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The Afsluitdijk is a 32-kilometer stretch of the Netherlands that, since 1932, has been one of the country’s barriers to sea level rise. But after nearly a century of use it became necessary hundreds of millions of dollars in addition. So, about ten years ago, the government turned to the contractor group to strengthen security. Instead of paying for the project, the governing body signed a 25-year lease that allowed it to make payments over time — a move that amounted to private funding for a public project.
As climate risks increase, cities around the world face a major financial challenge: Protecting themselves from rising seas and extreme weather will cost billions of dollars – more than most governments can afford. A A new report from C40a climate group that represents cities, says that one way to close this gap is to bring in foreign investors.
Work on the Afsluitdijk has been completed, and the sea wall continues to protect the incoming water. The work is one of 10 studies that form the backbone of the report, which C40 is releasing on the sidelines of the World Bank’s spring conference this week. It cites examples from Dakar, Senegal to Washington DC to show why – and how – cities should partner with the private sector.
“The aim of this report is to guide the discussion and bring proof of concept so that we can work with cities to take advantage of these opportunities,” said Barbara Barros, global chief economist at C40 and one of the report’s authors. “We can change the story.”
As climate risks grow, so does the cost of protection. The report shows research showing that this could cost low- and middle-income countries alone between $256 and $821 billion by 2050. However, no more than 1 percent of all climate change money is going to urban adaptation, leaving a gap between what cities need and what they can afford.
This is partly because change is easier to sell than projects that reduce emissions. “Preventing future losses is not a way to get money that you can take from the bank as much as you can with energy and energy. decarbonization,” said Dan Zarrilli, former director of the New York City Climate Change Association and senior climate consultant.
Creating an investment that meets public sector objectives while being attractive to the public can be difficult, but C40 hopes the report released today will help accelerate the effort. Barros says finding creative ways to raise money is critical for cities that can’t easily raise taxes and that have little debt. According to a report from the Zurich Climate Resilience Alliancesmall businesses account for only 3 percent of the capital required in developing countries. It is a concerted effort that can go up to 15 percent.
Stephen Lam / San Francisco History via Getty Images
“There is a big difference between reduction and change,” Barros said. “The only way to increase the exchange rate is through more private investment.”
Increasing public spending is important in the United States as well, said Dakota Fisher, who works with the NRDC’s environmental reform group. Local governments often don’t have tax breaks to fund major projects, while the federal government — historically a major contributor to climate change — is scaling back its aid under President Donald Trump. At that retreat, he said, “all of us together are thinking a lot about how to get more dollars to change the climate.
Almost everyone working on climate change has faced this challenge, said Zarrilli, who is now a professor of climate and sustainability at Columbia University. What this report does best, he said, is lay out the options and what others can do.
“Courtesy is good,” he said.
The report highlights several examples: a water restoration project in Sao Paolo, coral reef insurance in Mexico, and work-based payments in Washington DC, to name a few. One project that caught Zarrilli’s attention was in Kuala Lumpur, Malaysia, where planners integrated a stormwater management system with roads to generate revenue.
“Now you have a way to raise money to do this,” he said, praising the technology. One of the keys to creating projects that attract the public and private sector, he said, is early consultation, rather than taking a firm idea from a partner. “You have to work to gain confidence and find a voice to share.”
The report shows some ways to overcome the barriers that cities face. For example, urban climate change projects can be small, so bundling them together can create a package that will be more attractive to donors like the World Bank or development banks. Investment vehicles such as green bonds or funds can make it easier for companies to invest in large scale changes, rather than signing up for individual projects.
Fisher wants rural and low-income communities, especially in the United States, to be better represented in the report. A small town in Iowa that experiences frequent flooding and has only a handful of employees, for example, may not fit into the study. But he said, “having examples, time, is useful.”
But bringing private companies to the project is not a risk. The Zurich Climate Resilience Alliance The report warns that governments need to ensure that projects remain high quality, and remain consistent with equity and fairness. Profitability goals, the report said, can lead to focusing on small-scale projects and reducing costs for long-term needs. There is also a limit to how much organizations can do, warned Debbie Hillier, the union’s chief executive. “There is a lot there, but what we don’t want is to assume that the private sector is going to do everything,” he said. “They can’t and they won’t.”
Q40 published similar findings. Fisher adds that even the idea of favoritism, or that private companies are receiving inappropriate public funding, can be problematic for officials. “Whenever you are in government, you try to build trust,” he said, adding that clear rules on procurement, contracting, funding and other forms of management are needed. “You need to establish a clear framework for how the public sector and private sector will work together.”
The main goal, said Barros, is to ensure that the most vulnerable are protected from the effects of climate change, rather than exposed to them. “Successful experiences depend on how projects are designed – especially in terms of cost and risk sharing, as well as strong social and environmental protection,” he said. “It seems very capitalist, but the goal is to protect our citizens.”
Zarrilli added that it’s about finding the “right balance” between bringing in private investment and getting good jobs—governments have long been working in other fields, such as building roads and bridges. That said, he and Barros stress that the private sector should not do anything. “What we’re saying,” said Barros, “is that, for projects that can generate revenue, why not include the private sector?”
Without this, most of the conversion work cannot be done. Or it can’t be done fast enough to deal with the climate-related disasters that threaten cities around the world. The private sector, C40 says, can help.
“It will take a few years for cities to think differently,” Barros said. But, he added, “I hope this will change.”
