The Carbon Capture Business

September 2021

If you want to become the next Elon Musk, success in one infrastructure business will guarantee your untold riches: Carbon Capture. The only catch? Still being alive when it’s time to cash in.

At the rate efforts to stem carbon emissions are going, and observing how changed climate just from GHG emissions to date is affecting hundreds of millions across the globe, many parts of planet earth will become more and more unpleasant to live in. The latest IPCC report sounded its loudest alarm bells to date, and yet there are few political signs that getting gas-guzzling cars and trucks off the road, or shutting any significant fraction of the world’s coal-fired generating plants, is going to happen anytime soon. In the best of political will and consensus cases, we’ll still have way too much carbon in the air for the planet’s climate to be as we would want it – soon, and for centuries.

Enter Carbon Capture.

The idea of sucking some of that excess carbon out of the air — negative emissions — in order to reduce global warming has been around for a couple of decades now. Working prototypes first started appearing around 2015, and the biggest carbon capture plant to date was turned on just this week, in Iceland. It can actually work. At a very small scale, and a very high cost – for now. In today’s post, we’ll have a look at where this business is, and where it might be going.

Carbon capture comes in two basic flavors: point-specific, and general. Publicity and early investment have been more focused on the former, notably carbon capture facilities being tied to coal-fired generation – often referred to as CCS, or Carbon Capture and Storage plants. There are currently some 20 CCS plants in operation worldwide, with a combined capacity of about 40MT of CO2 per annum. The first large-scale facility was installed in 2014 at the Boundary Dam coal plant in Saskatchewan. The track record of these early efforts has been… mixed. While technical performance has generally been in line with expectations (an efficient CCS facility should be able to remove some 90% of an associated plant’s CO2 emissions), the overall economics have been marginal. A highly publicized effort to incorporate CCS onto coal-fired generation by Duke Energy was abandoned, and the PetraNova plant in Texas, the largest in the world when launched in 2017, was shut down earlier this year for losing money.

The International Energy Association (IEA), among others, remains bullish on CCS. While public attention has been primarily on CCS in conjunction with power generation plants, CCS can be applied to many kinds of industrial processes with GHG emissions. Facilities tied to plants which produce more concentrated CO2 streams – such as ethanol or natural gas – require less energy to separate out carbon for subsequent storage, and thus have significantly lower costs than those tied to power generation. The IEA notes that after a time of declining investment pipelines, plans for more than 30 new integrated CCS facilities have been announced in the last three years, with a combined CO2 capture capacity of around 90 Mt per year. That, however, is still less than 0.1% of estimated global CO2 emissions. The IEA stated earlier in 2021 that carbon-neutrality by 2050 would require the capacity to remove 1 billion tons of CO2 from the atmosphere every year. A recently issued report by the National Academies of Science puts that number 10 times higher, at 10 Gigatons per annum.

This week public attention has been on the other “flavor” of carbon capture, non-point-specific carbon capture, often referred to as Direct Air Capture (DAC). Instead of being located alongside a specific source of emissions, DAC facilities can be sited anywhere – often near potential carbon storage sites, and extract carbon from the atmosphere itself. According to Bloomberg New Energy Finance, the current global capacity of DAC is 6,415 tons of annual CO2 capture, to which the September 8^th launch of the Orca Climeworks plant in Iceland will add another 4,000 tons: a big jump, yet still a tiny fraction of the capacity of point-specific CCS technologies, which themselves are a tiny fraction of the excess CO2 in the atmosphere.

There are plans for DAC capacity to get bigger, much bigger, and we’d say the force is with DAC. There are three main players as of now – Climeworks, Carbon Engineering, and Global Thermostat. Bloomberg NEF says their capacity will “increase 150-Fold by 2024.” That would be the year in which Carbon Engineering plans to open a 1 million TPA facility. While this would still lag the impact and capacity of point-specific CCS technologies, we think that DAC has a couple of decisive advantages over CCS in the medium to longer term. The first advantage is location: a DAC plant (which essentially looks like a shipping container) can be placed anywhere, and extract CO2 that entered the atmosphere from any number of sources. At the far larger scales on the road to removing 1 billion tons per year, or 10 times that, from the atmosphere, not being tied to power generation or other industrial processes will become a big advantage. The second big advantage will be political attractiveness. In the next 1-2 decades, as political pressure to take action grows in tandem with global warming and its impacts on populations everywhere, and extracting carbon from the atmosphere gets seen more and more as one essential part of the solution, DAC will be a far more attractive place to channel global investment and subsidies. It is not that DAC doesn’t have a moral hazard problem – it’s just that DAC’s moral hazard is and looks far, far smaller than that of point-specific Carbon Capture. Some degree of public subsidy and support has flowed to CCS – the IEA says $2.8 billion in public grants have accompanied the $15 billion in private investment in already commissioned CCS plants, and places like Wyoming and North Dakota are lobbying hard for more. But environmental opposition to such support is already fierce – as it “rewards” large polluters directly, and scaling up such public support is going to be extremely difficult politically, if not impossible. In contrast, DAC doesn’t reward any polluters, and its own scale won’t be significant early enough to really impact the political debates around taxing, decommissioning or prohibiting fossil fuel usage. Yet the political demand for removing carbon from the atmosphere, just to make the problem less bad in the coming decades and beyond, will become huge – and DAC is far more likely to be the beneficiary of tax monies channeled to attacking that problem.

Issues

Several obstacles stand between today’s small-scale DAC and an eventual large-scale flood of public support and investment. Leaving aside the combination of moral hazard and the creation of public subsidies, chief among the obstacles are (i) costs, (ii) energy intensity, and (iii) what to do about the carbon.

DAC costs and business model. DAC is for now the most expensive of carbon capture technologies. According to Christopher Gebald, co-founder of Climeworks, current costs run at $600-800 per ton of CO2 extracted from the atmosphere; CCS costs related to power generation might run at 10-15% of this, between $60-120 per ton, while CCS costs related to more “pure” forms of CO2 emissions such as ethanol production can be as low as $20/ton (still leaving costs related to carbon separation and storage). Revenues are far lower, with the largest source presently from selling to oil companies for enhanced oil recovery – but even that isn’t high enough to keep some CCS plants in operation, and it is hard to envisage the petroleum industry paying much more. Some CO2 is recycled to industrial producers which use it as feedstock. Global Thermostat sells its DAC-derived carbon dioxide to soft-drink producers, but it is also hard to envisage a large-scale business model around this. For now, the economics of decommissioning coal fired plants is more attractive. The business model of DAC, however, may become more positive. Economics of scale will be a big factor: the Orca plant in Iceland was made entirely by hand; as demand and volumes increase by orders of magnitude, it should become far cheaper to build DAC plants, as we’ve seen happen in other technologies such as battery storage. Gebald of Climeworks projects costs at around $200-300/ton by 2030, and $100-150/ton by 2040. Steve Oldham, CEO of Carbon Engineering, claims that his company is already capable of building plants with costs closer to $100/ton. On the revenue side, larger, commercial-scale plants will allow DAC players to sell offsets to firms looking to reduce their emissions. But public sector payments are still likely to be the big revenue source for DAC. The first steps in this direction in the US were taken this Spring, with the passage of the 45Q rule, which provides a tax credit of $50/ton for captured and sequestered CO2.

