Georgina Dowling, Associate at Ramboll UK outlines the importance of investment in infrastructure to help tackle climate change
In December, 195 nations reached a landmark agreement ‘to keep a global temperature rise this century well below 2°C and to drive efforts to limit the temperature increase even further to 1.5°C above pre-industrial levels’ (UNFCC, Paris COP21). To support developing nations, governments committed to $100bn of climate finance by 2020 with a new goal from 2025.
How does this translate at a local level? The effects of Storms Desmond, Eva and Frank are predicted to cost the UK £1.3bn according to the ABI and this is in a country with formal flood planning. Internationally, the cost of doing nothing is even more daunting.
From a public sector perspective, the potential value of losses of a future with 6°C warming are projected at $43 trillion in present value, or 30% of current assets, according to a 2015 report from The Economist Intelligence Unit.
A clear message from COP21 was that commitments at city and corporation level are critical in ensuring a collective response to tackling climate change. However, financing at a city level can still prove elusive and increasingly, city decision-makers are turning to alternative financing methods, such as foundations, city networks, the private sector and more recently, green bonds.
In principle, green bonds are designed to address a wide variety of environmental matters but are backed by the issuer’s entire balance sheet resulting in flat pricing. That is, the bond price is the same as ordinary bonds but it funds projects that have positive environmental and/or climate benefits. The market is growing exponentially with $37bn in green bonds issued worldwide in 2014.
As an economic expert, Henrik Stener Pederson, Ramboll Management Consulting is helping cities analyse climate investments which must serve more than one purpose to be attractive:
‘Investments must be directed at energy and transport infrastructure, climate adaptation, cloudburst mitigation and blue-green infrastructure that reduce CO2 emissions and enhance the quality of life. Only by designing multipurpose solutions can we support long-term, sustainable development.’
Copenhagen has developed an ambitious climate plan, for which it was named European Green Capital 2014. Jorgen Abildgaard, Executive Climate Project Director of the City of Copenhagen, argues that a city needs a system that allows knowledge sharing between cities and companies, and a new financial vehicle.
‘Finding financing for this transformation is running into a lot of problems. We need financial systems that invite cities to invest massively in infrastructure and other climate solutions. In Copenhagen, we look at the secondary benefits. For instance, if you can pinpoint the health benefits of a project, you have an argument to bring to the negotiation table.’
From 2010 to 2011, Copenhagen was hit by 3 destructive cloudbursts, the last causing $1.18bn in damage. The economic analysis estimated that inaction would result in such costs tripling in 100 years, so Copenhagen included cloudburst mitigation in its climate plan aiming to protect the City and use water as a recreational urban resource.
In the Middle East, the megacity of Jeddah, Saudi Arabia, has also found the cost of doing nothing to be an incentive for investment. An environmental degradation study by Ramboll shows that Jeddah will lose 2-4% of its annual GDP unless something is done to address the rapid population growth, water scarcity and pollution. To meet the challenges and improve public life, Ramboll developed an environmental and social masterplan, including environmental impact assessments and cost-benefit analyses, to help resolve current and future environmental and socio-economic problems and serve as a decision maker’s guide.
Back in the UK, the cost of the Christmas floods could trigger stakeholders to consider the approach taken in Canada’s largest city, Toronto.
Following the 2 worst storms in Toronto’s recent history costing more than $1.7bn, the shattering losses and costs of inaction motivated more than 50 public, private and non-profit organisations to join the WeatherWise Partnership. Convened in 2011 by the City of Toronto and CivicAction, a business-orientated NGO, the multi-sectoral action group identifies risks associated with extreme weather and prioritises areas for action and investment by businesses, communities, organisations and governments.
To date, the initiative has resulted in a range of studies within such priority areas as electrical systems risks, critical infrastructure interdependencies and engineering vulnerabilities within roads, drainage and housing. Preliminary results have led to tangible resilience actions including the instalment of basement backflow preventers and window well guards to reduce flood risks, as well as the use of cool, reflective materials on roofs to reduce urban heat island effects. As Pedersen states, ‘Cities need to understand the full costs and benefits of action and inaction. The cost of doing nothing is measured not only in material damages but also in lost investments, competencies and – in the worst case – lives.’
Associate – Ramboll UK