OVE RVI E W Stéphane Hallegatte Jun Rentschler Julie Rozenberg SUSTAINABLE INFRASTRUCTURE SERIES OVERVIEW LIFELINES The Resilient Infrastructure Opportunity Stéphane Hallegatte Jun Rentschler Julie Rozenberg This booklet contains the overview from doi: 10.1596/978-1-4648-1430-3. A PDF of the final book, once published, will be available at https://openknowledge.worldbank.org/ and http://documents.worldbank.org/, and print copies can be ordered at www.amazon.com. Please use the final version of the book for citation, reproduction, and adaptation purposes. © 2019 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org Some rights reserved This work is a product of the staff of The World Bank with external contributions. 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Cover design and graphs: Brad Amburn, Brad Amburn Creative, LLC Contents Foreword. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii Acknowledgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix Infrastructure disruptions are a drag on people and economies. . . . . . . . . . . . . . . . . . . . . . 3 Infrastructure disruptions cost firms more than $300 billion per year. . . . . . . . . . . . . . . . . . . . 3 Infrastructure disruptions’ direct impacts on people are worth at least $90 billion per year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Natural shocks are among the leading causes of infrastructure disruptions . . . . . . . . . . . . . . . 4 More resilient infrastructure assets pay for themselves. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Building more resilient infrastructure assets in exposed areas is cost-effective. . . . . . . . . . . . 11 From resilient infrastructure assets to resilient infrastructure services. . . . . . . . . . . . . . . . . . . 12 From resilient infrastructure services to resilient users and economies. . . . . . . . . . . . . . . . . . 13 Making infrastructure more resilient requires a consistent strategy. . . . . . . . . . . . . . . . . 15 Recommendation 1: Get the basics right. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Recommendation 2: Build institutions for resilience. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Recommendation 3: Include resilience in regulations and incentives. . . . . . . . . . . . . . . . . . . 17 Recommendation 4: Improve decision making . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Recommendation 5: Provide financing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 References. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 iii Contents of the Full Report Foreword Acknowledgments Overview Chapter 1 Resilient Infrastructure: A Lifeline for Sustainable Development Part I A Diagnosis: A Lack of Resilient Infrastructure Is Harming People and Firms Chapter 2 Infrastructure Disruptions Are a Barrier to Thriving Firms Chapter 3 Infrastructure Disruptions Affect the Health and Well-Being of Households Chapter 4 Natural Shocks Are a Leading Cause of Infrastructure Disruptions and Damages Chapter 5 From Micro to Macro: Local Disruptions Translate into Macroeconomic Impacts Part II A Matter of Design: Resilient Infrastructure Is Cost-Effective Chapter 6 More Resilient Infrastructure Assets Are Cost-Effective Chapter 7 From Resilient Assets to Resilient Infrastructure Services Chapter 8 From Resilient Infrastructure Services to Resilient Users Part III A Way Forward: Five Recommendations for More Resilient Infrastructure Chapter 9 The Foundation for Resilient Infrastructure v vi CONTENTS OF THE FULL REPORT Chapter 10 Build Institutions for Resilience Chapter 11 Create Regulations and Incentives for Resilience Chapter 12 Improve Decision Making Chapter 13 Provide Financing Appendix A Engineering Options to Increase the Resilience of Infrastructure Assets Foreword Resilient infrastructure is about people. It is the natural hazards that are increasing due to about the households and communities for climate change. whom infrastructure is a lifeline to better But there is good news. Around the world, health, better education, and a better liveli- there are many examples of investments that hood. It affects people’s well-being, their eco- make infrastructure more resilient and more nomic prospects, and their quality of life. economically robust. Resilient infrastructure is, in part, about This report assesses, for the first time, the bridges that can withstand more frequent or cost of infrastructure disruptions to low- and stronger floods, water pipes that can resist middle-income countries and the economic earthquakes, or electric poles that are sturdier benefits of investing in resilient infrastructure. in the face of more intense hurricanes. And it is It examines four essential infrastructure also about making sure people will not lose systems: power, water and sanitation, trans- their jobs because they cannot get to work, port, and telecommunications. And the report that they can get urgent medical care, and that lays out a framework for understanding the their children can get to school. ability of infrastructure systems to function In developing countries, infrastructure dis- and meet users’ needs during and after natural ruptions are an everyday concern. When infra- shocks. structure fails, it undermines businesses, job We find that the extra cost of building resil- creation, and economic development. With ience into these systems is only 3 percent of rapidly growing populations and a changing overall investment needs. Thanks to fewer dis- climate increasing the frequency and intensity ruptions and reduced economic impacts, the of natural hazards, the need to adapt and invest overall net benefit of investing in the resilience in resilience should be an urgent priority. of infrastructure in developing countries would Disruption to infrastructure costs households be $4.2 trillion over the lifetime of new infra- and firms in low- and middle-income countries structure. That is a $4 benefit for each dollar at least $390 billion a year, and the indirect invested in resilience. effects place a further toll on households, busi- Finally, with a range of clearly defined rec- nesses, and communities. It is typically caused ommendations, the report lays out how to by poor maintenance, mismanagement, and unlock this $4.2 trillion opportunity. Rather vii viii FOREWORD than just spending more, the focus is on spend- There is no time to waste. With a rapidly ing better. The message for infrastructure changing climate, and large investments in investors, governments, development banks, infrastructure taking place in many countries, and the private sector is this: Invest in regula- business as usual over the next decade would tions and planning, in the early stages of proj- cost $1 trillion more. By getting it right, how- ect design, and in maintenance. Doing so can ever, we can provide the critical infrastructure significantly outweigh the costs of repairs or services—lifelines—that will spur sustained reconstruction after a disaster strikes. and resilient economic development. Kristalina Georgieva Chief Executive Officer The World Bank Acknowledgments The Lifelines report was prepared by a team led and Naho Shibuya contributed to the sections by Stéphane Hallegatte, with Jun Rentschler on public-private partnerships. The team at and Julie Rozenberg. It benefited from contri- Miyamoto International provided important butions from multiple teams working on dif- insights into the engineering solutions to build ferent sectors and topics. The power sector resilience. analysis was led by Claire Nicolas, with a team As World Bank Group peer reviewers, Greg composed of Christopher Arderne, Diana Browder, Marianne Fay, Vivien Foster, Hideaki Cubas, Mark Deinert, Eriko Ichikawa, Elco Hamada, Helen Martin, Shomik Mehndiratta, Koks, Ji Li, Samuel Oguah, Albertine Potter Artessa Saldivar-Sali, Alanna Simpson, and van Loon, and Amy Schweikert. The water Vladimir Stenek provided invaluable com- sector analysis was led by Zhimin Mao, work- ments and suggestions. Thanks also to external ing with Laura Bonzanigo, Xi Hu, Elco Koks, advisors: Carter Brandon, Jim Hall, Guillaume Weeho Lim, Raghav Pant, Patrick Ray, Clem- Prudent-Richard, Adam Rose, and Yasuyuki entine Stip, Jacob Tracy, and Conrad Zorn. The Todo. transport sector analysis was led by Julie Suggestions, comments, and data were pro- Rozenberg, with Xavier Espinet Alegre, vided by Anjali Acharya, Charles Baubion, Charles Fox, Stuart Fraser, Jim Hall, Elco Koks, Andrii Berdnyk, Moussa Blimpo, Marga Can- Mercedeh Tariverdi, Michalis Vousdoukas, and tada, Debabrata Chattopadhyay, Ashraf Dewan, Conrad Zorn. The telecommunication analysis Mirtha Escobar, Charles Esser, Scott Ferguson, was contributed by Himmat Sandhu and Matias Herrera Dappe, Martin Humphreys, Siddhartha Raja. The analysis of firm and Marie Hyland, Oscar Ishizawa, Asif Islam, Bren- household surveys was led by Jun Rentschler, den Jongman, Denis Jordy, Balázs Józsa, Shefali with Paolo Avner, Johannes Braese, Alvina Khanna, Brian Kinuthia, Shweta Kulkarni, Erman, Nick Jones, Martin Kornejew, Sadick Mathijs van Ledden, Jia Jun Lee, Richard Nassoro, Marguerite Obolensky, Samet Sahin, MacGeorge, Justice Tei Mensah, Jared Mer- and Eugene Tan. Shinji Ayuha, Célian Colon, cadante, Brian Min, Alice Mortlock, Sumati Etienne Raffi Kechichian, Maryia Markhvida, Rajput, Steven Rubinyi, Jason Russ, Peter Nah Yoon Shin, Shoko Takemoto, and Brian Sanfey, Guillermo Siercke, Ben Stewart, Shen Walsh contributed to the sections on resilient Sun, Janna Tenzing, Joshua Wimpey, Davida industries and supply chains. Sanae Sasamori Wood, and Fan Zhang. ix x ACKNOWLEDGMENTS Susan Graham of the World Bank Group’s The team thanks Julie Dana, manager of the Publishing Unit was the production editor. Edi- Global Facility for Disaster Reduction and torial services were provided by Sabra Ledent, Recovery (GFDRR), and Luis Tineo for their Laura Wallace, Nick