Energy Intensity. Direct Air Carbon Capture is highly energy intensive – mostly a function of the fact that CO2 is a small fraction of the air DAC absorbs, meaning that energy needs for separation of the carbon are high. How energy intensive? Research firm Carbon Brief claims DAC could account for as much as 25% of global energy consumption by the end of the century (direct CO2 capture machines could use a quarter of global energy in 2020). DAC technology, however, is still far up the learning curve. Liquid solvents for example require a far lower temperature to run separation processes, in which case waste heat – at near-zero marginal cost – could become a replacement energy source.

What to do with the carbon? Storing the extracted carbon presents challenges. The issue is less the existence of potential underground storage with appropriate geology (less prone to re-release of the carbon than, say, forests which might get consumed by fires), and more with the need to get the carbon from where it is extracted to where it is stored. This is especially an issue for CCS, whose location is determined by emission sources such as power or industrial plants. A big part of costs and land issues for CCS, if this should scale up substantially, will be pipeline networks to transport the extracted carbon. Such pipelines exist today (piping carbon to oil fields for enhanced recovery), and studies are underway in several places for this kind of infrastructure at a larger scale. This should be less of an issue for DAC, which can be sited closer to storage areas, requiring far less transport infrastructure and investment. DAC is also less land-intensive than solar or wind farms, and unlikely to compete with other priority land uses, like agriculture.

The impact that carbon capture technology will have on reducing carbon in the atmosphere, over the next two decades, is likely to be… minuscule. Which, paradoxically, may help make it an even bigger business than it would otherwise be… maybe by 2050. By 2050 (and certainly way before), the political pressure to remove large amounts of GHGs from the atmosphere will have become enormous – unlike the tepid interest which the idea now attracts. By then DAC technology should have sufficiently matured to be more economic to operate, and be able to grow faster with fewer subsidies. As heat waves, mega-fires and super-storms occur in more places and more frequently than we’d want to imagine at this point – along with whatever other climate problems may be in store as global temperatures rise – there could literally be no end to the appetite for building more and more carbon capture machines. In the second half of this century this could be, no joke, the largest infrastructure business in the world.

A business that won’t be mature or profitable for maybe 25 years sounds like it’s too early for a good investment. Or maybe not.

Index to Previous Climate Adaptation Posts

German Floods and Performance Bonds

August 2021

In mid-July, some 250 people were killed in Germany and Belgium as rain-swollen rivers flooded towns over a wide area. More than 10 inches of rain fell in 48 hours in some spots; Cologne received 6 inches in 24 hours. It was the deadliest natural disaster to hit Germany in over 50 years. Economic losses are estimated at over $3 billion, with the total likely to rise much higher. Germany was not alone in experiencing extreme rainfall in July. One Sunday, Londoners were hit with a month’s worth of rain within a few hours. In Central China, rain amount records were set, over a million people were affected, and the subway in Zhengzhou – a city of 5 million – flooded while passengers were trapped in trains. This a year after several million were displaced by flooding in the Yangtze River Basin. And in the Berkshires of Massachusetts, July 2021 became the rainiest year since records were first kept – in 1891.

In our previous column, Infrastructure Ideas wrote about rising water levels along coasts, and the infrastructure implications of plans to build seawalls to defend many cities. As last month has shown, once again, weather-related flood events are increasing far from the seas as well. Floods are both damaging existing infrastructure, creating repair and restoration needs, and triggering plans for new infrastructure investments to help cities adapt to rising flood risks.

Too much water in many places, and not enough in others. July’s extreme weather events were not limited to flooding: in the Western US, in Turkey, in Greece and in Sardinia, wildfires also set records and damaged widespread areas. Some of these wildfires are expected to burn on into the Fall. Much of the Western US also saw unprecedented heat waves in July, setting the stage for the fires – as did Moscow, among other places. Last year it was Australia. In an era of climate change, extreme weather events are becoming more common, and the IPCC — the Intergovernmental Panel on Climate Change – tells us that the frequency of these extreme events will increase as global temperatures rise. As a headline from the New York Times says “No One is Safe.”

From the standpoint of infrastructure, these floods, and the wildfires, share one important thing in common. They result from extreme weather events which are unpredictable.

General trends are clear: more floods in some places, and more heat and fires in others. Sea level rises are increasingly observable, and “predictable” in the short term. But the timing and scale of downpours is – generally speaking – not predictable, and neither are the location or breadth of wildfires. With Climate Change, we already observe that extreme events occur on shorter notice, with both more intensity and severity than before – and, as July has demonstrated, outside of any forecast range.

This lack of predictability, in an age of adaptation to climate change, has significant implications for infrastructure. The big implication is that related infrastructure investments — being made with a short (or no) planning period, and subject to a large range of uncertainties as to how soon they are needed, how frequently they’ll be used, and the magnitude of the problem they seek to solve — will tend to have some of the least desirable characteristics of infrastructure projects. Notably, these investments can expect to be characterized by (a) frequent design changes, (b) significant delay risks, and (c) large cost overruns. Frequent design changes will almost inevitably stem from the uncertainties involved, and from the politics surrounding how best to respond. Risks of delays and overruns go hand-in-hand with frequent design changes in all construction projects.

In normal times, public authorities asking for infrastructure projects, and lenders supporting the projects, always look to lay this kind of risk off to sponsors and construction companies. Completion guarantees from sponsors and performance bonds from construction companies are the primary instruments to shift these risks. A consequence of climate change, and the rapid rise in adaptation-related infrastructure investments, is that it will become more difficult for these risks to be shifted in the way public authorities and lenders typically require. The culprit will be unpredictability. With the higher risks of delays and overruns coming from that unpredictability, the size of adaptation-related infrastructure performance bonds will strain the balance sheets of many construction companies. Where sponsors themselves are also construction companies, required completion guarantees will make the problem worse. And the construction companies will note, often correctly, that weather-related sources of cost overruns – as well as overruns stemming from political disagreements on how best to respond to extreme weather events – are outside of their control, making them even more unwilling to take on these risks. We can therefore expect to see that many infrastructure investments intended to help cities and other areas adapt to more extreme weather events – urgent investments when the need for them becomes clear – will get at best delayed and at worse stuck due to the unwillingness of parties to bear the risks stemming from higher unpredictability.

Keeping infrastructure investments flowing as the need to adapt to extreme weather events grows may therefore require something new. For developing countries, funding for these higher risk investments may simply get swept up into their general need for additional finance related to climate change: yet one more problem to solve. For wealthier and middle-income countries, the solution may wind up in the domain of insurance. The likely best way to manage the risks from unpredictability will be diversification of that risk across a very large pool of geographies and projects. One model may be the World Bank’s Disaster Risk Financing and Insurance program, developed in the mid-2010s, which was created to pool weather-related risks for low-income countries.

