Application in Appraisal

Example 1

A project is considering the replacement or repair of a stormwater pipe that releases outflow into a lake. The reason for the project is to mitigate the risk of the stormwater runoff reducing the quality of the water in the lake, which could ultimately have impacts on the environment and people’s health and wellbeing. An understanding of the value of the ecosystem services provided by the lake (e.g., water provisioning, fish provisioning, etc.) would help inform the priority of the project. Possible alternative solutions to the problem could include planting of vegetation that would provide water purification services. If the value of these services is higher than the costs of planting the vegetation, this may represent a cost-effective manner of improving the water quality. Depending on the specific situation, this planting may be able to reduce the costs of the project by either negating the need for replacement of the stormwater pipe or reducing overall repair costs.

Example 2

Consider a housing development where regular flooding events are a known risk. These floods may lead to damage to properties, which both increases costs for the owners and tenants of the properties and increases risks to financing institutions. In trying to reduce the risk associated with flooding, some solutions that could be suggested could include creating artificial wetlands and/or putting in physical drainage infrastructure. By understanding the ecosystem services that could be provided by the wetlands, the value the wetlands could provide less their installation and maintenance costs could be compared with the physical drainage infrastructure installation and maintenance costs. This would enable a cost-effectiveness analysis to be undertaken that will assist in identifying the project that will use funds most efficiently.