The impact of climate change on infrastructure is receiving more focused attention from project planners, sponsors, and financiers. The expectation of increase or decline in precipitation levels, increase in wind speeds, variations in temperature, and rising sea levels raises the question of whether, and by how much, new or existing infrastructure should be weatherproofed in
response to actual or expected climate change.

This is particularly relevant for PPPs, for which the useful lifetime of the infrastructure asset is usually long and spans several decades between design and the end of operational life. During that period, the climate may go through considerable changes. Therefore, the assets, if their design is based only on historic records, may underperform on several levels as the years go by.

Depending on their nature as well as local conditions, projects and their components will have specific sets of climate “variables” associated with climate risk. As the variables exceed critical threshold limits, there will be materialization of direct and indirect risks and impacts.

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First, the analysis

The first question for the project planner analyzing this challenge is whether there is a need to respond to actual or potential changes in climate. Examining how a discrete asset will perform in a future climate scenario, when the threshold levels will be exceeded, and the potential financial and other consequences, is important for investment and design planning. This planning process should take into account the consequences of potential climate scenarios, which could include loss of functionality and revenue (such as lower generation capacity of a hydropower plant due to decline in precipitation levels) or greater costs (such as increased maintenance or rehabilitation costs and greater insurance premiums in the case of a port facing a rise in sea level).

Tools and data for climate risk analysis are becoming increasingly available as stakeholders recognize the need for their use. Planners now have the advantage of accessible, user-friendly information about climate variables, like the World Bank’s climate portal. They also benefit from the refinement of spatial and temporal resolution of climate models and projections.

Nevertheless, it is important to consider that many climate variables have a marked region-specific character and need to be scrutinized in the context of a specific location and applied to a project’s (or sector’s) vulnerabilities and needs.
Once the actual or expected climate risks are identified, planners must ask which adaptation option (or combination) should be considered from among the following choices:

  • Resisting the risk, which entails designing to resist an expected climate condition (for example, stronger winds) so the infrastructure does not lose its functionality.
  • Accepting the risk, where the design takes into account an expectation of temporary loss of functionality (for example, accepting temporary flooding).
  • Avoiding the risk, where the planner seeks to elude the anticipated risk (for example, redefining the project site to avoid vulnerability to flooding).

The evaluation of options comes with a review of their cost effectiveness. From a cost angle, it will be expected that resisting will usually bring increased costs, while accepting or avoiding risk may or may not. The risk of not evaluating the impact of climate risk and measuring its potential consequences is not only locking in an inadequate design but also increasing the probability of having to pay higher insurance, performance guarantee premiums, and financing costs.

A third relevant question is whether adaptation should also involve limiting the climate-related risks beyond the immediate scope of the project. The options may include reducing negative impacts arising from the interaction of climate and infrastructure, like including storage within infrastructure drainage systems to reduce the risk of causing flooding. Another option is protecting against negative impacts arising from climate change, like designing a road so that it can also serve as a refuge in case of flooding. In addition, special climateproofing infrastructure like coastal defenses can protect a very specific piece of infrastructure (a sea in a port) or be extended to benefit a larger area (such as the Thames Barrier).

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Proper planning is key

IFC’s most recent Climate Risk Case Study, Climate Risk and Business: Ports, shows how climate risk can be evaluated for proper planning and investment. The report first assessed the risks and opportunities that seaports’ operations in general may be exposed to due to changing climate variables (such as berthing, navigation, transport inside and outside of the ports, insurance, and social and environmental issues).

Next, changes in key climatic variables – as they relate to the identified risks and the port’s location– were analyzed in the context of forecasted climate scenarios. Such an analysis provided a thorough understanding of impacts that allowed for a financial cost and benefit analysis of adaptation options. This analysis can include visualization examples like the following ones that show the highest spring tides in 2050 and 2100 for this project:

Spring tide levels provide information needed to calculate the costs of business interruption due to flooding inside the port, and financial analyses of investments that would climateproof it, thus preventing the flood in the first place. In this particular project, the cost and benefit analysis showed that such investments would be justified from the financial point of view.

The key initial decision is to take climate risk into consideration. In the case of ports, a recent survey of world’s seaports (Becker et al. 2011) shows that most of the planned infrastructure is built taking into account only historic records, potentially exposing the new assets to severe and frequent impacts. This is not the case in Muelles del Bosque, as the climate risk analysis was instrumental in the concessionaire’s decision to invest $10 million in areas subject to flooding.

The exact change in frequency or intensity of events such as the storm tide for another port will be specific to the location and project characteristics, requiring analyses of vulnerabilities and adaptation options in that context. Although each location is unique in its needs, they all deserve careful consideration based on the most up-to-date research and tools available.