Financing climate-resilient infrastructure: Determining risk, reward, and return on investment

doi:10.1007/s42524-019-0009-4

Front. Eng

2019, Vol. 6

Issue (1) : 117-127 https://doi.org/10.1007/s42524-019-0009-4

RESEARCH ARTICLE

Financing climate-resilient infrastructure: Determining risk, reward, and return on investment

Peter B. MEYER¹, Reimund SCHWARZE²(

)

¹. Urban Policy and Economics, 228 Riverwoods Dr., New Hope, PA 18938, USA
². Department of Economics, Helmholtz-Centre for Environmental Research – UFZ , Leipzig D-14532, Germany

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Abstract

Urban infrastructure investment is needed for both, mitigation of climate risks and improved urban resiliency. Financing them requires the translation of those benefits into measurable returns on investment in the context of emerging risks that capital markets can understand and appreciate. This paper develops a generic framework to identify what are the necessary and sufficient factors to economically favor climate-change resilient infrastructure in private investment decisions. We specifically demonstrate that carbon pricing alone will not generate the needed will, because market prices at present systematically fail to account for climate change risks such as the costs of stranded assets and the national and local co-benefits of investments in climate resiliency. Carbon pricing is necessary, but not sufficient for an enhanced private financing of climate-resilient infrastructure. The Paris Agreement and other supra-local policies and actors including city networks can concretely help to generate the sufficient social and political will for investments into climate change mitigation and resiliency at the city level.

Keywords infrastructure urban finance climate low carbon economy

Corresponding Author(s): Reimund SCHWARZE

Online First Date: 21 February 2019 Issue Date: 12 March 2019

Cite this article:

Peter B. MEYER,Reimund SCHWARZE. Financing climate-resilient infrastructure: Determining risk, reward, and return on investment[J]. Front. Eng, 2019, 6(1): 117-127.

URL:

https://academic.hep.com.cn/fem/EN/10.1007/s42524-019-0009-4
https://academic.hep.com.cn/fem/EN/Y2019/V6/I1/117

Fig.1 Global investment requirements 2015-2030, US$ trillion, constant 2010 dollars

Fig.2 Regional, national, and subnational carbon pricing instruments already implemented or scheduled for implementation: share of global GHG emissions covered

Tab.1 Voluntary self-generated reports of cities and regions

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