Estimating the Economic Value of Green Infrastructure: Economic Valuation Models

A study has proposed a method to place monetary value on green infrastructure at both a project and regional scale, which illustrates the value of investing in green infrastructure to the public and other stakeholders.  Source: Vandermeulen, V., Verspecht, A., Vermeire, B. et al. (2011) The use of economic valuation to create public support for green infrastructure investments in urban areas. Landscape and Urban Planning. 103:198-206. 

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With increasing urbanisation and its subsequent negative effects on the environment, the need for green spaces is becoming increasingly recognised. Although it is difficult to define ‘Green infrastructure’, a network of open spaces, parks, waterways, trees and woodland that protect and enhance nature, and provide health and economic benefits, presents a possible solution to this problem. Decision makers need to know that investment in it will provide an economic return at both a regional and a community scale.

Using results from the EU VALUE project (1) , the study produced a combined local-regional economic valuation model for assessing green infrastructure investment. At the project level, the study applied a cost-benefit analysis, using the concept of ‘Total Economic Value’, which attempts to capture the value of the different components of natural resources. Costs considered by this approach include land purchasing costs, design and construction costs and maintenance costs of the infrastructure, whilst benefits include production and regulating ecosystem services such as air quality improvement and climate change mitigation, as well as improved health from cycling, reduced accident risks, as well as recreational benefits. At the regional level, a ‘multiplier analysis’ was used, based on an input-output approach to consider not only the positive impact on local industry, but also on wages and the subsequent impact from better wages and job creation on the regional economy.

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To illustrate how this two-tier model could be applied, the researchers used a case study of a proposed green cycle route in Bruges, Belgium, which is expected to lead to a 5% increase in cyclists. The example represents only a few aspects of multi-functional green infrastructure – an approach which is aimed at directly improving ecosystem health and resilience and contributing to conserving biodiversity (2) . But it represents a type of project that contributes to the health and welfare of urban dwellers and brings environmental benefits to urban areas. Values were calculated for a 20 year timeframe. Examples of costs at the project-level were the construction of the bicycle road, indirect costs arising from tax increases and lost opportunity costs owing to farmers giving up land.

Evaluated benefits included the avoided car costs, tourist expenditure, improved traffic safety and positive health effects of cycling leading to lower health care costs and less absence from work. Alongside this were the environmental benefits effects of improved air quality and climate change mitigation. Using the cost-benefit approach, environmental benefits alone were estimated at €608,894 over 20 years, whilst the total value of green infrastructure at project level was estimated to be €1,707,169, which also included benefits from improved road safety, health and recreation. Regional additional effects were valued at €3,885,723, more than twice as high as the project effects. Most of the regional value is created by the multiplier effect of the investments in the project. The total value of the cycle belt is therefore €5,592,892, when project and regional values are combined over a 20 year period.

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The researchers suggest that the model provides a useful complement to traditional cost-benefit approaches by highlighting the indirect economic benefits of green infrastructure. It can help convince stakeholders of the importance of investing in green infrastructure and allow policymakers to balance issues of community and economy growth, environmental protection and quality of life. They highlight that in addition to data limitations, the objectives of the evaluation will define or limit the inclusion of different types of benefits and costs in the evaluation exercise. If full benefits were included, such as stress reduction and emotional benefits, then the outcomes would be more positive, whereas if costs, such as automobile industry losses, were included, then the investment would seem less positive.

Footnotes:

1. VALUE (Valuing Attractive Landscapes in the Urban Economy) is supported by the European Commission through the Interreg IVB programme. See: http://www.value-landscapes.eu

2. European Commission’s webpage on Green Infrastructure. See: http://ec.europa.eu/environment/nature/ecosystems/index_en.htm

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A second publication The Economic Value of Green Infrastructure  is the result of a partnership between the Northwest Regional Development Agency and Natural England.  The report looks at the key challenge for policymakers and economic development practitioners regarding how to shape a strong economic case for environmental improvements.  ‘Green’ issues might be very attractive, it’s argued, but where are the economic benefits? What difference will they make to jobs, health and the economic strength of areas struggling with deprivation and social problems?

Northwest Regional Development Agency and Natural England commissioned reports by ECOTEC and AMION, designed to help practitioners make the case for investment in green infrastructure.  It summarises the many benefits of green infrastructure and the way in which it can underpin the success of other economic sectors, offering an improved environment, jobs, sustainable business enterprises, social benefits, economic security and cost savings.  These savings include a reduced need for healthcare, better employee productivity and better adaptation for climate change. The summary also shows how more credible and consistent tests and measures are being developed to assess the value of green infrastructure projects.  It emphasises, too, that green infrastructure is dynamic – it must be strategically planned for, invested in and managed at local and regional levels, if it is to function in underpinning and providing for a prosperous and sustainable economic future.  This management requires in-depth understanding of the role green infrastructure plays throughout our everyday lives, and of the need for co-ordination and co-operation across political, sector and administrative boundaries.

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Research into the benefits of green infrastructure, and the development of tests and frameworks designed to demonstrate strong economic cases for its value, send a clear message.  Green infrastructure, if properly planned, managed and invested in, has a lot to offer, and presents opportunities which should be grasped. There are economic benefits from improving the quality of the environment, promoting underused natural green areas, attracting investment and developing the region’s image as a green, healthy place to live, work, invest, holiday and study. On a global scale, we can address the increasingly pressing issues of  climate change, resource shortages and biodiversity loss.

Some of the practical tools policymakers and economic development practitioners need to grasp these opportunities are already in place. The North West Green Infrastructure Guide, which can downloaded from http://www.greeninfrastructurenw.co.uk, provides a detailed step by step guide to planning green infrastructure,
with case studies illustrating best practice. It is particularly designed for planning authorities and seeks to inform the process of preparing the local development framework.

More information:

Natural England – http://www.naturalengland.org.uk

Northwest Regional Development Agency – http://www.nwda.co.uk

Natural Economy Northwest – these two websites contain further guidance, case studies and information on the benefits of green infrastructure

Finally you may also be interested in a paper by Mell, IC. & Allin, S. (2014) Evaluating the role of high quality 3D-visualisations in establishing economic valuations for urban green infrastructure investments’ presented at the Applied Environmental Economics Conference, The Royal Society, London. Click on title to download the full document.

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One comment

  1. Urban Choreography

    Reblogged this on Urban Choreography and commented:
    The valuation of green infrastructure and landscape improvements is s contentious issue but without doing so makes it difficult to justify the capital costs of such assets, especially in the developmental; economies of the South.

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