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Financing climate-resilient infrastructure: A political-economy framework

Peter B. Meyer and Reimund Schwarze

No 1/2019, UFZ Discussion Papers from Helmholtz Centre for Environmental Research (UFZ), Division of Social Sciences (ÖKUS)

Abstract: Urban infrastructure investment is needed for both, mitigation of climate risks and improved urban resiliency. Financing them requires the translation of those benefits into measurable returns on investment in the context of emerging risks that capital markets can understand and appreciate. This paper develops a generic framework to identify what are the necessary and sufficient factors to economically favor climate-change resilient infrastructure in private investment decisions. We specifically demonstrate that carbon pricing alone will not generate the needed will, because market prices at present systematically fail to account for climate change risks such as the costs of stranded assets and the national and local co-benefits of investments in climate resiliency. Carbon pricing is necessary, but not sufficient for an enhanced private financing of climate-resilient infrastructure. The Paris Agreement and other supra-local policies and actors including city networks can concretely help to generate the sufficient social and political will for investments into climate change mitigation and resiliency at the city level.

Keywords: infrastructure; urban finance; resilience; low carbon economy; city networks; Paris agreement; carbon pricing; Infrastruktur; Finanzierung; Resilienz; Klimaneutralität; Städte; Akteursnetzwerke; Parisabkommen; CO2-Bepreisung (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-ene, nep-env and nep-ure
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