Floods in Germany, fires in the Mediterranean, these are disasters whose occurrence, timing and scope are increasingly unpredictable. Yet that such events will occur more frequently is itself predictable. Infrastructure investments may in at least some cases mitigate the damages and deaths from further extreme weather events, and will in many cases be needed to repair damages. These adaptation-related investments will present different problems than traditional infrastructure, due to the unpredictability of specific severe weather events. The biggest problem is likely to revolve around Performance Bonds, and the ability of construction companies to absorb unpredictability risk. Let’s hope insurance can provide a solution.

Index to Previous Columns on Climate Adaptation and Infrastructure

Seawalls and Emerging Markets

July 2021

Built on beautiful Biscayne Bay, money has flowed from the sea to Miami – especially to its real estate developers — for centuries. It is starting to flow back to the sea.

Last month, the US Corps of Engineers released a draft study for how best to protect the city of Miami from rising seas and recurring flooding. The Engineers’ recommendation: a $6 billion, 6-mile long, and up to 20-foot-high seawall. City and state politics are now mired in a high-profile back-and-forth on whether to proceed (see “A 20-Foot Sea Wall? Miami Faces the Hard Choices of Climate Change”). Similar plans to build large and expensive seawalls are being debated in other American cities: Houston, San Francisco, Charleston, and Honolulu for a few, with New York City looking at the most grandiose plans of all, costing well over $100 billion. A 2019 report noted that the cost of building the seawalls under debate in the US could run to $416 billion – the same cost as the build-out of the entire national interstate highway system. Across the Atlantic Europe already has seawalls in a number of places: Venice, London, St Petersburg, the Netherlands. A gargantuan project – nearly 400 miles long – is under discussion to protect European coastlines along the North Sea – at a preliminary cost estimate of half a trillion dollars. Along the Pacific Singapore and Shanghai are among (the few and wealthy) Asian cities with seawalls.

There is still novelty around the idea. Until the last decade, one would have been hard pressed to find “seawall” in anyone’s definition of infrastructure. Ports have built jetties in many places to protect harbors, but these have been much smaller endeavors. Yet the future where one can plausibly project seawalls becoming one of the 3 or 4 largest categories of infrastructure spending around the world, capturing hundreds of billions of dollars, has come quickly. A future where seawalls will be the single largest ticket item in the budget of many coastal cities, at times dwarfing their combined spending on all other infrastructure combined. This is another example of how disruptions have upended the once stable and fairly predictable world of infrastructure, whether disruptions from technology – such as wind turbines or batteries – or from other sources, like climate change.

Fear of rising sea levels from the melting of glaciers is galvanizing the newfound interest in seawall building. Hundreds of millions of people live in coastal cities with low elevations and many, like those in Miami, are already seeing the increased flooding that will worsen in coming years. As the World Economic Forum states, “Even if we collectively manage to keep global temperatures from rising to 2°C, by 2050 at least 570 million cities and some 800 million people will be exposed to rising seas and storm surges. And it is not just people and real estate that are at risk, but roads, railways, ports, underwater internet cables, farmland, sanitation and drinking water pipelines and reservoirs, and even mass transit systems.” Estimates of the sea level rise itself, which may sound small or slow, tend to understate the problem. Only about 1/3 of future coastal flooding risk is from rising sea levels that would permanently submerge low-lying areas, while 2/3 of the risk comes rather from the likely increase in extreme high tides, storm surges and breaking waves. Cities are looking at a variety of ways to protect themselves, looking to better absorb and drain water faster, but attempting to keep water away is on nearly every wish list.

New research (see “A Space Laser Shows How Catastrophic Sea Level Rise Will Be”) shows that for several of these coastal cities, the issues of rising seas and more severe storms will be made worse by yet another problem: sinking. As populations in many of these urban areas have grown rapidly, over-extraction of ground water is causing the ground to subside. Cities built on river deltas usually sit on several layers of clay, deposited over time as sediments by the river, with underlying aquifers. When the aquifers get drained to provide water to the city’s population, the clay collapses into the space which had held water. The more an urban center grows, the more people it needs to hydrate, which increases the rate and severity of subsidence. Djakarta is the prime example of this effect, with subsidence having been a key factor in last year’s decision by the Indonesian government to move the capital to a different location (see Capital Punishment (or So Long, Djakarta ?)), but it is far from the only one.

The surge in interest in seawalls as the centerpiece of the solution for many cities will keep engineers occupied and planners preoccupied. It is still very early days in the growth of what will likely be one of future infrastructure’s largest areas. Today we’ll look at just a couple implications of this coming boom, especially as regards developing countries.

We’ll start with one safe assumption about this new type of infrastructure: if the seawalls get built, they’ll cost a lot more than the amounts now projected – even the $400+ billion estimated for the US. Seawalls will fit squarely into the type of infrastructure prone to frequent and large cost overruns (think of tunneling projects, like Boston’s infamous “Big Dig,” or of large hydroelectric dams, with average overruns approaching 50%). They will be highly politicized investments, with continued debate about every detail (whose property is disturbed, whose views are affected, which houses are outside the protection zone, what is the timeline – and especially, who pays), and debate about just how high the tidal or storm surges they’re built to prevent will be and how soon. This means the construction of these barriers will be subject to frequent change orders, the perfect recipe for more cost overruns. And they may become obsolete fairly quickly, depending on the pace of climate change and glacier melt in the coming decades. It would not be a big stretch to see the US spend over $1 trillion on seawalls in the coming 20 years, nor would it be a big stretch to see global spending on such projects well over $5 trillion. That’s a lot of infrastructure spending

A second safe assumption about seawalls? You won’t find many in Emerging Markets any time soon.

And that will become a big deal.

Cities in lower-income countries stand to be disproportionately affected by rising seas. While all coastal cities will be affected by sea-level rises, some will be hit much harder than others. Asian cities will be particularly badly affected. About 4 out of every 5 people impacted by sea-level rise by 2050 will live in East or South East Asia – several hundreds of millions of people. Africa is also highly threatened, due to rapid urbanization in coastal cities and the crowding of poor populations in informal settlements along the coast. The list of most affected cities includes Mumbai, Kolkata, Dhaka, Guangzhou, Rangoon, Ho Chi Minh City, Manila, Dakar, Alexandria, Lagos, Abidjan, among many others. Leaving aside China, most of these Emerging Markets cities and their national governments have one thing in common when looking at seawalls as part of their adaptation plans: a lack of capital.

The list of Emerging Markets countries with cities affected by rising seas looks an awful lot like the list of Emerging Markets countries with large infrastructure deficits – already. The capital requirements for building seawalls to protect their coastal cities from increased flooding will absorb a large share of their capital that is already needed for deficient infrastructure: for some smaller countries, the cost of seawalls may approach the size of their entire current infrastructure budgets. It is no surprise, therefore, that a list of cities actively considering seawalls is 90%+ in developed markets (including China). Djakarta – banking on financial support from the Netherlands – is the only city in a lower-income country with an advanced plan.