Paul, Devan Kreisberg, support in the development of this project. Inge Pakulski, and Elizabeth Forsyth. Brad Finally, the team acknowledges the gener- Amburn designed the cover and created the ous support of the Japan–World Bank Program graphs. The team also thanks Aziz Gökdemir for Mainstreaming Disaster Risk Management and Jewel McFadden for their help in preparing in Developing Countries, the Climate Change the report for production. Visibility and launch Group of the World Bank under the leadership of the report were supported by Ferzina Banaji, of John Roome and Bernice Van Bronkhorst, with Uwimana Basaninyenzi, Joana Lopes, and the World Bank Sustainable Development Camila Perez, Mehreen Arshad Sheikh, and Practice Group led by Laura Tuck. Gerardo Spatuzzi. Overview F rom serving our most basic needs to enabling our most ambitious ventures in trade or technology, infrastructure services support our well-being and development. Reliable water, sanitation, energy, transport, and telecommunication services are uni- versally considered to be essential for raising the quality of life of people. Access to ba- sic infrastructure services is also a central factor in the productivity of firms and thus of entire economies, making it a key enabler of economic development. And in this time of rapid climate change and intensifying natural disasters, infrastructure systems are under pressure to deliver resilient and reliable services. By one estimate, governments in low- and ruptions in transport and energy networks, middle-income countries around the world are which in turn affect telecommunications and investing around $1 trillion—between 3.4 per- other essential services. The lack of resilient cent and 5 percent of gross domestic product sanitation systems also means that floods often (GDP)—in infrastructure every year (Fay et al. spread dangerous waterborne diseases. 2019).1 Still, the quality and adequacy of infra- The disruption of infrastructure services is structure services vary widely across countries. especially severe when considering more Millions of people, especially in fast-growing extreme natural shocks. For example, earth- cities in low- and middle-income countries, are quakes damage port infrastructure and slow facing the consequences of substandard infra- down local economies, as occurred in Kobe in structure, often at a significant cost. Under- 1995. Hurricanes wipe out electricity transmis- funding and poor maintenance are some of the sion and distribution systems, cutting people’s key factors resulting in unreliable electricity access to electricity for months, as occurred in grids, inadequate water and sanitation systems, Puerto Rico in 2017. In these examples, many and overstrained transport networks. people who did not experience direct damage Natural hazards magnify the challenges from the disaster still experienced impacts from faced by these already-strained and fragile sys- infrastructure disruptions. tems. Urban flooding, for instance, is a reality This report, Lifelines: The Resilient Infrastruc- for people around the world—from Amman, ture Opportunity, explores the resilience of four Buenos Aires, and Dar es Salaam to Jakarta essential infrastructure systems: power, water and Mumbai. Often exacerbated by poor drain- and sanitation, transport, and telecommunica- age systems, these floods cause frequent dis- tions. All of these systems provide critical ser- 1 2 LIFELINES vices for the well-being of households and the and supply chains—better able to manage productivity of firms, yet they are particularly disruptions. This report finds that investing vulnerable to natural hazards because they are $1 in more resilient infrastructure is bene- organized in complex networks through which ficial in 96 percent of thousands of scenar- even small local shocks can propagate quickly. ios exploring possible future socioeconomic Making them more resilient—that is, better and climate trends. In the median scenario, able to deliver the services people and firms the net benefit of investing in more resilient need during and after natural shocks—is criti- infrastructure in low- and middle-income cal, not only to avoid costly damage but also to countries is $4.2 trillion, with $4 in benefit minimize the wide-ranging consequences of for each $1 invested. Climate change makes natural disasters for the livelihoods and well- action on resilience even more necessary being of people. and attractive: on average, it doubles the net Building on a wide range of case studies, benefits from resilience. And because large global empirical analyses, and modeling exer- investments in infrastructure are currently cises, this report arrives at three main messages: being made in low- and middle-income countries, the median cost of one decade of • The lack of resilient infrastructure is harming peo- inaction is $1 trillion. ple and firms. Natural disasters cause direct • Good infrastructure management is the neces- damage to power generation and transport sary basis for resilient infrastructure, but targeted infrastructure, costing about $18 billion a year actions are also needed. Unfortunately, no sin- in low- and middle-income countries. This gle intervention will make infrastructure damage is straining public budgets and reduc- systems resilient. Instead, a range of coor- ing the attractiveness of these sectors for pri- dinated actions will be required. The first vate investors. But natural hazards not only recommendation is for countries to get the damage assets, they also disrupt infrastructure basics right—proper planning, operation, services, with significant impacts on firms and and maintenance of their assets—which people. Altogether, infrastructure disruptions can both increase resilience and save costs. impose costs between $391 billion and $647 However, good design and management billion a year on households and firms in low- alone are not enough to make infrastruc- and middle-income countries. These disrup- ture resilient, especially against rare and tions have a wide range of causes, including high-intensity hazards and long-term trends poor maintenance, mismanagement, and like climate change. To address these issues, underfunding. But case studies suggest that this report offers four additional recom- natural hazards typically explain 10 percent mendations: define institutional mandates to 70 percent of the disruptions, depending and strategies for infrastructure resilience; on the sector and the region. introduce resilience in the regulations and • Investing in more resilient infrastructure is incentive systems of infrastructure sectors, robust, profitable, and urgent. In low- and users, and supply chains; improve decision middle-income countries, designs for more making through data, tools, and skills; and resilient assets in the power, water and san- provide appropriate financing—especially itation, and transport sectors would cost for risk-informed master plans, asset design, between $11 billion and $65 billion a year and preparedness. Actions on these issues by 2030—an incremental cost of around 3 can be highly cost-effective and transfor- percent compared with overall investment mational, but they can nevertheless be chal- needs. And these costs can be reduced by lenging to fund in many poor countries, looking at services, not just assets, and mak- making them priorities for support from the ing infrastructure service users— households international community. OVERVIEW 3 INFRASTRUCTURE DISRUPTIONS indirectly, through their effects on the produc- ARE A DRAG ON PEOPLE AND tivity of firms, and directly, through their effects ECONOMIES on households’ consumption and well-being. This report begins by investigating how infra- structure disruptions—regardless of their origin— Infrastructure disruptions cost firms affect people and firms. The frequency of these more than $300 billion per year disruptions is generally closely linked to the level Unreliable infrastructure systems affect firms of economic development, as shown in figure through various impacts (table O.1). Most O.1 using GDP per capita as a proxy and electric- visible are the direct impacts: a firm relying on ­ ity and water outages from the World Bank’s water to cool a machine must halt production Enterprise Surveys. Disruptions cost people both during a dryout; a restaurant with an electric FIGURE O.1 Poorer countries are hit hardest by inadequate infrastructure a. Number of electricity outages per month b. Number of water outages per month 30 30 25 25 20 20 15 15 10 10 5 5 0 0 0 10,000 20,000 30,000 40,000 0 10,000 20,000 30,000 40,000 GDP per capita (US$) GDP per capita (US$) Source: Rentschler, Kornejew, et al. 2019, based on the World Bank’s Enterprise Surveys. Note: Panels a and b show the latest available survey data for 137 countries, but none older than 2009. Panel a only shows countries with up to 30 outages a month. Eight countries (all with GDP per capita below $9,000) report between 30 and 95 outages a month. TABLE O.1 Disrupted infrastructure services have multiple impacts on firms Sector Direct impacts Coping costs Indirect impacts Power • Reduced utilization rates • Generator investment ($6 billion ($38 billion a year) a year) • Sales losses ($82 billion a year) • Generator operation costs • Higher barriers to market entry and ($59 billion a year) lower investment • Less competition and innovation Water • Reduced utilization rates • Investment in alternative water due to lack of small and new firms ($6 billion a year) sources (reservoirs, wells) • Sales losses • Bias toward labor-intensive production Transport • Reduced utilization rates • Increased inventory ($107 billion a year) • More expensive location choices, • Inability to provide on-demand • Sales losses for example, in proximity to services and goods • Delayed supplies and deliveries clients or ports • Diminished competitiveness in international markets Telecommunications • Reduced utilization rates • Expensive location choices close • Sales losses to fast Internet Source: Rentschler, Kornejew, et al. 2019. Note: Highlighted in bold are the impacts for which original estimates are presented in this section. Estimates cover low- and middle-income countries. 