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MERIT Economic Impact Assessment Tool for Infrastructure Resilience

Solution Overview

MERIT (Measuring the Economics of Resilient Infrastructure Tool) is an economic impact assessment tool developed by GNS Science, Market Economics and Resilient Organisations that models the economic impact resulting from a loss of lifeline services due to water, power, roading outages and other infrastructure disruptions.[1] This dynamic economic analysis tool was specifically designed to evaluate 'shock' events and help resilience planners estimate the economic consequences of disruptive events.[2][1] The Wellington Lifelines Resilience Programme project was commissioned by the Wellington Region Lifelines Group to assess infrastructure vulnerabilities and investment priorities.[4]

Technical Components

The MERIT model is calibrated to a 2013 social accounting matrix for the Wellington region and is solved using the GEMPACK software.[6] The system includes a detailed representation of the region's infrastructure networks, including electricity, gas, water, and transport, with the ability to model the impacts of disruptions to these networks on different sectors of the economy.[6] The model has 35 sectors based on the Australian and New Zealand Standard Industrial Classification (ANZSIC).[6] MERIT applies Social Accounting Matrices (SAMs) to understand economic value chains in greater detail, enabling planners to identify and mitigate pinch points in the economy that could delay response, recovery and rebuild.[1] The tool includes an Inoperability MERIT module that provides data for short-run outages between 1-day and 1-week from localised small-scale disruption events such as electricity, gas, or telecommunication outages, designed to assess economic impacts associated with small-to-medium sized disruption events.[5] MERIT runs comfortably over a 50-year time horizon, with the first 15-years calibrated against real-world data.[5] The system reports various economic aggregate impacts including output, income, value added, GDP, factor prices, commodity prices, and welfare measures by industry for both the regional and national economy.[5]

Implementation Details

Smith N, McDonald G, Kim J-H, Ayers M, Brown C, and Seville E published the Wellington Resilience Programme Business Case: Modelling the Economics of Resilient Infrastructure Tool (MERIT) Assumptions Report in 2017.[1] Brown C, Smith N, Buxton R, McDonald G, Daly M, and Sevill E published the Wellington Water resilience project report in 2016 for Wellington Water.[1] The development of MERIT was halfway through a 4-year government funded development at the time of reporting.[7] The modelling was carried out using MERIT as a state of the art economic modelling tool developed to estimate the economic impacts of infrastructure disruption.[4] The preferred programme of investment comprises 25 resilience projects at an estimated total capital cost of $3.9 billion.[3] MERIT capabilities were extended to cover 'welfare' impacts to enable decision-makers and planners to target resilience measures to the most vulnerable communities.[1] The tool was further extended to provide decision-makers with assessments of physical and financial impacts of natural hazards as well as social and environmental impacts through dynamic assessment of multiple capitals.[1]

Benefits and Impacts

MERIT estimated that proposed infrastructure investment options valued at NZD2016 2.2–2.6 billion would result in reduced event losses of NZD2016 6 billion over 5 years for Wellington.[2] The modelling revealed that if a magnitude 7.5 earthquake occurs on the Wellington Fault with no investment (the do-nothing scenario), the expected loss to New Zealand's GDP over a 5-year period will exceed $16 billion.[3] If the preferred investment programme is implemented before the earthquake occurs, the expected economic loss reduces to $10 billion over a 5-year period, and a $6 billion impact to New Zealand's economy is avoided.[3] A coordinated investment of $3.9 billion would save the nation $6 billion in the aftermath of a magnitude 7.5 earthquake on the Wellington Fault.[3]

Climate Adaptation Relevance

This economic modeling approach addresses climate adaptation by quantifying the financial consequences of infrastructure failures resulting from natural hazards, enabling evidence-based investment decisions for resilience improvements. The tool's capability to assess disruptions across water, power, transport, and other critical lifeline services provides decision-makers with comprehensive assessments of how infrastructure vulnerabilities compound economic losses during extreme events. By modeling both short-term outages and long-term recovery scenarios over a 50-year horizon, the system supports strategic planning for climate-related infrastructure risks.

Business Analysis

The MERIT analysis demonstrated substantial economic returns on resilience investments, with a benefit-cost ratio showing that $3.9 billion in coordinated infrastructure improvements would prevent $6 billion in economic losses from a major seismic event.[3] This financial modeling provides a compelling business case for proactive infrastructure investment, demonstrating that resilience measures deliver measurable economic value beyond traditional cost-benefit frameworks. The tool's integration with RiskScape, a multi-hazard risk assessment tool developed by GNS Science and NIWA that estimates damage and direct losses for assets exposed to natural hazards, enables comprehensive risk-informed investment planning.[3] Government funding supported the 4-year development of MERIT, reflecting public sector recognition of the need for sophisticated economic modeling tools to guide infrastructure resilience investments.[7] The system's ability to assess welfare impacts by household type enables targeted allocation of resilience resources to protect vulnerable communities, supporting equitable investment frameworks that address both economic efficiency and social equity objectives.[1]

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