The following is an excerpt from a chapter in the forthcoming Lincoln Institute book Infrastructure Economics and Policy: International Perspectives, which includes contributions from leading international academics and practitioners addressing the latest approaches to infrastructure policy, implementation, and finance. Edited by José Gómez-Ibáñez of Harvard University and Zhi Liu of the Peking University–Lincoln Institute Center for Urban Development and Land Policy, the book is now available for preorder. 

As the world focuses on the COVID-19 pandemic, the disruptive reality of global climate change looms on the horizon. Its implications for public infrastructure could be immense. Forest fires in Australia, Siberia, and California, record cold in Texas, droughts in southern India and South Africa, intense hurricanes and floods in the United States and the Philippines, and the melting of the Arctic ice sheet are all harbingers of what a changing climate has in store. 

As pointed out by Martin Weitzman and Gernot Wagner in their book Climate Shock, “Climate change is unlike . . . any other public policy problem. It’s almost uniquely global, uniquely long-term, uniquely irreversible, and uniquely uncertain—certainly unique in the combination of all four” (2015). 

The impact of climate change on infrastructure services will be integral to the world’s economy. How we power our factories, buildings, and homes; allocate and treat our water; and transport people and goods may look very different 30 years from now. Uncertainty surrounds both the impacts of and responses to climate change, but the direction is clear. The effects will be more disruptive in 2050 than today. More floods, droughts, fires, and heat waves will occur. While countries may struggle to transition their economies, escalating climate impacts may force them to accelerate their efforts.  

The biggest challenges to meeting national and local climate goals through infrastructure investments will not be in the realms of engineering or technology, but rather in the areas of governance and public policy. Key institutional issues include the broad governance issues that prevent governments at all levels from working together effectively; infrastructure siting; stranded economic and social assets; and the need for greater public investment in preventing damages as opposed to investing only in relief and recovery. 

Structural Inefficiency 

Governments consist of multiple agencies, each with a defined portfolio of responsibilities. The water resources department provides water to consumers. Another department might provide sewerage services, while still another addresses water pollution. In many jurisdictions, irrigation is within the purview of the agriculture department, while the public health agency sets quality standards for drinking water. In many countries there are agencies that develop plans for coastal areas, while another agency has a similar responsibility for rivers and lakes. If the country requires desalination technologies to meet the demand for potable water, it must work with the agencies responsible for electricity, since such facilities consume substantial amounts of power. 

When these agencies want to make investments in new infrastructure, they must seek permits from a variety of other agencies. Finally, yet another group provides support services such as budget oversight, procurement, and human resources. This description is simply the governance structure for water infrastructure. The same complex map of complementary responsibilities exists for transport or energy. 

In most cases, these water departments were established at different times to meet different public policy problems. Establishing a new department, as opposed to expanding an existing one, allowed public officials to demonstrate responsiveness to the public concern of the moment. In some countries, the existence of multiple agencies gives elected officials the ability to make more appointments, which is a key currency for elected officials. The result, however, is a balkanized system that does not effectively manage problems that cross departmental responsibilities. Interagency coordination and cooperation will be growing concerns for presidents, prime ministers, governors, and mayors as they address the underlying interconnections inherent in climate policy. 

Horizontal coordination challenges are replicated at the vertical level. What responsibilities should lie with national or central governments, and which should be given to mayors? Highways, transmission lines, pipelines, and possibly water lines are important to realizing national goals and priorities; however, their construction and management often require substantial cooperation between national and subnational governments. Permitting electric generating facilities is essential to meeting national targets for adequate power, yet this responsibility is usually allocated to subregional governments. 

Climate change does not recognize jurisdictional boundaries. Most countries contain states or provinces, each with its own government, its own bureaucracies, and, in many cases, its own priorities. Many of these states or provinces contain metropolitan areas, each consisting of a large city surrounded by smaller cities and towns whose economies are closely linked, but whose governments are independent of each other. 

The challenge of managing climate change becomes very difficult when these jurisdictions do not share common goals and when their ability to cooperate is derailed by financial and political rivalries. The ability to develop new and innovative intergovernmental structures will determine whether subregional governments can ensure the continuing operation of infrastructure services in a climate-constrained world. 

Climate is the ultimate interagency issue, and it will impact a vast majority of the existing governance structures. To meet this challenge, governments will have to organize themselves so that responsibilities for responding to the threat and damages from climate disruptions are better assigned. Which climate-related activities are best handled by local governments, and which should be tackled by higher levels of governance? To what extent should the national government be able to overrule subnational governments when an infrastructure decision or climate investment falls within the jurisdiction of the subnational government but is deemed to be of national importance? 