4 LIFELINES stove cannot cook meals without power. Dis- to engage in productive, educational, and rec- ruptions leave production capacity unused, reational activities (Lenz et al. 2017). In South reduce firms’ sales, and delay the supply and Asia, Zhang (2019) finds that long power out- delivery of goods. Firms also incur costs for cop- ages are associated with a decrease in both per ing with unreliable infrastructure, such as for capita income and women’s labor force partici- backup power generation or water storage. The pation, probably because the lack of electricity indirect impacts of disruptions are less immedi- is associated with an increase in the time ate. They include effects on the long-term needed for domestic work (figure O.2). Studies investment and strategic decisions of firms and also identify a strong and consistent relation- on the composition, competition, and innova- ship between water outages and health tion of industries. Together, these effects figure impacts. In the Democratic Republic of Congo, in an economy’s ability to generate wealth and suspected cholera incidence rates increased in its international competitiveness (for details, 155 percent after one day of water disruption, see Braese, Rentschler, and Hallegatte 2019). compared with the incidence rate following Using a set of microdata on about 143,000 optimal water provision (Jeandron et al. 2015). firms, it is possible to estimate the monetary Infrastructure disruptions have many costs of infrastructure disruption for firms in impacts on households, and estimating the 137 low- and middle-income countries, repre- global cost is difficult (table O.2). For this analy- senting 78 percent of the world population sis, lower and upper bounds were established (map O.1).2 These data are used to assess the for power and water outages, based on studies impact of infrastructure disruptions on the assessing the willingness of households to pay to capacity utilization rates of firms—that is, to prevent such outages (see details in Obolensky compare the actual output of firms with the et al. 2019). For power outages, the estimates maximum output they can achieve using all range between 0.002 percent and 0.15 percent of their available resources—which is a good of GDP a year for low- and middle-income metric for firms’ performance. countries, which corresponds to between $2.3 The data reveal utilization losses from power, billion and $190 billion.3 In total, water inter- water, and transport disruptions of $151 billion ruptions are estimated to cost between 0.11 per- a year. (Unfortunately, a similar estimate for cent and 0.19 percent of GDP each year, which telecommunications is not possible because of a corresponds to a range of from $88 billion to lack of data.) In addition, firm data reveal sales $153 billion. Waterborne diseases stemming losses from electricity outages of $82 billion a from an intermittent water supply are estimated year and additional costs of self-generating to cause medical treatment costs and lost electricity of $65 billion a year. Although these incomes between $3 billion and $6 billion a figures highlight the significance of unreliable year. However, these results are highly uncer- infrastructure, they constitute lower-bound tain because of differences in methodologies estimates of the global costs of outages because and contexts. Similar assessments of the trans- neither all countries nor all types of impacts are port and telecommunications sectors were not covered in this analysis. possible due to data constraints. Infrastructure disruptions’ direct Natural shocks are among the leading impacts on people are worth at least causes of infrastructure disruptions $90 billion per year Taken together, the cost of infrastructure dis- Unreliable infrastructure services negatively ruptions ranges from $391 billion to $647 bil- affect the welfare of households. Frequent lion in the low- and middle-income countries power outages limit the ability of households for which data are available and for the types OVERVIEW 5 MAP O.1 Africa and South Asia bear the highest losses from unreliable infrastructure a. Countrywide average utilization rate losses from disruptions in electricity, water, and transport infrastructure b. Additional costs of firms’ backup electricity generation as % of GDP, including up-front investments and additional operating costs Source: Rentschler, Kornejew, et al. 2019. 6 LIFELINES FIGURE O.2 Reliable access to electricity has more favorable effects on income and social outcomes than access alone in Bangladesh, India, and Pakistan 40 37.0 35 31.2 30 28.0 25 24.2 23.0 21.1 % of change 20 17.1 16.7 15 13.8 11.7 9.6 10 5.8 6.5 5 2.3 2.0 0 Per capita Girls’ study Women’s Per capita Girls’ study Women’s Per capita Women’s income time labor force income time labor force income labor force participation participation participation Bangladesh India Pakistan  Increased access  Increased reliable access Source: Zhang 2019. Note: Estimates are based on household surveys in Bangladesh, India, and Pakistan. TABLE O.2 Disrupted infrastructure services have multiple impacts on households Sector Direct impacts Coping costs Indirect and health impacts Power • Diminished well-being • Generator investments • Higher mortality and morbidity (lack of access • Lower productivity of family • Generator operation costs to health care, air-conditioning during heat firms waves, or heat during cold spells) Willingness to pay to prevent outages: between $2.3 billion and $190 billion a year Water • Diminished well-being and • Investment in alternative • Higher incidence of diarrhea, cholera, and loss of time water sources (reservoirs, other diseases wells, water bottles) Willingness to pay to prevent outages: between $88 billion Medical costs and missed income: between and $153 billion a year $3 billion and $6 billion a year Transport • Greater congestion and loss • Higher cost of alternative • Air pollution and health impacts of time transport modes • Constrained access to jobs, markets, services • Higher fuel costs • People forced to live close to jobs, possibly on bad land Telecommunications • Diminished well-being • Inability to call emergency services Note: Highlighted in bold are the impacts for which original estimates are presented in this section. Estimates cover low- and middle-income countries. of impacts that can be quantified. Even though hazards play in these disruptions? While it is these estimates are incomplete, they highlight impossible to answer this question globally the substantial costs that unreliable infrastruc- and for all sectors, many case studies docu- ture impose on people in low- and middle- ment the role of natural hazards in infrastruc- income countries. But what role do natural ture disruptions. OVERVIEW 7 FIGURE O.3 Natural shocks explain a significant fraction of power outages 100 West Virginia Georgia Alabama 90 Share of power outages due to natural shocks (%) 80 Slovenia Croatia Belgium 70 Portugal 60 United States 50 Romania Italy France 40 Latvia Ireland Greece United Kingdom 30 Poland Germany Bangladesh (Dhaka) 20 Spain Sweden Lithuania 10 Czech Republic Bangladesh Canada Netherlands (Chittagong) Slovak Republic 0 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 GDP per capita (US$) Countries U.S. states Source: Rentschler, Obolensky, and Kornejew 2019. In the power sector, natural hazards—in partic- In many low- and middle-income countries, ular, storms—are a major cause of electricity natural shocks are responsible for a small frac- supply disruptions, as shown in figure O.3. In tion of power outages, although this does not Belgium, Croatia, Portugal, Slovenia, and the mean that resilience is not an issue. Indeed, United States, they are responsible for more power systems are more vulnerable to natural than 50 percent of all outages. By contrast, in shocks in poorer countries than in richer coun- Bangladesh, natural shocks account for a tries, and natural hazards can be responsible for smaller share of power outages—not because a large number of disruptions. In the power energy systems are more resilient, but because sector, aging equipment, a lack of maintenance, system failures and nonnatural factors are so rapid expansion of the grid, and insufficient frequent that energy users experience daily generation capacity are all factors that reduce outages. But this figure also underestimates the the reliability of service in general, while also role of natural hazards because outages caused increasing vulnerability to natural shocks. For by natural hazards tend to be longer and geo- example, storms of the same intensity are more graphically larger than other outages. In Europe likely to cause outages in Bangladesh than in between 2010 and 2017, natural hazard– the United States (figure O.4). On a day with induced outages lasted 409 minutes on aver- average wind speeds exceeding 35 kilometers age, making them almost four times as long as per hour, electricity users in Bangladesh are 11 outages caused by nonnatural causes. And in times more likely to experience a blackout than Bangladesh in 2007, Tropical Storm Sidr caused U.S. consumers. As a result of this vulnerability, the largest outage in national history: all 26 in 2013 in Chittagong, Bangladesh, users expe- power plants tripped and failed, leaving cus- rienced about 16 power outages due to storms tomers without power for up to a week (Rent- alone. This number corresponds to only 4 per- schler, Obolensky and Kornejew 2019). cent of all outages experienced, yet it is already 8 LIFELINES FIGURE O.4 