Benchmarking Climate Consequences to Observed Public Asset & Investment Damage & Loss Levels
This work was co-authored with Kai Kaiser, Parvathy Krishnan. All errors and omissions are those of the author(s).
Damage and losses in the context of climate change risks to infrastructure refer to the negative impacts that climate change can have on physical infrastructure such as buildings, roads, bridges, and other critical facilities. Climate change can cause more frequent and severe extreme weather events, such as floods, storms, heatwaves, droughts, and wildfires, which can damage or destroy infrastructure and result in significant social and economic losses.
Articulating Likely Adverse Consequences for Specific Contexts
The daily headlines on the internet are filled with reports about the adverse consequences of extreme and changing climate patters across the globe on different types of infrastructure services.But many relevant actors across the globe may not yet have truly reflected or digested the possible implications of climate change disruptions to their local non-financial assets, investments, and socio-economic activities. If there have been recent national disasters — for example the 2014 South East Europe Floods that particularly impacted Serbia and Bosnia and Herzegovina — awareness is likely to be higher.
But if there are no such acute local memories, relevant actors may not yet have internalized the possible risks of climate change to their contexts. This disconnect may be accentuated at past climate patterns are no longer a good measure of possible future events. Moreover adverse impacts can be acute, in the sense that they are triggered by extreme/disaster type events. But they can also be chronic, subject to slower onset. For example, trains may be made to run slower than under normal conditions in the context of heat waves. The implications of chronic risks may often stand in the relative shadows to the acute disruptions, but their cumulative adverse impacts over time may be equally if not more significant.
There is general recognition that flooding can cause infrastructure damage such as erosion of bridges, damage to roads and culverts, and damage to water treatment plants. Extreme heat can cause damage to buildings, roads, and other infrastructure, while wildfires can cause damage to power lines and other critical infrastructure.
These damages can result in direct losses, such as the cost of repairing or replacing damaged infrastructure, as well as indirect losses such as economic disruption, loss of access to critical services, and decreased property values. In addition, climate change can also lead to increased insurance costs (where mature markets exist) and decreased availability of coverage for infrastructure projects in high-risk areas.
From Awareness to Action: Incorporating Climate Change Risk
Public Investment Management (PIM) and Public Asset Management (PAM) are two important areas of public financial management that are closely related to climate change risks to infrastructure. PIM involves the planning, selection, and management of public investments in infrastructure, such as transportation networks, water and sanitation systems, and energy production and distribution systems. In the context of climate change, PIM must take into account the potential risks that climate change poses to infrastructure investments. This includes assessing the vulnerability of proposed infrastructure projects to climate change impacts, and incorporating measures to increase resilience and reduce the risk of damage and losses. PIM must also consider the potential economic and financial impacts of climate change on infrastructure investments, such as increased maintenance and repair costs, and decreased economic productivity.
PAM involves the management of public assets, including infrastructure, to ensure they are used efficiently and effectively. In the context of climate change, PAM must address the risks that climate change poses to existing infrastructure assets, such as the risk of damage and loss due to extreme weather events. PAM must also consider the potential for climate change to affect the value and useful life of infrastructure assets, and incorporate measures to increase resilience and mitigate the risk of damage and losses. Overall, PIM and PAM are important tools for managing the risks that climate change poses to infrastructure investments and assets. By incorporating climate change considerations into these processes, governments can improve the resilience of infrastructure and reduce the potential for damage and losses.
Learning from the Sailors: Articulating Hazards
The big data revolution has mean that there is now an incredible amount of data available about past climate exposure across then global, and a range of scenarios about possible future climate patterns. For wide-spread human application, it is often necessary to put climate hazards into more comprehensible language. One widely used historical example is the Beaufort scale that relates wind speed to observed conditions at sea or on land through a 13 point scale (0 t 12). While not an exact nor an objective scale, the approach allow for visual and subjective observation of a ship and of the sea to be standardized for wider application. Captains would be reluctant to put their ships to see if the likelihood of storms was high, and the possibility that they and their crew would come away unscathed low.
Quantifying Consequences of Climate Change Hazards
For non-technical users — but ultimately those actors that are expected to take tangible actions and make resource allocation trade-offs in the face of competing demands — climate change data in is largely raw form is typically difficult to digest. Experts are simply not available to be deployed to the the daily scenes PIM and PAM decision that need to be made on a daily basis across the globe. There is therefore a critical need to be able to present climate risk levels — and devise mitigation and/or tolerance decisions — in a more end-user accessible manner.
The first step in such a process of awareness to action support is working with stakeholders to a shared understanding of possible climate change consequences through the lens of damage and loses. Damage & Losses (D&L) as they relate to a particular asset or investment can also benefit from mapping to a scale for purposes of more general communication, but also quantification. Here we consider by way of example of a bridge how a scale of minor, moderate, severe, or extreme destruction could be benchmarking for a bridge. This in turn might open a conversation about how the consequences and likelihood of this occurring given some set of exposures (imagine describing a day with the Beaufort scale), starting at the level of individual public infrastructure assets and investments, but also building to a wider portfolio view.
