Past performance and future needs for low carbon climate resilient infrastructure– An investment perspective

Abstract

This article explores the investment implications of moving to low-carbon, climate-resilient infrastructure. It begins with analysis of gross fixed capital formation and decarbonisation trends to examine past performance of OECD countries in reducing GHG emissions from 1997 to 2007. Many OECD countries made progress in decoupling GHG emissions from infrastructure investment in residential buildings, and to a lesser extent from power and industry, but increased efforts are required, especially in the transportation sector. The analysis highlights the need to accelerate the pace and scale of change to reverse GHG emission trends to bring into reach ambitious climate policy goals. It then assesses future global infrastructure needs under low-carbon and business-as-usual (BAU) global warming scenarios, and the incremental costs of going “low-carbon” are estimated to be small relative to the magnitude of the BAU infrastructure investment needs. Global infrastructure needs for 2015–2020, including buildings and transportation vehicles, are approximately 6.7 trillion USD/year under BAU. Incremental costs of low-carbon infrastructure are of the order −70 to +450 billion USD/year. Achieving climate resilient infrastructure may add costs, but there is potentially synergistic overlap with low-carbon attributes. Although estimates are incomplete, the technical and financial inter-dependency between infrastructure systems suggests the potential to generate infrastructure investment to support a “virtuous cycle” of low-carbon growth.