Assessment of the Impact of Loss-of-Retention Fees on Green Infrastructure Investments

Abstract

Urbanization leads to the growth of impervious surfaces, which increases surface runoff, causing pluvial and flash flood phenomena. Furthermore, it significantly limits the infiltration of stormwater into the ground; this, in turn, reduces groundwater supply, ultimately intensifying drought effects. In order to adapt urbanized areas to climate change, the objective is to stop these unfavorable processes and strive for recreating the natural water cycle through developing decentralized stormwater management practices on private properties. An important management instrument that motivates property owners to invest is economic incentives, such as stormwater or impact fees associated with a system of rebates/discounts that depend on the applied stormwater runoff reduction solutions. Herein, we analyze a new economic instrument—a fee for reducing natural field retention—which is planned to be introduced in Poland. We assessed the incentive and funding (income-generating) function of the fee based on the example of the Sudół river catchment in Krakow, Poland. The research involved conducting simulation calculations and assessing the incentive impact through calculating investment Net Present Value (NPV), which is the investor’s response to the proposed economic incentives included in the structure of the fee and the rebate system. This study demonstrated errors and loopholes in the suggested fee rules—too low rates that prevent achieving profitability (negative NPV) for small-scale stormwater retention practices, and incorrect conditions that enable obtaining discounted fees. We also estimated the fee rate that ensures investment profitability.