How can governments design and implement greater interagency coordination, both horizontally among agencies at the same level of government and vertically across those at different levels? To meet this need, some governments have established major decision-making bodies at their highest levels. For example, China has a State Council, and the United States has expanded the roles of the Domestic Policy Council and the National Security Council. However, only issues of highest priority reach these bodies. Climate change will require thousands of decisions made by thousands of officials at all levels. 

Finally, subnational governments have access to only certain revenues, while national governments almost always have access to a larger portfolio of revenue sources. Climate change will dramatically increase the fiscal burden on local, state, and provincial governments. It may do so in scenarios in which local fiscal revenues are decreasing, as investors move their money to regions less vulnerable to climate disruption. 

As discussed earlier, subnational jurisdictions will face substantial infrastructure costs. They will look to national governments for financial assistance, but what will be the political and structural cost demanded in exchange for those funds? For example, if the federal government provides substantial assistance, should it take on greater responsibility for the provision of local services? Will local governments voluntarily allow national governments to micromanage services that heretofore were their exclusive responsibility? Or will national governments provide substantial incremental assistance with no strings attached? Will national governments be willing to experiment with creative pilots that encourage effective coordination at the subregional level? How the institutions of governance are structured and operate will have a major impact on the provision of more resilient infrastructure services. 

Infrastructure Siting 

In the first half of the 20th century, western countries embarked on ambitious infrastructure programs. Intercity highways were constructed. Impressive boulevards and parkways were built as dilapidated neighborhoods were demolished to be replaced by modern downtown areas. Many countries initiated efforts to develop power-generation complexes and transmission grids to move electricity. Airports and seaports were built, and global trade was expanded. While these achievements were impressive, they often happened without much consultation with the people affected by these investments. Environmental considerations were ignored. Too often, the infrastructure seemed to be built because it could be built. Bigger and more modern projects crowded out smaller and more appropriately scaled facilities. Alternative options were not considered. 

The backlash that ensued resulted in the establishment of rigorous siting procedures to ensure that critical externalities and social concerns would no longer be ignored. Stakeholders with a wide spectrum of interests were given multiple opportunities to raise their concerns. Often developers not only had to demonstrate a regional need for a project, but also had to show that it met the specific needs of each jurisdiction affected by the proposed project. A power line moving electricity from point A to point B that crossed region C had to demonstrate a benefit to the populations of all three jurisdictions. 

In many instances, this process became very expensive and time-consuming. Developers (and their lenders) became reluctant to invest the time and money needed to guide a project through the labyrinthine permitting process, obtain support from multiple stakeholders, and survive legal challenges. While siting may be more difficult in democracies, even authoritarian governments such as China have encountered strong public opposition to certain infrastructure projects, forcing them to forgo or amend those investments. 

It would be hard to argue against stakeholder involvement or the merits of greater sensitivity to the environmental and social consequences of large infrastructure projects. No one is suggesting that governments return to the first half of the 20th century, when officials imposed large public works projects on an uninformed, and sometimes skeptical, public. However, the infrastructure requirements to transition to a decarbonized economy will be huge. In 2019, global electricity generation consisted of 9,824.1 terawatt-hours (TWh) of coal, 825.3 TWh of oil, and 6,297.9 TWh of natural gas (BP Statistical Review of World Energy 2020). In a decarbonized world, a significant proportion of this fossil fuel capacity will be replaced by renewables that have approximately half the capacity of an equally sized fossil fuel facility, which means nations will need to build many more generating stations than they have today. Further, renewable systems will require substantially more land and significantly expanded transmission and distribution systems. 

In the United States alone, an analysis by Wu (2020) found that achieving net-zero greenhouse gas emissions by 2050 would require about the land area of New Mexico for new onshore wind capacity and about the land area of Vermont for new solar photovoltaic capacity. The probability that these investments can be successful under today’s siting regimes is, unfortunately, low. The consequences of not making these investments will be to fail to transition public infrastructure to meet national climate goals and to suffer ever greater climate disruption.  

Transitioning water and sewerage infrastructure (to manage ever more droughts and floods) and transportation infrastructure (to meet the realities of climate disruption) may require less investment in the siting process than energy infrastructure. However, over the next 30 years, significant infrastructure siting will be needed across all three of these sectors. Identifying this problem is easier than solving it. Many reform policies and programs have been suggested, but most have failed to improve the siting process. Any meaningful reforms must have several characteristics. 

