Infrastructure for a Climate-Resilient Future

2. Planning for climate-resilient infrastructure

Abstract

Effective governance for infrastructure can enable governments to anticipate and respond to threats posed by climate change. This chapter examines how countries can identify risks and respond by engaging the actors and stakeholders that deliver, operate and use infrastructure, identify interdependencies among infrastructure systems and share information about vulnerabilities to climate risks. It also examines how countries can use policies and regulation both to provide incentives for infrastructure providers and to impose mandatory requirements on them. Finally, the chapter examines how infrastructure providers can collect data and use technologies during the operations and maintenance phase of the infrastructure life cycle to improve resilience.

Key policy insights

• Countries need a holistic approach to plan and fund infrastructure to address the threats posed by climate change. Countries can set the foundations for climate-resilient infrastructure in three ways. First, they can co-ordinate the actors that deliver and operate infrastructure. Second, they can identify the interdependencies among infrastructure systems. Third, they can develop ways to share information about vulnerabilities to climate risks among infrastructure operators and stakeholders.

• Countries can work with a wide range of stakeholders to identify climate-related risks and evaluate their likelihood and severity in the context of all risks (climate and non-climate).

  Countries can use planning and policy settings to signal the government’s intended investment in resilient infrastructure and set out requirements for actors to deliver and operate infrastructure to meet resilience standards.

• Countries can also establish national and subnational budgeting arrangements so they are well positioned to invest in climate-resilient infrastructure over the long term. In addition, given the many actors that operate and use infrastructure, countries should establish principles for fair and equitable allocation of costs and benefits between government, subnational governments, private investors, citizens and other parties.

• Finally, countries can use data and new techniques during maintenance and operations to maintain service levels in the face of increasing climate-related risks. For example, new technologies – such as remote sensing, big data, Internet of Things, cloud technologies and machine learning – are transforming how infrastructure is operated and maintained.

2.1. Introduction

Given the risks posed by all-hazards and threats, including climate-related risks, countries need a holistic approach to plan and deliver infrastructure. The changing intensity and frequency of climate risks mean that infrastructure assets and networks may face significantly different risk profiles over their lifespan. Infrastructure providers must avoid the risk of locking in vulnerability, and also plan for infrastructure assets to perform better as climate risks increase. Infrastructure assets will thus need to be designed, built, maintained and operated in ways that consider how risks are changing over the full life cycle. In this context, the OECD Recommendation on the Governance of Infrastructure highlights the need to improve governments’ approach to delivering resilient infrastructure and work with the private sector and civil society to achieve it.

This chapter sets out the steps for countries to reinforce infrastructure resilience to current and future climate-related risks. It recognises the importance of planning infrastructure that can withstand future climate-related risks, while involving stakeholders in decisions that will affect the future placement of infrastructure and how land will be used. The chapter also recognises the importance of methodologies to select projects that deliver high levels of resilience and technical tools to operate and maintain for resilience over the full life cycle. Finally, while the focus of this report is on climate resilience, the chapter includes case studies and cross-country comparisons of how countries prepare for a wide range of risks. It stresses the importance of an all-hazards approach and illustrates how countries can apply lessons from a wide range of risks to climate-related risks.

2.2. Co-ordinate between public and private infrastructure providers

2.2.1. Co-ordinate the actors

Given the wide range of actors affected by decisions relating to planning, delivering and maintaining climate-resilient infrastructure, countries need to involve national and subnational governments, state-owned enterprises, the private sector and other relevant parties. Engagement and partnership with citizens on decisions about climate-resilient infrastructure are also important (Section 2.7). Ideally, such broad participation in governance would involve sectoral ministries and agencies overseeing infrastructure delivery and regulation across all infrastructure sectors, as well as those in charge of resilience to all-hazards and threats. It is also important for countries to note that the actors may vary depending on the lifecycle stage. Several countries use co‑ordination at the centre of government to manage the interests of stakeholders and make relevant trade-offs for effective resilience policies. Countries often also adopt multi-level governance approaches to support public investment at the relevant scale and to co‑ordinate actions among and across levels of government (see Chapter 6).

Effective co‑ordination requires governments to assume multiple and complex roles. Risk managers and officials in charge of the governance of all risks, including those related to climate, must co‑ordinate across several functions in government. In so doing, they must ensure that, on behalf of the general interest, resilience objectives can be achieved, while balancing the relevant trade-offs.

Co‑ordination is essential since actors may have conflicting visions for climate-resilient infrastructure, which can have both technical and financial implications. As an important first step towards better co‑ordination, governments should partner with infrastructure operators from national and subnational governments, and the private sector. Together, they need to agree on a common vision for climate-resilient infrastructure and on shared and achievable resilience objectives (OECD, 2019[1]). This matters because, while operators and governments agree on the need to protect assets and maintain service, they may differ on the level of resilience required, the means to achieve it and the applicable regulations. These measures have financial implications and raise questions about who will take on additional costs to invest in resilience (see Chapter 4). Resilience visions can also be defined at a regional or local level, allowing for more targeted, place-based approaches as climate risks can be more concentrated in some places than others (see Chapter 6).

