Innovative Solution

Water management, Land use, Energy crop, biofuel, Biodiversity, Ecosystem services, Valuation

technical

Methodological

Management

The Karolinenhöhe Ecosystem Valuation project was conducted on a290 haparcel of land where the permit to discharge treated wastewater expired at the end of 2010. This change in circumstance provided an opportunity to consider how best to manage the Karolinenhöhe land field, in particular in relation to growing energy crop.

The objective of the study was to assess the financial and economic (societal) costs and benefits of different water and land management options for the Karolinenhöhe land fields

The study was conducted in two phase. The first one included:

• identifying the business aspect and scenarios to be considered;
• establishing baseline conditions including key ecosystem services and a rough estimate of their importance;
• identifying potential physico-chemical impacts of land use changes;
• determining subsequent changes in environmental conditions;
• and the potential direction and magnitude of impacts on ecosystem services.

The second phase involved undertaking a monetary valuation. Techniques used included “change in production” for agricultural and energy crop outputs, “value transfer” for reduced CO2 emissions stemming from the use of energy crop biomass instead of fossil fuel, and two stakeholder willingness to pay (WTP) questionnaire surveys, as part of a ‘quasi’ Contingent Valuation Method (CVM) analysis to determine recreational and non-use values provided on the site.

The results were proven successful as they allowed the operational to select and justify to their stakeholders the best management option for the site. The results also informed the corporate ecosystem strategy of the company helping evaluate the potential of PES for the definition of new business model.

The Karolinenhöhe site is located at the western edge of the city of Berlin, just west of the river Havel.

The project has been initiated by Veolia Environnement together with Berliner Wasserbetriebe (BWB), the water and wastewater service provider for the city of Berlin.

BWB’s permit to discharge treated wastewater at Karolinenhöhe expired at the end of 2010. Excess wastewater will instead be treated by a UV process and discharged directly into the HavelRiver. The driver for launching this ecosystem valuation project was the need to make a decision regarding how best to manage the Karolinenhöhe landfields.

Local stakeholders including water and environment regulators, potential energy providers, farmers using the site, visitors of the site and general public of the city of Berlin, were involved since the early stage of the project.

This study has been conducted from January to November 2010 and helped select the best option for the future use of the site. Veolia proposed  continuing to irrigate the site and partnering with an energy company to grow short rotation energy crops on a portion of the land while maintaining the remainder of the area for local farmers, open space and paths for recreational use. The implementation of this management scheme is still under consideration by the local stakeholders.

The main purpose of the study was to help inform an ‘option appraisal’, specifically to value the complex range of environmental and social trade-offs in order to help select and justify to the local authorities and stakeholders the preferred land and water use at Karolinenhöhe.

The aim was also to assess the main winners and losers in terms of financial (internal) and societal (external) costs and benefits. This form of ‘distribution analysis’ would allow Veolia to evaluate and select the optimum option from a societal perspective, rather than purely the most financially beneficial. In this way, they could create greater ‘shared value’ for themselves and the stakeholders affected.   

In addition, a core aim was to explore potential sustainable financing opportunities (in terms of ‘payments for ecosystem services’), both at this site and as a concept to be applied elsewhere

The main outcome of the study is that Veolia used the study process and results to inform their discussions with the regulating authority to help select the best option from a financial and societal point of view. If the Karolinenhöhe energy crop project is successful, Veolia could make significant tax and maintenance costs savings.

Veolia is also using the results and approach to consider potential sources of revenue stemming from maintenance or generation of ecosystem services and to determine the potential scale of benefits associated to them. Related PES mechanisms could contribute to the emergence of new sustainable business model for water services.

The first phase of the study was a qualitative analysis, which included determining the potential direction and magnitude of impacts on ecosystem services under each scenarios including the current baseline conditions. The results revealed the main ecosystem service relative values.

The second phase of the study involved a monetary valuation of these main ecosystem services, comparing internal (financial) versus external (societal) costs and benefits, and conducting a sensitivity analysis. Methodologies used range from using benefit transfer to using stated preference questionnaire surveys.

The Karolinenhöhe project was used as a foundation for embedding ecosystem valuation within the company. It was deemed convincing enough to get the buy-in from high-level management for launching a structured Ecosystem Valuation Program whose first goal would be to strengthen the business case.

Indeed, the Karolinenhöhe project demonstrates to Veolia that:

• From a local and short-term perspective, CEV is useful for giving monetary value to the positive externalities of an activity. It is thus effective in highlighting the true benefits of Veolia’s services and their capacity to create shared value.
• From a corporate and medium term perspective, CEV can help investigate the feasibility of Payments for Ecosystem Services (PES) mechanisms.

Consequently Veolia’s Ecosystem Valuation Program is aimed at:

• Communicating on the approach and its capacity to help making better informed decisions.
• Developing water related ecosystem services value expertise.
• Concentrating efforts where the biggest potential values are, and convincing such sites to value the ecosystem services they interact with.
• Considering new payment mechanisms to capture (part of) these values, and build an ecologically enhanced business model.
• Sharing the results with public authorities and governments to ensure the emergence of facilitating policy frameworks.

Stakeholders consultation was key in the process to ensure that the different land and water management options was agreeable to all.

The valuation study was undertaken over 8 months. In addition to using around 30 days of Veolia, it required about 50 days of consultancy inputs and 15 days in total of three trained students who conducted the questionnaire survey.

The review of existing valuation literature for the benefit (value) transfer approach highlighted the current relative lack of comprehensive and reliable valuation studies available to compare the impacts of relatively similar energy crop scenarios. The quasi CVM questionnaire survey approach thus provided a good relatively low cost approach to determining more credible site and scenario specific values.

Initially the option appraisal was supposed to include continued discharge of UV treated wastewater at the site, thereby continuing to provide cost-effective irrigation. However, during the course of the study, the Berlin authorities decided that this option was not permissible. This meant that Veolia could not assess the value of re-using treated water as was originally intended. Nevertheless, evaluating alternative pumped groundwater options still allowed selection of an optimum option from a societal perspective. This situation highlighted the need for a flexible approach to be undertaken during the study. An unfortunate consequence was the loss of the direct link with Veolia’s core business, which weakened Veolia’s business case for applying the ecosystem valuation. 

Ecosystem valuation is encouraged at both international (Nagoya targets and TEEB study), european (Blueprint) and national (Grenelle, SNB) level.

Business organization such as WBCSD is working to define some guidelines to help companies implementing ecoystem valuation

Two other ecosystem valuation studies are in progress at the moment within Veolia Water at a drinking water site and a wastewater site together with the concerned municipalities

Mathieu TOLIAN

VEOLIA WATER

Corporate Social Responsibility Department

52, rue d’Anjou – 75008 PARIS  

Tel : +33.1.49.24.35.07

Fax: +33 1.49.24.35.13

Mobile : +33.6.21.34.62.06

Mail : mathieu.tolian@veoliaeau.fr

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