The vulnerability of the power network to wind is much higher in Bangladesh than in the United States more than 15 times higher than the average 16 number of outages experienced by consumers  Bangladesh in New York City. Share of windy days during which at least 14.3 14  United States In the transport sector, floods and other haz- one outage was reported (%) 12 ards disrupt traffic and cause congestion, taking 10 a toll on people and firms in rich and poor 8.4 8 countries alike. In Kampala, the impacts of floods on urban transport reduce people’s 6 access to a health care facility, according to an 4 3.7 2.4 analysis undertaken for this report (Rentschler, 1.8 2 0.9 1.2 Braese, et al. 2019) (figure O.5). A network 0.3 0.4 0.6 0 analysis estimates that the mean travel time by >15 >20 >25 >30 >35 car to a hospital from nearly all locations in Wind speed (km/hour) Inner Kampala is less than 30 minutes. How- Source: Rentschler, Obolensky, and Kornejew 2019. ever, during a 10-year flood, disruption of the Note: Windy days are defined using different thresholds for recorded daily wind road network can increase travel times signifi- speeds. Wind speeds are obtained from the global ERA5 climate reanalysis model, which tends to underrepresent the highest local wind speeds. cantly, and about a third of persons living in FIGURE O.5 Floods in Kampala severely restrict people’s access to health care facilities a. Travel a. Mean time travel from times locations from across locations all Kampala in Inner b. b. Increase in Increases in travel time from travel times from locations across locations acrossInner Kampala of Inner Kampala health toto care health facilities care facilities to health Inner Kampala care facilities to hospitals during aflood in a 10-year 10-year flood Frequency density 0 10 20 30 40 50 60 Increase in travel time (%)  0–27  10-year flood extent Minutes  27–36  Bodies of water No flood  36–47 Area of analysis 10-year flood  47–70 Roads 50-year flood  > 70 Trips no longer possible Source: Rentschler, Braese, et al. 2019. Note: In panel a, the vertical line denotes the “golden hour” (the window of time that maximizes survival of a major health emer- gency), assuming that ambulances complete a return trip starting at a hospital. The curves show frequency densities that represent the distribution of travel times from all locations. The 10-year flood is the flood of a magnitude that occurs on average once every 10 years. OVERVIEW 9 Inner Kampala would no longer be able to FIGURE O.6 Tanzanian firms report large reach health facilities within the “golden losses from infrastructure disruptions hour”—a rule of thumb referring to the win- 350 325 dow of time that maximizes the likelihood of 300 Utilization losses (US$, millions) survival after a severe medical incident. Such flood-related transport disruptions are 250 46% 216 costly for firms. The same network analysis 200 estimates travel times between some 400 firms 47% 150 127 as a proxy for the impact of floods on interfirm connectivity and local supply chains. A moder- 100 ate flood in Kampala increases the average 50 travel time between firms by 54 percent. A sig- 0 nificant number of firms are affected even Transport Power Water more severely, with more than a quarter of  Losses due to disruptions caused by rain and floods firms facing an increase in average travel time  Losses due to disruptions caused by other factors of between 100 percent and 350 percent. As Source: Rentschler, Braese, et al. 2019. roads are flooded, people are unable to reach their workplace, and firms wait in vain for sup- plies, miss their deliveries, and lose sales. firms and households, local studies are needed In the water sector, assets and services are also to provide a detailed assessment. To support affected by natural hazards, even in the such an assessment, a survey was developed absence of physical damage to assets. The and piloted in Tanzania for a sample of 800 severe landslides that occurred in Lima in firms across the country. It found that Tanza- March 2017, interrupted the water supply for nian firms are incurring utilization losses of four days, as the city’s river filled with mud. $668 million a year from power and water The main water treatment plant could not outages and transport disruptions, which is handle the resulting turbidity and had to shut equivalent to 1.8 percent of the country’s GDP down (Stip et al. 2019). (figure O.6). Power alone is responsible for In the telecommunications sector, in December losses of $216 million a year, and 47 percent of 2006, the Great Hengchun Earthquake on the these losses are solely due to power outages island of Taiwan, China, and in the Luzon that can be attributed to rain and floods (equiv- Strait was one of the severest examples of dis- alent to $101 million, or 0.3 percent of GDP). ruptions to the submarine cable systems on As for transport disruptions, about 46 percent which international communications networks of utilization losses stem from disruptions depend. Submarine landslides caused 19 breaks caused by rain and floods (equivalent to $150 in seven cable systems, requiring repairs that million, or 0.4 percent of GDP). But the survey were carried out over 49 days. Meanwhile, does not find that rain and floods have a signif- traffic was quickly rerouted using undamaged icant impact on the incidence of water supply infrastructure, but the pressures on it resulted disruptions. in a lower quality of service and delays. Inter- In addition to these disruptions, natural haz- net connectivity in the region was seriously ards cause direct damage to infrastructure affected, and financial services and the airlines assets. This damage is critical, given that it bur- and shipping industries were significantly hurt dens public infrastructure budgets and detracts (Sandhu and Raja 2019). from the attractiveness of the infrastructure Although it is agreed that disruptions from sector for private investors. Based on a global natural hazards represent a significant cost for risk assessment performed for this report, 10 LIFELINES power generation and transport infrastructure estimate the total cost of a two-week blackout incur losses of $30 billion a year on average in Los Angeles at $2.8 billion—that is, 13 per- from natural hazards (about $15 billion each), cent of the total economic activity during the with low- and middle-income countries shoul- two weeks. Colon, Hallegatte, and Rozenberg dering about $18 billion of the total amount (2019) find that in Tanzania, the macroeco- (Koks et al. 2019; Nicolas et al. 2019). nomic impact of a flood disruption in the trans- Although these numbers remain manage- port sector increases nonlinearly with the dura- able on average and at the global level, losses tion of the disruption. A four-week disruption can reach high values after extreme events. In is, on average, 23 times costlier for households some vulnerable countries, they are high than a two-week disruption. Comprehensive enough to impede the provision of universal risk assessments need to account for these sec- access to infrastructure services. ondary impacts and look beyond asset losses to The severity of natural disasters is usually inform disaster risk management investments measured by the asset losses they provoke and policies properly and to guide decision (Munich Re 2019; Swiss Re 2019). But the sec- making on infrastructure design and operation. ondary consequences of direct asset losses on economic activities and output can often explain MORE RESILIENT INFRASTRUCTURE a large share of total disaster impacts, especially ASSETS PAY FOR THEMSELVES when infrastructure systems are affected (Halle- The resilience of infrastructure has three levels gatte 2013; Hallegatte and Vogt-Schilb 2016). (figure O.7): For example, Rose, Oladosu, and Liao (2007) • Resilience of infrastructure assets. In the nar- rowest sense, resilient infrastructure refers FIGURE O.7 The resilience of infrastructure should be to assets such as roads, bridges, cellphone considered at several overlapping and complementary levels towers, and power lines that can withstand external shocks, especially natural hazards. Here, the benefit of more resilient infra- High-quality infrastructure structure is that it reduces the life-cycle cost of assets. • Resilience of infrastructure services. Infrastruc- Resilience of infrastructure users ture systems are interconnected networks, Resilient infrastructure reduces the impact of and the resilience of individual assets is a natural hazards on people and economies poor proxy for the resilience of services pro- vided at the network level. For infrastruc- Resilience of infrastructure services ture, a systemic approach to resilience is Resilient infrastructure provides more reliable services preferable. At this level, the benefit of more resilient infrastructure is that it provides more reliable services. Resilience of infrastructure assets • Resilience of infrastructure users. Eventually, Resilient infrastructure is less what matters is the resilience of users. Infra- costly to maintain and repair structure disruptions can be catastophic or benign, depending on whether users— including people and supply chains—can cope with them. At this level, the benefit of more resilient infrastructure is that it OVERVIEW 11 reduces the total impact of natural hazards FIGURE O.8 The incremental cost of increasing the resilience on people and economies. of future infrastructure investments depends on the spending scenario but remains limited in all cases The resilience of infrastructure is one of the many determinants of high-quality infrastruc- 60 Average annual cost (US$, billions) ture. However, integrating resilience in the 50 design and implementation of infrastructure investments not only helps to manage natural 40 shocks but also complements the cost- 30 effectiveness and quality of infrastructure ser- 20 vices more generally. 