Written by Gianleo Frisari, Anaitee Mills, Mariana Silva, Marcel Ham, Elisa Donadi, Christine Shepherd, and Irene Pohl
This “Toolkit for Climate Resilient Infrastructure PPP” and the accompanying report “Improving Climate Resilience in Public Private Partnerships in Jamaica” are the result of an 18-month project of the Climate Change Division at the IDB in collaboration with the Public-Private Partnership team at Development Bank of Jamaica and IMG Rebel.
The aim has always been to provide DBJ’s PPP professionals and, ultimately PPP professionals in the Caribbean Region, with pragmatic, practical solutions to integrate the assessment of climate risks and resiliency opportunities in the preparation of infrastructure projects through Public Private Partnerships (PPPs).
The need to consider climate change issues in the provision of infrastructure services through PPPs originates from two key observations in the context of Jamaica, but easily extendable to other climate vulnerable countries in Latin America and the Caribbean: On one side, these countries face many risks associated with climate change, with their infrastructure stock vulnerable to hazard events like hurricanes and landslides, as well as to chronic slow changes as sea level rise and perturbations in temperature and precipitations patterns. At the same time, Jamaica and many countries as such have been seeking to develop and build its infrastructure with an increased role for the private sector, developing Public Private Partnerships models that are constantly evolving in the region. As very long-dated contractual relationships, the success of PPPs is highly dependent on an accurate, sustainable and efficient distribution of risks and benefits between the public and private counterparts of the transaction – risk distribution that could be significantly perturbated by climate change, making the task of structuring efficient 20-30 years PPP contracts incredibly difficult if those risks are not identified, assessed and managed throughout the whole process of structuring a PPP transaction.
This project was borne then of an effort supported by IDB and the Government of Jamaica to understand how, if at all, Jamaica currently considers climate change within its PPP policies and project development processes and what steps the country can take to ensure that it does so. Considering the high potential for replication for such instruments, and the common challenges that several climate vulnerable countries face when developing their infrastructure projects, this companion Toolkit has been developed, including decision support tools for policy makers and developers partaking in the PPP development process and which applies to Jamaica as well as any country government seeking to ensure their PPPs are more resilient, was developed in conjunction with this effort. Report and Toolkit as well have been developed following the typical structure of the PPP process, from Project Identification, to the Business Case, the Transaction Structuring and the Management of the Contract during the whole life of the PPP project. In each phase, climate change risks may arise, as well as opportunities for an improved design for resilient and/or more productive infrastructure, and it would be important for such cases that risks and opportunities alike would be considered and followed-through in the different phases of the transaction to ensure, for example, that critical aspects identified in the project preparation phase are then included in the preparation of the tender documents and, as well, inform the performance indicators in the contract management phase.
The analysis for the report and toolkit has identified several instruments and tools already used to address climate change issues in the context of infrastructure production – albeit not always in a systematic way – that could be integrated in the PPP process in a more institutionalized and standardized manner, identifying options for a low-cost and seamless implementation in a Resilient PPP model. The Toolkit, finally, is to be considered a living document; we hope it could provide initial guidance to professionals implementing PPP projects in the region, while being open to improvements and updating as we collect evidence on other instruments that can be used to manage climate change risks and/ or create resiliency opportunities for the infrastructure of the Latin America and the Caribbean.