Flood risk portfolio in a subsiding peat basin
A river basin of 1,850 km² drains to a town of 26,000 people. A 2021 flood caused €78m in damage. Upstream, 12,000 ha are farmed, and 60% of that is drained peatland that is subsiding. Three flood-risk options are being appraised. Option A raises levees by 1.2 m through the town at a cost of €38m; it protects against a 1-in-100-year event but increases the consequences of failure. Option B restores 1,800 ha of floodplain and rewets 900 ha of peat, costing €31m; it would cut peak flow by 12–18%, require compensation for 140 farms, and may raise water tables under 60 homes. Option C is a hybrid of targeted levees and upstream restoration, costing €44m. The available budget is €45m. The regional flood authority must choose a portfolio and explain who bears the residual risk.
1. Using the stated expected annual damage (EAD) values-no action €6.2m; Option A €2.0m; Option B €3.1m; Option C €1.1m-calculate simple benefit-cost ratios over 30 years at zero discount and state one limitation.
Read the worked answer
Option A benefit = (€6.2m − €2.0m) × 30 = €126m; BCR = 126/38 = 3.3. Option B benefit = (€6.2m − €3.1m) × 30 = €93m; BCR = 93/31 = 3.0. Option C benefit = (€6.2m − €1.1m) × 30 = €153m; BCR = 153/44 = 3.5. C has the highest simple BCR, but the differences are not large. The zero discount rate overweights distant benefits and ignores maintenance and the rising value of assets in the floodplain. It also treats EAD as certain, whereas the 1-in-100 standard is a design event, not a full risk curve. The calculation is useful for screening, not for choosing. A lower discount rate or a shorter appraisal period would narrow C's advantage; including habitat and carbon benefits from peat rewetting would widen it.
2. Recommend an option under the €45m budget, considering residual risk and equity. Explain who bears the costs and benefits.
Read the worked answer
Recommend C if the compensation and water-table issues can be managed within the €45m envelope; otherwise B plus targeted levee raising. C fits the budget at €44m and has the lowest residual EAD, which matters because levee-only protection creates a catastrophic tail risk if the design event is exceeded. But C concentrates costs on 140 farms and 60 homes upstream, while the main benefits accrue to downstream town property. That is a distributional problem: upstream landowners are asked to provide a service for downstream beneficiaries. Compensation should be funded from the scheme, not left to voluntary agreements, and the 60 homes need individual surveys and, where necessary, drainage works. If compensation exceeds about €5m, C no longer fits; then choose B and use the remaining budget for targeted levee raising around critical infrastructure. The authority should publish residual risk maps and explain that no option removes risk.
3. Which EU policy principle or directive is most relevant, and how would it change the appraisal?
Read the worked answer
The EU Floods Directive is the most relevant because it requires preliminary flood risk assessment, flood hazard and risk maps, and flood risk management plans with public participation. It shifts appraisal from a single design event to a risk-cycle approach and requires coordination across the basin, including upstream measures. The Habitats Directive also matters if floodplain restoration affects protected sites; it would require an appropriate assessment and could make B or C more attractive if they improve site condition. The appraisal should therefore include non-market benefits (habitat, carbon, water quality) and a consultation record, not just EAD. It should also state that measures must not increase risk elsewhere, which challenges levee-only options that transfer risk downstream. This does not dictate the choice, but it changes the burden of proof.