Green and Resilient Infrastructure

9.2.1 Overview of Infrastructure throughout Sub-Saharan Africa

The growing population and urbanization of Sub-Saharan Africa has led to a higher demand for infrastructure, which is as yet unaddressed by the current rates of investment in infrastructure creation, maintenance, and oversight. With a population growth rate of 2.7 percent in Sub-Saharan Africa³⁷ and an urbanization rate of 4.1 percent,³⁸ the rapidly growing demand for adequate infrastructure services continues to be underserved by the existing infrastructure capacities in the region. Infrastructure in Sub-Saharan Africa lags behind the global levels of provision in key infrastructure classes, including energy, transportation, and water services (Lakmeeharan and others 2020). Only 47.7 percent of people living in Sub-Saharan Africa have access to electricity compared to the global average of 89.6 percent.³⁹ There are an estimated 841 secure Internet servers per 1 million people in Sub-Saharan Africa, whereas this figure sits at 10,050 per 1 million on a global scale.⁴⁰ Road access rates in Africa are 34 percent, in contrast with approximate access rates of 50 percent throughout other low-income areas. Furthermore, transport costs are estimated to be 100 percent higher than other low-income equivalents. Due to this increase for demand and need,

Nairobi, Kenya. Sambrian Mbaabu /World Bank

the Program for Infrastructure Development in Africa (PIDA)⁴¹ and the AfDB estimate that Africa’s infrastructure requires between US$130 billion and US$170 billion per year to meet the growing demands of the continent, leaving a financing gap of US$68 billion to US$108 billion per year (AfDB 2018).

While there are critical gaps in the existing infrastructure of Africa, there is also

significant potential to address the gaps by using climate awareness as a key component.

The coming years will be critical for building efficient, equitable cities, which foster economic and environmental growth, while enabling the development of robust and resilient economies (The Global Comission on the Economy and Climate of the Stockholm Environment Institute, 2016). Depending on the efficiencies with which countries are able to approach their

infrastructure development, and with the right policies, investments of 4.5 percent of the GDP of LMICs globally could achieve the infrastructure-related SDGs. This would include addressing weaknesses in universal access to water supply, sanitation, and electricity; greater mobility;

improved food security; better flood protection; and eventual full decarbonization (Rozenberg and Fay 2019). By meeting the increased demand for infrastructure with resilient and green infrastructure growth, the necessary infrastructure growth can not only address the growing needs of the population, but it can also help to ensure resiliency against the impacts of climate change and contribute to mitigating the larger issues of climate change.

Resilient and green infrastructure contributes to mitigating climate change. While a multitude of sectors contribute to the growing concern of climate change, approximately 70 percent of GHG emissions come from the construction and operation of infrastructure,

including power plants, buildings, and transportation systems (Deblina Saha 2018). Low carbon infrastructure approaches are less polluting and generate fewer carbon emissions than do traditional infrastructure approaches. Examples of such infrastructure might include:

41 Coordinated by the African Union Commission, the New Partnership for Africa’s Development (NEPAD), the regional economic communities, and the AfDB, supported by the AfDB.

ɖ Railway infrastructure: modal shift from road to rail can reduce the carbon intensity of freight movement where economically feasible.

ɖ Urban transport projects (such as metro and light rail projects): encourage people to shift from private vehicles to mass transit, reducing car usage and traffic congestion, which is one of the more notable sources of carbon emissions.

ɖ Energy efficient buildings: use less energy for heating and cooling, reducing overall carbon emissions.

ɖ Renewable energy projects (solar, wind, and hydropower): have much lower carbon emissions compared to fossil fuels.

While low carbon infrastructure can help to slow the acceleration of climate change, subsidies from governments for conventional energy sources in the electricity infrastructure sector have been much higher in comparison to renewable energy sources. In 2015, US$325 billion in subsidies were given to support the development of fossil fuels compared to the US$150 billion given to supporting the development of renewable forms of energy. Sub-Saharan Africa is endowed with solar, hydro, and wind resources that still remain developed under their full potential. Falling renewable energy prices present the opportunity for Africa to increase the share of installed renewable capacity (see chapter 6).

Transport systems have set a good precedent. Globally, the share of urban transport projects, which have lower carbon emission per unit traveled than private vehicles, tripled to 14% in privately invested infrastructure, after 2010 (World Bank 2020). This shift of investment toward public transport options, such as metro and light rail projects, is a good step forward,

THE NEXT GENERATION AFRICA CLIMATE BUSINESS PLAN 135

but significant progress is still needed on this front because road projects still receive almost three-quarters of land transport investment (Deblina Saha 2018).

