Co-benefits assessment in the Lez Demo through choice experiment

Description

The co-benefits of a Nature Based Solution are frequently the largest part of its economic value and the hardest part to price, because most of them are not traded and several are not even directly experienced by the people who would pay for them. A choice experiment addresses this by asking people to choose between alternatives described by their attributes, so that the value of each attribute can be inferred from the trade-offs they make.

This tool applies a choice experiment in the Lez demonstration site near Montpellier, where the NAIAD strategy combines active management of the aquifer, de-proofing of the city, bio-swales, ditches, retention basins and green roofs. Respondents were presented with alternative configurations of these measures and the benefits they deliver — flood risk reduction, drought security, water quality, amenity and landscape, urban heat — and asked to choose.

The resulting values are specific to the basin and to the population affected, and were designed to be read alongside the avoided-damage figures produced by the economic assessment framework and the transferred values produced by meta-regression, so that the three estimates of co-benefit value can be compared.

Applications to decision making in the insurance sector

A choice experiment produces the part of the business case that a risk carrier cannot generate from its own loss data: the value that beneficiaries place on benefits other than avoided damage. That is the evidence needed to argue that indirect beneficiaries should contribute to funding, which is one of the recurring obstacles NAIAD identified in building viable Natural Assurance Schemes.

Added value of this modelling approach

Stated-preference methods are the accepted way to value goods that have no market, and choice experiments in particular avoid asking people to price a benefit directly. Because the alternatives are built from attributes, the analysis also reveals which attributes drive the choice, and how the population segments.

What decision can be improved with this modelling approach

Whether the co-benefit stream is large enough to justify an investment that avoided damage alone would not; how a measure should be configured to deliver the benefits people actually value; and how the cost of a strategy might be shared between direct and indirect beneficiaries.