While it is not surprising that attention to seawalls is almost entirely concentrated in more developed countries, the absence of such attention in Emerging Markets has some important implications worth noting.

1. Flooding increases in coastal cities and the inability of those in low-income countries to engineer solutions (or at least what may appear to be solutions) to offset sea-level rise will lead to much larger-scale relocation of populations in the Emerging Markets than what we will see in the US, Europe and the richer Asian countries. Some of that relocation may be organized, at least to an extent, along the model of Indonesia’s announced move of the country’s capital, and much of it is likely to be dis-organized, in the form of migration – in country where inland options may be available, and cross-border where those options are not available. As the World Economic Forum states it, “The coming decades will be marked by the rise of ex-cities and climate migrants.” To date much of this climate migration has been relatively “invisible,” contained within countries. Don’t expect this to continue. The cry we have seen in early 2021 for better equity in the distribution of COVID-19 vaccines may presage a louder cry in years to come for better equity in the building of seawalls.

2. Given that the wealthy countries that dominate the Boards of International Financial Institutions will want to see as little large-scale cross-border migration as possible, and will have to devote plenty of capital to their own climate adaptation plans, we will undoubtedly see a big push for the IFIs to engage in helping Emerging Markets fund seawalls. With the scale of the financing challenge, this will be the domain of the large global and regional multilateral development banks, and will stretch their balance sheets. Should a large-scale Climate Adaptation Fund emerge, as has been discussed for many years, and could safely assume that a large share of its capital would wind up going into this area.

3. There will even greater interest in “innovative financial solutions” than there is for traditional forms of infrastructure. Don’t be surprised to see mechanisms through which the local private sector in coastal cities (especially companies serving consumers in these cities, such as retail, telecommunications, and producers of consumer goods) “help finance” some kind of Public-Private Partnerships (it will sound better than to say they are being taxed) in order to preserve their own revenues. And don’t be surprised to see some mechanism emerge whereby wealthy countries contribute to some kind of “Fund” to help finance seawalls in lower-income countries. It would be the same kind of general principle which has been discussed now for decades for Climate Change adjustment funds, but would have the clear advantage, relative to current discussion, of going to concrete (pun intended) objectives. In the US, we have seen the building of a wall to limit immigration generate considerable political momentum: one can imagine building of walls further away, with the same idea of limiting immigration in mind, will also generate plenty of political momentum in the future.

Seawalls: coming soon for infrastructure budgets – ready or not.

Index to previous Infrastructure Ideas columns about Climate Adaptation

Airports, Ports and Climate Change (II)

Airports, Ports, and Climate Change (part 2)
December 2019

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This is the second in a two-part Infrastructure Ideas series on the effects of climate change on infrastructure transport facilities, following part 1 on airports. This post will survey climate change impacts on ports around the world.

Over 3700 maritime ports and their supply chains enable global and local commerce, helping the over 90% of the world’s freight that moves by sea. Ships make on average some 3 million landings a year at ports around the world. One study found that ports and ships account for as much as one-quarter of the GDP of the United States, contributing over $5 trillion to the US economy alone. All of these ports are, by definition (leaving out “dry ports” which have their own importance in logistics chains) located by water. As climate change accelerates, and waters rise, all of these ports will be affected by a range of consequences, some of them expensive.

The EU’s Joint Research Center projects that by 2030 64% of all seaports are expected to be inundated by sea level rise, due to the combined effects of tides, waves, and storm surges. The number of ports that face the risk of inundation in 2080 is expected to increase further by 80% to 2080. While various climate change projections may have considerable uncertainty, depending on the combination of how much higher carbon dioxide atmospheric concentrations get (uncertain because possible future emission trajectories are all over the place) and of feedback loops (on which key pieces of the science remain untested), two things are very clear: (1) sea levels will rise, and (2) they will rise more in some places than others. In Europe, it is forecast that the North Sea (where 15% of total world cargo is handled), the Western part of the Baltic Sea, and parts of the British and French Atlantic coasts will see double the sea level rise of most of the rest Europe’s coastline. In the Black Sea and the Mediterranean, impacts from extreme high sea level are expected to be significantly milder, but also to occur more frequently. One analysis projects that once-in-a-century “extreme sea levels” will on average occur approximately every 11 years by 2050, and every 3 and 1 year by 2100 under more extreme warming scenarios. The analysis adds that “some regions are projected to experience an even higher increase in the frequency of occurrence of extreme events, most notably along the Mediterranean and the Black Sea, where the present day 100-year ESL is projected to occur several times a year.”

One might superficially think that rising water levels would, for seaports, be a matter of indifference, or even a plus. As opposed to airports, where airplanes affected by inundation become useless, ports are home to ships which float on top of the water – no matter how high the water is. Dredging might become less of a concern in some ports, and other ports may become less dependent on high tides for larger cargo ships to enter. But while it is no doubt true that climate change impacts will be more severe for airports than for ports, they will not be absent for port owners and operators. A 2011 case study published by the International Finance Corporation, on a port in Colombia, summarized well the issues, of which the two biggest are the storage and movement of goods, and multimodal connectivity inland from the port. Ships can keep floating as the waters rise, but containers of goods cannot. Spoilage risk can be expected to affect revenues in particular for ports handling grains and other perishables. The fairly small number of transshipment ports may not worry too much about inland connectivity, but the large majority of operators will be need to be concerned about impacts of high waters on infrastructure which they do not control – roads, and sometimes rail lines – in and out of the port to other parts of their region. A review of risks to Long Beach Port, one of the busiest in the world, notes that “in the next few decades, access roads could be covered in water; rail lines, either from heat or from ocean water inundation, would be unusable; electrified infrastructure such as cranes could stop working. The piers themselves, particularly older piers in the center of the sprawling 3,000-acre Long Beach complex, would be swallowed by sea and flood water, leaving them inaccessible to trains and trucks”. As the Colombia study also notes in passing, ports in developing and emerging markets may often also have unpaved areas which can be damaged more severely by inundations.

In this context, many ports face both pressure to participate in mitigation/ decarbonization efforts, and pressure to think ahead about adaptation. On mitigation, ome larger ports have had the luxury of trying to get on the front foot in the public debate. Seven ports — Hamburg, Barcelona, Antwerp, Los Angeles, Long Beach, Vancouver and Rotterdam – announced in September 2018 the creation of a “World Ports Climate Action Program,” aimed at working together to find ways to reduce CO2 emissions from maritime transport. Their program has five action areas:

1. Increase efficiency of supply chains using digital tools.
2. Advance policy approaches aimed at reducing emissions within larger geographical areas.
3. Accelerate development of in-port renewable power-to-ship solutions.
4. Accelerate the development of commercially viable sustainable low-carbon fuels for maritime transport and infrastructure for electrification of ship propulsion systems.
5. Accelerate efforts to fully decarbonize cargo-handling facilities in ports.