First, reforms will require a renewed trust in the public sector. The magnitude and scope of infrastructure investments required will not happen without significant government involvement. Second, the number of government agencies involved in permitting and siting will need to be compressed, which means that existing siting laws will have to be amended. A comprehensive one-stop siting shop may be too difficult to achieve, but narrowing down the fifteen to twenty involved agencies to four to five could significantly expedite the process for new infrastructure. 

The biggest and most important step will be to establish siting institutions across different levels of government while incentivizing officials from the national and subregional governments to conduct joint assessments with a prior agreement that both will abide by the joint decision. For example, in the United States, offshore wind projects require permits from the federal, state, and, in some situations, local governments. Under the present system, opponents can strive to sequence the three siting processes until the developer runs out of money and leaves. Identifying processes to encourage the three levels of government to review siting in a collaborative process could significantly reduce the cost and timeline. 

Third, the entire siting process for a project must be concluded in a reasonable time frame. Drawing the process out for years is a luxury that societies could afford in a non-climate-constrained world, but it will not be feasible if countries desire to effectively respond to the looming climate threat. Stakeholders need to be listened to, and environmental concerns need to be assessed; at some point, however, infrastructure decisions must be made, and appeals to the courts limited. One idea is to establish a compressed review process for only a subset of projects that meet certain criteria, such as zero greenhouse gas emissions. The challenge will be reaching agreement on the appropriate criteria. 

Fourth, societies must accept that this process will produce a few bad projects and a few projects in which new facts and problems will emerge after decisions have been made. The present system minimizes the number of such projects. The siting process described above could increase that number, but the trade-off may be necessary for countries to benefit from being better prepared to manage emerging climate disruptions. 

Stranded Assets 

Investments to decarbonize the energy sector and adapt to climate change will result in human dislocations (for example, climate refugees, workers who lose their jobs, and communities that lose their sources of employment) and economic dislocations (for example, unamortized physical assets). These problems may be less urgent in the cases of transportation and water infrastructure, since the existing assets are unlikely to be replaced by an entirely new system. 

Energy, however, will be a different case, as countries replace the existing fossil fuel system with one that relies heavily on renewables, storage, and possibly sequestration. Past efforts to deregulate portions of the vertically integrated electric industry give us a sneak preview of the importance of managing the stranded asset problem. High-cost generating facilities were not competitive in the new deregulated market. The utilities that owned these assets would not accept the proposed deregulation policies unless regulators allowed them the opportunity to recover the cost of their previous investments, approved by past regulatory bodies. 

If countries intend to decarbonize their electricity sectors, the magnitude and cost of the stranded assets will be much larger than those in recent history, as will the pressure on regulators to compensate the owners of fossil-fueled generating assets. This problem will be larger in countries such as China and India, where a significant portion of their coal-fired generation was built in the last 20 years and will not be fully amortized until 2040 to 2055. 

The labor-force dislocation associated with climate mitigation and infrastructure adaptation may prove to be even more challenging to manage. Millions of men and women are employed in the fossil-fuel-intensive electricity sector, and their prospects for finding work in another industry may be limited because of age or geography. Some countries have no social security net for retired workers, who are instead simply retained on their company’s payroll. If the plant is closed, their pensions evaporate. There will be understandable political opposition to retiring these facilities without a funded plan to take care of these employees. Simply retraining them to install solar collectors or build transmission lines will not be politically sufficient or practically feasible at a meaningful scale. One creative approach is an effort championed by the Evergreen climate group, inspired by Washington State Governor Jay Inslee and established in 2020, which advocates a GI Bill of sorts to assist fossil fuel workers and communities through pensions, health care, and other training and financial support. While the governance solution to these stranded communities and workers may not be quite so drastic, equity considerations demand that they be addressed in any national climate-infrastructure policy. 

Invest in Disaster Relief or Prevention? 

Historically, governments have placed significantly more emphasis on responding to disasters than on disaster preparation and resilience. In the United States, the Federal Emergency Management Agency (FEMA) spends billions on disaster relief and recovery while spending negligible amounts on avoiding or minimizing those damages in the first place. Why do governments so rarely prioritize climate disaster prevention? 

Some state and local governments, often in partnership with nonprofit organizations, purchase coastal barriers or create artificial wetlands or mangrove swamps; these investments are often driven by the cobenefits (in the form of habitat protection, biodiversity, or parklands) as opposed to climate adaptation. Governments in some earthquake-prone regions have inserted requirements for more resilient building practices into city zoning regulation, but those cities are frequently the ones that have repeatedly experienced severe earthquake damage, making the public more enthusiastic about investments in greater resilience. Research has shown some cases in which the government bought up land to reduce the costs of damages (both human and economic) from a future earthquake; these cases are the exceptions, not the rule. 