Establishing partnerships between governments and operators (public and private) can help develop a common vision of resilience in critical infrastructure and define shared objectives. Policy issues include deciding on the acceptable duration of “down time”, maintaining a level playing field among operators and circumventing free-riding in competitive sectors. Engaging stakeholders with the public, in regular meetings, institutionalised dialogues and joint exercises can foster consensus (OECD, 2019[1]). A common vision for resilience can also allow infrastructure operators to plan for an agreed level of service. This will enable them to plan maintenance so that infrastructure can perform to an agreed level in the face of risks.

Recent data show that many OECD countries have laid the foundations for co‑ordination. In 2022, of OECD countries for which information is available, 25 of 27 had established a national strategy for critical infrastructure resilience (93%). In addition, 21 (78%) had designated a lead institution. Whether or not they had a strategy, 29 of 31 OECD countries (94%) had defined “critical infrastructure” in 2022, and all 32 OECD countries with available data had identified critical infrastructure sectors. Moreover, 19 of 23 countries (82%) reported they had established national inventories of critical infrastructure assets, systems or functions (OECD, 2021[2]). Figure 2.1 shows how governments within OECD countries co‑operate with critical infrastructure operators to enhance resilience.

Figure 2.1. Government measures to enhance resilience of critical infrastructure

Source: OECD (2022[3]), Questionnaire on the Governance of Critical Risks, https://qdd.oecd.org/subject.aspx?Subject=GOV_RISK.

2.2.2. Consider the interdependencies among different infrastructure assets and networks

Countries can also better plan the resilience of infrastructure by adopting methodologies and metrics that identify investment priorities among critical functions, systems and assets. This requires a good understanding of how disruptions can affect infrastructure assets and where dependencies and interdependencies at the subnational, national and international levels could amplify their impacts. Once priority nodes and hubs are found across interdependent systems, countries need to assess their resilience with relevant indicators and to compare actual and expected results to identify gaps (OECD, 2019[1]).

Many OECD countries (14) research links between different types of critical risks (OECD, 2022[3]), but they can go further with a three-tier approach. First, they can map the interdependencies (physical, digital, geographic, logical) between critical infrastructure assets and systems. This is key to estimating the full impact of service loss in case of disruption. Second, a criticality assessment allows countries to classify systems, networks and assets based on the impact of their disruption on a range of pre-established criteria. Third, resilience analysis and stress tests help identify weak points where potential failures are more likely. As a final step, developing relevant indicators for infrastructure assets and systems enables the best comparison of their level of resilience (OECD, 2019[1]).

2.2.3. Establish ways of sharing information

By sharing information, stakeholders can better understand the context for climate resilience, including their own roles. Countries can foster resilience of infrastructure by establishing information-sharing platforms with operators of critical infrastructure. This will enable all relevant infrastructure stakeholders to obtain a comprehensive and shared understanding of risks and vulnerabilities. Types of information include an asset or network’s ability to perform during natural hazards in particular locations, their expected life in the face of growing threats, arrangements for reinstatement of infrastructure in the event of outages and anything else that may affect operations of other infrastructure providers. Sharing such information helps operators understand their own vulnerabilities, their dependencies on other infrastructures, and how disruptions to their services could affect other infrastructures or even their own. These platforms must be secure and confidential with clear rules of access to allow a trusted sharing of sensitive information. It is also important for countries to note that the types of information that need to be shared could vary depending on the lifecycle stage.

As one key challenge to voluntary information sharing, parties can be concerned their information may be publicly disclosed. Operators are not inclined to share sensitive information about their vulnerabilities, their critical dependencies and any disruptive incidents outside of safe circles. Disclosure may lead to liability, affect competitiveness in the market or damage a firm’s reputation.

Information sharing can also be viewed as an opportunity. Transparency of risk information can strengthen operators’ accountability and reinforce resilience measures. In a world characterised by interconnected systems, interdependent infrastructure systems are as vulnerable as their weakest link. Therefore, sharing information at the international, national and sub-national levels helps create a common understanding among infrastructure operators of how to reach an acceptable level of resilience (OECD, 2019[1]).

2.3. Identify the risks to infrastructure

2.3.1. Take an all-hazards approach

When planning infrastructure, countries need to consider resilience to climate-related risks within a wider context of potential risks, including cyber threats, terrorism and pandemics. Taking an all-hazards approach is important because the hazards facing critical infrastructure constantly evolve. In response, countries need to be agile and flexible in the face of new, emerging threats, ensuring they do not become too preoccupied with particular threats and risk being caught out by new ones. This approach also helps countries stay focused on the level of disruption posed to infrastructure by particular risks rather than being fixated on any specific risk events. Figure 2.2 shows where common climate-related risks, such as natural hazards, sit alongside other types of critical risks for OECD members.