10 Building more resilient infrastructure 0 assets in exposed areas is cost-effective Power Transport Water and Total The additional up-front cost of more resilient sanitation infrastructure assets ranges from negative to a Source: Hallegatte et al. 2019. Note: This figure shows the incremental annual capital cost for more resilient infra- doubling of the construction cost, depending on structure for 2015–30. The range comes primarily from the uncertainty on how much the asset and the hazard. Interventions to make will be invested on infrastructure during the period (and on the technologies chosen). assets more resilient include using alternative materials, digging deeper foundations, elevating methods are available. Improving the resilience assets, building flood protection around the of only the assets that are exposed to hazards asset, or adding redundant components. would increase investment needs in power, How much would it cost to implement these water and sanitation, and transport by between technical solutions? This report tackles this $11 billion and $65 billion a year (figure O.8). question with an analysis that begins with the Although not negligible, this range represents estimates by Rozenberg and Fay (2019) of how only 3 percent of infrastructure investment much low- and middle-income countries would needs and less than 0.1 percent of the GDP of have to spend on infrastructure to achieve their low- and middle-income countries. It would, development goals. The analysis then asks how therefore, not affect the current affordability much those estimates would change if infra- challenges that countries face. structure systems were designed and built in a However, making infrastructure more resil- more resilient manner (using one set of techni- ient by strengthening assets is realistic only if cal options from Miyamoto International 2019). the appropriate data on the spatial distribution Note that the solutions assessed here do not of natural hazards are available. Without infor- guarantee that assets cannot be damaged by mation on which locations are exposed to haz- natural hazards and do not include all possible ards, strengthening the whole system would options to reduce risks. Many high-income cost 10 times more, between $120 billion and countries like Japan implement technical solu- $670 billion, which suggests that the value of tions that go beyond—and are more expensive hazards data is orders of magnitude higher than—the set of solutions considered in this than the cost of producing the information. analysis. What are the returns on investments for Overall, the incremental cost of building the making exposed infrastructure more resilient resilience of infrastructure assets in low- and to natural disasters? The uncertainty pertaining middle-income countries is small, provided the to the cost of infrastructure resilience and the right data, risk models, and decision-making benefits in terms of both avoided repairs and 12 LIFELINES disruptions for households and firms make it of natural hazards and climate change. In 93 difficult to provide one single estimate for the percent of the scenarios, it is costly to delay benefit-cost ratio of strengthening exposed action from 2020 to 2030—and the median cost infrastructure assets. However, a set of 3,000 of a decade of inaction is $1 trillion. scenarios (which covers the uncertainty of all parameters of the analysis) can be used to From resilient infrastructure assets to explore the costs and benefits of making infra- resilient infrastructure services structure more resilient. Making assets more resistant is not the only The analysis shows that, despite the uncer- option for building resilience. Expansion of the tainty, investing in more resilient infrastructure analysis from infrastructure assets to infrastruc- is clearly a cost-effective and robust choice. The ture services reveals that the cost of resilience benefit-cost ratio is higher than 1 in 96 percent can be reduced further by working at the net- of the scenarios, larger than 2 in 77 percent of work and system level—looking at criticality, them, and higher than 6 in 25 percent of them redundancy, diversification, and nature-based (Hallegatte et al. 2019). The net present value of solutions as additional options. these investments, over the lifetime of new To illustrate the role of networks in infra- infrastructure assets, exceeds $2 trillion in 75 structure system resilience, a study conducted percent of the scenarios and $4.2 trillion in half for this report quantifies the resilience of transport of them. Moreover, climate change makes the networks, defined as the ratio of the loss of func- strengthening of infrastructure assets even more tionality to the loss of assets (Rozenberg et al. important. Without climate change, the median 2019b). A resilient road network, such as the benefit-cost ratio would be equal to 2, but it one in Belgium or Morocco, can lose many doubles when climate change is considered. assets (such as road segments) without losing The urgency of investing in better infrastruc- much functionality, whereas fragile networks ture is also evident. With massive investment in with little redundancy, such as the one in Mad- infrastructure taking place in low- and middle- agascar, become disfunctional even with slight income countries, the stock of low-resilience damage (figure O.9). Similar approaches can be assets is growing rapidly, increasing future costs mobilized in water systems, where the typical methodology consists of mapping all compo- nents of a network and assessing the conditions FIGURE O.9 Belgium’s and Morocco’s transport systems can under which they would fail, what the effects absorb much larger road disruptions than Madagascar’s of those failures would be, and how they would 100 affect service delivery. Loss of functionality of the network (%) Network effects create opportunities to 75 strengthen the resilience of services and users at a limited cost, either by strengthening criti- cal assets or by building in redundancy only 50 where there are choke points (Rozenberg et al. 2019a). For transmission and distribution net- 25 works, for example, resilience is often built up through redundancy, which does not necessar- 0 ily mean doubling or tripling key components 0 10 20 30 40 50 60 of the network. A more effective approach is Level of disruption (% links disrupted) usually to create “ringed” or meshed networks Belgium Madagascar Morocco that have multiple supply points for various Source: Rozenberg et al. 2019b. nodes in the grid. OVERVIEW 13 Diversification and decentralization also ture systems have to be stress-tested against a offer opportunities for more resilient services. range of events to minimize the risk of cata- The use of power generation with differentiated strophic failures (Kalra et al. 2014). Such stress vulnerabilities (for example, hydropower, tests have two goals: (1) identify low-cost which is vulnerable to drought, versus solar and options that can reduce the vulnerability of wind, which are vulnerable to strong winds) infrastructure systems to extreme events, even makes it more likely that a system will be able quite unlikely ones, and (2) prepare for failure to maintain a minimum level of service. Multi- in terms of managing infrastructure systems modal transport systems that rely on nonmo- (such as how to recover from a major failure) torized modes and public transit are more resil- and in terms of supporting users (such as how ient than systems that rely on private vehicles to minimize impacts on hospitals). Running sce- only. Distributed power systems using solar and narios of failures is the first and most critical batteries can harden a grid and make it more step in defining contingency plans. resilient. Minigrids and microgrids, because Finally, sometimes the best way to make an they do not rely on long-distance transmission infrastructure resilient is not to build it. Nich- wires, can provide useful backup generation in olls et al. (2019) find that coastal protection case of grid failure. During Hurricane Sandy, against storm surges and a rise in sea level the Co-Op City microgrid in New York City was would make economic sense only for about successfully decoupled from the main grid, and 22–32 percent of the world’s coastlines through it supported consumers during outages in the the 21st century. Thus, some communities may wider network (Strahl et al. 2016). have to retreat gradually or use lower-cost or Combining green and gray infrastructure nature-based approaches to coastal defense. can provide lower-cost, more resilient, and These communities are mostly in low-density more sustainable infrastructure solutions areas where the costs of protection are too high (Browder et al. 2019). In New York City, 90 to be affordable. In those areas, the best percent of water is from well-protected wilder- approach to resilience may be not to build new ness watersheds, making New York’s water infrastructure. This approach, however, has to treatment process simpler than that of other be complemented by a consistent strategy to U.S. cities (National Research Council 2000). manage retreat, while maintaining livelihoods According to Beck et al. (2018), without coral and community ties. reefs the annual damage from coastal flooding would double worldwide. They estimate that From resilient infrastructure services to Cuba, Indonesia, Malaysia, Mexico, and the resilient users and economies Philippines benefit the most from their reefs, In some cases, it can be easier and cheaper to with annual savings of more than $400 million manage service interruptions than to prevent for each country. In Colombo, preserving the them. This report explores the role of the users wetland system was found to be a cost- of infrastructure services and how their actions effective solution to reducing flooding in the can