NBS Cost-Benefit Assessment

The Koiliaris River watershed ^[1] in Crete, Greece, represents a good example to illustrate the rationale and the implementation of the socio-economic assessment of NBS.

The main challenges faced by the Koiliaris River watershed derive mainly from the following (LENSES project, Deliverable 8.1):

The NBS identified consists of the restoration of a riparian forest according to information provided by Lilli et al. (2020). The restored broadleaved riparian forest planned will covers 20m-wide buffer stripes on each riverbank for a total of 200,000 m². For the socio-economic assessment a recalibration of the size of the area in which NBS is planned has been done for a final total area of 335,450 m². The NBS will incorporate a walking path to improve the recreational and tourism potential of the area.

The socio-economic assessment has been performed as a cost-benefit analysis (CBA), by considering the potential Ecosystem Services (ES) supply and the associated economic values (benefits) expected from the targeted NBS vis-a-vis the costs associated to the NBS implementation and maintenance. The CBA has been performed considering a selection of ES, notably the moderation of extreme events, to identify the potential of the NBS to reduce flood impacts, and climate regulation . These two ES have been selected mainly because of their relevance and data availability.

Both ES have been initially quantified in biophysical terms considering the Business as usual scenario (Scenario A), i.e., the current scenario without NBS implementation. Subsequently, they have been computed considering the scenario with the NBS implementation (Scenario B). The difference between the two scenarios, in terms of both biophysical and economic values, allows quantifying the gain (or loss) due to changes in ES provided as a consequence of the NBS establishment. The sum of the net values of the ES considered provides information about the total benefits contributed by the NBS. To calculate NBS benefits, the Integrated Valuation of Ecosystem Services and Tradeoffs model InVEST (Natural Capital Project) has been used.

The ES related to the moderation of extreme events is expressed by the value of the retained runoff volume (in m³). It indicates the capability of the area considered to store the runoff deriving from an extreme precipitation event. The difference between the retained runoff volume of the current land use and the one with the implementation of the selected NBS (i.e., the broadleaved forest), indicates the expected change in the runoff retention capacity. To calculate the economic value a lamination basin has been used as substitute good, assuming an average unit building cost of 400€/m³ .

The ES related to climate regulation has been assessed by estimating the organic carbon storing capacity per different land use and associated carbon sinks. The economic value has been calculated considering an average market price per ton of CO₂ (7.70€ per tCO₂eq).

Table 1 reports the outcomes of the biophysical evaluation of the supply and the corresponding economic value for the two targeted ES. The total gross benefits provided by the NBS, in term of moderation of extreme events and climate regulation, is equal to 1,240,013€.

The costs associated to NBS implementation, derived from Lilli et al. (2020), have been adapted considering the recalibrated area of 335,450 m². The total implementation costs are 1,082,808.50€.

For the CBA, implementation costs have been distributed unevenly within the first two years of the project, i.e. respectively 75% and 25% of total implementation costs (Carvajal and Janmaat, 2016), to consider those additional costs that might occur after year zero (e.g., to address seedling mortality after planting). Maintenance costs have been assumed to be equal to 5% of the total costs. Benefits have been introduced from the fifth year, assuming the NBS will start delivering benefits when the forest reaches a minimum growth stage. A 3.5% discount rate (Dicks et al., 2020) and a time horizon of 20 years have been considered. The results of the CBA are summarised as following.

The NPV and the B/C ratio show positive values, thus indicating that the implementation of the riparian forest is expected to be beneficial and profitable: for every euro invested, there is a pay back of 7.7€. Moreover, the time span needed to fully recover the total expenditures borne for NBS implementation (payback period) is 5 years .

It is important to consider that in this assessment only two ES have been considered while other co-benefits that may be provided by the NBS have not been included. To better support decision makers in evaluate a NBS implementation the full range of benefits and co-benefits should be evaluated .

^[1] Koiliaris River watershed is situated in the north-western part of Crete Island (Greece) and is one of the pilots participating in the LENSES project. It stretches for 132 km² at an altitude ranging from 0 to 2,120 m above the sea level. The main land use categories within the area include intensively grazed shrublands and pastures, olive trees, citrus groves, vineyards, vegetable crop fields, and mixed forest. The length of the drainage network is 44.8 km, consisting of an intermittent tributary, two ephemeral streams providing surface runoff, and karstic springs, forming the main segment of the Koiliaris River. These springs are fed by an 80 km² area of karst which is located outside the basin boundaries (Henao et al., 2022).