Figure 2.2. Types of hazards and/or threats identified as potential critical risks

Source: OECD (2022[3]), Questionnaire on the Governance of Critical Risks, https://qdd.oecd.org/subject.aspx?Subject=GOV_RISK.

2.3.2. Identify the severity, likelihood and anticipated impact of risks

Box 2.1. Identifying the severity, likelihood and impact of climate risks

United Kingdom

The Department of Environment, Food and Rural Affairs identifies eight factors to consider when accounting for the impacts on infrastructure of events induced by climate change:

• Hazard: the potential for loss of life, injury or other health impacts, damage and loss to property, infrastructure, livelihoods, service provision, ecosystems and environmental resources.

• Exposure: people, ecosystems, services, resources that could be adversely affected.

• Vulnerability: the propensity or predisposition to be adversely affected.

• Adaptive capacity: the ability to adjust to a risk event.

• Sensitivity: the degree to which a system is affected, either adversely or beneficially, either through direct or indirect effects.

• Timing: attention should be paid to activities that have long-term time horizons, lifetimes or implications. This may also include decision lead times.

• Tipping points (and thresholds): the critical points where the climate changes from one stable state to another stable state. These can involve biophysical, engineering, performance or policy thresholds (or tipping points), above which much larger impacts occur.

• Irreversibility: given uncertainty of many risks, decisions that would be difficult or expensive to revise in future should receive additional scrutiny.

Canada

The Climate Lens is a project-level requirement applicable to Infrastructure Canada's Investing in Canada Infrastructure Program and Disaster Mitigation and Adaptation Fund. It aims primarily to raise awareness of climate change risks and impacts associated with projects and encourage improved choices by project planners, designers and decision makers. The Climate Lens also supports Infrastructure Canada in measuring its progress towards meeting its climate goals.

The Climate Lens looks at the anticipated greenhouse gas emissions from an infrastructure project, as well as its risk and resilience to disruptions or impacts related to climate change. It assesses climate resiliency through four steps:

• Assess the severity or consequence of the hazard's impact on the project.

• Assess the likelihood of the hazard's impact on the project.

• Identify the number and level of risks of each hazard on the project.

• Record the risks.

Source: DEFRA (2020[4]), Accounting for the Effects of Climate Change –Supplementary Green Book Guidance, https://assets.publishing.service.gov.uk/media/5fabacf98fa8f56da26ba375/Accounting_for_the_Effects_Of_Climate_Change_-_Supplementary_Green_Book_.._.pdf; INFC (2023[5]), Investing in Canada Infrastructure Program Climate Lens – General Guidance, https://www.infrastructure.gc.ca/pub/other-autre/cl-occ-eng.html#Introduction.

By understanding the risks posed to their infrastructure, countries can identify the likelihood and magnitude of a risk event. Such an analysis could project economic damage, social disruption and environmental impacts. As well as assessing and understanding their climate risks, countries can also assess future projected risks (Chapter 1). Box 2.1 shows how the United Kingdom and Canada identify the severity, likelihood and impact of risks.

Figure 2.3 shows different methods of OECD countries to anticipate all types of risks. Figure 2.4 shows how countries use data gathered regarding the exposure, vulnerability, damages and economic losses to infrastructure as a result of climate risks and hazards.

Figure 2.3. Measures to develop capacity to anticipate risk

Source: OECD (2022[3]), Questionnaire on the Governance of Critical Risks, https://qdd.oecd.org/subject.aspx?Subject=GOV_RISK.

Figure 2.4. How countries use data on the exposure and vulnerability to climate risks and hazards, and on damages and economic losses from extreme events

Source: OECD (2022[3]), Questionnaire on the Governance of Critical Risks, https://qdd.oecd.org/subject.aspx?Subject=GOV_RISK.

2.4. Set long-term plans and policies that address climate resilience (national and subnational)

2.4.1. Delivering greater certainty to citizens and the private sector through long-term plans

Long-term plans set out the timeframe and sequencing of key investments in infrastructure, including steps to deliver new, resilient infrastructure or to upgrade the resilience of existing infrastructure. Long-term plans set out the future use of land. To that end, they designate areas as off-limits for future development. They also protect corridors or sites for future infrastructure and identify timeframes for such development.

Long-term development plans vary across countries (OECD, 2017[6]), but the common types used in national, regional and urban contexts generally include:

• development strategies (e.g. urban development strategy), which provide high-level cross-sectoral goals for development for national or subnational levels

• spatial plans (strategic spatial plans, master plans), which specify and protect future land use and infrastructure corridors

• capital works plans that define specific project commitments either by place or by sector.