The Port of Oslo last month announced a 17-point climate-action plan, with the goal of becoming the world’s first zero-emissions port. The port produces 55,000 metric tons of greenhouse-gas emissions a year. By 2030, the port aims to make an 85% reduction in its emissions of carbon dioxide, sulphur oxide, nitrogen oxide, and particulate matter. The plan includes refitting ferry boats, implementing a low-carbon contracting process, and installing shore power, which would allow boats to cut their engines and plug into the grid when docked. Shore power can also power equipment like cranes, which normally run on diesel. Oslo incentivizes replacement of diesel with lower port fees and electricity costs to reward compliant ships, and by revising contracting processes to command terminal builders and shipping companies to obey low-emission rules. Rotterdam, which is Europe’s biggest port, is using zero-emission port equipment, while two months ago the Port of Los Angeles unveiled two new battery-electric top loaders.

Oslo’s plan is also of specific interest in that Oslo is a major port for ferries running across the Baltic straights; these ferries are estimated to be responsible for half the port’s emissions, a function of their frequency. Oslo has awarded a contract to Norled to electrify existing passenger ships; Norled delivered the first electric refit in September, and the ship now has the equivalent of 20 Tesla batteries on board. In a further sign of growing interest toward electrification among the industry, last month Washington State Ferries, which runs the second-largest ferry system in the world, announced it is switching from diesel to batteries. Washington State Ferries carry 25 million people a year across Puget Sound, and its annual fuel consumption is on par with that of a midsize airline, making it the state’s biggest diesel polluter. The ferry operator’s electrification program will start with the three most polluting vessels, which consume 5 million gallons of fuel a year between them; switching the three ships to fully electric operations would cut emissions by an estimated 48,000 metric tons of CO2 a year, the equivalent of taking 10,000 cars off the road. This will also require a major quayside electrification effort. Canada’s British Columbia Ferry Services, another major operator, moved to LNG some time ago and is now eyeing electrification of its fleet. This August also saw the launch of the world’s largest all-electric ferry to date, a 200-passenger, 30-car carrying vessel in Denmark, while in July the U.K. government announced that all new ships would have to be equipped with zero-emission technology.

On adaptation, almost all ports will need to take some sort of action to deal with rising waters, and more frequent extreme weather events bringing flooding. Key areas will be in protecting goods being stored and moved within ports, and inland transport connections. So far, the approach being taken by most ports is the obvious one – trying to keep water out of where it’s not wanted, and European ports are in the forefront. Rotterdam, Amsterdam and London are known to be protected against a 1 in 1000-year event, or at least what has been thought of as 1 in 1000-year events. Rotterdam’s measures are of the highest level globally, consisting of two of the largest storm surge barriers in the world. London’s flood barrier is also among the biggest in the world. These kinds of defenses do not come cheap. According to a recent study by consultancy Asia Research and Engagement (ARE), upgrading some of the 50 largest ports in the Asia-Pacific region to help cope with the effects of climate chance could cost up to $49 billion.

Future port adaptation measures are likely to be far more extensive than those implemented to date, and to require more varied technical approaches. Chances are pretty good, as estimates of how much and how soon sea levels will rise keep getting ratcheted up, that current forecast numbers for seawall-type protections will escalate quickly – as in the example of San Francisco’s barrier, whose projected cost jumped in a few years from $50m to over $500m. Chances are also pretty good that other complementary solutions will be needed, along the lines of major drainage improvements and ways to elevate storage facilities. Unless some radical positive change takes place, rising sea levels are likely to inexorably make seawalls regularly obsolete unless they too keep getting (expensively) raised, and solutions that focus more on the parts of ports that have to keep dry make be most cost-effective. Finally, chances are pretty good that new kinds of private-public partnerships for adaptation will be needed. Inland connecting infrastructure is more often owned by local governments that port operations are, and those governments struggle more than port operators to find revenues with which to fund raising and hardening that connecting infrastructure. Ports may find they need to help governments put in place the improvements to connecting infrastructure, without which ports will find their revenue streams drying up – all puns intended.

Airports, Ports, and Climate Change (part I)

Airports, Ports, and Climate Change (part 1)
December 2019

Last month, Denmark announced that Kangerlussuaq Airport — Greenland’s main airport — is set to end civilian flights within five years due to the melting of permafrost cracking its runway. Infrastructure investors take note – this is the first airport worldwide to close due to climate change, but unlikely to be the last. A new greenfield facility will have to be built to accommodate future flights.

A year earlier, Osaka’s Kansai International Airport was largely closed for 17 days, when waves and winds from Typhoon Jebi breached a seawall. In June 2017, American Airlines cancelled 40 flights out of Phoenix, Arizona, as extreme heat made it too difficult for smaller jets to takeoff from the airport.

Welcome to the future of airports.

Climate change is arriving, faster and worse than most projections estimated. For airport operators and investors, this will entail more of the type of consequences already being seen in Greenland, Japan, and Arizona. The current Infrastructure Ideas issue will outline some of these consequences, while the subsequent issue will examine the future of ports in a time of climate adaptation.

Emissions Mitigation. The world’s airlines are expected to fly over 4.5 billion passengers in 2019 (yes, almost a flight for every person on the planet), up by a billion since 2015. This high growth is driving very large capital investment plans for airports, as well as rising emissions. The aviation industry is estimated to be responsible for more than 850 million tons of CO2 emissions annually, about 3% of all global emissions. Emissions from jets are thought to have more harmful effects than many other sources of emissions, as they get released higher up in the atmosphere. Given air traffic projections, emissions from aviation are projected to triple by 2050. This has led in the past few years to increasing concerns, in the context of increasingly dire warnings from the scientific community about the pace and severity of climate change. Already in 2016 the International Civil Aviation Organization, ICAO, agreed to cap carbon emissions from international flights, starting in 2021 – an agreement which may prove difficult to implement if passenger growth continues as projected. Some airlines are also trying to get on the front foot: United Airlines announced a goal to cut its greenhouse gas emissions 50% by 2050. How this will be done, and whether it will be enough to offset the onset of major regulatory limits, remains to be seen. As start-up technology companies explore the launch of “air taxi” services, domestic flight emissions may also see accelerated growth. Industry players should expect that there is likely to be increased conflict between political emission reduction objectives on the one hand and unabated passenger growth on the other. Therefore investors in the sector may do well to factor the risk of political action either taxing flights and/or limiting flights, and therefore reducing the overall needs for capital investment in airport expansions. Arguments can also be seen already that controlling the expansion of airports themselves is an important tool to curbing airline emissions (see Curbed, Want to Get People to Fly Less? Stop Funding Airport Expansions).

