Three reasons why PPPs can mobilize adaptation investment
One, A PPP incentive structure establishes project requirements that enable resilient and adaptable assets or services. The need for robust revenue models also ensures that adaptation and resilience options result in clear economic benefits for operators and public sponsors. The northern Indian city of Udaipur has introduced clean energy to the operation of its wastewater treatment plant, which reuses half of its wastewater for the system’s own treatment needs. It also generates additional revenue by reselling waste residue for horticultural use.
two, PPPs allow risk to be spread between public and private partners in a way that can best manage uncertain climate conditions and achieve resilience benefits. India’s Urban Water Supply Modernization Project was developed with support from the Public-Private Infrastructure Advisory Facility (PPIAF) and integrated climate adaptation measures through environmental health and safety management plans. The PPP contract addressed climate change factors and introduced incentive payments to encourage bidders to optimize their investments. In Japan, the law clarifies disaster risk-sharing arrangements between private and public partners where liability is limited to 1% of the contract amount.
three, A focus on measurable output and performance drives innovations such as resilient design standards and nature-based solutions (NBS) to reduce costs across the infrastructure lifecycle. New Clark City, a green, smart, and disaster-resilient development in the Philippines, is considered a model PPP program that leverages the use of NBS for flood mitigation and green city development.
But while African governments are increasingly relying on PPPs to attract private capital for infrastructure projects, Africa has secured less than 7 percent ($74.8 billion) of investment from the global private sector over the past decade, according to the World Bank’s Private Participation in Infrastructure (PPI) database. In sub-Saharan Africa, $59.3 billion was invested in 275 projects between 2010 and 2020, mainly related to power, ports and ICT.
Best practices for climate risk management in infrastructure PPPs
The GCA, World Bank, AfDB, Asian Development Bank, European Investment Bank, European Bank for Reconstruction and Development, and other partners have launched a knowledge module on PPPs for climate-resilient infrastructure as a practical step towards helping countries engage the private sector in financing climate-resilient infrastructure. GCA also recently hosted a masterclass on climate-resilient PPPs, facilitating knowledge sharing among 46 global experts from 25 countries.
GCA is currently working with AfDB and PPIAF to develop a pipeline of PPP projects that integrates resilience from upstream planning stages to project completion. GCA will also work with PPIAF to provide technical and analytical support to help countries build capabilities to assess and integrate climate change resilience into PPP projects.
At this pivotal moment, as many countries begin the path to recovery from the economic devastation caused by COVID-19, we must seize the opportunity to build back better. Public-private cooperation and partnerships are essential to fill gaps in existing infrastructure while ensuring resilience to climate change.
Disclaimer: The content of this blog does not necessarily reflect the views of the World Bank Group, its board of directors, staff, or the governments it represents. The World Bank Group does not guarantee the accuracy of the data, findings, or analysis in this post.
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This blog is managed by the World Bank’s Infrastructure Finance, PPPs and Guarantees Group. Learn more about our work here.
