Editor's note: The concept of accounting for natural capital gained traction this week at the Rio+20 conference, with a new report estimating that companies use $72 trillion in natural resources without paying for them and 86 CEOs agreeing to develop natural capital accounting methodologies to inform business decisions. World Resources Institute has already developed a methodology to evaluate the costs of what it dubs "green infrastructure" -- a tool it says can help make the financial case for investing in the preservation of natural ecosystems.

Infrastructure is essential for economic growth. But as governments debate the future of sustainable development at the Rio+20 conference, there is one infrastructure solution that can provide a good return on investment: nature.

People often don’t think of forests, wetlands, coral reefs, and other natural ecosystems as forms of infrastructure. But they are. Forests, for instance, can prevent silt and pollutants from entering streams that supply freshwater to downstream cities and businesses. They can act as natural water filtration plants. As such, they are a form of “green infrastructure” that can serve the same function as “gray infrastructure,” the human-engineered solutions that often involve concrete and steel.

Examples of public and private investments in green infrastructure already exist. For instance, Bogotá, Columbia is pursuing upstream landscape conservation and restoration as an alternative to more conventional water treatment technologies. Ho Chi Minh City restored mangroves instead of building dikes in order to protect shorelines from storm damage. And a chemical facility in Texas built a wetland instead of using deep well injection to treat wastewater.

Photo: Ho Chi Minh City elected to invest in mangrove restoration instead of building dikes as a way to protect shorelines. Photo of Can Gio mangrove forest near Ho Chi Minh City, Vietnam provided by Tho nau via Wikimedia Commons

Costs of green vs. gray infrastructure

What should be of particular interest to finance ministers, CFOs, and conservationists alike is that, in many instances, investments in green infrastructure can be much less expensive than those in gray infrastructure. For instance, New York City evaluated two schemes to manage its stormwater flows. One was a green infrastructure plan that emphasized stream buffer restoration, green roofs, and bio-swales,landscape elements designed to remove silt and pollution from surface runoff water. The other was a gray infrastructure plan involving tunnels and storm drains. The green infrastructure option presented a cost savings of more than $1.5 billion. Decisionmakers in Idaho and N.C. found similar cost savings through green infrastructure.

If green infrastructure can provide comparable benefits to gray infrastructure at reduced costs, then the financial case can be made for investing in the conservation, sustainable management, or restoration of natural ecosystems to achieve development goals.

Analyzing green infrastructure’s costs and benefits

To help make this financial case, we need a method for evaluating green and gray costs in a manner that compares apples-to-apples and focuses on incurred expenses. Working with a number of partners, WRI developed such a “Green-Gray Analysis” approach and applied it in the Sebago Lake watershed, which provides water to Portland, Maine (check out our issue brief Insights from the Field: Forests for Water).

The Portland Water District (PWD) currently qualifies for filtration avoidance under the U.S. Environmental Protection Agency (EPA) 1989 Surface Water Treatment Rule. This rule waives public water systems from needing to install water filtration systems so long as beneficial land use practices keep concentrations of particulates and contaminants at or below regulatory baselines. However, recent upstream development, forest clearing, and population growth may jeopardize the filtration waiver, potentially forcing PWD to install a conventional membrane filtration system–an expensive proposition.

Amidst this context, WRI and partners recently explored the economics of conventional gray infrastructure versus green infrastructure alternatives that would help retain water quality and avoid loss of the waiver. These alternatives included riparian buffers, reforestation, conservation easements, sustainability certification of future timber harvests, and upgrades to culverts or drainage pipes. Costs associated with the green infrastructure options were determined through on-site consultations, publicly available data, and geospatial analysis.

We found that investing in green infrastructure options could represent a cost savings of up to 67 percent over constructing a new filtration plant. And that analysis was conservative. We only looked at costs to achieve one particular clean water benefit—meeting the EPA rule. We didn’t estimate the ancillary benefits of green infrastructure options, such as certified timber revenue, increased carbon sequestration, hunting and recreation opportunities, and increased property values due to conserved aesthetics. If we had done so, the net economic benefits of the green infrastructure option would have been even higher.

Uncertainty over green infrastructure effectiveness, costs, discount rates, and financing terms will impact the relative financials between green and gray for any specific project. Green won’t always be more cost-effective than gray. Nevertheless, the Portland analysis demonstrates the usefulness of a general methodology to assess cost comparisons.

Green Infrastructure and Sustainable Development

The lesson here is that instead of automatically defaulting to dikes and pipes to control flooding, we first should look at restoring wetlands. Rather than building sea walls, we need to think about conserving sand dunes and coral reefs. And before building more water filtration systems, we could first consider rehabilitating upstream watersheds. Although green infrastructure may not always be the most cost-effective approach, with a robust methodology in hand, planners can compare green to gray and identify new opportunities for investing in nature.

As planners -- especially those at Rio+20 -- look to meet infrastructure demands of the 21st century, the lesson is clear: Think about green before investing in gray.