Redcar cost-benefit analysis, UK

Redcar is a seaside resort in the North East of England and is situated in an area that is vulnerable to flooding and coastal erosion, particularly as a result of severe storm events from the North Sea. This case study provides an example of best practice in relation to using cost-benefit analysis to inform decision making and to prioritise responses to the potential impacts of climate change.

In order to inform the most appropriate and cost effective adaptation option Redcar carried out a cost-benefit analysis looking into three scenarios (UK Environment Agency, 2009):

  1. Do nothing (to establish a baseline)
  2. Do minimum
  3. Do something (seawall improvements and groyne maintenance at various standards to defend along the existing line)

The options for adaptive measures were designed to provide a particular standard of protection (SoP) for 50 years, after which adaptive/management measures will be required to address climate change. Maintenance and future costs were calculated for each option with figures derived from the contractor’s estimate and the current cost database for civil engineering works. The two tables below outline the results of the cost-benefit analysis and provide the rationale behind taking adaptive action.

Table 1: Overview of present value costs and damage (UK Environment Agency, 2009)

                                            Values cost and damage

Scenarios

Present Value Cost

Present Value Damage

Flooding

Erosion

Total

Do nothing

0

28,832

120,502

149,334

Do Minimum

16,032

109,954

0

109,954

Do something

1 in 100 (1%) SoP

Precautionary

30,744

2,107

0

2,107

Managed adaptive

27,995

7,676

0

7,676

1 in 200

Precautionary

31,233

1,669

0

1,669

 

(0.5%) SoP

Managed adaptive

28,383

3,408

0

3,408

1 in 300 (0.33%) SoP

Precautionary

31,395

1,573

-

1,573

Managed adaptive

28,520

2,425

0

2,425

1 in 500 (0.2%) SoP

Precautionary

31,720

1,489

0

1,489

Managed adaptive

28,794

1,489

0

1,489

Present values in thousand GBP (£)

Table 2: Summary of the cost benefit (UK Environment Agency, 2009)

 

Do nothing

Do minimum

Improve – Managed Adaptive

1 in 100 (1%)

1 in 200 (0.5%)

1 in 300 (0.33%)

1 in 500 (0.2%)

Total present value of costs

-

16.03

27.99

28.38

28.52

28.79

Total present value of residual damages

149.33

109.95

7.68

3.41

2.43

1.49

Total present value of benefits (reduction in damage relative to Do nothing baseline)

 

39.38

141.66

145.93

146.91

147.85

Net present value

 

23.35

113.66

117.54

118.39

119.05

Average benefit/cost ratio

 

2.46

5.06

5.14

5.15

5.13

Present value in million GBP (£)