Climate Change Adaptation of Infrastructure

The study “Optimal Infrastructure Adaptation to Climate Change” presents an interesting discussion on designing and implementing climate change adaptation policies in infrastructure investments.

It reports that significant emphasis has been placed on designing climate change mitigation, both in New Zealand and internationally.

Published on the Motu site as Motu Note No. 11, the study discusses the following:

• Climate mitigation is essential, but it takes a global effort to be effective.
• For a small country like New Zealand, its mitigation efforts may not directly impact the global climate.
• In contrast, adaptation can immediately and directly affect infrastructures.

The paper examines some of the critical issues that should be considered when investing in infrastructure for climate adaptation, such as identifying and quantifying the risk of a climate event using a “certainty equivalent” method borrowed from the financial market credit loss approach.

The report also highlights the uncertainty of climate change prospects, and as new information comes, probabilities of the severity and frequency of climate events will be subject to revisions.

Overall, the study presents two key lessons from the analysis of infrastructure investments:

1. “To spread the nature of adaptation responses to climate change across margins that reduce the probability of a disaster, reduce the exposure given a disaster, and reduce the loss given exposure; and
2. To be cautious in committing to irreversible investments that may no longer be optimal as our understandings of the severity and frequency of climate change outcomes are revised.”

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