Governments are concerned that tax revenues be spent on activities for which the benefits can be documented and the public can be assured that their tax dollars have not been misused. If FEMA were to spend millions buying private properties in areas vulnerable to significant flooding, but no floods occurred for the next 15 years, the agency would be accused of having wasted taxpayer money. But if FEMA were to spend nothing on resilience and a flood were to occur a few years later, FEMA would be judged on its response to the victims of that flood and its willingness to help that community recover. Few would point out after a disaster that the recovery costs would have been far less if FEMA had bought out the most vulnerable of the buildings prior to the disaster. The incentives are clearly skewed toward investing in recovery rather than in preparation or resilience. 

To put this dilemma in perspective, southern Australia has experienced forest and bushfires that were especially severe because of years of droughts and unusually hot weather. After the 2009 Black Saturday fires, the government of Victoria implemented a housing buyback program. Its offer received considerable publicity at the time, since here was an example of a government trying to get ahead of a future problem. However, it took a year to get the program passed because of bureaucratic delays, and few homeowners were interested in pursuing the government’s offer thereafter (Herscher and Rizzo 2020). In 2019 and 2020, the same areas experienced even more severe bushfires. 

Interestingly, few criticized the government for its inability to implement the buyback program, and there has been no clamor from the public to develop a new program. Some experts suggest measures such as more stringent building codes, expanded voluntary buyback programs, and enhanced early warning systems; thus far, these policies have not been pursued (Henriques-Gomes 2020; Hill and Martinez-Diaz 2020). 

Will this dilemma change? It is unlikely, without a significant push from the public. Admittedly, the financial costs of relief and recovery efforts are skyrocketing as disaster intensity increases. The Wharton Risk Management and Decision Processes team at the University of Pennsylvania found that post-disaster spending in response to 2017 events in the United States was more than $130 billion—a record high (Lingle, Kousky, and Shabman 2018). Perhaps as this number increases, pressure will increase for greater national governmental investment in climate preparation. 

Most future investments in preparation and resilience will be made by property owners who will do their own cost-benefit analyses, realizing that government assistance in the best of circumstances will be inconsistent and difficult to predict. This outcome is not necessarily bad, but it ignores lower-income communities and households, many of which are located in the most vulnerable locations. 

It might be more effective to direct incremental government adaptation funds to these lower-income neighborhoods than to attempt to convince the major public and private relief organizations to fund large-scale infrastructure adaptation and resilience. Perhaps those agencies responsible for housing and urban development should lead the national government’s efforts to promote preparation in concert with their sister institutions at the subnational level. 

Conclusions 

The climate problem is real, and its impacts will be severe. These impacts will be neither homogeneous nor temporally or spatially predictable. In light of these uncertainties, many governments will hesitate to invest in low-carbon infrastructure without economic and financial assistance at scales that exceed normal political comfort.  

What can be done to address these challenges? First, rational pricing for infrastructure services such as electricity and water will become substantially more important in a world dependent on renewable energy, electric vehicles, and water from distant aquifers or capital-intensive desalination facilities. Pricing that reflects the true social cost of these services is essential but by itself will not be enough. In addition, governments at all levels must develop interagency and intergovernmental institutions and processes to address adaptation and mitigation investments. These initiatives should be accompanied by a commitment to transfer funds to where they are needed. Traditional political rigidities must be superseded by a willingness to be creative and to take political risks based more on vision and less on historical stakeholder loyalties. Finally, this new sense of innovation must focus on governance reforms in areas such as siting, stranded assets, interagency coordination, and preventive investments. These reforms will occur only when key stakeholders become more aware of the looming risks of climate change and demand that their elected officials respond to these threats with considerably more urgency than shown to date. 

Henry Lee is the Jassim M. Jaidah Family Director of the Environment and Natural Resources Program within the Belfer Center for Science and International Affairs at the Kennedy School of Government, Harvard University. He also serves as faculty cochair of the Sustainability Science Program and a senior lecturer in Public Policy. He is the coeditor of a forthcoming book on the pathways to decarbonization in China, to be published by Cambridge University Press in late 2021. 

Lead image: Seyhan River, Turkey. Credit: tunart via Getty Images.  

REFERENCES 

BP Statistical Review of World Energy. 2020. 69th ed., “Electricity–2019 in Review.” https://www.bp.com/en/global/corporate/energy-economics/statistical-reviewof-world-energy.html

Henriques-Gomes, Luke. 2020. “Bushfire-destroyed Homes Should Not Be Rebuilt in Riskiest Areas, Experts Say.” The Guardian. January 18. https://www.theguardian.com/australia-news/2020/jan/19/bushfiredestroyed-homes-should-not-be-rebuilt-in-riskiest-areas-experts-say

Herscher, Rebecca, and Meredith Rizzo. 2020. “Sell or Stay? Australia’s Fire Zone Experiment.” NPR. February 25. https://www.npr.org/2020/02/25/807084043/sell-or-stay-australia-s-fire-zone-experiment

Hill, Alice, and Leonardo Martinez-Diaz. 2020. Building a Resilient Tomorrow. Oxford and New York: Oxford University Press.  

