Leaders of nearly 200 countries will gather in Glasgow for the UN Climate Change Conference to shape climate adaptation policy and galvanize cooperation for the escalating climate emergency. As global development and environmental leaders have pointed out, for COP26 to succeed, the “adaptation acceleration imperative” must be on par with emission controls.
The “Race to Resilience” campaign is building further momentum on climate adaptation. As the only global solutions broker solely focused on climate adaptation, the Global Center on Adaptation (GCA) joined forces with the African Development Bank (AfDB) to create the Africa Adaptation Acceleration Program (AAAP). The $25 billion joint initiative is the largest, most comprehensive program to help African countries set the basis for a faster and climate-resilient COVID-19 recovery and was endorsed at the Leaders' Dialogue on the Africa COVID-Climate Emergency last April.
Infrastructure is at the heart of this agenda and the AAAP recognizes the importance of including multiple development actors and financers in this effort. The equitable provision of infrastructure is a key determinant of Africa’s development, with the potential to influence all 17 Sustainable Development Goals (SDGs) and 92 percent of the 169 SDG targets.
Why do we need climate-resilient infrastructure?
Climate-related damage to infrastructure disrupts services and exacts a significant human and economic toll in Africa. Drought-induced power shortages in Zimbabwe and Zambia have cascading impacts on water, health, connectivity, supply chains and businesses. In Tanzania, businesses lose $101 million (0.3 percent of GDP) annually due to power outages caused by rain and floods, and $150 million (0.4 percent of GDP) due to transport disruptions caused by flooding.
In the aftermath of these disasters, governments must divert public funding to rebuild instead of investing in new infrastructure to make up for existing deficits. This creates an “infrastructure trap”— vicious cycles of repeated climate shocks that risk halting economic growth and disrupting or even reversing progress towards the SDGs.
The AAAP aims to integrate climate resilience into $7 billion worth of infrastructure investments. Making infrastructure assets and systems adaptive and resilient to climate change will have additional upfront costs of 3 percent, but returns can be four times the initial investment, in addition to important social returns.
The transformation required to achieve this impact cannot be delivered by the public sector alone. AfDB estimates the African infrastructure financing gap is between $68 and $108 billion. Private sector engagement is critical for catalyzing investment and innovation to identify climate change risks, to develop robust adaptation measures, and to design, build and operate infrastructure.
Three reasons why PPPs can mobilize adaptation investments
One, The need for a robust revenue model also ensures adaptation and resilience options are linked to clear financial benefits for the operator and public sponsors. Udaipur, a city in northern India, adopted clean energy to operate a wastewater treatment plant that reuses half of the wastewater for the systems’ own processing needs. It also resells waste residuals for horticulture to generate additional revenues.
Two, An urban water supply modernization project in India, developed with support from the Public-Private Infrastructure Advisory Facility (PPIAF), integrated climate adaptation measures through an environmental health and safety management plan. The PPP contract addressed climate stressors and introduced incentive payments to encourage bidders to optimize investment. In Japan, the legislation clarifies the risk-sharing arrangement for disasters between the private partner, whose liability is limited to 1 percent of the contract value, and the public partner.
Three, New Clark City, a green, smart, and disaster-resilient development in the Philippines, is considered a model PPP program that leverages the use of NBS for flood mitigation and green city development.
Yet, while African governments are increasingly turning to PPPs to attract private capital for infrastructure projects, the World Bank’s Private Participation in Infrastructure (PPI) database shows that Africa has secured less than 7 percent, or $74.8 billion, of global private sector investment over the last decade. In Sub-Saharan Africa, investments between 2010 and 2020 amount to $59.3 billion in 275 projects mainly related to electricity, ports, and ICT.
Best practices for managing climate risk in infrastructure PPPs
GCA, the World Bank, AfDB, Asian Development Bank, European Investment Bank, European Bank for Reconstruction and Development, and other partners, launched the Knowledge Module on PPPs for Climate-Resilient Infrastructure as a pragmatic step towards helping countries draw the private sector into financing climate resilient infrastructure. GCA also recently hosted a Masterclass on Climate-Resilient PPPs, facilitating knowledge sharing between 46 global practitioners from 25 countries.
GCA is now working with the AfDB and PPIAF to develop a pipeline of PPP projects that integrate resilience from the upstream planning stage to project close. GCA will also work with PPIAF to provide technical assistance and analytical support to help countries embed capacity to assess and integrate climate resilience into PPP projects.
At this pivotal moment, as many nations embark on the path to recovery from the economic devastation of COVID-19, we must seize the opportunity to build back better.
Disclaimer: The content of this blog does not necessarily reflect the views of the World Bank Group, its Board of Executive Directors, staff, or the governments it represents. The World Bank Group does not guarantee the accuracy of the data, findings, or analysis in this post.
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This blog is managed by the Infrastructure Finance, PPPs & Guarantees Group of the World Bank. Learn more about our work here.