For the end-of-year Infrastructure Policy Watch, the ICE rounds up the topics that shaped global infrastructure decision making this year.
Many factors influenced infrastructure decision making this year.
Russia’s invasion of Ukraine had far-reaching impacts. Rising energy prices drove up inflation and put infrastructure pipelines at risk.
In response, governments targeted better productivity and strengthened strategic frameworks.
Stark warnings emphasised the scale of the climate challenge. It became clear that delivering infrastructure efficiently will be key for achieving net zero and resilience goals.
This is a round-up of this year’s key themes for global infrastructure policy.
1. Inflation begins to impact infrastructure pipelines
Around the world, the cost of construction rose much more sharply over 2022 than many projects planned for.
Inflation and competing demands on public finances are making it harder for many countries to implement their infrastructure pipelines.
The UK government will freeze capital budgets in cash terms from 2025/6, rather than increasing them in line with inflation.
With projects having to do more with less, planners are looking at how to improve productivity to deliver planned infrastructure.
New Zealand, has one of the highest construction price inflation rates in the OECD. Its infrastructure commission, Te Waihanga, found that New Zealand ‘gets less value from its infrastructure spending than most other high-income countries’.
The causes include its geography and low average population density. However, there are also systemic factors including quality of institutions, planning frameworks and management of cost and delivery pressures.
Another report also suggested more involvement by subnational governments in delivering public capital investment could boost efficiency.
Inflation and the energy crisis
Inflation is also having an impact outside of construction.
Singapore’s Public Transport Council raised fares by 2.9% to ensure the sustainability of its public transport system. It said cost drivers for public transport had risen significantly, primarily due to increased energy prices.
The rising cost of energy is one of the key drivers of inflation. Energy security and shielding households from rising prices were high on government agendas.
2. Infrastructure investment is still seen as key to growth and sustainable development
Despite the pressures of inflation, governments continued to recognise the value of infrastructure investment as a driver of economic growth and sustainable development.
India announced a 35% increase in capital expenditure across transport, energy, affordable housing and communications.
New Zealand also stepped up investment as it seeks to close its infrastructure gap. Key areas will be transport, digital and climate change.
While the UK is set to enter a recession next year, its government signalled it will not repeat the mistakes of the 2008 economic downturn.
Instead, infrastructure investment looks set to be maintained in the short term in line with the National Infrastructure Strategy. Major projects critical to achieving that vision, including Sizewell C, Project Gigabit and the Integrated Rail Plan, will go ahead.
The UK and South Africa also unveiled a new Infrastructure Partnership to ‘turbocharge’ investment and deliver economic benefits in both countries.
3. Strong strategic frameworks are more important than ever
Delivering nationally important infrastructure projects in a time of rising inflation means having the right strategic framework is vital.
A focus on outcomes, enabling good decision-making and having the right institutions are essential if infrastructure is to meet public needs and deliver value for money.
New Zealand published its first national infrastructure strategy setting out the challenges and opportunities facing the country over the next thirty years.
South Africa approved the first phase of its National Infrastructure Plan 2050. The plan aims to link the vision in the country’s National Development Plan to infrastructure investments and outcomes.
Governments also acted to strengthen the bodies tasked with strategic infrastructure planning.
Australia’s new government launched a review of Infrastructure Australia’s remit to ensure it is best placed to provide quality advice on nationally significant infrastructure.
Meanwhile Canada is planning its first infrastructure assessment. The Institute of Fiscal Studies and Democracy produced the methodology which will put agility and data at the core of decision-making.
4. Stark warnings emphasise lack of progress on climate change…
There is currently no credible pathway to limit global warming to 1.5°C according to reports published in 2022 by the Intergovernmental Panel on Climate Change (IPCC) and the UN Environment Programme.
The World Meteorological Organization (WMO) suggested there’s already a 48% chance that annual average global temperatures will temporarily reach 1.5°C above pre-industrial levels in at least one of the next five years.
The impact of climate change is unavoidable and damage to infrastructure systems is growing globally.
An OECD report highlighted the scale of the investment gap in climate mitigation and resilience efforts.
In 2020 developed countries provided and mobilised US$83.3 billion – far below the goal of US$100 billion a year by 2020. Trends suggest it could finally be met by 2023.
Given the link between climate action and the Sustainable Development Goals (SDGs) it is also concerning that many countries are advancing slowly on achieving the SDGs by 2030.
5. But some countries step up their climate action
Avoiding the highest temperature rise scenarios is still possible. However, global failings in ambition, policy-detail, implementation and financing need to be addressed urgently.
There were some signs of progress in 2022.
Australia’s new government acted quickly to set more ambitious climate goals. It passed legislation to cut carbon dioxide emissions by 43% by 2030 and pursue a goal of reaching net zero emissions by 2050.
With energy security and decarbonisation high on agendas, many countries reviewed their energy policies. Singapore's Energy 2050 Committee outlined several scenarios for its net zero energy transition by 2050.
New Zealand’s Infrastructure Commission argued the country has more than enough natural renewable energy resources to power its net zero goal.
Resilience and green finance high on government agendas
New Zealand published its International Climate Finance Strategy and its first national adaptation plan. The latter focuses on enabling better decision-making and preparing the country’s infrastructure for climate change.
The UK has been a world leader in setting ambitious, legally binding climate targets.
Another report from the UK Parliament warned the government about the risk to the country’s critical national infrastructure from climate change.
Given the need for concrete action, the UN also highlighted the risks from ‘greenwashing’.
It set up a UN Expert Group on Net-Zero Emissions Commitments of Non-State Entities to increase scrutiny of climate pledges by non-state actors.
In case you missed it:
- The ICE welcomes responses to a consultation on improving the UK’s infrastructure climate resilience.
- We reflect on our recent ‘Financing Net Zero’ Next Steps Programme online panel debate.
Check back in the new year for the next edition of the ICE's Infrastructure Policy Watch.
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