Resilient and green infrastructure leads to resiliency against the impacts of climate change. In addition to ensuring infrastructure does not contribute to progressing climate change acceleration, it is critical to design infrastructure to be resilient to the future impacts of climate change that are inevitable. The quality and adequacy of infrastructure services varies widely across countries (Hallegatte and others 2019). Governments in low- and middle-income countries invest around 3.4 per cent to 5 per cent of their GDP in infrastructure but many of these countries continue to face the consequences of substandard infrastructure, for example unreliable electricity grids, inadequate water and sanitation systems, and overstrained transport networks (Hallegatte and others 2019). Climate change further increases the strains on these systems.

Resilient infrastructure also helps alleviate system wide impacts and ensure end-to-end delivery of services. Resilient transportation networks are necessary for preventing disruptions to supply chains. Because infrastructure acts as a structural mainstay of society, making investments in infrastructure that increase resilience to the impacts of climate change reduces damages from natural hazards, increases the likelihood for recovery from extreme events and raises the capability of communities to protect the economic strength, public health and security of its citizens.

Resilient and green infrastructure is cross-cutting across sectors. Increasing the resilience of infrastructure often requires multi-sectoral planning approaches across spatial and temporal scales. For example hydropower development needs to be aligned with goals like drought control, water supply, and flood control through climate informed models that consider long-term climate impacts as this infrastructure is long-lived. The lack of resilient infrastructure can also impact low carbon development. Digitalization means that ICT systems underpin powergrids; ICT disruptions will also decrease socio-economic resilience such as by failures of banking systems/ATMs, decreased access to the internet, etc. For example, failure to sufficiently account for climate impacts in hydropower systems causes decreases availability of hydroelectricity under periods of extended drought, often leading to increased utilization of energy from fossil fuel sources.

While there are a large variety of approaches that can be used to shape the approach in which climate-resilient infrastructure is designed and built, the following consists of several principles that can be used in doing so (Hill and others 2019):

ɖ Proactivity. Use existing knowledge and foresight to plan and design better infrastructure.

ɖ Equity. Ensure the implications of decisions for those who are most vulnerable.

ɖ Inclusivity. Engage stakeholders early and often throughout the duration of the investment process.

ɖ Comprehensiveness. Ensure all risks, in accordance with their expected likelihood of occurrence, are addressed in planning.

9.2.2 Economics of low carbon, resilient infrastructure

Infrastructure investments geared towards low carbon does not need to cost more than more-polluting alternatives (Rozenberg and Fay 2019). Investing in climate-resilient infrastructure has both short- and long- term benefits. Investing in more resilient infrastructure is robust, profitable and urgent (Rozenberg and Fay 2019). The cost of investing in more resilient infrastructure is estimated to be between US$11 billion and US$65 billion annually by 2030, an

increase of 3 percent over the above annual investments needed, or less than an estimated 0.1 percent of GDP in LMICs (Hallegatte and others 2019). However, this analysis should include the stipulation that such investments need to be made under careful understanding of what areas are at most risk to the impacts of climate change because strengthening the entire network could be 10 times costlier than those estimates. Investing in all three levels of infrastructure resiliency, which includes resilience of infrastructure assets, infrastructure services, and infrastructure users, ensures high-quality infrastructure (Hallegatte and others 2019).

Maintaining infrastructure systems is a cost-effective way to reduce the impacts of climate change over the life cycle of the infrastructure. Good maintenance practices can generate savings of greater than 50 percent of the project cost in transport, water supply, and sanitation infrastructure projects. By investing resources into the operations and maintenance of infrastructure systems, service gaps can be more effectively addressed (Rozenberg and Fay 2019). This approach can be further strengthened by shifting from creating resilient infrastructure assets to more resilient infrastructure services. By working to implement climate resiliency at a systems level, the cost of resilience can be further reduced from when solely looking at an asset level. This is done by assessing for criticality of a system, redundancy within the system for responses to shocks, diversification, and nature-based solutions as viable alternatives (Hallegatte and others 2019). This approach is particularly valuable when assessing large systems and long-lived infrastructure such as dams, roads or water distribution networks.