Airports themselves emit a tiny fraction of the GHGs that airlines do – at least directly. Their own operations are far less likely to face political pressure of the type that airlines will. Nonetheless a climate neutral accreditation exists and has enrolled many facilities, whose efforts focus on meeting energy needs through renewables and improved efficiency, on the use of hybrid or electric vehicles, and on public/group transit facilitation for employees. Potential emission reductions of this type may be largest in airports located in lower-income countries, which often see a combination of less-modern/ less-efficient operational equipment and older less-fuel efficient aircraft. Jomo Kenyatta International Airport in Nairobi, for example, has achieved major GHG reductions by purchasing power units for parked aircraft which run on electricity, rather than diesel as the older units had. This is good — yet the indirect emissions related to airports are significant, and may prove to be more of a political target in the future. Indirect emissions would be mainly two elements: how many flights airport capacity allows, and transport emissions from people getting to and parking at an airport. As noted above, activism is beginning to target the issue of airport capacity expansions as a means of curbing airline emissions. It is likely that in the near future, the efficiency of passengers reaching an airport starts attracting attention, with arguments for parking expansions to be replaced by public transit, for example. At one level further removed, one can also anticipate growing pressure for investment in passenger rail services, coupled with increased taxation of short-haul flights, to attempt to shift traffic from air to rail for short-distance travel (as most fuel is burned on take-off and landing, making short flights more carbon-intensive flights). The bigger climate change worry for airports, however, is likely to be adaptation.

Adaptation needs: water. Water has gone from a friend of airports to a foe. In many cities, airports were built near seacoasts to minimize disturbances to humans or avoid natural obstacles like mountains. Now that water is rising, and airports are some of the most vulnerable infrastructure to sea level rise. In the USA, 13 of the country’s 47 largest airports have at least one runway that is vulnerable to storm surge, including the giant facilities in New York, Miami and San Francisco. Globally fifteen of the 50 busiest airports sit less than 30 feet above sea level, while the OECD identified 64 airports as likely to be affected by the predicted rise in sea levels. Complete disappearance of facilities may be remote (for the extreme risk, see our previous Lessons from the Venice Floods), but higher water levels will exacerbate the effects of storms, making airport flooding far more common and damaging. And though damage will be more extensive and long-lasting for coastal airports, inland airports will not be exempt from water-related adaptation issues. More intense rain events, another predicted effect of climate change, will cause more frequent and damaging river flooding, as the US Midwest has been experiencing. Inland airports are also frequently sited near rivers, for the same reasons that their coastal counterparts are frequently sited along the shore, increasing their vulnerability to flooding.

The obvious approach to adaptation for airports is to try to keep the water out. San Francisco is Exhibit A for this approach, having announced plans for a $587 million seawall to protect its airport. When the project was first tabled, in 2012, it was designed for an 11-inch sea level rise, with an estimated cost of $50 million. Seven years later, with climate projections getting worse, the revised plan now calls for planning on a 36-inch rise and has increased the estimated cost by 1,000%. Across the bay, Oakland plans a $46 million project to fortify and raise by 2 feet the 4.5-mile dike which protects it. In Hong Kong, plans for the $18 billion third airport runway were revised to include a 21-foot high seawall. Norway, whose state-run airport operator Avinor has called almost half its airports “quite exposed” to potential sea level rise, has decided to build all future runways at least 23 feet above sea level (For more, see this month’s article in Wired, How Airports are Protecting Themselves Against Rising Seas). Moving the water that does arrive is also critical: airport drainage systems will need significant fortifying to move greater and faster-arriving amounts of water. At some stage, however, airports will face the same dilemma that coastal cities and seaside home-owners increasingly face (see previous column, Capital Punishment): keep investing in barriers to the sea, or move. When city leaders opt to move, as in the case of Jakarta, it will be difficult for its airport to remain viable.

Adaptation needs: Heat. After water, the next biggest issue for airports will be extreme heat. The curbing of takeoffs due to 120-degree heat in Phoenix garnered many headlines (see the New York Times, Too Hot to Fly? Climate Change May Take a Toll on Air Travel). Hotter air means thinner air, impacting the ability of planes with smaller engines to generate enough lift to get airborne. Extreme heat requires longer distances to take off and/or reducing aircraft weight (with fewer passengers or cargo). Airports in locations where high temperatures already occur frequently, and with short runways that limit planes’ ability pick up speed, will be especially affected. One of Air India’s general managers, Captain Rajeev Bajpai, notes that extreme heat is already an aviation problem in countries like Kuwait, where planes can be grounded on summer days because their electronics automatically shut down. Hotter temperatures may cause tarmac to melt, or as in the case of Kangerlussuaq, may cause the ground under the tarmac to melt. While the impact of these issues may not rise to that caused by rising seas, takeoff and weight restrictions, and more frequent tarmac repairs, all add up to substantial costs for airport operators – as well as disruptions to passenger and cargo transport. Higher cooling costs will be another obvious effect.

There will be other climate adaptation needs. ICAO notes that high wind, heavy precipitation and even lightning strike events that threaten facilities, and aircraft are growing more frequent. But dealing with water and heat will be the big two for airports.

Financing Implications. Adapting to climate change will require greater capital spending from airports, accompanied by greater uncertainty and low likelihood of associated revenue gains. The airport industry is already today a major infrastructure investor. According to Reuters, $260 billion in airport infrastructure projects are under construction worldwide. Those are big numbers, and climate adaptation needs will add more, as we can see from the costs of just the San Francisco and Hong Kong plans. The handful of 30-million passenger per year airports will most easily finance and absorb these capital costs. Issues are likely, however, to arise for the larger number of mid-size airports around the world. The problem they will face is that the capital costs for keeping water out are related more to geography than the volume of an airport’s operations, and mid-size airports may face similar adaptation-related capital costs to those of larger airports, but without the same revenue base over which to amortize them. It will be an expensive asymmetry for many airports. The second financial implication of adaptation, greater uncertainty, is also illustrated by the case of San Francisco – where in seven years the projected capital needed to hold off rising waters rose by a factor of ten as projected sea rise levels kept changing. “It’s going to be an evolving battle,” as says Patti Clark, a former airport manager who now teaches at Embry-Riddle College of Aeronautics. Capital expenditures needed for continued operations in 2050 may well look very different in 2030 than it does in 2020. These kind of investments also have the disadvantage they will not in themselves produce incremental revenues – they will just try to keep the ship afloat, so to speak.

Harvey Houston Airport flooding

Houston Airport after Hurricane Harvey

Lessons from the Venice Floods

Lessons from the Venice Flood
November 2019

venice-floods-2164704

Venice is famous for its “high waters,” or Aqua Alta. The city has also been famously sinking in the past few decades. But even by its wet standards, early November has been remarkable – very unfortunately remarkable. On November 6, Venice saw its highest floodwaters since 1966: about six feet over normal high tide. Famous monuments such as La Fenice and St Mark’s were partly under water; the Aqua Alta bookstore, loved by tourists and Venetians for its habit of using bathtubs, plastic bins and even a gondola to display – and keep dry – part of its book collections, couldn’t stay above water. At the worst of it, water rose 10 inches in the span of 20 minutes. Even Venice’s one vineyard, home of the unique Doroma grape, was under threat. Then over the following week the floods returned… three times. It was the worst week of flooding in Venice since 1872, and at its peak floodwaters were the second highest ever recorded in the city. Thousand-year old St Mark’s has been previously flooded… five times. As this is written, the city remains flooded.

