System dynamic modelling to assess economic viability and risk trade-offs for ecological restoration in South Africa

Can markets assist by providing support for ecological restoration, and if so, under what conditions? The first step in addressing this question is to develop a consistent methodology for economic evaluation of ecological restoration projects. A risk analysis process was followed in which a system dynamics model was constructed for eight diverse case study sites where ecological restoration is currently being pursued. Restoration costs vary across each of these sites, as do the benefits associated with restored ecosystem functioning. The system dynamics model simulates the ecological, hydrological and economic benefits of ecological restoration and informs a portfolio mapping exercise where payoffs are matched against the likelihood of success of a project, as well as a number of other factors (such as project costs and risk measures). This is the first known application that couples ecological restoration with system dynamics and portfolio mapping. The results suggest an approach that is able to move beyond traditional indicators of project success, since the effect of discounting is virtually eliminated. We conclude that systems dynamic modelling with portfolio mapping can guide decisions on when markets for restoration activities may be feasible.

► The study examines whether markets are appropriate for ecological restoration.
► We propose an integrated system dynamics and risk analysis using portfolio mapping.
► We model eight case study sites where ecological restoration is occurring.
► We examine the net present value of restoration at each of these sites.
► The proposed framework provides an enhanced means of assessing project viability.