Nature-based or green infrastructure can be as or even more cost-effective than grey infrastructure (Rozenberg and Fay 2019). For example, strengthening coastlines with wetlands – such as mangroves and salt marshes – can be two to five times cheaper than to construct submerged breakwaters to deal with wave heights of up to half a meter (World Bank/PROFOR/WRI 2018). Nature-based solutions in urban areas are typically more expensive but are more effective. For example, permeable pavements cost two or three times as much as regular asphalt and concrete, but some applications have demonstrated a 90 percent reduction in runoff volumes (World Bank/PROFOR/WRI 2018). Such nature-based solutions can be combined with payment for environmental services, generating additional economic benefits for communities. Grey and green infrastructure can also be combined. The Zimbabwe Idai Recovery Project, which aims to enhance the coping capacity of affected communities from Cyclone Idai, finances key public infrastructure across multiple sectors including water, sanitation, education, health and disaster risk mitigation and preparedness.

A lack of resilient infrastructure is harming the productivity of firms in LMICs. Frequent disruptions in electricity, water, transportation, and communication services often results in systemwide impacts beyond infrastructure assets and services, for example reduced production capacity⁴² of firms. Countries in Africa have some of the highest utilization losses due to infrastructure disruptions (map 9.1 and figure 9.1). A dataset analysis of the World Bank’s Enterprise Survey reveals that across the 118 countries for which data were available, gaps and issues with power, water, and transport infrastructure provision led to utilization losses of US$151 billion a year, or an equivalent of 0.59 percent of the sample GDP (Hallegatte and others 2019). Table 9.2 outlines the costs of disrupted infrastructure services and the direct impacts on the four primary infrastructure services; power, water, transport, and telecommunications. The study finds that disruptions in transportation services cause the most economic damage, accounting for losses of US$107 billion annually, or 0.42 percent of sample GDP. Issues with electricity supply followed in magnitude, accounting for US$38 billion of lost productivity; water disruptions cause utilization rate losses of US$6 billion a year (Hallegatte and others 2019).

42 An indicator used to measure how effective a firm is in converting resources into revenue.

THE NEXT GENERATION AFRICA CLIMATE BUSINESS PLAN 137

MAP 9.1 Countrywide average utilization rate losses due to electricity, water, and transport infrastructure disruptions

Source: Rentschler and others 2019

FIGURE 9.1 Countries with greatest utilization rate losses by type of infrastructure disruption

Left panel: electricity infrastructure, middle panel: water infrastructure, right panel:

transport infrastructure

Source: Rentschler and others 2019

9.2.3 Existing Gaps and Needs

While the infrastructure gap throughout Africa is growing, it does not seem to be due to a lack of interest in investment. According to a report from the Infrastructure Consortium for Africa from 2018, African state and subnational spending on infrastructure systems increased from US$30.7 billion in 2016 to US$34.4 billion in 2017. Furthermore, commitments from all sources to all sectors were higher in 2017 than they were in 2016. The transportation sector had the largest boost in support, jumping up 30 percent from US$26.2 billion in 2016 to US$34 billion in 2017. Commitments to energy increased during this period by 20 percent, up to US$24.8 billion from US$20.6 billion. Growth in ICT investment grew by 37 percent, from US$1.7 billion in 2016 to US$2.3 billion in 2017. Increase in water commitments grew 8 percent, from US$12.2 billion in 2016 to US$13.2 billion in 2017 (AfDB 2017).

While the proportion of government funding being spent on investments in

infrastructure are at an all-time high, there is still a prominent gap in the availability of management and funding for infrastructure projects and development. In spite of the increased growth of funds committed to addressing infrastructure weaknesses by African governments, the total values in the preceding paragraph account for only 42 percent of the total funding allocated to infrastructure projects in 2017. While Chinese investment has moved swiftly to fill in some of the critical gaps in the infrastructure services throughout Africa, the distance between the current investment of 3.5 percent of GDP and the objective of 4.5 percent of GDP will require financing from external sources. . In order to keep pace with other countries, such China which spends 7.7 percent of its GDP on infrastructure, and India, which spends 5.2 percent of GDP on infrastructure, the absolute value of money invested in African infrastructure by local governments would need to double between 2015 and 2025, to US$150 billion (Lakmeeharan and others 2020).

TABLE 9.2 Effects of disrupted infrastructure services on firms, global sample

Sector Direct Impacts Coping Costs Indirect Impacts

Power ɖ Reduced utilization rates

($38 billion a year) ɖ Sales losses ($82 billion a

year)

ɖ Generator investment ($6 billion a year)

ɖ Generator operation costs ($59 billion a year)

ɖ Higher barriers to market entry and lower investment ɖ Less competition and

innovation due to lack of small and new firms

Water ɖ Reduced utilization rates ($6

billion a year) ɖ Sales losses

ɖ Investment in alternative water sources (reservoirs, wells)

Transport ɖ Reduced utilization rates ($107 billion a year)

ɖ Sales losses ^ɖ Expensive location choices

close to fast Internet Source: Hallegatte, Rentschler, and Rozenberg 2019.

