In recent years, we have witnessed an acceleration in the rate at which the Earth’s climate is changing. Rising average temperatures[1] have led to growth in the frequency and severity of acute hazards, such as heat waves and floods, as well as growth in the intensity of chronic hazards, such as drought and rising sea levels. In the next decades, a change in climate implies that the number and size of regions affected by intense physical hazards will continue to grow, with direct socio-economic effects on livability and workability, food systems, physical assets, infrastructure and services, and natural capital. A first estimate of the impact on GDP of climate change is ⁓8,000 B€ in 2050[2], resulting in a 3% contraction of GDP. Henceforth, understanding the nature and extent of physical risk arising from climate change is of paramount importance to understanding the magnitude of the challenge, and to highlighting the case for adaptation and mitigation strategies.
Infrastructure assets are particularly sensitive to intense physical hazards such heat, wind, and flooding, as they can be destroyed or disrupted in their functioning, resulting in a decline in services and/or a rise in the cost of those services, with also a knock-on effect on the one hand on other sectors that rely on these infrastructure assets and on the other hand on the livability of people, as intense physical hazards often also put human lives at risk. A first estimate of the Expected Annual Damage (EAD) to critical infrastructures[3] in Europe due to climate change will be in the range of 20 B€/year[4] in 2050, more than 5 times the baseline (3.4 B€/year on average in the period 1981-2010). Italy is among the most impacted countries[5], with projected EAD rising from 0.5 B€/year on average today to 4.9 B€/year in 2050, a increase of more than 10 times. This can be attributed to aging infrastructure and to the morphology of the Italian territory, which is more vulnerable to flooding and heat waves and wildfires.
To give a recent example of climate change risks and impacts, in July 2019 Europe experienced a severe heat wave of above 37.5 degree Celsius, across the UK, the Netherlands, France, Italy, Spain and Belgium. Europe’s physical infrastructures, such as railways, roads and powerlines, were heavily impacted, with noticeable delays in transportation and power outages. As a result, economic activity also slowed because small businesses and restaurants without air-conditioning closed. Academic research on the heat wave concluded that, in the case of France, climate change was ultimately responsible, since it made the heat wave 10 times more likely to occur.[6]
In a discussion with shareholders to develop a strategy to mitigate the effects of climate risk on infrastructure, a holistic approach that encompasses all infrastructure assets should be put in place, as they all have highly specific vulnerability to hazards:
- Transportation assets (e.g., airports, railways, roads, rivers, seaports) are extremely vulnerable to flooding and hurricanes. For example, traffic can slow by 30% with even a few centimeters of water on a road’s surface[7];
- Telecom assets (e.g., wireless infrastructure such as base substations and radio towers, fixed infrastructure such as cable, data centers) are also vulnerable to hurricanes and other high wind hazards, and heat. For example, in New York during Hurricane Sandy in 2012, 80-mph winds downed 25% of towers[8];
- Energy-related infrastructure assets, from generation (e.g., thermal and RES power plants) to T&D (e.g., lines and substations) are extremely vulnerable, in particular to heat and wildfires, especially T&D; and
- Water infrastructure assets (e.g., freshwater infrastructure, water treatment systems) are vulnerable to drought as well as to flooding and wind hazards.
Key adaption measures must include protecting people and assets and building resilience. Measures to protect people and assets can include prioritizing emergency response, preparedness to erect shelters/support elements, and overall strengthening existing infrastructure and assets. Moreover, in addition to retrofitting existing infrastructure, new assets should be designed already with climate risk in mind. Asset reinforcement goes hand-in-hand with measures and initiatives that make the system more robust and resilient to rising climate hazards. Initiatives that key stakeholders in infrastructure should put in place to develop and ensure the resilience of the system are, for example:
- Developing new, more systematic risk management frameworks, where climate change science insights are translated into potential physical and financial damages through robust modeling, recognizing the limitation of past data (es., through use of granular and multi-dimension maps)
- Quantifying exposition to climate change risks in the medium-long term (e.g., increases in maintenance costs, emergency management costs, disruption of assets)
- Drafting the investment plan and scouting for possible European funds (e.g., the Green New Deal) dedicated to the resilience of infrastructure
- Putting in place advanced analytic tools to monitor risks (e.g., through real-time data collection of the performance and deteriorating status of assets) and mitigations (e.g., use of machine learning and artificial intelligence techniques for predictive maintenance)
- In addition, choosing the appropriate insurance and financing can help provide ‘system’ resilience to recover and reduce knock-on effects in the case of hazards (for example, through instruments such as parametrized insurance and catastrophe bonds).
Now evident is the urgency to adapt and prepare to adapt infrastructure, through prevention and dedicated investments. Despite the importance of developing a resilient infrastructure, there is, however, consensus in the scientific community about the fact that further warming and risk increases can only be stopped by achieving zero net greenhouse gas emissions. Hence, in addition to risk management and adaptation strategies, “every government, company, and shareholder must confront climate change”[9] and devise long-term strategies that embrace and accelerate the decarbonization pathway.
NOTES:
[1] After more than 10,000 years of relative stability, since the 1880s the average global temperature has risen by about 1.1 degree Celsius, with significant variations between regions
[2] The Economist Intelligence Unit, 2019
[3] Includes transport infrastructure, energy infrastructure, industry (e.g., heavy metals) and public sector (e.g., schools)
[4] European Commission, Joint Research Centre, Escalating impacts of climate extremes on critical infrastructures in Europe, 2018
[5] Compared to Spain (from 0.6 B€/year to 5.3 B€/year in 2050, 8x increase), France (from 0.4 B€/year to 2.9 B€/year in 2050, 6x increase) and Germany (from 0.4 B€/year to 1.8 B€/year in 2050, 3x increase)
[6] Geert Jan van Oldenborgh et al., Human contribution to record-breaking June 2019 heat wave in France, World Weather Attribution, July 2019
[7] Katya Pyatkova et al., “Flood Impacts on Road Transportation Using Microscopic Traffic Modelling Techniques,” in Simulating Urban Traffic Scenarios: 3rd SUMO Conference 2015 Berlin, Germany, Michael Behrisch and Melanie Weber, eds., Cham, Switzerland: Springer, 2019; Maria Pregnolato et al., “The impact of flooding on road transport: A depth disruption function,” Transportation Research Part D: Transport and Environment, August 2017, Volume 55; Pablo Suarez et al., “Impacts of flooding and climate change on urban transportation: A systemwide performance assessment of the Boston metro area,” Transportation Research Part D: Transport and Environment, May 2005, Volume 10, Number 3.
[8] Alyson Kenward, Daniel Yawitz, and Urooj Raja, Sewage overflows from Hurricane Sandy, Climate Central, April 2013.
[9] Larry Fink, CEO of BlackRock, Letter to clients, January 2020. Larry Fink is the founder, chairman, and CEO of BlackRock, the largest asset management fund in the world with >7,430 B$ of assets under management