Poor decisions will be costly, with the effects locked in for the long-term. So it’s important to base decisions on strong economics, where outcomes and benefits are properly measured and considered.

Government and utilities are increasingly aware that climate change, a growing population and increasing interdependencies between infrastructure systems will place increasing pressure on infrastructure as a whole. This is particularly relevant for essential community services such as urban water infrastructure.

Particularly for place-based policies and investments that involve large and irreversible investments with long asset lives, it is important to ensure that these assets and systems can maintain their essential functions no matter the changes that occur around them. These systems must be resilient.

Failure to adequately address infrastructure resilience puts existing and future assets at risk and may impose significant economic and social costs on the community. Government and decision makers need flexible and resilient policy, regulatory and investment strategies that can anticipate or identify when change occurs and provide the opportunity to respond advantageously to prevailing conditions. However, traditional investment decision-making frameworks often frame investments as one-off decisions, and do not countenance changes to the original project plan even if new information arises.

More complex forms of economic analysis, such as real-options analysis enables decision makers to consider how risks and uncertainties can impact the value to the community of an investment and to identify which investment may be most resilient to risks going forward.

Integrating climate change and natural hazard resilience into infrastructure planning

Aware that risks such as climate change and interdependencies between infrastructure systems will place pressure on the State’s infrastructure, the NSW Government wanted to embed consideration of resilience into decision making.

The government engaged Frontier Economics to develop guidelines to integrate climate change and natural hazard resilience into infrastructure planning and decision making. These guidelines relate to existing government processes, such as business cases, and provide practical steps that should be taken to embed resilience into this process. This includes identifying natural hazard resilience risks early in infrastructure planning and systematically appraising and evaluating risk and uncertainty in decision making.

Read more from Frontier Economics on Resilience

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