building infrastructure for green growth

To “build back better”, governments must oversee the creation of new infrastructure to decarbonize their economies. In a recent webinar, senior officials from the OECD, Estonia and the Czech Republic discussed how best to fund and manage these changes – and the extent to which COVID-19 has displaced them. Goals. Catherine First reports

Changes to infrastructure and the built environment are an important part of governments ‘efforts to turn their economies to’ net zero ‘by 2050. But contrary to what you might expect,’ building nothing is the way to go. perfect scenario, ”said Dr Kim Yates, Head of Sustainability and Climate Change UK and Europe at Mott MacDonald, design and engineering consultancy.

As overall UK carbon emissions decline, those released from the production of building materials such as steel, concrete and asphalt continue to rise, Yates said. One of the problems is the lack of a policy on how to achieve net zero, she noted. And, although it is catching up quickly, engineers must go beyond compliance to build green infrastructure, Yates explained.

Indeed, sustainability needs to be considered long before construction: Yates argued that big gains in terms of carbon reduction and environmental issues are realized when these factors are taken into account early in projects. “It’s watching what you build. Can you renew an existing asset? Do you really need it? It is a question of integrating this reflection ”, she declared.

Examining what you need to build – and what if – was just one topic covered in a recent webinar on green infrastructure hosted by the Global Government Forum and supported by specialist partner Mott MacDonald. Senior representatives from the Organization for Economic Co-operation and Development (OECD) and the governments of Estonia and the Czech Republic discussed policy approaches, how to shape financial systems and how to mobilize private sector investment for them. finance, and whether the COVID-19 pandemic has altered the challenges faced by policymakers and project managers.

Reduce, modernize and renovate

Rather than building new infrastructure, the Czech Republic is renovating infrastructure as part of its decarbonization strategy, according to Anna Pasková, director of environmental policy and sustainable development at the country’s environment ministry. Since 2009, a retrofit program has made 36,000 buildings more energy efficient by providing insulation subsidies to households, she said. The next phase of the program will also provide funding for solar thermal heating systems, green roofs and water-saving technologies.

In Estonia, the government’s strategy has been to step back from energy production and focus on smarter use, according to Ivo Jaanisoo, head of the construction and housing department at the Ministry of Economic Affairs and of Communications. “We really want to harness the cheapest energy potential, which is the energy saved,” he said.

The renovation of buildings is a key part of this approach. About half of Estonia’s total energy consumption comes from buildings, compared to a European average of 40%, Jaanisoo said. The country’s long-term renovation strategy plans to increase annual renovations of government, residential and commercial buildings from the current level of around 500,000 per year to nearly 2,500,000 by 2035, he said. ..

Along with cost, energy and carbon savings, making buildings more energy efficient can improve indoor air quality, the heritage of older buildings and the flexibility of spaces to adapt to different uses. the future, Jaanisoo said.

Estonia is also experimenting with how real-time data can guide energy efficiency. Real-time energy consumption data could boost a vibrant market for energy efficiency products and services, Jaanisoo noted. “Real-time consumption data opens the door to real-time carbon footprint measurements so that every building owner can see the potential savings when considering upgrading their building,” he said. .

Financing of green infrastructure

But even if efficiency is built into projects, governments still have to fund them from balance sheets torn by the pandemic. For this, many use a combination of public and private sector funding.

The Czech Republic finances the modernization of its green infrastructure through various European funds, including the EU Structural Funds and the Modernization Fund, which supports low-income member states in decarbonization, Pasková said. The funding will support programs such as energy savings, renewable energies, new heating plants, clean mobility and water infrastructure.

The country will also use money from the Just Transition Fund from the EU’s economic stimulus package to support its decarbonization work in former mining areas, which will also reduce inequalities, she said. The European Commission has also stipulated that member states’ investments must pass a “do no harm” test on the climate and the environment. This could be a game-changer in the mindset of countries about how they invest funds, she added.

But governments also need to create the right environment for institutional investors to support green infrastructure finance, said Dirk Röttgers, policy analyst in Green Finance and Investment at the OECD. Pension funds and insurance companies typically devote a very small portion of their portfolios to infrastructure, he noted.

The top four types of institutional investors held US $ 1.04 trillion in infrastructure such as transport, energy, waste, water and construction, according to a study by the OECD. But that is overshadowed by the $ 64 trillion held in corporate stocks and bonds, and only $ 314 billion of the total could be considered green infrastructure.

Recent research by Röttgers shows how policymakers could encourage investors to make their portfolios greener. Governments can intervene to regulate financial markets, or become actors to leverage investments from institutional funds, he suggested, citing as an example the need to ensure that project pipelines that fulfill policy objectives are available for the funds to invest in.

Governments should also be careful not to unintentionally block investments by banning certain financial instruments, such as YieldCos: investment vehicles set up by a parent company to hold operating assets. “It’s a very good instrument that matches the appetite of institutional investors, but they are not allowed in all countries. And there are similar instruments that focus only on fossil fuels, ”he said.

“Make sure that anyone on the private side who wants to invest in these projects can do so, whether they are a very large investor with huge amounts of funding, or a very small one like your private saver. Governments must give private finance a chance to meet their needs, ”Röttgers advised.

Rebuild better?

But it’s not just institutional investors who need to be encouraged to invest in green infrastructure. A recent OECD analysis revealed that governments spend roughly the same amount of salvage money on investments that are positive for the environment as they do on those with negative impacts, according to Röttgers.

“For governments focusing on these investments, it can be helpful to be transparent about what they are actually invested in, to set targets for how much to invest in green measures and to be very clear on what in what not to invest, ”he said. . So far, only the European Commission had established such guidelines, he added.

Other panelists were more optimistic: Yates said she had never seen so much activity on the issue of low carbon in the infrastructure sector. “We saw an upsurge in investigations and work, certainly when Biden arrived. I can’t see him on the agenda because I don’t think the citizens will allow it,” she said. .

But public needs could change dramatically once COVID-19 lockdowns are over, with a hybrid working future predicted by many. Röttgers pointed out that public transport systems may need to be redesigned, as people are already moving further to the suburbs as they don’t have to travel to the office five days a week. Networks could be less dense in now heavily populated areas, but expand further, he suggested.

“There may be a paradigm shift based on what we need for the climate and other environmental reasons anyway. It’s an interesting time, ”he said.

Others were more careful. The effect on office use in the Czech Republic should not be overestimated, Pasková noted, since only 30-50% of office workers had worked from home during the lockdown. In addition, emission reductions resulting from reduced commute to work could be replaced by an increase in those resulting from door-to-door deliveries, she said. Here, as throughout the sustainability agenda, many of the keys to success lie in a better understanding of the evidence for the relationship between economic change and environmental impacts. “We will have to verify the data,” she concluded.