Lingle, Brett, Carolyn Kousky, and Leonard Shabman. 2018. “Federal Disaster Rebuilding Spending: A Look at the Numbers.” Wharton Risk Management and Decision Processes Center. https://riskcenter.wharton.upenn.edu/lab-notes/federal-disaster-rebuilding-spending-look-numbers

Weitzman, Martin L., and Gernot Wagner. 2015. Climate Shock: The Economic Consequences of a Hotter Planet. Princeton, NJ: Princeton University Press. 

Wu, Grace. 2020. “Spatial Planning of Low-Carbon Transitions.” Sustainable Development Solutions Network Deep Decarbonization Pathways Project for the United States. National Center for Ecological Analysis and Synthesis: The Nature Conservancy. https://www.unsdsn.org/new-paper-and-webinar-spatial-planning-for-a-low-carbon-future

Among its many consequences, the pandemic ushered in a period of experimental, rapid-fire adjustments to public space. Cities were suddenly tweaking zoning rules to allow more outdoor dining, blocking off streets to give pedestrians and bicyclists more space, and figuring out how to respond to dramatic upticks in food and retail pickup and delivery. It has been a pivotal stretch, in short, for managing the curb. 

Even before the lockdowns began, the increasing popularity of transportation network companies—from ridesharing services like Uber and Lyft to scooter firms like Bird and Lime—had made curb management a rising priority for many cities. “In today’s urban fabric, few spaces are more contested than the curb,” the American Planning Association declared back in the before-times of 2019. 

But the welter of recent experiments, some involving deployment of new technologies, seems even more significant. Consider the case of Aspen, Colorado. Aspen is an unusual municipality, with a downtown business district that is geographically modest, at just 16 square blocks. Nevertheless, it’s extremely busy: the retail and restaurant businesses there rack up a collective $1 billion a year. The inevitable upshot is that demand for curb space—for parking, for deliveries—can outpace supply. And that makes Aspen a useful curb-management lab. 

In February 2020, Aspen joined a group of municipalities exploring pilot programs with a start-up called Coord, one of a number of “smart city” tech companies with a curb-management bent. “I’m a data freak,” explains Mitch Osur, Aspen’s director of parking and downtown services. He figured that at the very least, Coord’s platform—which integrates “smart zones” with a payment app used by delivery drivers (and a separate app for enforcement officers)—could give him fresh insight into how the downtown streets are really being used. 

The city identified what it believed were its busiest loading zones. Starting in November 2020, using these zones required booking space through Coord’s app, at a cost of $2 an hour. While regular street parking in downtown Aspen can cost $6 an hour, the city (like many others) had never previously charged for loading, but figured it was necessary to get delivery fleets’ attention. In the end there wasn’t much pushback; most drivers appreciated being able to capture a time slot. When one shipping fleet manager questioned the scheme, Osur explained that the shipper could use other loading zones, but the data Aspen was collecting would affect policy decisions about curbs across the downtown area. “If you’re not part of the program, your data won’t count,” he added. Moreover, he was sharing data with participants and soliciting their input. The shipper signed on. 

Because the Coord platform tracks actual usage of the smart loading zones, Osur did indeed get plenty of fresh data. Some was expected, some surprising. He figured average “dwell times” were about 30 minutes, and found they were averaging 39 minutes and 13 seconds. The dwell times were longer in the morning and shrank to about 15 minutes after 2 p.m. He was surprised to learn that the busiest days weren’t Monday and Friday, as expected, but Tuesday and Thursday; Wednesday’s loading zone use was half that of peak days. Based on these insights, Aspen is planning to change the rules for some zones, converting them to regular parking at 11 a.m. on some days rather than 6 p.m. (Osur has seen other changes as a result of adopting Coord; drivers have stopped snagging space early and eating lunch in loading zones, a previously routine practice.) 

Coord has run similar pilots in Omaha, Nashville, and other cities. But it is just one entity involved in curb-management experiments. Cox Communications, through its Cox2M “internet of things” division, is testing curbside kiosks that can essentially monitor dwell times in loading zones and present a countdown clock warning drivers not to overstay their time on the curb; the technology can alert city enforcement when drivers linger. Las Vegas is running a pilot program with the technology, which can also be used to manage commercial deliveries, a Cox official told Government Technology. Columbus, Ohio, and Washington, DC, have run pilots with another app, curbFlow, designed to coordinate deliveries from multiple services along particularly busy curb stretches. 