Unusual for sure. Notable for the fame of Venice and its monuments, visited by millions of tourists, for sure. A lesson in that more and worse flooding is coming to many famous waterside cities, as discussed in Infrastructure Ideas’ recent post on Jakarta (see Capital Punishment), again for sure. And also a lesson in what flooded Venice says about infrastructure and adaptation to climate change.

Increased flooding is already with us in many places (inland as well coastal, as reviewed in our earlier column “Floods and Infrastructure Investment”), and billions of dollars are already being spent trying to adapt. Many more billions are on the drawing board of infrastructure planners: this summer Wired reported the projected cost of protecting (just) US cities from sea level rise at over $400 Billion. Globally cost estimates are approaching the trillions of dollars.

A few things are already apparent from the billions being spent to attempt to stave off flooding. One lesson: flood barriers can be expensive – very, very expensive. New York City’s rebuilding of the Rockway Boardwalk after Hurricane Sandy cost $70 million per mile, and that was just for repairs. The Thames Barrier, in place since the 1980s to keep London dry, cost about $2 billion in today’s dollars to install. Venice – for here the story takes its major, intriguing, lesson-filled turn – yes, Venice, has spent billions to date on one of the biggest flood barriers in the world, “an underwater fortress of steel,” as the Washington Post called it. As reported by City Lab

What makes this round of destruction especially frustrating is that Venice’s massive flood defense system is almost complete. Costing almost $6.5 billion and under construction since 2003, the Venice Lagoon’s vast MOSE flood barrier is due to come into service in summer 2021. A string of 78 raiseable barriers threaded across the lagoon to block tidal surge, the MOSE project represent Venice’s moon-shot bid for survival in a warmed world.

Flood barriers are expensive. Venice’s experience also illustrates a second lesson for cities contemplating this kind of infrastructure investment: like other very large infrastructure construction projects, they take a long time to complete, and completion schedules only change in one direction. Venice’s barrier has been under construction 16 years: the original completion date was 2011, eight years ago. Had it been in schedule, Venice’s libraries, frescoes and squares would probably not be underwater today. When it will be available for use is unclear, and projected final costs reach as high $9 billion.

A third lesson is that, like with other major infrastructure construction, large amounts of funding may not wind up going where they are supposed to go. Venice’s previous mayor was arrested in 2014 and accused (never convicted) of siphoning off large amounts of money intended for the construction. A few months ago, before the floods, there were reports that sub-standard materials had been procured, and that repairs would be needed before the barrier was even used (a similar issue is currently plaguing the effort to extend the Washington DC Metrorail to Dulles Airport).

It would be good if the bad news ended there. But it doesn’t. The severity of this month’s flooding in Venice raises a fundamental question. After the billions, when the barrier is finally complete, how long will it last? A couple of decades?

Infrastructure planners and policy-makers in cities worldwide will be looking at many more billions of dollars in infrastructure spending to adapt to climate change-induced coastal flooding. Venice’s lessons indicate this infrastructure will require finding a lot of capital – some cities will find it, others will need to turn to national governments or the private sector, in public-private partnerships — to find the money. The lessons also indicate that planning, and construction, need to start sooner rather than later. Floods driven by sea-level rise and extreme weather events are rapidly increasing in frequency and severity, and every new projection shows problems coming sooner than the previous projections. Venice shows that flood barriers are not easy or quick to put in place. Venice also shows that spending controls and corruption prevention efforts will be important – with a lot of money comes a lot of temptation.

There are, of course, alternatives. Many cities are discovering the importance of smaller-budget “green infrastructure” efforts as part of their adaptation plans. Expanding rather than shrinking planted, permeable surfaces, preserving wetlands and other natural water catchment areas, green roofs and many other approaches can help reduce the incidence and impact of flooding. These approaches have the advantage of reducing the need for multi-billion dollar, probably delayed and more expensive than planned, possibly of rapid obsolescence, highly-engineered infrastructure investments. To a point. This would not have been likely to affect Venice’s situation much, though for certain cities the impact might be large.

And then there is moving. Indonesia is taking that route with Jakarta (sort of). Even culturally and historically important buildings sometime get moved. I once saw the Piva Monastery, in Montenegro: a 16th century church with remarkable frescoes, it was originally built in the valley of the Piva River, then relocated – stone by stone – in the 1970s during the construction of a reservoir for a hydroelectric complex. Adapting to flooding, in this case, intentional.

Capital Punishment

Capital Punishment (or, so long, Jakarta)
September 2019

During the last week of August, President Joko Widodo announced that Indonesia would develop a new capital city in Borneo, and move government offices there from Jakarta, Indonesia’s historic capital. The combination of Jakarta’s own sinking – as it pumps so much water from its underground aquifer that part of the city is subsiding a foot a year – and a rising Java Sea, has spelled the end for one of Asia’s largest cities (Jakarta is sinking so fast, it may wind up underwater). This big decision will have immense repercussions – and Indonesia may well prove to be a trendsetter.

Who’s Next?
Jakarta may be the first capital to be relocated as a consequence of climate change, but it will have company soon. For those looking at Jakarta as an aberration, let’s look at two things. First, nearly two-thirds of the world’s major cities are on a coast: Shanghai, Hong Kong, Mumbai, Shenzen, Singapore, Stockholm, Barcelona, New York, Los Angeles, Miami, Montevideo, Dar Es Salaam, Capetown, Algiers, and a list way too long to continue. Second, expectations for sea level rise. For those who don’t look at this issue often, well, fasten your seat belts. At the time of the Paris Climate Summit in 2015, expectations for sea level rise to 2100 tended to see 3 feet as a maximum, with rise in subsequent centuries depending on emissions. By the end of 2017, two years later, 3 feet was beginning to be seen as a minimum sea level rise for the century, rather than a maximum. NOAA (the National Oceanic and Atmospheric Administration), supposedly an authority, projects 8 feet. Maximum potential sea level rise by 2100 in some studies, in the lifetime of most of today’s younger generation? 20 feet.