This is not always a perfectly linear process given unexpected events can happen at any time, which can create an immediate imperative to reinstate infrastructure. However, over the long-term, it is important that these three types of long-term plans align. Therefore, infrastructure commitments deliver on high-level policy objectives and the land required to deliver them is identified and protected and made available in advance.

Land-use choices matter for climate resilience. OECD countries have a range of systems for land-use regulations that shape the development trajectory of different places. Subnational governments often have key competencies for these systems (OECD, 2017[7]). Some examples of regulations include land-use planning processes, and environmental and building code regulations. These help define what can be built and where. Given the close link between land use and infrastructure planning, government should closely consider existing land-use planning systems through a place-based approach for development of public infrastructure (Chapter 6).

Capital works plans are also important for delivering climate-resilient infrastructure. Given the long-term nature of climate risks, the long lead times to deliver major physical assets and the many decades these assets may be operating, countries need capital works plans to ensure climate-resilient infrastructure. For long-term risks like climate change, long-term planning is essential to deliver as much certainty and predictability to citizens as possible. This is especially important for those living in areas with uncertain futures. Rising sea levels and increased storm and wildfire events, for example, may make some places uninhabitable. The well-being and security of people require certain and predictable decisions about when to make key investments to protect citizens from future risks or when to relocate settlements, if necessary.

Figure 2.5 shows environmental and climate-related dimensions for OECD members to consider in developing national or sectoral infrastructure strategies.

Figure 2.5. Environmental and climate-related dimensions for national or sectoral infrastructure strategies

Source: OECD (2022[3]), Questionnaire on the Governance of Critical Risks, https://qdd.oecd.org/subject.aspx?Subject=GOV_RISK.

2.4.2. Setting policies that enable and incentivise the planning and delivery of resilient infrastructure

Countries can plan for better infrastructure resilience by defining a mix of policy tools that incentivise operators’ investments in resilience and achieve shared objectives. Such measures should address the entire infrastructure life cycle – from planning and operations to maintenance and renewal or retrofits. Of 29 OECD countries surveyed, 26 use the results of risk anticipatory measures to inform strategic policy decisions (OECD, 2022[3]). Meanwhile, 20 also have guidance on adaptation for national or subnational levels (OECD, 2022[8]).

Governments can choose from a variety of policy tools and mechanisms to advance implementation of resilience objectives – from voluntary frameworks and incentive mechanisms to regulatory or legal tools. Many operators have a keen interest in maintaining the continuity of their services and their reputation by investing in resilience. However, investments in resilience often imply costs up front, even if these should be compensated by greater reliability of service and resilience to shocks. Additional requirements imposed by governments to strengthen resilience may result in further costs ultimately borne by customers, citizens and businesses. Governments should tailor public policy instruments to provide effective incentives for operators to invest in resilience, while managing financial repercussions. Chapter 5 discusses the national policies required in the developing world. It is also important for countries to note that different regulatory interventions and incentives may be required depending on the lifecycle stage. For example, the measures needed to require or incentivise capital investment in resilience could be different from measures to require or incentivise investment in operations and maintenance.

The regulatory approach provides clear and measurable obligations. Regulations, for instance, can set reliability requirements or require business continuity plans, insurance mechanisms and minimum security standards. Figure 2.6 shows an example of the regulatory approach in action, showing the extent to which OECD countries require adaptation measures to be integrated into the design of transport assets.

Figure 2.6. Requirement to integrate adaptation measures into transport infrastructure design in OECD countries

Source: OECD (2022[8]), Survey on the Governance of Infrastructure, https://data-explorer.oecd.org/vis?lc=en&fs%5b0%5d=Topic%2C1%7CGovernment%23GOV%23%7CGeneral%20government%23GOV_GG%23&pg=20&fc=Topic&bp=true&snb=22&df%5bds%5d=dsDisseminateFinalDMZ&df%5bid%5d=DSD_QDD_GOV_INFRA_PH_2%40DF_GOV_INFRA_PH_2&df%5bag%5d=OECD.GOV.

When too prescriptive, the regulatory approach can prove costly, rely on outdated technology and lead to compliance challenges. Making operators compensate customers or imposing other penalties for disrupted service can be an efficient way to incentivise resilience investments, notably in public-private partnerships. Such approaches also provide operators with a choice in ways to increase their resilience. Voluntary frameworks, such as resilience guidelines, awareness-raising activities or the sharing of good practices, are often preferred options to engage stakeholders. However, the voluntary approach may lead to uncertain outcomes. Regulatory measures need to strike the right balance between public financial support and private investments measures. Cost-benefit analysis can prioritise the most effective ways to share the costs of achieving shared resilience objectives.

Figure 2.7 shows different incentives that countries use to enhance resilience of critical infrastructure.

Figure 2.7. Incentives for operators to invest in critical infrastructure resilience

Source: OECD (2021[2]), Government at a Glance 2021, https://doi.org/10.1787/1c258f55-en.