contribute to more resilient infrastructure city, even when accounting for land develop- systems. ment constraints (Browder et al. 2019). Often, a first option for building resilience is Limits to what is achievable in terms of to reduce demand by improving efficiency. In strengthening also need to be considered. No the face of growing populations and increas- infrastructure asset or system can be designed to ingly scarce water resources, a water utility can cope with all possible hazards. And great uncer- use demand management to reduce stress on tainty surrounds the probability and intensity of the city’s water supply. A recent example is the most extreme events. As a result, infrastruc- Cape Town, which had to take drastic measures 14 LIFELINES MAP O.2 Investment priorities for Tanzania’s transport network will depend on its supply chains a. Impacts of disruption on households’ consumption b. Impacts of disruption on international clients Source: Colon, Hallegatte, and Rozenberg 2019. Note: The width of the line overlaying a given road is proportional to the impacts that a one-week disruption of that road would trigger. Impacts, mea- sured in percentage of daily consumption, represent exceptional expenditures due to costlier transport and missed consumption due to shortages. Panel a shows these impacts for products consumed by households, and panel b shows these impacts for international buyers. to avoid reaching “Day 0”—the day the city considered most vulnerable or most important. would run out of water. The demand manage- For example, segments of the coastal trunk ment measures implemented by the city were road, located about 200 km south of Dar-es- extremely successful, reducing use by 40 per- Salaam, are critical for domestic consumption cent between 2015 and 2018 and preventing but rather irrelevant for international trade. For what could have been a major socioeconomic trade, the road east of Morogoro appears as a crisis. priority. This segment accommodates large Understanding the needs and capacities of freight flows between the port of Dar es Salaam users helps utilities to target better where to and landlocked countries, such as the Demo- invest and what part of the network to cratic Republic of Congo and Zambia. strengthen. A power distribution line to a hos- When preventing disruptions is not possible pital or a flood shelter is likely more important or not affordable, firms have many options for during and after an emergency than the aver- improving their own resilience to disruptions. age power line in a country. To investigate how Larger inventories will protect them against criticality depends on users and supply chains, a transport issues. Generators and batteries will study undertaken for this report combines a help them manage short power outages. Main- transport and a supply chain model to investi- taining a diversity of suppliers, from both local gate the criticality of the transport network in and distant locations, is another powerful safe- Tanzania (Colon, Hallegatte, and Rozenberg guard, especially against long disruptions. How- 2019). Map O.2 shows the most critical assets in ever, holding large inventories and managing the transport sector for two supply chains and multiple suppliers are financial burdens that reveals that investment priorities for strength- involve significant transaction costs, making ening assets depend on which supply chains are them most relevant for large firms. Because a OVERVIEW 15 static supply chain will never be able to cope FIGURE O.10 Spending more improves the reliability of the with a large-scale disaster and associated disrup- transport system, but only if governance improves as well tions, adaptability is critical and should be 5 Best Logistic Performance Index: Timeliness embedded in business continuity plans (Chris- topher and Peck 2004; Sheffi 2005). 4 MAKING INFRASTRUCTURE 3 MORE RESILIENT REQUIRES A CONSISTENT STRATEGY In many countries, infrastructure disruptions 2 are the symptoms of chronic shortcomings. Worst Power outages occur every day, water supply is 1 0 200 400 600 800 1,000 1,200 1,400 unreliable or unsafe, and congestion makes Annual public road spending per capita (constant 2009 US$) travel slow and unpredictable. In many places, these disruptions occur simply because infra-  Spending and governance improve together  Increase in spending alone structure systems are not designed to keep up Source: Kornejew, Rentschler, and Hallegatte 2019. with ever-rising demand or because system failures are the result of poor asset manage- Thus, poor governance of infrastructure sys- ment or maintenance. While natural hazards tems is the first obstacle that needs to be tack- can exacerbate these issues, the majority of led. If infrastructure is to be resilient to natural these disruptions reflect more fundamental shocks, countries first need to get the basics challenges related to infrastructure design and right for infrastructure management, with the management. This means that, to make infra- following three priority actions. structure systems resilient, the first step is to make them reliable in normal conditions Action 1.1: Introduce and enforce regulations, through appropriate infrastructure design, construction codes, and procurement rules operation, maintenance, and financing. Well-designed regulations, codes, and procure- ment rules are the simplest approach to Recommendation 1: Get the basics right enhancing the quality of infrastructure ser- Underperforming infrastructure systems are vices, including their reliability and resilience. explained largely by poor management and Effective enforcement in the infrastructure sec- governance, according to a recent analysis of tor requires a robust legal framework, but also countries across the world (Kornejew, Rent- strong regulatory agencies to monitor con- schler, and Hallegatte 2019). Using the World struction, service quality, and performance and Bank’s Logistic Performance Index as a proxy, to reward or penalize service providers for their figure O.10 shows how the performance of the performance. Currently, many regulators lack transport system depends on public spending the resources and capacity to enforce the exist- on roads. Performance increases rapidly with ing construction codes. spending per capita, but only if the quality of governance improves in parallel (dark blue Action 1.2: Create systems for appropriate line). If the quality of governance remains infrastructure operation, maintenance, and unchanged (light blue line), increased spending postincident response only yields marginal improvements in transport Improving maintenance and operations is a system performance and is not cost-effective. no-regret option (it generates benefits what- Similar analyses yield similar findings for power ever happens in the future) for boosting the and water systems. resilience of infrastructure assets while reduc- 16 LIFELINES ing overall costs. An analysis of member coun- Implementing these three basic measures tries of the Organisation for Economic Co- would contribute to more reliable infrastruc- operation and Development performed for this ture systems and establish a basic capacity to report suggests that each additional $1 spent cope with natural hazards and climate change. on road maintenance saves $1.5 in new invest- But they would not be sufficient to achieve ments, making better maintenance a very more ambitious objectives regarding resilience. cost-effective option (Kornejew, Rentschler, Without targeted actions to strengthen resil- and Hallegatte 2019). An important tool for ience, infrastructure assets will not be able to this purpose is infrastructure asset manage- cope with rarer events, such as hurricanes, ment systems, which include an inventory of river floods, or earthquakes. And without spe- all assets and their condition, as well as all of cific actions on climate change, these assets run the strategic, financial, and technical aspects of the risk of being designed for the wrong cli- the management of infrastructure assets across mate and environmental conditions. To build their life cycle. Such tools help to move toward resilience to these evolving natural hazards, it an evidence-based and preventive mainte- is necessary to tackle four additional obstacles nance schedule and away from a reactive that are specific to the resilience challenge. patch-by-patch approach to maintenance. Recommendation 2: Build institutions Action 1.3: Provide appropriate funding for resilience and financing for infrastructure planning, Political economy challenges and coordination construction, and maintenance failures impede the creation of a resilient infra- The quality of infrastructure services depends structure ecosystem. Governments, therefore, on many factors, from good planning to good need to play a coordinating role (OECD 2019), maintenance, but each of these comes at a cost with the following three priority actions. (figure O.11). If resources are insufficient to meet the need for any of these factors, the Action 2.1: Implement a whole-of-government quality of infrastructure services is likely to suf- approach to infrastructure resilience, building fer. Even if investment spending is appropriate, on existing regulatory systems insufficient resources for planning, designing, Analysts agree that governments play a key role or maintaining assets would result in low qual- in ensuring the resilience of critical infrastruc- ity and reliability. Dedicated funds and budget- ture and that they should adopt a whole-of- ary allocations can be used to ensure that government approach (Renn 2008; Wiener and enough resources are available to meet differ- Rogers 2002; World Bank 2013). A common ent needs, especially for maintenance. solution to improve the coordination of risk FIGURE O.11 High-quality infrastructure requires providing for multiple funding needs Cost to regulators