In the context of PIM, a Cost-Benefit Analysis (CBA) tools are the place such benefits — and supporting costs — are quantified over time. This analysis typically done in Excel, but is now also available under the GPBP online suite of tools. A CBA may run different cost-benefit variants of the same project, ultimately to prefer the optimal combination of expected returns given prevailing financial constraints. A CBA will also consider costing different construction standards, but as they relate to minimum regulatory standards (and costs). Quantifying an annual series of socio-economic benefit series over the full life time of a project at the early stage of screening is often challenging given data demands. In the case of transport, for example, a full-fledged CBA will require more detailed traffic demand and travel time savings associated with a given project. But by going through a more structured process to itermized the key benefits associated with a investment/assest, which in turn serves to identify how this could be disrupted or reduce due to climate change. This should be put in very concrete terms: the impacts of a bridget being washed away during flooding, or the need for trains to run half speed for a significant number of days our of the year.
Climate change is associated with a significant degree of uncertainty. Part of a robust PIM or PAM process is to identify ways to best manage in a feasible and cost-effective manner the potential adverse consequences of environmental hazards such as temperature, precipitation, or wind. Governments operate under a variety of competing priorities and constraints. For climate change risk mitigation to be approached in more disciplined — and ultimately successful manner — they need to be address with due attention to people, process, and technology (platforms+data) realities
The valuation of possible adverse consequences will depend on the stocks and flow valuations associated with a particular project/non-financial asset. For the example of a bridge, the probability of disruption will depend on the nature of the non-financial asset (prospective or existing “stock”), the benefit flows associated with it, and expected hazards/exposures.
Risk threshold mapping involves assessing the likelihood and potential severity of climate change impacts on different types of infrastructure and identifying the point at which the risk of damage or loss becomes unacceptable. Having a risk threshold mapping for different infrastructure to climate change allows decision-makers to allocate resources to the most critical infrastructure assets first. For example, a risk threshold mapping may identify a critical transportation corridor that is at high risk of flooding due to sea-level rise. By prioritizing investments in flood protection measures for this corridor, decision-makers can help ensure that this critical asset remains functional and accessible in the face of climate change impacts. Risk threshold mapping, together with a processes of CBA variant analysis, also helps decision-makers identify infrastructure assets that may be beyond the point of feasible adaptation, where the cost of increasing resilience exceeds the expected benefits. In these cases, decision-makers may need to consider alternative strategies such as relocation or decommissioning of the asset.
Defining Risk Threshold Climate Chage Trigger Across Sectors/Asset Types
World Bank’s Risk Threshold Database online platform is a citizen science tool that allows users to crowdsource information on risk thresholds for different types of assets and climate change impacts. The platform provides a user-friendly interface where users can input information on risk thresholds, such as temperature or precipitation, for different types of assets, such as buildings, transportation systems, and water infrastructure. The platform allows users to browse and search the database of risk thresholds, which can be sorted by asset type, climate impact, or geographic region. Users can also contribute to the database by submitting their own risk thresholds, based on their experience or expertise in a particular field. The Risk Threshold Database online platform provides a valuable resource for decision-makers, planners, and researchers who need to understand the risks that climate change poses to different types of assets. By incorporating the collective knowledge and experience of a diverse group of users, the platform helps to ensure that risk thresholds are based on the most current and relevant information available. Overall, the Risk Threshold Database online platform is an innovative and valuable citizen science tool that can help improve our understanding of the risks that climate change poses to infrastructure assets, and guide investment decisions and adaptation strategies.
The Risk threshold database is then connected to the Geospatial Planning and Budgeting Platform’s (GPBP) Climate Change Screening Tool (CCS). The Climate Change Screening (CCS) Tool is a software application designed to assess the vulnerability of infrastructure investments to climate change impacts. The tool uses a combination of historic and future climate data to screen infrastructure projects against risk thresholds in the Risk Threshold Database online platform. By doing so, the tool helps decision-makers identify infrastructure investments that are most at risk from climate change impacts and prioritize adaptation strategies and investments accordingly. CCS uses a variety of climate parameters such as temperature, precipitation, sea level rise, and extreme weather events to assess the potential impacts of climate change on infrastructure investments. The tool takes into account the location and extent of the investment, as well as the asset type, to provide a comprehensive assessment of vulnerability. The tool works by comparing the climate data for a specific location and time period against the risk thresholds for the corresponding asset type in the Risk Threshold Database online platform. If the climate data exceeds the risk threshold, the tool flags the investment as being at high risk from climate change impacts. The Climate Change Screening Tool provides decision-makers with a powerful tool to assess the risks of climate change to infrastructure investments and prioritize adaptation strategies accordingly. By incorporating the latest climate data and risk thresholds, the tool can help decision-makers identify critical infrastructure investments that require immediate attention, and guide investments towards assets that are more resilient to climate change impacts. Overall, the Climate Change Screening Tool is an important tool in the effort to build a more resilient and sustainable infrastructure system that is able to withstand the challenges of climate change.