2.4.3. Ensure analysis of projects identifies solutions that capture the wider benefits of resilience

Appraisal tools can assess the present and future benefits and costs of resilience projects, such as the reinstatement of infrastructure after landslips. Considering the weight of different factors can help inform how to respond to a natural hazard event. Factors could include the frequency of such events and the costs to people’s lives and businesses, or lack of access to essential services. For example, cost-benefit analysis can help decide whether a like-for-like replacement of an asset or a solution is the best approach. Would a more resilient long-term solution generate greater or fewer benefits? Figure 2.8 shows a full range of project selection tools and how they can be applied when considering the costs and benefits of different climate-resilient infrastructure options.

Project risk appraisal can help providers and operators to respond and anticipate infrastructure emergencies. When natural hazard events occur, emergency service operators and infrastructure providers must respond quickly to reinstate infrastructure. This can enable people to resume their lives as soon as possible. However, rather than waiting for natural hazard events, project appraisal can be applied to at-risk sites outside of emergency in anticipation of such events (OECD, 2023[9]). Box 2.2 shows a methodology from New Zealand, a country highly exposed to natural hazard risk, for monetising the benefits of resilience.

Figure 2.8. Decision tools to support adaptation

Source: OECD (2015[10]), Climate Change Risks and Adaptation: Linking Policy and Economics, OECD Publishing, Paris, https://doi.org/10.1787/9789264234611-en.

Nature-based Solutions (NbS), explored in Chapter 4, can generate additional social, economic and environmental co-benefits, especially when integrated with other comprehensive approaches. The co-benefits of NbS can be challenging to measure. A combination of traditional appraisal tools and non-traditional methods allows for more inclusive reporting on indicators that grasp the benefits of NbS, including in an environmental impact assessment (EIA). In addition, this combination of approaches can be integrated into cost-benefit analysis for the assessment and comparison of project alternatives. It can then be further complemented with, for example, multi-criteria analysis, which allows for comparing project alternatives on their scores on both quantitative and qualitative criteria. Such a comprehensive approach allows for a fairer comparison with projects that do not necessarily score high on monetary outcomes but do have benefits to nature and social indicators (OECD, 2023[11]).

Box 2.2. Measuring the benefits of resilience

New Zealand is especially prone to events like earthquakes, volcanic activity and extreme weather events that cause floods and landslides.

To help identify projects with greater resilience, the New Zealand Transport Agency developed a methodology for monetising the benefits of resilience. This methodology estimates resilience benefits against the non-disrupted state. If options are being considered with different levels of resilience, the value of an option relative to base can be assessed as:

Value of option relative to the base case =

• net change in benefits in non-disrupted state plus

• net change in benefits of resilience

Where:

Net increase in benefits of resilience = Net reduction in expected costs of disruption

• expected costs of disruption under the Base Case minus

• expected costs of disruption under the Option.

In a hypothetical example, flooding costs EUR 1 million annually in disruptions along an existing route. An alternative route provides transport cost savings valued at EUR 3 million per year. The new route is also subject to some flooding, but the annual cost of disruption is estimated at EUR 0.4 million. The annual benefits of the alternative route relative to the base case are then estimated as EUR 3.6 million (EUR 3 million plus a EUR 0.6 million reduction in disruption costs).

The methodology also factors in a wider range of costs and impacts, including user costs (diversion, waiting times); other direct costs (loss of life, injury, repair, reinstatement); and indirect impacts (wider economic benefits).

Source: McWha and Tooth (2020[12]), Better measurement of the direct and indirect costs and benefits of resilience, https://www.nzta.govt.nz/assets/resources/research/reports/670/670-Better-measurement-of-the-direct-a.

Overall, countries could make greater use of methodological tools to integrate environmental and climate considerations into project appraisal. All OECD countries for which data are available require an EIA to evaluate the possible impacts of a transport infrastructure project. However, only 68% (19 of 28) systematically use assessment results to inform project selection and prioritisation. Similarly, while 63% (17 of 27) require a climate impact assessment to estimate potential emissions of a transport infrastructure project, only 44% (12 of 27) systematically use results to select or prioritise projects. Less than half of OECD respondents (12 of 26 or 46%) require climate change adaptation measures to be integrated into the design of transport infrastructure projects. Finally, only 35% (9 of 26) systematically use climate resilience criteria to inform project selection and prioritisation (OECD, 2023[13]).

2.5. Use capital budgeting arrangements to incentivise and deliver climate-resilient infrastructure

Box 2.3. Green budgeting in OECD countries

Green budgeting is relevant to the provision of climate-resilient assets. It ensures that capital budgeting frameworks include development priorities, such as national emission reduction and adaptation strategies, to inform budget decisions in the context of scarce resources. OECD countries are considering climate change in forecasting, modelling and fiscal risk management to strengthen their budget approaches.