Technology such as video kiosks and app-based location trackers adds both new options and new complexity to the business of managing curbs. Traditionally, defining curb use has involved signage and paint, which are hard to tweak quickly, notes Anne Goodchild, professor of civil and environmental engineering at the University of Washington, whose Urban Freight Lab has focused on public-private efforts to address evolving delivery logistics and planning. 

Perhaps because of the pandemic, cities have been more willing to try new options. Before the pandemic, a curb change would have entailed lengthy public processes. The crisis showed that a more nimble alternative was possible. “We did some things differently,” Goodchild says. “For example, we changed curb allocations literally overnight.” 

The pandemic pushed a fast-forward button on both new patterns of street usage and policy responses to those patterns, says Heather Hannon, associate director of planning practice and scenario planning at the Lincoln Institute. During the pandemic, the organization’s Big City Planning Directors Institute shifted from a twice-yearly gathering to a monthly one (held virtually, of course). The pandemic, she points out, “was a reason to try new things.” 

Hannon has observed a spike in interest in scenario planning for potential futures among U.S. communities since the pandemic began. She also points out that curb management isn’t merely an issue for downtowns or commercial districts, noting that it tilts into residential neighborhoods as well. The demand for home delivery has soared: food-delivery apps doubled their revenues in a six-month period during 2020 compared to the same period in 2019, and e-commerce in the United States grew 44 percent in 2020 compared to the previous year. These trends will only be complicated by the experiments with robots and drones that policy makers increasingly have to accommodate. 

Aspen, meanwhile, has expanded its pilot program, adding new loading zones to the experiment as the number of participating drivers keeps growing. While it is just one experiment in a small city, it overlaps with a singular moment in the way citizens and businesses use technology to interact with planned spaces, opening a window onto how planners and policy makers might think about the future of the curb. “This is totally scalable,” Osur says, referring not to any specific app or technology but to the general idea of cities using new tools to more actively manage the curb. “This is the future.” 

Rob Walker is a journalist covering design, technology, and other subjects. He is the author of The Art of Noticing. His newsletter is at robwalker.substack.com. 

Image: Curb management has become a rising priority in cities including Las Vegas, where Cox Communications is piloting curbside kiosks that monitor dwell times in loading zones. Credit: Courtesy of Cox Communications.

This essay is adapted from the foreword to the forthcoming Lincoln Institute book Infrastructure Economics and Policy: International Perspectives.  

The Lincoln Institute is preparing to launch a book about infrastructure, which you’ll find excerpted in the October print issue of Land Lines. It is one of the very few books about infrastructure published in the last decade. It could not come at a better time. 

Today, we are on the cusp of historic investments in global infrastructure. The World Bank estimates that we will need more than US$90 trillion in new infrastructure by 2030 to prepare cities for 2 billion new inhabitants, primarily in sprawling metropolises in low-income countries. This total investment exceeds the current annual gross domestic product of all the countries on the planet by around 20 percent. In order to formulate new sustainability strategies and policies for cities in regions where populations are growing rapidly—and in regions where city structures continue to evolve to adjust to innovations in technology and commerce—we need to understand the relationship between urbanization and infrastructure. 

The world also faces new challenges associated with the climate crisis, the sharing economy, and the fallout from COVID-19. If we want to protect ourselves from the impacts of the climate crisis, the World Bank suggests we add another US$1 trillion per year to the global investment noted above. If we are to live in a “new normal” shaped by global pandemics, infrastructure design and usage must be modified. 

For most people in developed countries, infrastructure is largely invisible, noticed only due to its absence or failure. We are chagrined when the power goes out or the Internet goes down. More distressingly, infrastructure failures can be catastrophic, such as when the Ponte Morandi collapsed into the Polcevera River in Genoa, Italy, in 2018; or when leaking, centuries-old gas pipes destroyed two apartment buildings in East Harlem, New York, in 2014; or when the levees failed and floodwater inundated New Orleans after Hurricane Katrina in 2005. 

These awful events made headlines because infrastructure is supposed to be safe and reliable—and for a large portion of the world’s population, it usually is. But most people in developing countries live with inadequate roads, unreliable power supplies, and a lack of safe drinking water and basic sanitation. They have a diminished quality of life and reduced life expectancies as a result, and the growth of their local and national economies is constrained.  

