GENERAL METHODOLOGICAL FRAMEWORK

Overview

Economic valuation of a Nature Based Solution asks a simple question that is difficult to answer: is the intervention worth what it costs, and to whom. The general methodological framework sets out how NAIAD answers it, in a form that can be applied to a flood mitigation scheme, a drought adaptation measure or a portfolio of both, and that produces results comparable across the demonstration areas.

The framework

The framework begins by defining the counterfactual. A Nature Based Solution is assessed against what would have happened without it, not against an abstract baseline, and the comparison has to run over the same period and the same spatial extent on both sides. This is the step most often skipped in practice, and the framework treats it as the one that cannot be.

It then distinguishes the cost side from the benefit side and requires both to be built from the same physical model. Costs are treated over the whole life of the intervention, not only at construction. Benefits are grouped into the reduction of expected damage, the co-benefits delivered by the same intervention, and the residual value that the ecosystem provides independently of any hazard. Where a benefit cannot be monetised credibly, the framework records it as a physical quantity rather than assigning it a number, so that the valuation does not silently inflate itself.

The framework is explicit about uncertainty. Where the underlying hazard or damage estimates carry a range, that range is propagated rather than collapsed to a central figure, and the results are presented in a way that shows which assumptions the conclusion is sensitive to. A decision-maker can then see whether the case for an intervention survives being wrong about the thing they are least sure of.

What it produces

The output is a structured assessment rather than a single number: a cost profile over the life of the intervention, a benefit profile built from damage avoided and co-benefits, a treatment of the residual and the non-monetised effects, and a comparison presented so that the trade-offs are visible. This structure is what the demonstration-level assessments use, and what the cost-effectiveness and cost-benefit analyses at the sites inherit.

Related guidance

The framework is complemented by the life cycle costs methodology, which governs how the cost side is built, by the economic damage costs guidance, which governs the damage avoided, and by the co-benefits and cost-effectiveness material, which governs everything the intervention delivers beyond hazard reduction. Read together they form the economic assessment chain used in the project.