A Report by the Global Commission on the Economy and Climate has recommended that since more than 60% of the world’s greenhouse gas (GHG) emissions are sourced from the world's existing stock of infrastructure, ensuring infrastructure is built to deliver sustainability is the only way to meet the COP21 goal of keeping warming below 2°C and to guarantee long-term, inclusive and resilient growth. Infrastructure underpins core economic activity and is an essential foundation for achieving inclusive sustainable growth. Investing in sustainable infrastructure is key for reigniting global growth and reducing climate risk.
The Global Commission is chaired by former President of Mexico Felipe Calderón and co-chaired by the climate economist Lord Nicholas Stern.
The report estimates that $90 trillion in sustainable infrastructure investment will be required over the next 15 years. It stresses that this will require a shift in the world's construction and financial sectors to ensure that this money, which will be increasingly private, is spent on low-carbon, energy-efficient projects.
Change in infrastructure spending required for a 2°C scenario (percentage change in expenditure over 2015-2030 compared to Business-as-usual)
The report has adopted a broad definition of infrastructure which includes both traditional types of infrastructure; energy, public transport, buildings, water supply, and sanitation and also natural infrastructure; forest landscapes, wetlands and watershed protection. Infrastructure underpins core economic activity and is an essential foundation for achieving inclusive sustainable growth. It is indispensable for development and poverty elimination, as it enhances access to basic services, education and work opportunities, and can boost human capital and quality of life.
Investment is needed to replace ageing infrastructure in advanced economies and to accommodate higher growth and structural change in emerging market and developing countries. This will require a significant increase globally, from the estimated US$3.4 trillion per year currently invested in infrastructure to about US$6 trillion per year. The Global Commission found that it does not need to cost much more to ensure that this new infrastructure is compatible with climate goals, and the additional up-front costs can be fully offset by efficiency gains and fuel savings over the infrastructure lifecycle.
Importance of private infrastructure financing
Transforming the financial system and its intermediaries is essential to scaling up sustainable infrastructure finance. Public finance and investment will continue to play a critical role, particularly in low-income countries. But large amounts of private capital are needed and this will only flow if the right market signals are present within the financial system. The report suggests that reforms are needed in the financial regulatory system as well as other policy reforms, specifically, to price carbon to level the playing field between sustainable and unsustainable options in order to encourage private investment in sustainable infrastructure.
Private investment requires financial returns. Efficiency in construction and operation and maintenance of infrastructure is essential. Increasing productivity drives technological innovation. Many governments as well as private sector engineering and construction firms have identified building information modeling (BIM) as a key foundation for increasing construction productivity. Owners are beginning to recognize the benefits of full lifecycle BIM especially when augmented by geospatial technology.
The report estimates that energy infrastructure will require investment of US$25 trillion, or nearly a third of total core infrastructure investment over the coming 15 years. In addition energy efficiency will require investment of about the same magnitude. Building sustainable energy infrastructure encourages economic growth, reduces air pollution and greenhouse gas emissions, and plays a key role in building resilience.
The report found that energy efficiency is a highly cost-effective way to manage demand and reduce the investment requirements for overall energy supply. Increasing energy efficiency in industry, buildings and transport could achieve up to half of the emission reductions needed globally to peak greenhouse gas emissions by 2020 according to the IEA. Energy efficiency investments in IEA member countries since 1990 have avoided US$5.7 trillion of energy expenditure. The IEA estimates further investments could boost global GDP by US$18 trillion by 2035, increasing growth by as much as 1.1% per year. Energy efficiency measures are estimated to create up to three times as many jobs as fossil fuel supply investments per dollar of investment.
A key recommendation of the Global Commission’s 2015 report was to scale up commitments by development banks working with governments and the private sector to invest at least US$1 trillion per year by 2030 in clean energy, including energy efficiency.
Outdoor air pollution, much of which is associated with fossil fuels, is linked to nearly 4 million premature deaths per year. In China, it is estimated that air pollution killed around 1.6 million people in China in 2013. In India, the air pollution toll in 2013 stood at 1.4 million deaths. In Europe, coal plant emissions account for more than 18,200 premature deaths, about 8,500 new cases of chronic bronchitis, and over 4 million lost working days each year. Analysis for the Global Commission shows that the health and mortality burden of air pollution amounts to as much as 4% or more of GDP in some countries. Recent analysis by the OECD has found that globally air pollution-related healthcare costs alone are projected to increase from US$21 billion in 2015 to US$176 billion in 2060.
It is estimated that by 2050, two-thirds of the global population will live in cities, and over 70% of the global demand for infrastructure over the next 15 years is expected to be in urban areas. How cities develop is important both for growth and for climate change. The report emphasizes that investment in sustainable infrastructure is essential to make cities inclusive, safe, and resilient.
The global commission is supported by governmental and private sector leaders: Sharan Burrow, General Secretary, International Trade Union Confederation (ITUC), Australia; Suma Chakrabarti, President, European Bank for Reconstruction and Development (EBRD); Helen Clark, Administrator, UN Development Programme (UNDP); Former Prime Minister of New Zealand; Jamshyd Godrej Chairman and Managing Director, Godrej & Boyce Mfg Co. Ltd., India; Stuart Gulliver, Group Chief Executive, HSBC Holdings plc and Chairman of The Hongkong and Shanghai Banking Corporation Limited; Angel Gurría, Secretary-General, Organisation for Economic Co-operation and Development (OECD); Chad O. Holliday, Chairman, Shell, United States; and Sri Mulyani Indrawati, Finance Minister of Indonesia