When it works, infrastructure represents humanity at its best. Designing, developing, and financing infrastructure requires formidable technical expertise. But to get the job done, we also need to exercise our best social and political skills and work together to provide durable public goods that solve seemingly intractable social, economic, and environmental challenges. Colossal dams spanning treacherous canyons are a great example: they demand exceptional engineering acumen and provide decades of flood prevention, crop irrigation, drinking water, and electricity. Planning and financing infrastructure requires us to dispose of short-term thinking and make investments with benefits that will span generations. 

Infrastructure also represents humanity at its worst. We are at our worst when we allow opaque decisions about infrastructure to disadvantage or harm those without the economic or political power to influence those decisions—when new thoroughfares are forced through thriving communities of color to reduce drive times for suburban commuters, for example, or when public officials and beltway bandits strike sweetheart deals behind closed doors. Process is as important as, and sometimes more important than, outcomes. Infrastructure planning must include all stakeholders and account for their needs, aspirations, and rights.  

The stakes are high with infrastructure. We commit dizzying sums of money for decades to build and manage projects and systems of unimaginable scale and ambition. The very complexity of all aspects of infrastructure demands paramount integrity: conforming assiduously to engineering specifications, adhering to the rule of law, exercising fiscal discipline, and maintaining absolute transparency and accountability. Decisions to build infrastructure using public funds must be grounded in rigorous cost-benefit analysis. Although such methodologies are well developed in theory, in practice they can be abused with political pressure, intentional bias, or selective myopia. 

Moreover, public decision processes cannot always be trusted to produce optimal resource allocations. If we can understand the complexity of infrastructure within real-world constraints, we will make better spending decisions. Despite the obvious need for infrastructure, developing countries struggle to pay for long-term investments. While these constraints are real, there are many ways to finance infrastructure, even in the most impoverished places. These methods include land value capture mechanisms, which have been used for millennia and which involve recovering the increased value of land associated with infrastructure improvements. For example, betterment levies were used by the Roman Empire to build roads, bridges, tunnels, and viaducts connecting a vast area from Portugal to Constantinople. Land readjustment, in which parcels of land are pooled and improved with new infrastructure that is paid for through the sale of a small share of the land, has been used hundreds of times on multiple continents to build capital cities like Washington, DC, or rebuild towns and cities in countries ravaged by war. 

How effectively infrastructure meets economic and social goals depends critically on the way it is managed and regulated. Both the public and private sectors are active in infrastructure development and service provision. The infrastructure industry has gone through a cycle of domination by the private sector followed by public takeover and public provision, then to privatization, and to the increasingly popular public-private partnerships. Who gets served by infrastructure, and how they are served, is determined by regulatory structures that protect the public interest and require absolute transparency and accountability of vendors and public officials. 

We can learn a lot from international experiences related to the management and regulation of infrastructure. Some countries and regions develop and implement infrastructure plans and strategies to achieve specific social and economic objectives. The European Union used infrastructure grants and loans to help integrate new members both politically and economically through two rounds of expansion. Chinese policy makers advanced high-speed rail development strategies that supported the formation of several major city clusters (or megalopolises) to drive the growth of the national economy. In contrast, Japan’s rail policy relied mainly on the private sector to provide vital social services. The lessons from such experiences are important for countries that aspire to not only formulate effective infrastructure plans but also use infrastructure planning to achieve other important goals. 

It is hard to exaggerate the importance of infrastructure for sustaining human habitation on this planet. Without it, to quote Thomas Hobbes, “there is no place for Industry; because the fruit thereof is uncertain; and consequently no Culture of the Earth; no Navigation, nor use of the commodities that may be imported by Sea; no commodious Building; no Instruments of moving, and removing such things as require much force . . . And the life of man, solitary, poore, nasty, brutish, and short.” 

At the Lincoln Institute, we have spent more than seven decades addressing social, economic, and environmental challenges using innovative land policies. Among those we have studied and recommended to address global challenges, none is more important than infrastructure. Without the lifeline goods and services delivered by effective and efficient infrastructure, human life would be nastier, more brutish, and shorter. If we can learn from the authors of this book, life will be better and longer for a multitude of people around the world. 

George W. McCarthy is president and CEO of the Lincoln Institute of Land Policy. 

Image: Interstates 10 and 101 in Los Angeles. Credit: Art Wager via Getty Images. 

In the forthcoming book Infrastructure Economics and Policy: International Perspectives (Cambridge, MA: Lincoln Institute of Land Policy 2021), edited by José Gómez-Ibáñez and Zhi Liu, some 20 international authors offer perspectives that can help us evaluate the infrastructure investment proposals currently being considered in Washington.

