Understanding the local economic impacts of natural capital investment

Introduction

The Scottish Government, in partnership with NatureScot, commissioned WSP to undertake economic analysis to determine how local investment in natural capital can impact local economies and whether new multiplier values should be created for use in economic appraisal of future natural capital investment projects. The Project commenced in October 2021 and was completed in May 2022. This document is the Final Research Report for the project. It provides guidance for the Input-Output (I-O) models^[1] generated and is best read in conjunction with the model.

Aims and objectives of the project

The aim of the project was to quantify the typical contributions to local economies, measured as output and jobs created, of four different natural capital investments, outlined below. These investments do not have standardised definitions but can be summarised as per the descriptions below:

The restoration of upland and lowland peatland: Referring to management measures that aim to restore the original form and function of peatland habitats to favourable conservation status. The principal activity involved is the return of the site hydrology to natural conditions. Depending on the starting point, peatland sites may need drain blocking to rewet them using a variety of techniques. Peatland restoration helps to control emissions of greenhouse gases such as carbon dioxide and support biodiversity.

Woodland creation and restoration: Projects that involve the permanent transfer of an area of land from non-woodland habitats to coniferous or broadleaved woodland. Although often undertaken for timber production or the sequestration of carbon to support offsetting schemes, the wider multiple benefits of schemes will often support recreation, biodiversity and landscape objectives. Projects involve planting of young trees in cleared areas and the ongoing management through the project lifecycle to support their continued development.

Regenerative agriculture: Referring to the transition from intensive agriculture techniques to a wide range of management practises designed to maximise plant diversity, develop more resilient soil and support a wide range of biodiversity. Key techniques including reducing the disruption to the soil substructure using no-till techniques, the planting of cover crops and the use of rotational agricultural systems.

Coastal habitat restoration: Projects that aim to provide additional protection from coastal erosion through the creation and restoration of habitats such as coastal saltmarsh. These projects are often delivered in combination with traditional hard coastal defences and can provide large benefits to biodiversity, carbon sequestration and storage and climate change adaptation.

The project also aimed to identify the relative importance of different factors in the design and delivery of natural capital investment that contribute to the magnitude of local economic impacts from this investment, for example, the scale and complexity of the project, access issues and transport, the breadth of skills, materials, knowledge, and expertise required to deliver the project.

Contents of this Final Research Report

This document is the Final Research Report for the Scottish Government funded project concerning the Local Economic Impacts of Natural Capital Investment. It is intended to provide a comprehensive view of the research project's main findings as well as information on the methodological approach adopted. More detailed information on data, values, and model results are contained within the reference data provided within each I-O model, available as separate supporting documents to this report.

The report is structured as follows:

• This introduction chapter sets out the aims and objectives of the research and explains the purpose of this report and its structure.
• Context for the research sets out the context for the research including an outline of the policy context for natural capital investment.
• Project Approach explains the methodology adopted in the project, including data collection and the development of the Input-Output model.
• Input-output model guidance provides an overview on how to use the models developed as part of this project and how the results should be interpreted.
• Case study results present the outcomes of applying the Input-Output models to real world scenarios across three different intervention types.
• Conclusion discusses a summary of the main findings from the overall project, the key areas of learning and recommendations for further research.