Figure 2.9. OECD countries actively using green budgeting approaches in 2022

These policy developments contribute to better informed budget decisions on capital investment by considering climate resilience alongside other objectives in the budget:

• Forecasting: The composition of public revenue and expenditure is changing as a result of climate-related policies. This has implications for budget forecasts and the government’s fiscal position. Ministries of finance are including these changes in budget forecasts. In addition, independent fiscal institutions, such as fiscal councils, are including climate change considerations when forming a view on the sustainability of public finances.

• Modelling: Modelling the expected impacts of capital expenditure proposals can consider climate resilience. However, it can also consider the expected impact on emissions and capacity constraints on the implementation of the proposals.

• Fiscal risk management: Fiscal risk frameworks increasingly have regard for physical risks caused by extreme weather events, and transition risks from policies that are designed to deliver on climate commitments, specifically net-zero emissions under the Paris Agreement.

Sources: OECD (2022[14]) Green Budgeting Survey, https://qdd.oecd.org/subject.aspx?Subject=GOV_GREENBUD; OECD (2015[15]), Recommendation of the Council on Budgetary Governance, https://legalinstruments.oecd.org/en/instruments/OECD-LEGAL-0410; OECD (2023[13]), Government at a Glance 2023, https://doi.org/10.1787/3d5c5d31-en.

2.5.1. Establish budgeting arrangements for long-term investment in climate-resilient infrastructure

Decisions about the financing of resilient infrastructure can result in large spending commitments. Most OECD countries (67%) have adopted green budgeting, a term that refers to integrating climate and environmental considerations into budget processes to help inform funding and resource allocation decisions. Box 2.3 shows that 24 of 36 OECD countries were actively using green budgeting approaches in 2022 to help prioritise capital and current expenditure in governmental budgets. Green budgeting approaches are also emerging at a subnational level (OECD, 2022[16]).

2.5.2. Establish principles for the fair and equitable financing of resilient infrastructure

Given many parties are involved in infrastructure resilience, costs should be apportioned equitably among relevant parties. At the same time, the process should acknowledge that many parties will have limited ability to finance their full share of resilience. Countries should avoid enabling or incentivising operators from continuing to build infrastructure where it will be of greater risk in the future. These include in areas exposed to incrementally increasing risks such as rising sea levels, coastal erosion and flooding. Chapter 3 provides more information on linking planning to financing and use of innovative funding tools. Chapter 6 highlights how subnational governments can finance climate resilience investments.

Most OECD countries (20 of 29 respondents) promote resilience in infrastructure by financing adaptation and preventive measures (OECD, 2022[8]). However, countries can also address financing constraints by considering the following:

• Identification of key beneficiaries: Parties, such as property owners or private infrastructure providers, may stand to benefit from public investment in resilience. If so, it may be appropriate for them to contribute a financial share (through development contributions, land value capture instruments, taxation, etc.)

• Share of cross-subsidisation: Some parties simply will not be able to fund their share of investment in resilience. Since the costs of climate change will fall unevenly on certain groups, some cross-subsidisation will be necessary. This will be particularly the case for communities in developing countries and less developed places within these countries. In many such countries, subnational governments may bear the brunt of paying for climate resilience. Consequently, national governments may have a role to support them (see Chapter 6).

• Equity: Some stakeholders will be better placed to finance resilient infrastructure than others. Vulnerable communities may need additional financial support from national governments or third parties to meet an acceptable level of resilient infrastructure. In some cases, for example, it may be deemed appropriate that private parties contribute to their community’s resilience. In such scenarios, cost-sharing mechanisms, such as pay-as-you-go schemes, might be feasible. In other cases, there may be significant inequities. For example, subnational governments may be unable to raise the funding needed from their constituents. If this happens, central governments could raise debt directly or provide credit enhancement (such as guarantees) to subnational governments (see Chapter 6).

• Incentives and disincentives: Disincentivise asset owners and landowners from building infrastructure in high-risk places in the future. One effective way to do this is to transfer a reasonable and proportionate share of financial risk upon them. It is also reasonable that private asset owners and property owners pay for some resilience costs, given they are the direct beneficiaries of the investment.

• Compensation and liability: Understanding who is financially liable if land is deemed no longer habitable is an important step. This can help determine the appropriate financial contributors and therefore the appropriate funding and financing mechanisms. Insurance can provide a buffer in case of a disaster, although the limitations of this approach should be acknowledged (ICSI, 2023[17]).

2.6. Adequately involve stakeholders in decisions about resilient infrastructure

Decisions about large, physical assets need input from stakeholders for both social and economic reasons. Roads, water services, electricity infrastructure and public facilities have an immediate impact on people’s well-being, on the productivity and operations of businesses, and on the policy decisions of national and subnational governments. Another important aspect of stakeholder engagement involves land acquisition, where public works providers have recourse to acquire private land holdings. Governments need to be transparent, fair and timely with decisions that affect the property and wealth of people and businesses, especially when engaging with affected property owners (OECD, 2023[9]).

