New financing models for flood risk management offer an opportunity to increase investment and enable synergies between management of flood risk, water and wastewater to be exploited – this is one of the findings of a new report into valuing nature for economic benefit, published today.

The final report of the Ecosystem Markets Task Force, ‘Realising nature’s value’, is a review of the opportunities for UK business from expanding green goods, services, products, investment vehicles and markets which value and protect the natural environment.

One of its key recommendations is the privatisation of flood defences. The report justifies this by saying:

“Greater exploration of the mix of financing mechanisms across private and public sector institutions (e.g. taxation, utility charges, insurance premiums, regulation) and funding delivery models for flood defences will be required to meet future pressures from climate change and increasing development.”

According to the study, alternative funding arrangements including public-private partnerships “potentially provide Government with additional investment which could contribute to reducing the deficit and remove significant future expenditure from the public sector.”

It adds that “there may be opportunities to drive greater efficiencies and provide greater transparency of flood defence costs” and “new funding mechanisms for flood defences could lead to expansion of, and/or innovative approaches to, the engineering and natural solutions market.”

The Task Force therefore recommended that the Government should create the legal and regulatory conditions to enable the enable the transfer of the responsibility for the investment, planning, construction, management and maintenance for soft and hard flood defences from the public sector to the private sector. However, it warned that Government would need to carefully define the responsibilities, ownership, liabilities and funding mechanism.

The report covers opportunities in water cycle catchment management, as well as anaerobic digestion, sustainable woodfuel, nature-based certification and labelling and biodiversity offsetting.

As well as issues on flood defences, the study outlines the opportunities that exist from integrating nature into water, wastewater and flood management. It claims that a more holistic approach to the water cycle could garner substantial economic benefits.

The report reads:

“Better water cycle catchment management can help improve the quality of water entering the system, thereby reducing treatment costs, reduce the load on wastewater systems, reduce the risk of floods, preserve biodiversity, protect and enhance our natural environment for the benefit of local communities and tourists, and deliver economic benefits to government, businesses, consumers and farmers.”

The Task Force is recommending greater incentives for water catchment management, enabling water companies, farmers and businesses to work together on a larger scale to deliver water quality, biodiversity and economic benefits.

It also encourages wastewater catchment management, an “embryonic area” where sewerage companies, farmers and industrial businesses should work together to repair the damage done by past generations to rivers and beaches, whilst also delivering economic benefits.

Furthermore, a package of incentives should be considered to increase the uptake of sustainable drainage systems (SuDS), the report argues. The potential introduction of a charge on new developments on greenfield sites which send surface water to public sewers rather than adopting a SuDS solution is suggested.

The greater use of soft flood defences could also have a potential role in reducing flood risk in more economical ways, while also being better for biodiversity and the natural environment than traditional hard-engineering solutions.

The report also explores the economic opportunities thrown up by incentivising water trading, water metering and longer-term planning e.g. extending Water Resource Management Plans from 25 years to 50 years.

The Ecosystem Markets Task Force is a business led review of the business opportunities that arise from valuing nature properly.

The work of the Task Force is a key commitment in the Government’s Natural Environment White Paper, ‘The Natural Choice.’

The Government will issue its official response to the Task Force’s report later this year.

Read the full report here

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