Twenty feet higher shorelines sound far more threatening than three feet. Which will be right? Well, unfortunately, it’s very hard to tell. And the projections are changing rapidly. Part of the answer depends on GHG emission scenarios in the future. But a very big part of the answer depends on how fast ice melts where it locks up water in glaciers. A key problem in looking ahead, as well-framed by David Wallace-Wells in his excellent book, The Uninhabitable Earth, is that the break-up of ice represents an entirely new physics, never observed in human history and still poorly understood. When we look at what is actually happening with ice melt, it paints a grim picture. A new study in 2018 found that the melt rate of the great Antarctic ice sheet tripled from 1992 to 2017, a pace which makes 20 feet by century-end is no longer out of the question. The Greenland ice sheet alone is losing almost a billion tons of ice every day. And in 2017 it was discovered that two glaciers of the East Antarctic sheet were losing 18 billion tons of ice a year; if/when both go, scientists expect 16 feet just from the two glaciers. Sound bad? Projections are getting worse, quickly. Melt of the two Antarctic ice sheets – parts of which are visibly melting far faster than had been anticipated only a few years ago — could raise sea level by 200 feet. And as science journalist Peter Brannen noted, the last time the earth was 4 degrees warmer, sea level was 260 feet higher.

How threatening all this is also depends on expectations of time. 2100 sounds very far away, even though a substantial portion of people alive today will be alive then. Sea level rise, in most people’s understanding, will be very slow, and there will have been plenty of time to “solve” the problem. However… The other piece we’re learning about in terms of ice melt is, well, it can happen not so slowly. As noted by Bill McKibben in his latest book, Falter, in the distant past, sea levels often rose and fell with breathtaking speed. 14,000 years ago, at the end of the Ice Age, huge amounts of ice thawed, raising the sea level by sixty feet, with 13 feet perhaps having come in a single century. Last month, Scientific American highlighted a study which articulated the direction in which projections are clearly heading:

Scientists have been underestimating the pace of climate change. It was reported recently that in the one place where it was carefully measured, the underwater melting that is driving disintegration of ice sheets and glaciers is occurring far faster than predicted by theory—as much as two orders of magnitude faster—throwing current model projections of sea level rise further in doubt. When new observations of the climate system have provided more or better data, or permitted us to reevaluate old ones, the findings for ice extent, sea level rise and ocean temperature have generally been worse than earlier prevailing views.

For those who have lived or traveled in the American northwest, the recent understanding of the glacial floods which shaped the basin of the Columbia River has some sobering resonance. Geologists now understand that the mechanics of that ice melt, when the glaciers of then Lake Missoula were thawing, were such that melt built-up behind a wall of ice, and when that plug let go, water rushed out of the melted glacier down the valley in a wall estimated to be… 2,000 feet high – enough water fast enough to have emptied the equivalent of Lake Michigan in two days.

So, if you worry about 4-8 feet rise in sea levels, things could be a lot worse! And even 4-8 feet, while it may be very aggressive compared to other projections, means that as much as 5% of the world’s population will be flooded every single year.

The move
What is Indonesia doing, then? How will the change of location of the capital work? Much remains unclear, but announced plans call for construction of the first phase of the new city to begin in 2021 and to be finished by 2024. The entire city, targeted for completion in 2045, will occupy about 495,000 acres of land, twice the size of New York City. The proposed location in Borneo is near the relatively underdeveloped cities of Balikpapan and Samarinda. President Widodo noted that moving the country’s capital will be a mammoth and expensive undertaking. Estimated cost, according to the planning agency: US$34 billion. Chances of that being the final cost? Very low.

To fund this move, the Government has flagged some interesting ideas. Which, somewhat strangely, rely heavily on leaving Jakarta itself (the city, not the “capital”) where it is and selling land there to the private sector. This envisions a national capital move somewhat like those to Brasilia, or Abuja, where “just government” moves. A Finance Ministry official said the leasing of government-owned land and properties in Jakarta to private companies could help it raise 1/3 of the amount needed to develop the new capital site. On top of that private companies could be given a property such as a ministerial building in Jakarta in exchange for building a similar facility in the new capital, and government-owned land and properties in Jakarta could be sold to private companies. In fact, the Government has announced that it will spend more (!) money “rejuvenating” Jakarta than it plans to spend on the new capital. This includes US$22 billion for the development of public transport such as the extension of the Jakarta mass rapid transit and light rail transit network, $6B for delivering clean water to all city residents, and $5B for flood mitigation.

Homeowners across the world affected by rising seas, or at this stage just by increased flooding from extreme weather events, have been faced by the “stay or move” dilemma driving Indonesia’s move of its capital. Most respond to this choice with “stay”, at least initially, and many residents of Jakarta are in that camp. It is very expensive for homeowners to respond with a “stay and move” approach, as Indonesia has for now announced. Chances are pretty good that it will prove too expensive for Indonesia. And, given how projections for sea level rise are getting worse, the appearance of there being a choice may be illusory. We’d give pretty strong odds that not much will be happening in Jakarta by the end of the century (one model shows 95% of north Jakarta underwater by 2050). Yet this same dilemma is coming soon to a city near you. A late 2018 report stated Los Angeles would need to spend at least $6B to avoid slipping into the sea. Last month Wired reported the cost of protecting US cities from sea level rise at over $400 Billion. Even in the wealthy USA, it’s not clear where this kind of money might come from. Voters of high-income San Francisco approved a $425 million climate change protection bond — to pay for only 1/4 of the costs of fortifying a seawall. China may find the money to fortify Shanghai and Shenzen, and Singapore may also figure it out. But for capitals of low-to-mid income Emerging Markets, like Indonesia, where the money comes from will be a huge issue — soon. And without money to fund the “stay” option, or with “stay” being perhaps at best a delay in the inevitable “move,” chances are pretty good that a much higher percentage of affected low-to-mid income than OECD country capitals will move – or drown…

Infrastructure implications
The infrastructure implications of moving a capital city are, of course, major. It’s not just people who need to be moved, but power plants, ports and airports, which are also affected by sea level rise. Then new roads, water and sanitation fixed infrastructure will be needed wherever the new capital is located. Each part of that infrastructure is likely be somewhat different. Thermal power plants, often located near demand center capital cities, may have somewhat lower moving costs – the assets can be moved and used in a new location, or it may in any case be cheaper to replace them with lower-cost renewables, depending on the situation. Ports may stay put, as they’re by definition a coastal asset, so costs will relate more to raising of facilities, and so be lower than greenfield assets. Airports likely will need to be rebuilt as greenfield near the new capital, so will have the same higher price tag as roads, water and sanitation. To some extent, urban transport infrastructure in a newly designed city may benefit from new mobility technologies which have arisen in the last few years — though it is unclear whether benefits would be mostly from increased access and user convenience, or also in terms of lower capital costs. Water and sanitation will probably be more expensive than earlier investments, as both coastal and inland cities are likely to need flood management investments from more intense rainfall events. But even without numbers, or more precision, one can tell that moving a capital is going to be an expensive proposition.

Adaptation to climate change will have very large implications for infrastructure. Many more coastal cities will be faced with the kind of decision Jakarta has made. If they “stay,” there will be significant new infrastructure to protect themselves against sea level rise, and spending to protect (or in some cases “move”) existing infrastructure. And as seas continue to rise, the decision points and spending needs will keep recurring. If they “move,” then like “new Jakarta,” there will be massive spending for infrastructure in their new location. Some cities may, of course, do nothing. In which case, future refugee movements may well dwarf those which are already stirring politics in so many countries.