Box 2.4. Stakeholder Engagement on Coastal Climate Resilience in Denmark

In response to climate risks related to sea level rise and intensified storm surges, Denmark undertook the “BaltCICA” (2009-2012) and "Cities and the Rising Sea Level – Dialogue on Climate Adaptation” (2018-2022) initiatives to encourage the resilience of its coastal cities. Both projects placed significant emphasis on citizen participation to shape climate adaptation strategies.

BaltCICA, focused on issues of coastal retreat and threats to groundwater quality, facilitated citizen involvement through a scenario workshop during which stakeholders engaged in discussions about future scenarios and adaptation options. This workshop culminated in a citizen summit, where participant deliberation on adaptation options influenced the adaptation strategy for the local municipality, which was subsequently shared across Baltic countries. The "Cities and the Rising Sea Level" project took a comprehensive approach to citizen participation with the aim of improving the knowledge base for climate resilience in Denmark more broadly. Workshops, consultations, and online climate citizens' meetings brought together stakeholders, experts, and citizens to discuss themes such as nature, transportation, housing and business, and newsletters and articles encouraged continuous engagement among citizens.

Source: (Tekno, n.d.[18]), Cities and rising sea levels – Securing coastal cities against future sea level rise? https://tekno.dk/project/hvordan-skal-vi-sikre-kystbyer-mod-fremtidens-havstigninger/.

2.6.1. Helping stakeholders understand the economic, social and environmental benefits and costs of meeting different levels of resilience

Given that countries will face constraints in funding all of their resilience activities, they need to engage with citizens and other stakeholders on risk levels they can tolerate compared with the costs of addressing them. This is particularly important because different communities will face different types and levels of risk, and will also have varying capacity to fund efforts to increase resilience through infrastructure. By exchanging in dialogue about risks and the options to address them through planning, delivery and maintenance of infrastructure, government can understand the risk appetite of citizens and stakeholders.

Figure 2.10 shows the types of information-sharing measures commonly used by OECD countries. Figure 2.11 shows the infrastructure life cycle stages that require consultation with stakeholders on environmental or climate-related impacts. Figure 2.12 shows the methods countries use to engage stakeholders.

Figure 2.10. A whole-of-society approach to risk communication

Source: OECD (2022[3]), Questionnaire on the Governance of Critical Risks, https://qdd.oecd.org/subject.aspx?Subject=GOV_RISK.

Figure 2.11. Mandatory stages of consultation on environmental or climate-related impacts of infrastructure investments in OECD countries

Source: (OECD, 2022[8]) Survey on the Governance of Infrastructure, https://data-explorer.oecd.org/vis?lc=en&fs%5b0%5d=Topic%2C1%7CGovernment%23GOV%23%7CGeneral%20government%23GOV_GG%23&pg=20&fc=Topic&bp=true&snb=22&df%5bds%5d=dsDisseminateFinalDMZ&df%5bid%5d=DSD_QDD_GOV_INFRA_PH_2%40DF_GOV_INFRA_PH_2&df%5bag%5d=OECD.GOV.

Figure 2.12. Mechanisms for engaging national and subnational stakeholders

Source: OECD (2022[3]), Questionnaire on the Governance of Critical Risks, https://qdd.oecd.org/subject.aspx?Subject=GOV_RISK.

2.7. Collect data and use innovative techniques to better maintain and operate assets and networks

Because infrastructure is long-lived, countries need to build, maintain and renew it to withstand the risks both for today and tomorrow. This will be particularly relevant to infrastructure exposed to risks that are incrementally increasing. Such risks include sea level rise, coastal erosion, more frequent and severe storm events, and other risks induced by climate change. The severity, likelihood and return rates of risks will increase over time. Consequently, planning and funding of maintenance and operations of assets and networks will be vital. This will allow infrastructure to deliver an acceptable level of service over the full life cycle.

Given the expense of building climate-resilient infrastructure, countries may want to adopt innovative methods to strengthen existing operations. Countries will need to provide new public and private capital investment in infrastructure. However, many countries will struggle to meet rising expectations for infrastructure through new capital commitments alone. To uphold an acceptable level of resilience, countries can collect more data, monitor performance and adopt innovative methods to maintain and operate existing infrastructure. In this way, they can defer new capital commitments while meeting service that citizens need to uphold their well-being.

2.7.1. Collect data to inform decisions about the resilience of assets and networks

Countries often face challenges gathering information and data about their assets and networks, such as on past construction, repairs and an asset’s usage and performance. Keeping records on public assets up to date is technically demanding, involving valuation and revaluation of non-financial assets. In addition, most countries do not reflect non-financial assets in the government’s financial statements. Only a few countries, such as Estonia and Ireland, produce comprehensive asset registers (IMF, 2020[19]).