and government Life-cycle cost to (public or private) infrastructure service • Master planning, and regulation providers Full design and enforcement • Project design and preparation infrastructure • Data and model development, • Up-front investment cost cost research, training, and education • Operational, maintenance, and repair costs • Decommissioning OVERVIEW 17 management across risks and across systems is structure disruptions. Therefore, governments to place an existing (or new) multiministry body need to include resilience in a consistent set of in charge of information exchange, coordina- regulations and financial incentives to align the tion, and possibly even implementation of risk interests of infrastructure service providers management measures for infrastructure. with the interests of the public (figure O.12), with the following three priority actions. Action 2.2: Identify critical infrastructure and define acceptable and intolerable risk levels Action 3.1: Consider resilience objectives in Criticality analyses are an important tool for master plans, standards, and regulations and identifying the most important infrastructure adjust them regularly to account for climate assets and their vulnerability. Once the critical change infrastructure assets and systems have been Standards and regulations need to account for identified, governments need to define risk a range of factors, including climate conditions, levels that are acceptable or intolerable. Each geophysical hazards, environmental and socio- infrastructure sector can use these risk levels to economic trends, local construction practices, design its own regulations and measures, and policy priorities. They also need to be ensuring consistency across systems. Definition revised more regularly than is the case today to of these risk levels needs to consider the local consider climate change and other long-term context, especially the resources that are avail- trends (Vallejo and Mullan 2017). In addition, able, and requires an open and participatory governments can use regulations to strengthen approach to ensure that risk management does the resilience of specific users of infrastructure not become an obstacle to development. services, not just providers. For example, hos- pitals could be required to maintain backup Action 2.3: Ensure equitable access to resilient generators, batteries, and water tanks. And infrastructure firms could be required to prepare business Decisions regarding resilience cannot be driven continuity plans to minimize the economic cost by economic considerations alone. The strength­ - of disasters and infrastructure disruptions. en­ing of infrastructure resilience should be guided by a more complete assessment of the Action 3.2: Create financial incentives potential risks and impacts of disruptions, espe- for service providers to promote resilient cially for vulnerable and marginalized popula- infrastructure services tion groups. New approaches enable more com- Rewards and penalties can be used as incen- prehensive assessments of spatial priorities. For tives for service providers to go beyond the example, estimates of well-being losses or socio­ mandatory standards and implement cost- economic resilience provide a balanced assessment effective solutions to improve resilience (Par- of the impacts of natural disasters on poor and dina and Schiro 2018). The Australian Energy rich households (Hallegatte et al. 2016; Walsh Regulator established the Service Target Perfor- and Hallegatte 2019). mance Incentive Scheme, which includes pen- alties and rewards calibrated according to Recommendation 3: Include resilience how willing consumers are to pay for improved in regulations and incentives service. Another example is payment-for- A third obstacle to more resilient infrastructure ecosystem-services schemes, which promote is that public and private decision makers tend the use of nature-based solutions to increase to have few incentives to avoid disruptions. resilience. In Brazil, water users pay a fee to the Too often, they only consider lower repair costs local water company that local watershed com- when deciding on investments in resilience; mittees use for watershed maintenance and they rarely consider the full social cost of infra- reforestation (Browder et al. 2019). 18 LIFELINES FIGURE O.12 Creating the right incentives for infrastructure service providers requires a consistent set of regulations and financial incentives 1 2 3 4 Government or Government or Government or Developer designs regulator defines regulator defines an regulator adds project above and enforces an “acceptable” level of incentives to align the minimum "intolerable" level of risk that can be the interest of standard risk through a tolerated ("force service providers minimum standard in majeure" event) with the public Intensity construction codes interest, with of hazards or procurement penalties and rewards based on social cost Major, rare events Acceptable risks: For rare events, infrastructure assets Government are expected to experience damage or disruptions that bears the risk need to be managed through contingent planning Force majeure Provider bears at least part of the risk (insurance may be required) Project-specific designs Minimum standard Infrastructure services Intolerable risks: Infrastructure should not be disrupted should resist frequent hazards below this level. Provider bears the risk Small, frequent hazards Action 3.3: Ensure that infrastructure Recommendation 4: Improve decision regulations are consistent with risk-informed making land use plans and guide development toward Even if regulators and providers of infrastruc- safer areas ture services have the right incentives to build Since infrastructure investments influence spa- more resilient infrastructure systems, they often tial development patterns, they can influence lack access to data and tools, as well as the skills people’s exposure to natural hazards. To ensure and competencies they need to make good deci- that new infrastructure contributes to the resil- sions. Governments, therefore, need to help all ience of users, regulations should be aligned stakeholders to improve their decision making, with risk-informed land use and urbanization with the following three priority actions. plans. And the choice of infrastructure localiza- tions needs to account for the potential invest- Action 4.1: Invest in freely accessible natural ments that a new infrastructure asset will hazard and climate change data attract and the implications for resilience. Even Investments in risk data and models (such as better, infrastructure localization choices can hydrological models, maps of flood hazards, dig- be used to support the implementation of land ital elevation models, and inventories of infra- use planning and promote low-risk spatial structure assets) can have extremely high development. returns by improving the design and mainte- OVERVIEW 19 nance of infrastructure assets. Producing digital structure resilience, their appropriate use elevation models for all urban areas in low- and requires skills that are not always available. middle-income countries would cost between Universities and research centers need to be $50 million and $400 million in total and make supported so that they can offer training, it possible to perform in-depth risk assessments develop new methodologies (or adapt them to for all new infrastructure assets, informing hun- the local context), and advise policy and deci- dreds of billions in investments per year. How- sion makers. When public sector expertise is ever, such data have public goods characteristics insufficient, bringing in the private sector— that discourage private actors from investing in through direct procurement or public-private them and require public support. To be useful, partnerships—can be a solution. risk and infrastructure data must be made avail- able (and affordable) to infrastructure service Recommendation 5: Provide financing providers and users. While privacy and security The fifth obstacle is linked to affordability and concerns can make it necessary to restrict access, financing constraints. Increasing resilience can it is preferable to make open access the default increase various components of the life-cycle situation for hazard and infrastructure data and cost of infrastructure, including the costs borne to create processes to restrict access for data by the government or regulators or the costs proven to be too sensitive. borne by infrastructure providers (figure O.11). At times, these costs can lead to affordability Action 4.2: Make robust decisions and minimize challenges, when resilience increases the full the potential for regret and catastrophic failures life-cycle cost of an asset or system. Solutions Often, large uncertainties make it impossible might include either an increase in funding to design “optimal” systems or assets. An (financed through higher taxes, user fees, or alternative is to seek robust designs that yield transfers) or a trade-off between the resilience good results across a wide range of futures, and quantity of infrastructure services (such as preferences, and worldviews, even if they fewer but safer roads). But more often, making may not be optimal for any particular future. infrastructure more resilient increases only the Decision makers can identify robust strategies costs of design, construction, or maintenance, through systematic stress-testing of possible while decreasing other costs such as repairs, so options for a variety of hazards and threats— that the overall life-cycle cost is reduced. The even highly unlikely ones—to ensure that the challenge in that case is linked to financing— residual vulnerabilities are acceptable and that is, transforming annual revenues or bud- manageable. These stress tests can help to gets into the resources needed at each stage of