Here are the top five takeaways to consider in any infrastructure investment package, based on extensive research into the ingredients for success:

Think Long-Term Growth, Not Quick Stimulus

Infrastructure investment typically increases a country’s GDP, but contrary to the conventional wisdom, it’s not an effective way to provide a quick economic stimulus to cut short a recession. The pipeline of so-called “shovel ready” projects is usually relatively short, and it takes many years to secure the permissions and funding necessary to begin construction on a new project, by which time the recession is typically over. Moreover, the image of infrastructure providing opportunities for unskilled labor is also misleading. Modern construction projects often involve sophisticated equipment and require extensive training; they do not offer pathways to quick employment for large numbers of unemployed service-sector workers.

Shovel-Worthy Matters, Not Shovel-Ready

The returns on investment depend importantly on the quality of specific projects being funded. Economists have developed and refined methods for estimating the value individuals place on the various benefits and costs of a project. The resulting difference between the benefits and costs, or the net benefit, can be interpreted as the measure of how much society will gain or lose from implementing the project. Most federal infrastructure agencies are required to prepare benefit-cost analyses of the major projects or policies they are considering and of the relevant alternatives to those projects. However, the U.S. Congress seldom, if ever, requires the agencies to adopt the alternative with the highest net benefits because of political considerations, including the concern that benefit-cost analysis might not adequately reflect goals of fairness and equity. While cost-benefit analyses are not perfect, they are one of the best tools available for evaluating infrastructure proposals. Agencies should beware of departing significantly from the alternative with the highest net benefit without good reason.

Beware of Over-Confidence and Over-Optimism

One of the drawbacks of cost-benefit analyses is that they typically assume that the forecasts of the project’s usage, costs, and other dimensions of performance are accurate, when in fact they are biased. A landmark analysis of some 2,000 infrastructure projects found that actual costs were significantly higher than forecast, while usage was significantly lower, as Bent Flyvbjerg and Dirk W. Bester explore in a chapter of the forthcoming book. This pattern might arise if the agency executing the projects bore little liability for cost overruns and demand shortfalls. Such arrangements are rare, however; instead, the authors blame several well-known behavioral limitations, particularly overconfidence bias and optimism bias. Fighting against these biases is difficult because they are so deeply ingrained in human nature. Still, some measures suggested by the authors are worth considering, such as holding the forecasters legally accountable or using independent audits.

Take Equity Seriously

The benefits and costs of infrastructure projects are often distributed inequitably. On the one hand, major infrastructure facilities such as highways and power plants are often built in locations where the negative impacts are felt disproportionately by low-income residents and people of color. On the other hand, the lack of access to basic infrastructure, particularly in the developing world, impairs quality of life and contributes to inequality. Studies from the developing world show that access to an all-weather road or to the regional electricity grid can stimulate economic activity, narrow the gap between rural and urban incomes, and reduce the economic disparities between villages. In the United States, the Rural Electrification Administration, created during the Great Depression and now part of the U.S. Department of Agriculture’s Rural Utilities Service, is an example of a successful investment that raised living standards for many. The counterpart today is broadband internet, once considered something of a luxury but increasingly necessary to support electronic banking, remote learning, telemedicine, and other valued services in urban and rural areas alike.

Consider Governance Challenges

A final takeaway is to consider how a major investment program might require changes in how the infrastructure system is governed, including the roles of the public and private sectors but especially those of the national and state or local governments. State and local governments have historically been deeply involved in regulating both private and government-owned infrastructure for several reasons: The initial motivation was to protect against monopoly in sectors such as electricity. In addition, infrastructure’s importance to everyday life makes access an important concern for local government. Finally, the adverse impacts of facilities on their surroundings make siting controversial, leading state and local governments to intervene in order to manage competing interests. However, the advent of a major new infrastructure program—particularly one focused on decarbonizing the energy system to reduce climate change—will increase the national government’s role. First, national government is almost uniquely positioned to invest in future technologies for which there is not yet a sufficient market to fuel innovation, and to drive responses to large-scale problems that require collective action. In addition, decarbonization will likely require major new investment in renewable generation and longer transmission lines crossing more state borders, shifting disputes about siting new facilities to the national level. Further, national government will face pressure to mitigate the economic impact of its climate change policies—for example, compensating owners of fossil fuel plants and other assets that lose their value. These governance challenges may prove even more difficult than the financial challenges that current debates focus on.

In sum, the success of any infrastructure plan ultimately depends on the type and quality of the projects selected. The quality of the projects selected will depend on the quality of the supporting benefit-cost analyses, and on the ability of leaders to think strategically for the long run, commit to equitable outcomes, and sensibly balance national and local oversight.

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