Few countries regularly produce exhaustive maintenance expenditure data. Thanks to better data availability, including at a cross-country level, most empirical studies focus on specific sectors such as transport. In Canada, information is gathered through the Annual Capital and Repair Expenditures Survey, and in the United Kingdom through the Annual Report on the Government Major Projects Portfolio (OECD, 2021[20]).

2.7.2. Monitor the performance of assets and networks

Continuous monitoring, which increases accountability and early adoption of resilience measures, can take several forms. Beyond regular performance assessments to prioritise investment in resilience, other monitoring tools include fines for non-compliance. In addition, positive incentives such as recognition or awards for implementation of good practices, open access evaluations or rankings can maintain attention on resilience. In Korea, the Ministry of Interior and Safety makes public the annual evaluation ranking of disaster response capacities among critical infrastructure operators. The resulting peer pressure creates additional incentives for operators to keep up their public image (OECD, 2021[20]).

Evaluation of climate impact can inform decisions for both current and future infrastructure projects. For climate-related risks, systematic evaluation of projects’ climate impact brings to light key considerations, risks and mitigation strategies. This information can lead to better decisions in both current and future infrastructure projects. Figure 2.11 shows the extent to which OECD countries evaluate infrastructure systematically. Such monitoring and mitigation measures could inform planning and design of infrastructure with the least environmental and climate impact.

While over half of surveyed countries (15 of 26 or 57%) monitor and mitigate environmental and climate change risks throughout operation, maintenance and decommissioning of assets, there is room for improvement. For example, a good practice comes from France, which has launched a methodological guide to assess the impacts of projects on greenhouse gas (GHG) emissions. The guide proposes an avoid-reduce-compensate (ERC) sequence throughout construction, operation and decommissioning of assets. This is required for projects for which GHG emissions are quantified and significant impacts are identified. The guide illustrates examples of ERC measures at different stages of the life cycle and recommends monitoring their progress, as well as their effectiveness (MTES, 2022[21]).

Figure 2.13. Use of mechanisms to monitor and mitigate environmental and climate change risks throughout operation, maintenance and decommissioning of assets in OECD countries

Note: Data for Australia, Belgium, Denmark, Germany, Greece, Hungary, Israel, Japan, Luxembourg, the Netherlands, Norway and Türkiye are not available.

Source: OECD (2022[8]), Survey on the Governance of Infrastructure, https://data-explorer.oecd.org/vis?lc=en&fs%5b0%5d=Topic%2C1%7CGovernment%23GOV%23%7CGeneral%20government%23GOV_GG%23&pg=20&fc=Topic&bp=true&snb=22&df%5bds%5d=dsDisseminateFinalDMZ&df%5bid%5d=DSD_QDD_GOV_INFRA_PH_2%40DF_GOV_INFRA_PH_2&df%5bag%5d=OECD.GOV.

2.7.3. Apply innovative methods of maintaining and operating assets and networks

New technologies such as remote sensing, big data, Internet of Things, cloud technologies and machine learning are transforming how infrastructure is operated and maintained. Infrastructure technology, or InfraTech, can integrate material, machine and digital technologies across the infrastructure life cycle – from development to delivery and operations. InfraTech also improves resilience by enabling faster and more targeted responses to disruptive shocks or shifts in supply and demand. For example, a digital twin of an infrastructure asset or network can be continuously updated with big data from multiple sources. This, in turn, enables improved testing of what-if scenarios, analysis of the interdependency of multiple systems, and simulation of risks and vulnerabilities – all towards building the asset’s resilience. Figure 2.14 depicts how these technologies can help build intelligent infrastructure.

Several obstacles, both technical and bureaucratic, stand in the way of integrating digital technologies into the infrastructure life cycle. Many actors and jurisdictions are involved in planning and delivering infrastructure, but their approaches may not be in sync. Lack of national standards and approaches hampers broader take-up of digital technologies, interoperability and benefits at scale. In addition, some innovative solutions rely on new technologies that are still relatively un-tested or un-proven. Uncertainty about technologies may reduce the willingness of some actors to invest in their use. At a deeper level, new technologies for monitoring, delivering and predicting infrastructure maintenance require fundamental changes in regulatory, audit and decision-making processes. This implies the continued shift of public sector decision-making processes to focus on outcomes, to be more open to external stakeholders and to work in real time on the basis of data and analysis (OECD, 2021[20]). As emerging countries are particularly lacking when it comes to digital technologies, this could be an area where more advanced countries are able to provide technical assistance in the future. Chapter 6 details strategies for international co-operation on infrastructure development and management through discussion of the UNCDF Climate Adaptive Living Facility.

Figure 2.14. Building intelligent infrastructure for resilience

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