Variant Analysis
For existing assets, disruption analysis would capture the losses associated should the bridge fail for some time (e.g., hours, or days).
We attempt to capture these likelihoods on the basis of probabilities (percentage likelihood in a given year, once in how many years). Setting the thresholds for Table 1 below depends on the nature (and build) of the asset, as well as the climate hazard parameter. This logic is captures in the GPBP CCS RTD. The vulnerability (or inversely resilience) of the asset would depend on the building standards and implementation, maintenance, and cost of the non-financial asset.
Consequence: level of D&L.
Probability: the likelihood that this will happen in a given.
The rations are indicative based on a review of a sample of ex post public infrastructure asset stock/services streams D&L. (Source: Authors)
The D&L associated with a particular disruption will depend on the replacement/repair valuations associated with the asset, as well as losses. For example, a big bridge will involve larger numbers than a small bridge. Re-establishing service for a damaged bridge will depend on construction times, and availability of funds. Alternatives to the bridge will also determine its criticality for users, and the “costs” of being forced to rely on alternatives.
See Video: Galloping Gertie Bridge Collapse
A CBA exercise should ideally provide a quantification of both the benefit streams associated with a particular investment/asset, as well as its associated capital and recurrent costs. For example, Szporko (2022) provide for an ex post analysis of the disruption of the Pomeranian Metropolitan Railway (Polish: Pomorska Kolej Metropolitalna, PKM) due to a 2016 flooding event, after it was opened in 2015.
The analysis showed that the roughly EURO 200 million dollar project was associated with daily benefits of just under EURO 179 thousand. We project these rations for a reference project of EURO 100 million. Using the disruption levels presented in Table 1, we provide some monetary value to the annual consequences based on these quantifications.
Which consequences a policy maker would worry about most depends of course both on the expected D&Ls of a given disruption, and the likelihood that it could occur in any given year (or over the life of the asset). These scenarios focus more on acute disruptions, and also assume that the public infrastructure can be fully brought back on stream in a defined period of time. In reality, the time for this to happen will be contingent on a range of factors (including available resources). Beyond a monetary valuation, disruptions in services may also have a very adverse reputational impact for governments. Losses could also be chronic, for example leading to significant reduced “productivity” of the assets. For example, if a degraded track requires trains to be run at half speed, this would pose a significant draft on benefit streams accumulated over time.
Summing Up Climate Consequences and Uncertainty
Our climate change risk example for public asset and investment management stakeholders illustrated some options to quantify possible D&L. The extent to which resources need to be devoted to averting these D&L itself needs to be subject to cost-benefit analysis, as well as affordability. Developing country government in particular face a whole host of competing demands public infrastructure, which itself poses a set of trade-offs. This raises the question of whether to put additional EUROs into upgrading the prospective resilience of an existing or new asset (e.g., by applying higher but more expensive construction standards), or whether to live with the risks. Insurance can serve to offset the risk of rehabilitation/replacement costs for an asset, but may not address disruption losses for the public, or the reputation risk for authorities.
Hindsight and Project or Portfolio View: The example below focused on a single asset or investment. But typically a Ministry of Finance will need to take a perspective across a range of assets and investments. Rather than focusing on one bridge, it must consider the consequences and their annual likelihood for one hundred bridges. When resources are constrained, authorities need to prioritize where to invest in greater resilience ex ante, versus where the consequences are best addressed ex post. This is not a simple question, as it turns out, even with the benefit of hindsight if using the case of the PKM. While physical losses were limited (only about 5 percent of the initial investment cost), they disrupted services across the whole track. Having made all links exante damage proof would have possibly been far more costly that the revealed D&Ls.
Resilient Systems Perspectives: From the perspective of D&L, a individual bridge link is a relatively clear case. But it also suggests that PIM and PIM risk analytics of this type need to be conducted in a systems perspective. What benefits does a particular project/asset provide over time? This type of discussion encourages responsible stakeholders to identity risk mitigation options. These could include better building standards, insurance, redundancy/alternatives in systems (e.g., sister bridges!), etc. But a further question is the criticality of a particular bridge link: are alternatives available to users of that bridget. Will the rest of the system accommodate traffic rerouting, or will this lead to further losses for the wider network.
The Buck Stops Where? Uncertainty and trade-offs pose a challenge for enhancing transparency and accountability to address climate change risks to public asset and investment management. Asked differently, who wakes up in the morning truly worrying about the conditions under which a given set of public infrastructures could fail? Is it the Ministry of Finance, the sector agency, the mayor, or the public? Even if design standards may be high, the implementation and O&M of a project may be the ultimate achilles heal that leads to D&L consequences. Therefore mitigating D&L risks needs to be assessed through an institutional level around prevailing public asset and investment management functionalities.
