How do we link private sector participation and climate resilient infrastructure right now? Some ideas from PPIAF

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Warning sign in front of a house damaged by natural disasters | ©stockphoto-graf, Shutterstock

Texas just showed us how extreme winter weather can easily disrupt water and electric services, leaving millions without power just as they need it most. Attributed to a 'cascade of planning failures', these events underlined that business as usual simply no longer works to address growing climate vulnerabilities.

With risks even more pressing in developing countries, reducing interruption of service provision due to climate impacts requires significant investments in climate-resilient infrastructure upgrades, as well as maintenance and operation plans enabling climate change adaptation of infrastructure PPPs. By 2030, the cost of for this adaptation alone in developing countries could be as high as $140-300 billion per year. Today, annual investment for climate change adaptation in those countries lies at about $26.5 billion, leaving a funding gap of at least $115 billion per year by 2030. Public funds will be largely unable to cover the gap, so private sector financing of climate adaptation investments is increasingly urgent.

The nature of our work at the Public Private Infrastructure Advisory Facility (PPIAF) puts us at the intersection of these issues, assisting developing country governments to strengthen their regulatory frameworks to allow for the development of sustainable infrastructure with private-sector participation and PPPs. Specifically, much of this support seeks to mainstream adaptation and resilience considerations, incorporating them as core elements of sustainable PPP infrastructure planning and policies.

There are many ways in which we accomplish this work across the world and these three stories give some specific detail:

1. Reliable water, less leakage, higher revenues: a win all around in Karnataka, India

Within India, Karnataka is the second state most vulnerable to the impacts of climate change. Unusual rainfall patterns have led to increased pumping of groundwater as a source of public drinking supply. Residents have become dependent on it as groundwater currently supplies 90 percent of the region's drinking water. But as this sustained pumping of aquifers exceeded the rate of natural replenishment and supply dwindled, residents were receiving water for only a couple of hours per day. Poor supply management, system leaks, and financial mismanagement of utilities exacerbated the situation.

In response, a water use efficiency scheme was developed, with reduction of leakages as a main climate adaptation strategy. With PPP contracting planning support from PPIAF, a pioneering design, build, operate (DBO) contract for privately operated water service in the North Karnataka cities of Hubballi Dharwad, Belgaum, and Kalaburagi was implemented. Service and availability of water jumped from 10 hours a week to 24 hours a day. To boot, the volume of water lost to leakages was reduced by 2,500 m3/day proving that 24/7 water service was possible in India while improving water resource resilience to droughts.

2. Incorporating climate adaptation risk in transport projects

Project risks related to climate change are typically hard to define and allocate in the transport sector. In fact, few road maintenance PPP contracts consider them and instead use force majeure as the fallback option, apportioning greater risks and costs to governments. Yet, especially now, climate hazards should be expected within a project's lifespan, not considered an unforeseeable circumstance-as this prevents the public and private sectors from fulfilling obligations that should be well defined within the structure of the contract.

To address this, PPIAF proposed a tool to mainstream climate risk assessment and adaptation measures in performance-based contracts (PBC) tailored to the transport sector's needs. The tool performs scenario analysis, giving a range of options and implications that allow stakeholders to identify and potentially price the risk of climate change considerations in contracts. This tool also allows for the development of maintenance and operating performance standards, which can help ensure projects adequately address climate change impacts into the future. Several countries-including Vietnam, Cambodia, and Georgia-are using this tool, along with standard PBC templates, to sustainably develop and execute transport sector PPPs.

3. Improving sanitation services sustainability in Vietnam's coastal cities

Vietnam's tourism sector is strategic to its sustainable development, already contributing 8% of GDP and projected to grow to 14% by 2030. However, the coastal cities of Dong Hoi, Quy Nhon, Nha Trang, and Phan Rang Thap Cham have become increasingly affected by flooding, which overwhelms the cities' still-developing wastewater and sewerage treatment systems.

PPIAF's Coastal Cities Sustainable Environment Project looks at this issue, helping local governments assess the performance, operation, and maintenance of public sanitation facilities and screening cities' vulnerability to climate and disaster risks. Through this work, we've recommended improvements in utility equitization, service contracts, and institutional arrangements to allow for increased private sector participation in the sector. The aim here is to get more resources deployed quickly-to both improve residents' quality of life and secure the tourism industry as a sustainable source of income.

PPIAF has new resources for this work

PPIAF recognizes that significant barriers to private sector participation must continue to be overcome to meet the scale of need for climate adapted infrastructure. As part of our response, we're making additional funds and technical support available through our new Climate Resilience and Environmental Sustainability Technical Advisory (CREST). The technical support offered by CREST is wide ranging, spanning advice on improving climate finance enabling conditions; climate risk and opportunity screening for infrastructure PPPs; engineering and O&M standards for planning infrastructure PPPs; to ensuring financial liabilities and other PPP contractual obligations are climate adapted. This new approach draws on lessons learned from PPIAF's experience, adding capacity to government clients so that they can anticipate environmental and climate risks and incentivize private action to address them.

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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.

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