Economic merits of peatlands restoration in Scotland

Laetitia Pettinotti, Geneva 16 January 2014

Restoration of degraded peatlands in Scotland can generally be justified in economic terms on the basis of GHG emission savings alone.

Most peatland sites in the United Kingdom have already degraded to some extent due to direct and indirect anthropogenic stresses such as peat removal, farming activities, burning and acid rain. Peat degradation entails carbon release to the atmosphere or watercourses and a loss of endogenous habitats and species.

Climate change is anticipated to worsen peatland degradation. Peatlands’ distribution and occurrence is climate sensitive making them a rare ecosystem at the global scale.  Similarly, their biodiversity is highly specialized to the low nutrient and waterlogged conditions in Scotland. However, rainfall distribution over the year and temperature ranges are likely to alter, impacting peat accumulation and maintenance. In the long term, changes in climatic conditions when peatlands are already damaged will threaten their resilience. Ultimately, the provision of carbon uptake and storage, water quality and cultural services (e.g. sense of wildness, recreation, hunting, fishing) by peatlands is at stake. The degradation and/or loss of peatlands holds a cost for society since these ecosystem services will not be delivered.

Restoration of degraded sites may be able to slow the rate of loss of ecosystem services or indeed recover service levels similar to those associated with near-natural conditions. However, restoration incurs differentiated costs depending on the degradation state. These costs need to be compared to the expected benefits, which also vary with the degree of degradation, to determine the economic merits of any restoration. For simplicity, only the climate regulation benefits of restoration are considered here, since water and biodiversity benefits are more difficult to assess.  Moreover, using a GHG metric joins the policy agenda, which expresses targets in GHG fluxes.

Method CO2 equivalent emission profiles per hectare over time for different categories of degraded peatland in Scotland were estimated using a spreadsheet model based on the literature and a number of working assumptions. The emissions profiles are in CO2 equivalent so as to integrate methane fluxes. Indeed, rewetting the peat results in a methane spike at first and then a small continuous flux once restoration is completed. Profiles were estimated with and without restoration under different climate change scenarios:  no climate change; low climate change (P10) and high climate change (P90) – with the last two characterized as emission differentials increasing by 0.5% and 1.5% per year.  Thus the benefits of restoration are time-varying with carbon emission savings a function of the restoration rate, the baseline degradation rate and of carbon prices (Graph 1).

Graph blog article

Graph 1: Example of emissions differentials between a restoration and no restoration scenario per degradation category with no climate change impact on emissions.  Note: The initial negative values correspond to the approximated methane spike.

The differential between emission profiles under the restored and (baseline) non-restored cases (i.e. the benefits of restoration) was valued using DECC’s central non-traded carbon price over three time horizons: to 2027, 2050 & 2080. The selected time horizons approximate to policy target dates (2027 and 2050) for Scotland but also to predictions from bioclimatic envelope models of when most peatland sites will be under increased degradation pressures from climate change.  In total 67 years are under consideration, which could approximate to the time needed for peat recovery, though complete recovery time is still unknown. The discount rate used followed the HM Treasury Green Book: 3.5% from year 0 to 30 and 3% from year 31 to 67.

Cost data were taken from the literature and industry sources. They are complex to evaluate since they depend on numerous site-specific parameters such as heterogeneity of degradation, remoteness of sites and scale of intervention. Depending on the assumed peat condition, capital cost ranged from £0 to 1125 £/ha; on-going cost from £25 to £75 £/ha/yr; while opportunity cost vary from £0 to 370 £/ha/yr.

The value of net savings (emissions avoided plus any sequestration, less any additional emissions) was compared to the upfront capital costs plus on-going opportunity, management and monitoring costs of different types of restoration, to generate illustrative benefit:cost (B:C) ratios and discounted Net Present Values (NPV).

Variation across different peatland categories in terms of the shape and slope of emission profiles plus costs over time translates into different B:C ratios and NPVs.  All other things being equal, higher emission savings, more rapid emission savings and lower costs all yield greater net benefits, as do longer time-horizons and accelerating climate change. All parameters are subject to considerable uncertainty, but the case for restoration is generally positive (NPV >0; B:C > 1) once sufficient time has elapsed for restoration to take effect (Table 1).

Peatland table

Table 1: B:C ratios for peatlands restoration under no and high climate change scenarios.

Note: The results are to inform policy-making and are illustrative rather than definitive values. Main findings underline that –

Restoration of degraded peatlands in Scotland can generally be justified in economic terms on the basis of GHG emission savings alone. Even in the absence of further climate change, restoration is beneficial.

Inclusion of non-GHG benefits such as water and biodiversity benefits reinforces the case for restoration, as does consideration of worsening degradation under different climate change scenarios.

Due to upfront capital costs and the possibility of a methane spike immediately post- restoration, B:C ratios and NPVs increase as the period considered lengthens. Hence restoration is more cost beneficial in the long term.

A narrow focus on GHG emissions suggests prioritizing categories currently emitting high GHG levels, even though their restoration costs are also higher. However, the heterogeneous nature of sites (sometimes encompassing many of the peatland categories in Table 1 within the same site) and possible non-GHG benefits may alter this ranking.

For example, the B:C ratio for restoring afforested peatland sites is particularly sensitive to assumptions about opportunity costs.  If trees are harvested early (to permit restoration) the costs can be high whereas if restoration is delayed until the normal harvest time, or indeed if tree growth is so poor that the loss of timber value is minimal, then opportunity costs are greatly reduced – making restoration more attractive .  In addition, the net uptake of carbon by trees can be greater than that of peatlands at some points in the forest growth cycle. Hence site-specific information is needed to make judgments about individual sites.

Improved understanding of degradation rates (including threshold effects) with and without restoration would help to refine the results. Similarly, better data would more accurately depict the spatial co-incidence of costs and emissions, which were only assumed in this exercise.

Further details on the underlying methodologies and data may be found in:

Artz R., Chapman S., Donnelly D., Matthews R., 2013, Potential abatement from peatland restoration, ClimateXChange Research summary, Edinburgh, ClimateXChange.

Moran D., Wreford A., Evans A., Fox N., Glenk K., Hutchings M., McCracken D., McVittie A., Mitchell M., Moxey A., Topp K., Wall E., 2013, Assessing the preparedness of England’s natural resources for a changing climate: Assessing the type and level of adaptation action required to address climate risks in the ‘vulnerability hotspots’, Report for the ASC Committee.

About the author

Laetitia PettinottiLaetitia Pettinotti undertook this peatland research as part of her MSc in Environmental Economics at the University of Edinburgh, Scotland. She was supported in this by Rebekka Artz and Steve Chapman of the James Hutton Institute, Dominic Moran of SRUC and Andrew Moxey of Pareto Consulting, within “ClimateXChange, the Scottish Government’s Centre of Expertise on climate change.


The views expressed in this blog are purely those of the author and do not necessarily reflect the views of TEEB and should not in any circumstances be regarded as stating an official position of TEEB.

Photo credits:Simon Huguet

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