages • Assessment of flood risk (average annual damage vs. expected value of damage) • Benefit of flood protection effect as the difference between average annual damage with and without measures

11. Flooding modelling for Elbe river Downstream routing with retention Generation of artificial flooding events Dresden Maximaler Abfluss (m3s-1) Beitrag Nebenflüsse Wasserstand (m NN) Höhe (m NN) Überflutungshöhe (m) Beispiel Geländehöhe (m NN) Überflutungsvolumen in million m3 im Deichhinterland Elbe km 1D-hydraulic model with HEC-6 Inundation model

12. Damage assessment on a macro-scale Macro map of land cover + Value density Specific value for land cover types

13. Effect: Number of overtopped dike stretches Number of overtopped dike stretches Annual frequency of flood event

14. Benefits: avoided flood damages Avoided flood damages (Mio.€) options

15. Nutrient retention service

16. Nutrient retention yield Retentions yield per day of flooding: ~ 1,5 kg TN ha/d and 0,8 kg TP ha/d

17. Method: replacement costs • Indirect valuation: Does not value the benefit of the service (clean water), but the value of the service based on ecosystem function as replacement of other fmeasures which can be values • Prerequisite for application: • The valued measure (substitute) yields a comparative services • The substitute measures is the most cost efficient • The demand for the service exist at the given price (its costs)

18. Erosion Surface discharges Ground water Drainage Floodplains /wetlands Atmospheric deposition Urban surfaces Sewage treatment plants Nutrient discharge into the river Nutrient load in the river Nutrient load in coastal waters Model MONERIS Measures Costs of measures Minimization Simulation Indicators: - reduction potential - avoidance costs - cost-effectiveness

19. Erosion Surface discharge Ground water Drainage Floodplains /wetlands Atmospheric deposition Urban surfaces Sewage treatment plants Nutrient discharge into rivers Nutrient load in rivers Nutrient load in coastal waters Model MONERIS Measures in municipal water management Rainwater treatment Decentralized sewagetreatment technology / connection rate Technologiy of sewage treatment

20. Erosion Surface discharge Ground water Drainage Floodplain/ wetlands Atmospheric deposition Urban surfaces Sewage treatment plants Nutrient discharge into river Nutrient load in the river Nutrient load in coastal waters Model MONERIS Measures in agriculture Reduction of surplus of N-balance Erosion protection

21. Erosion Surface discharges Ground water Drainage Atmospheric deposition Urban surfaces Sewage treatment plants Floodplains/ wetlands Nutrient discharges into river Nutrient load in the river Nutrient load in coastal waters Modell MONERIS Measures in water management Drainage ponds Gewässerrandstreifen Rewetting wetlands River restroration

22. Cost minimization Minimize the sum of the individual cost components in relation to the desired reduction of the load

23. Shadow value of floodplains Shadow price as annualized costs (€/ha) Reduction target load (%)

24. Biodiversity benefits

25. Method: Willingness to Pay: Elbe example Source: Meyerhoff, 2002

26. Method: Step 2 Benefit Transfer / Meta-Analyse • Meta-Analysis: systematic analysis if available studies • Evaluation of existing studies with wtp for the protection of riverine wetlands • Problem: Divergent goods under the heading of wetlands • Own study: • - Only wtp for biodiversity and nature protection(non-use and use values) for wetlands in Europa • - 28 studies from Europe, 60-90 observations • Estimate with a meta-model: • WTP = f (area of measures, covered population, income, method)

27. Result: decreasing marginal WTP with size 100 km max distance 1000 km Max distance Grossmann, in press

28. Costs of measures • Cost of newly constructed new dikes • Regression equation from different sources as a function of dike heights • Costs of dike rehabilitation • references in the literature • Costs of dike cutting • references in the literature • Costs of dike maintenance • references in the literature • Costs of regulation of controlled polder • references in the literature • Costs of flood damages to agriculture for polder • estimate of expected damages to yield, valuation via contribution margin • Costs for permanent land use changes • 

29. Costs for permanent change of land use • Opportunity costs: Loss of agricultural services • Land purchase: • Verkehrswert • => Purchasing price differences (farmland / grassland/ forests • Uncultivated land/ forested wetland) • Ertragswert • capitalized land rent or lease payments => Correction by income transfer (EU Land payments) necessary

30. Results

31. Results of the cost benefit analysis Total values for Elbe according to cost and benefit categories # Only direct effects of dike relocation no indirect effects

32. Results of the CBA: distribution along the Elbe Program DR large Only dike relocations (Large scope) NPV: Net present value (3%) PC: Project costs; SC saved maintenance costs FD: avoided flood damage BD: WTP for Biodiversity in floodplain NR: Nutrient retention

33. Results of the CBA: Distribution along the Elbe • NPV: Net Present Value (3%) • PC: Project costs; • SC: saved maintenance costs • FD: avoided flood damage • BD: WTP for Biodiversity in floodplain • N NR: Nutrient retention Program DR small: Only dike relocation (small scope)

34. Results of the CBA: distribution along the Elbe • NPV: Net present value (3%) • PC: project costs; • SC saved maintenance costs; • FD: avoided flood damage; • BD: WTP for Biodiversity in floodplain; • NR: nutrient retention. Program P: Only large flood protection polder upstream

35. Results of the CBA: Distribution along the Elbe Program: Combination DR + P NPV: Net Present Value (3%) PC: Project costs; SC: saved maintenance costs FD: avoided flood damage BD: WTP for Biodiversity in floodplain NR: Nutrient retention

36. Summary: Methods • Economic valuation allows the integration of multifunctional effects of restoring wetlands as an option to improve the morphological quality of water bodies • Ecosystem services are a convincing and a practical concept to structure the multifunctional problem • The spatially explicit identification/ analysis of changes within the biophysical realm and on the use side are very important • Non-linearities are important • Including uncertainties is critical for the estimates of quantities and for values.

37. Summary: Relevance for WFD • Economic valuation allows the comparison of alternative strategies for flood protection in a multifunctional manner • It enables us to take nature protection objectives into account. • Dike relocations are an economic option to improve the morphological quality of riverine water bodies in lowlands • Dike relocations can be well assessed with the ecosystem services approach • The effects on the carbon budget and on recreation need to be added • Core requirement is the availability of a large scale hydrological flooding model

38. Thanks for listening!!

39. Analysis of incremental changes with/ without social benefits Calculation of „optimal“ share of active and diked floodplains Source: Heimlich et al. (1998 modified)