capture low-cost opportunities to build resil- the infrastructure project life cycle, with the ience to low-probability, high-consequence following three priority actions. events and prevent catastrophic failures. They can also support the development of contin- Action 5.1: Provide adequate funding to gency plans for service providers and business include risk assessments in master plans and continuity plans for users. early project design Even though hundreds of billions of dollars are Action 4.3: Build the skills needed to use data invested in infrastructure every year, it remains and models and mobilize the know-how of the difficult to mobilize resources for infrastructure- private sector sector regulations, risk-informed master plans, Even if infrastructure risk data and models are infrastructure risk assessment, or early-stage available to all those seeking to improve infra- project design. More resources tend to become 20 LIFELINES available when infrastructure projects are Action 5.3: Promote transparency to better mature, but at this stage most strategic deci- inform investors and decision makers sions have already been made, and most low- One way to ensure that resilient infrastructure cost options to increase resilience are no longer projects are adequately financed is to inform available (such as changing the location of an investors and decision makers about the risks asset or even the nature of the project). Sup- associated with projects. Multiple interna- porting and funding these activities is highly tional, regional, and national initiatives are cost-effective and can be transformational, seeking to make the physical risks associated especially in poorer countries, making them a with investments and assets more transparent. priority for international aid and cooperation Examples include the work of the Task Force (World Bank 2018). Dedicated organizations for Climate-Related Financial Disclosure, and project preparation facilities, such as the which recommends that firms and investors Global Facility for Disaster Reduction and report on physical risks and how they are man- Recovery or the Global Infrastructure Facility, aged. To contribute to this trend, the World are already active in these domains, but they Bank Group is committed to developing a resil- remain small compared with the magnitude of ience rating system to inform investors about the needs. the resilience of their infrastructure invest- ments and help them to select the most resil- Action 5.2: Develop a government-wide ient projects. financial protection strategy and contingency plans In sum, as illustrated by these five recom- In the aftermath of a disaster, governments are mendations and 15 actions (table O.3), no single typically required to raise significant financing measure can make infrastructure systems resil- for response and recovery measures. Several ient. Instead, governments need to define and instruments are available to do so, including implement a consistent strategy—in partnership reserve funds or budget reallocation, contin- with all stakeholders, such as utilities, investors, gent credit, or insurance or risk transfers. The business associations, and citizen organiza- choice of financial instruments is determined tions—to tackle the many obstacles to more by the risks that need to be covered, the cost of resilient infrastructure systems. One common the instrument, the speed of disbursement, and feature of these recommendations is a focus on the transparency and predictability of the the early stages of infrastructure system devel- resources (Clarke and Dercon 2016; World opment—the design of regulations, the produc- Bank 2017). After a disaster, however, the tion of hazards data and master plans, or the availability of financial resources is only half of initial stages of new infrastructure asset design. the story; just as important is the ability to These early stages are when small investments deliver resources effectively and rapidly to can significantly improve the overall resilience where they are needed, including to the firms of infrastructure systems and generate very large and households that are affected by infrastruc- benefits. In poor countries, however, mobilizing ture disruptions, even if they are not affected resources to invest in these actions may be chal- directly by the disaster. Financial instruments lenging, which makes targeted support from the therefore need to be combined with contin- international community necessary, transforma- gency plans and flexible delivery mechanisms— tional, and highly cost-effective. if possible, building on existing instruments, Although these recommendations are such as social protection systems. aimed at making infrastructure more resilient, OVERVIEW 21 TABLE O.3 Five recommendations to address the five obstacles to resilient infrastructure Recommendation Actions 1: Get the basics right 1.1: Introduce and enforce regulations, construction codes, and procurement rules 1.2: Create systems for appropriate infrastructure operation, maintenance, and postincident response 1.3: Provide appropriate funding and financing for infrastructure planning, construction, and maintenance 2: Build institutions for resilience 2.1: Implement a whole-of-government approach to resilient infrastructure, building on existing regulatory systems 2.2: Identify critical infrastructure and define acceptable and intolerable risk levels 2.3: Ensure equitable access to resilient infrastructure 3: Create regulations and incentives 3.1: Consider resilience objectives in master plans, standards, and regulations for resilience and adjust them regularly to account for climate change 3.2: Create economic incentives for service providers to offer resilient infrastructure assets and services 3.3: Ensure that infrastructure regulations are consistent with risk-informed land use plans and guide development toward safer areas 4: Improve decision making 4.1: Invest in freely accessible natural hazard and climate change data 4.2: Make robust decisions and minimize the potential for regret and catastrophic failures 4.3: Build the skills needed to use data and models and mobilize the know-how of the private sector 5: Provide financing 5.1: Provide adequate funding to include risk assessments in master plans and early project design 5.2: Develop a government-wide financial protection strategy and contingency plans 5.3: Promote transparency to better inform investors and decision makers most of them tackle market or government details, refer to chapter 2 and Rentschler, failures that are responsible not only for less Kornejew, et al. (2019). 3. The estimates summarized in this paragraph resilient infrastructure but also for less effi- cover up to 137 low- and middle-income cient, less inclusive, and costlier infrastructure. countries, although the exact country cover- As a result, taking these actions will contribute age varies across infrastructure sectors due to to more than infrastructure resilience and help data constraints. For details, refer to chapter create more productive, livable, and inclusive 3 and Obolensky et al. (2019). societies. REFERENCES NOTES Beck, M. W., I. J. Losada, P. Menéndez, B. G. 1. In this report, all dollar amounts are U.S. dol- Reguero, P. Díaz-Simal, and F. Fernández. lars, unless otherwise indicated. 2018. “The Global Flood Protection Savings 2. The data set covers 137 countries represent- Provided by Coral Reefs.” Nature Communi- ing 80 percent of the GDP of low- and middle- cations 9 (1): 2186. https://doi.org/10.1038 income countries, or 32 percent of global /s41467-018-04568-z. 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Power Sector Distortions Cost South Asia? South Sandhu, H. S., and S. Raja. 2019. “No Broken Asia Development Forum. Washington, DC: Link: The Vulnerability of Telecommunication World Bank. https://doi.org/doi:10.1596 Infrastructure to Natural Hazards.” Sector /978-1-4648-1154-8. From serving our most basic needs to enabling our most ambitious ventures in trade and technology, infrastructure services support our well-being and development. Reliable water, sanitation, energy, transport, and telecommunication services are universally considered to be essential for raising and maintaining people’s quality of life. Yet millions of people, especially in low- and middle-income countries, are facing the consequences of unreliable electricity grids, inadequate water and sanitation systems, and overstrained transport networks. From floods and storms to earthquakes and landslides, natural hazards magnify the challenges faced by these fragile systems. This book, Lifelines: The Resilient Infrastructure Opportunity, lays out a framework for understanding infrastructure resilience—the ability of infrastructure systems to function and meet users’ needs during and after a natural shock—and it makes an economic case for building more resilient infrastructure. Building on a wide range of case studies, global empirical analyses, and modeling exercises, Lifelines provides an estimate of the impact of natural hazards on infrastructure. It looks at not only the repair costs but also the consequences for users—from households to global supply chains. It also reviews available options to make infrastructure assets, systems, and users more resilient and better able to cope with natural disasters. Assessing the costs and benefits of these options, the book demonstrates the economic value of investing in more resilient infrastructure, especially in low- and middle-income countries. Lifelines concludes by identifying five obstacles to resilient infrastructure and offering concrete recommendations and specific actions that can be taken by governments, stakeholders, and the international community to improve the quality and adequacy of these essential systems and services, and thereby contribute to more resilient and prosperous societies. SKU 33321