THE NEXT GENERATION AFRICA CLIMATE BUSINESS PLAN 139

This is an opportunity to capitalize upon the strengths of private sector investment mechanisms and drive climate resilient infrastructure at scale alongside climate change and demographic growth and ensue that African countries leapfrog into new and novel development pathways. If this is the path forward, African infrastructure projects will need to ensure they have several key considerations covered. There should be commercial viability and bankability in which projects have adequate risk returns. Political and currency risks should be primarily mitigated by a perceived degree of political stability. Counterparty and regulatory risks should be managed using a credible off take. Deal flow should be ensured so there is no time crunch on the funds or the deal completion process. There should be active engagement of development finance institutions, which has a multiplier effect on private capital investment.

(Lakmeeharan and others 2020) In addition to ensuring the preceding criteria are met to increase the change of success for private investment opportunities, policy makers should consider alternative financial mechanisms, including long-term debt finance, large pools of institutional investor capital, reduction in the overall cost of capital, and accelerating the greening of the financial systems (Global Commission on the Economy and Climate 2016).

In addition to addressing the financing mechanisms of the sector, it is also important to implement policies that support resilient green infrastructure. Governments should support sound transition plans, including measures that ensure clean energy solutions are economically viable in comparison to the true cost of coal and other fossil fuel sources. This entails tackling pricing structures, which support environmentally harmful practices, through phasing out subsidies for fossil fuels and establishing carbon pricing, which can be done through a sectoral approach or mainstreaming at large (see section 9.1 on special emphasis on climate-informed macroeconomic policies). Alternative avenues include strengthening the ways through which financing achieves policy outcomes by supporting implementation of energy consumption transition plans and investments in research and development for clean technology and deployment (Global Commission on the Economy and Climate 2016).

9.2.4 Priority Action Areas

Action areas seek to influence the design of infrastructure to make it resilient and less carbon intensive while also contributing to an enabling environment. The following strategies are suggested:

I Create and enforce standards for resilient and low carbon infrastructure

ɖ Regulations and codes that improve the quality of infrastructure and will contribute to its resilience

ɖ Low carbon standards for infrastructure

ɖ Enforcement and monitoring of these standards and providing incentives for further measures

II Include resilience and low carbon objectives in infrastructure planning

ɖ Planning at various levels of government to include resilience and low carbon objectives informed by robust analytics

ɖ Strengthen institutional capacity to address resilience and low carbon growth, including coordination across sectors and agencies

TABLE 9.3 Existing World Bank Group Targets Related to Resilient and Green Infrastructure Sector/

Strategic Direction

Agreed IDA-19 or Corporate commitments - Bankwide

Energy ɖ IDA19 commitment to add/enable 10 GW of renewable energy (35% increase from 2015) (Corporate FY25 target)

ɖ Under MFD approach, mobilize US$10 billion private financing for renewable energy (2.5X increase against IDA16–17) (Corporate FY25 target)

ɖ US$1 billion for battery storage (Corporate FY25 target) ɖ 36GW renewable energy (Corporate FY25 target)

ɖ Increase renewable energy generation capacity from 28GW to 38GW (Africa regional FY23 target) ɖ 1.5 million GWh-equivalent energy savings (Corporate FY25 target)

Urban ɖ 100 cities with low carbon and compact urban planning (Corporate FY25 target) ɖ 100 cities with integrated, city-based resilience approach (Corporate FY25 target) Water ɖ 100 river basins with climate-informed management plans (Corporate FY25) Note: GW = gigawatt; MFD = Maximizing Finance for Development; GWh = gigawatt hour

III Secure financing for resilient and low carbon infrastructure, especially from the private sector

ɖ Make available sufficient capital for resilient and low carbon construction and supporting analytics

ɖ Leverage financing and financing innovations including MFD

9.2.5 Targets and Commitments

Existing Bankwide IDA-19 and Corporate commitments relevant to resilient and green infrastructure are presented in Table 9.3. A concerted focus to secure green and resilient infrastructure and drive transformation at scale will be undertaken in Sub-Saharan Africa through the strategic directions that support these Bankwide targets (see targets under this Climate Plan as presented in Chapters 4-8, and Chapter 10).

THE NEXT GENERATION AFRICA CLIMATE BUSINESS PLAN 141