Appreciating the cost of repairing and replacing infrastructure assets is vital for owners needing to understand their long-term cost implications. Asset management has become standard for so many project owners and municipalities across Canada as they determine how best to spend their annual infrastructure budgets.
However, one cost has yet to be properly factored into the asset management cost assessment, climate change. According to the report: “Both the knowledge of the magnitude of costs and the methodology of how to calculate costs are critical building blocks in Canada’s adaptation to a changing climate.”
Seeing this need, the Financial Accountability Office of Ontario developed a system for understanding the cost that these new and developing climate impacts have on public infrastructure assets, and tasked WSP with estimating the engineering relationships required. The goal was to quantify, using the best available data, the additional cost that climate change will incur for these assets so that owners can budget accordingly. The FAO’s background report is the introduction to the Costing Climate Change Impacts on Public Infrastructure (CIPI) project, and WSP’s report outlines the engineering relationships.
The project has filled an important knowledge gap. While it is well established in Canada that physical infrastructure is one of the sectors with the greatest risk from the impacts of climate change and has the most to gain from adaptation, decision makers lack an understanding of the potential magnitude of that impact, and its disaggregation at the provincial/territorial scale or within asset classes. Both the knowledge of the magnitude of costs and the methodology of how to calculate costs are critical building blocks in Canada’s adaptation to a changing climate.
The Methodology for the Analysis
The FAO developed its Provincial Asset Inventory Deterioration (PAID) model (from the Ontario Ministry of Infrastructure) to assess how public infrastructure in Ontario may deteriorate over time. The PAID model considers rehabilitation, operations, and maintenance (O&M), renewal, and retrofit operations. The model is designed to reflect province-wide asset management practices to provide estimates and projections of the condition of assets and infrastructure backlog. Prior to the CIPI project, the PAID model had not been developed to account for the effects of climate change.
We initially selected three climate hazards for the analysis: extreme rainfall, heat waves, and freeze-thaw cycles.
To assess impacts, WSP defined a set of relationships between climate indicators and infrastructure costs, termed “climate-cost elasticities”, based on climate projections for the province, consultation with subject-matter experts and best practices. These climate-cost elasticities are sensitive to climate data and can be directly integrated into the PAID model to estimate the influence of climate change on four distinct types of costs.
The series of climate-cost elasticity coefficients measure the relative response of cost-related parameters of an asset component to a change in the climate indicator. These climate-cost elasticities can be interpreted as a direct relationship between the evolution of a climate indicator under climate change and the projected changes (increase or decrease) in service life and costs for a given asset or component. In this framework, the relative variation in a cost parameter is derived from a bottom-up approach (starting with the impacts on the asset components) on how a climate hazard interacts with a given asset. In other words, the variation in a cost parameter at the asset level is the cumulative variation in cost of its components.
The four types of costs were considered as follows:
Useful Service Life (USL)
What would be the variation of useful service life under the influence of the evolution of each climate hazard for each asset and component?
Operate and Maintain Costs
What would it cost annually, as a share of the current replacement value (CRV), to operate and maintain the expected deterioration rate under future climate conditions?
Costs of Retrofit
What would it cost to retrofit an existent asset, i.e., to make it resilient to climate change? These costs are likely to address damages to certain components of a system (e.g., repairs of sections of pipe) due to climate impacts.
Additional Renewal Costs
What are the additional costs of designing a brand-new climate resilient asset that has the same expected functionality as before? Complete renewal can be required due to lack of capacity of the system or condition of the system. It is likely that renewal will be more costly than retrofit.
Using the climate hazards and the cost parameters, and the most up-to-date climate data available, we were able to provide cost projections for buildings, roads, transit, bridges, culverts, storm water and wastewater infrastructure.
As an example, roads, which we know are vulnerable to the impact of three selected climate hazards, WSP estimates that they will most likely have a 43% reduction in their USL, increase in their O&M costs (5% to 9% of asset value); and their retrofit and renewal costs would increase by 52% and 107%, respectively. These increases in cost and reduction in useful life reflect the need to spend more money on the maintenance, such as asphalt roads needing more crack sealing to prevent water infiltration or on the addition of cement additives to concrete during renewal.
Understanding the Limitations
It is important to appreciate that, although this work is very innovative, it should be considered as a first step to refine the analysis at the asset level.
Limitations are the following:
Data Availability and Granularity
The CIPI project operates at the portfolio level and makes use of the best available data at the time of the project. While the results are reasonable at the portfolio level, the current methodology would need to be refined to be used at the asset level.
“The CIPI project assumes that climate-cost elasticities will remain constant over time, which suggests a linear relationship between climate and costs of climate change.” However, there are a multitude of factors, not related to climate, that can influence the deterioration of a given asset. These variables, such as changes in asset function or adjustments to asset demand, could cause an asset to experience increasing climate impacts over a length of time. How an asset’s usage could change over its life cycle, and the increased or decreased climate impact that would result, was not considered in the analysis.
Cumulative Climate Costs
“The CIPI project considers the costs of three climate hazards individually then sums these to arrive at a total cumulative impact. However, the true cumulative impact of the three hazards and other climate events not considered in the analysis may be larger than a straight summing of the impacts. For example, an event may weaken components of the asset which may make it more vulnerable to other climate hazards.”
Energy Efficiency Retrofits
The CIPI project only considers climate change adaptation, not climate change mitigation. However, there may be opportunities for the asset managers to integrate adaptation with mitigation efforts, such as energy efficiency retrofits to improve building performance, or the choice of materials that are less intensive in carbon dioxide emissions.