Climate change may lead to an global average annual loss of over $700 billion in infrastructure sectors and buildings
Climate change may lead to a estimated global average annual loss (AAL) in infrastructure sectors and buildings of between $732 and $845 billion, according to a report looking into infrastructure resilience and losses in global infrastructure due to climate impact and disasters.
This means around 14 per cent of 2021- 2022 global gross domestic product is at risk, found Biennial Report on Global Infrastructure Resilience: Capturing the Resilience Dividend released by Coalition for Disaster Resilient Infrastructure (CDRI) on October 4, 2023. About half of this contingent liability is held by low- and middle- income countries (LMIC).
The global AAL from disasters and climate change in just the principal infrastructure sectors is between $301 and $330 billion. The report stated that $9.2 trillion must be invested to address the infrastructure deficit, achieve the United Nations-mandated Sustainable Development Goals, achieve Net Zero and strengthen resilience by 2050, with $2.84-2.9 trillion invested in LMICs.
The paper presented an economic, financial and political imperative for investing in resilience, based on a Global Infrastructure Risk Model and Resilience Index, or GIRI. This is the first fully probabilistic risk model that is publicly available for estimating risk for infrastructure assets in relation to the majority of major geological and climate-related hazards.
The paper stated that geological hazards account for 30 per cent of total global AAL, while climatic hazards account for 70 per cent. Climate change has the potential to significantly increase the AAL, with different consequences for high, middle and low-income countries.
The risk is also not distributed evenly across sectors, with roughly 80 per cent of the risk concentrated in the power, transportation and telecommunications sectors, according to the CDRI report.
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High-income countries account for approximately 67 per cent of global infrastructure asset value. Upper and lower middle-income countries account for 24.8 per cent and 7.0 per cent, respectively, while low-income countries account for 0.6 per cent. However, LMICs have the highest relative risk, with a relative AAL ranging from 0.31 to 0.41 per cent, compared to 0.14 per cent in high-income countries.
While climate change is expected to increase AAL by 11 per cent in high-income countries, it may increase by 12-22 per cent in middle-income countries and 33 per cent in low-income countries.
Capital investment in an infrastructure asset accounts for only 15-30 per cent of total expenditure over its design lifecycle, with operations and maintenance accounting for up to 70-85 per cent of total expenditure, CDRI said.
LMICs face a number of complex challenges, including a significant infrastructure deficit that impedes social and economic development, according to the report. These countries also have low-quality infrastructure as a result of poor infrastructure governance.
Furthermore, asset loss and damage caused by disasters disrupt services. Legacy infrastructure in LMICs is insufficient to meet the challenges posed by climate change and technological progress.
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Many of these high-risk countries are located in sub-Saharan Africa and the Middle East, CDRI highlighted.
“Rising asset loss and service disruption associated with disaster and climate risk erodes a significant proportion of the new capital investment countries need to address their infrastructure deficit,” the report said, adding that new infrastructure investments without strengthened resilience was analogous to pouring water into a bamboo basket.
Extreme climate hazards, according to the paper, exacerbate disaster risks, asset losses and service disruptions. Existing infrastructure may become dysfunctional and despite increased efforts to mitigate climate change, the AAL in infrastructure remains high, according to the report.
The report also advocated for nature-based infrastructure systems, which have average costs of only 51 per cent of grey infrastructure projects.
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Relief work in Libya after the country faced huge losses following floods due to a medicane in September 2023. Photo: UNHCRLibya / X (formerly Twitter).png)
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