Is Your Project Robust to the Impacts of Climate Change and Disasters?

STORY HIGHLIGHTS

  • A stress testing methodology and tool were recently developed to ensure that the economic analyses of World Bank projects properly consider climate and disaster risks.
  • When applied to a transport project in India, the methodology demonstrates that the project is robust to even highly pessimistic climate and disaster scenarios.
  • If deployed widely, this methodology and tool could help ensure that all investments are designed to be robust and resilient to climate and disaster risks and thereby promote adaptation to climate change.

Climate stressors such as temperature increases, sea level rise, water scarcity, and extreme weather events including droughts, hurricanes and floods, are increasingly posing risks to the health, livelihoods, and wellbeing of households and communities. They disrupt critical services, reduce agricultural productivity, and destroy infrastructure and dwellings with increasing frequency. To minimize the effect on people’s wellbeing, these impacts need to be considered and integrated in all investments and projects, regardless of their sector, nature, and financing. Ideally, no building, factory, transport infrastructure, or any other asset, should be designed and built without considering disaster and climate risks.

This applies particularly to World Bank projects: to maximize development benefits, it is critical to ensure that our investments are robust, throughout their lifetimes, to a changing climate. The World Bank Group’s newly launched Climate Change Action Plan 2021-2025 starts from the premise that climate and development need to be integrated. To help align climate and development, the newly launched Resilience Ratings System provides a simple approach to measure and disclose the extent to which adaptation and resilience considerations have been integrated into project design. The Resilience Rating System is currently being piloted in a number of investment projects supported by the International Development Association, the World Bank’s fund for the poorest countries. The Resilience Rating System provides a rating from C through to A+ along two complementary dimensions: (1) the resilience of the project design – or the robustness of project design to disaster and climate risks, and the confidence the project will perform as expected in spite of these risks; and (2) the resilience through project outcomes – or the project’s broader contribution to building the climate resilience of beneficiaries. These two dimensions are complementary but different. In particular, all projects should be made resilient to disaster and climate risks, while not all projects need to boost resilience (there are many other valid development outcomes).

“To help align climate and development, the newly launched Resilience Ratings System provides a simple approach to measure and disclose the extent to which adaptation and resilience considerations have been integrated into project design.”

To achieve an “A” rating in the resilience of the project design dimension, projects are required to demonstrate that a climate and disaster risk stress test has been incorporated in the project’s economic and financial analysis. Projects are also required to report on how, after risk reduction measures are included, residual risks do not make the project economically or financially unviable (or they at least must disclose the existence of any residual risk).

In this interview, World Bank Climate Change Lead Economist Stéphane Hallegatte and Senior Climate Change Specialist Veronique Morin explain how the climate risk stress testing methodology can support project teams by identifying potential climate and disaster risks to a project and inform decision makers on project robustness.

What is the history behind the Risk Stress Test methodology? What is the methodology designed to do?

The Resilience Rating System has been piloted in more than 20 projects. Early results  have demonstrated that incorporating a climate and disaster risk stress test is far from straightforward. To help teams perform such a stress test, the World Bank just released a new report, Integrating Climate Change and Natural Disasters in the Economic Analysis of Projects, which provides a methodology – and a tool – to perform a disaster and climate stress test.

Because future changes in climate conditions are highly uncertain, the methodology does not recommend predicting a revised net present value or rate of return. In particular, for projects with long lifetimes, uncertainties are too large and results would be overdependent on assumptions and hypotheses, and risk creating overconfidence.

Instead, the methodology suggests to perform a stress test as part of a project’s economic analysis using various scenarios ranging from the most optimistic to the most pessimistic, and to identify the conditions under which the project may fail, as well as the consequences in case of failure. A reporting template is then proposed to help decision makers assess the level of residual risks, and therefore the project’s attractiveness and economic feasibility.

Practically, the methodology is designed to highlight the risks to project outcomes and evaluation criteria (such as net present value and benefit-to-cost ratio) over long time horizons, in multiple scenarios and accounting for risks along three dimensions:

  • Changes in average climate conditions (e.g., temperature, precipitation);
  • Impacts from natural disasters, with historic frequency and intensity (e.g., hurricanes, floods, wildfires); and
  • Changes in the occurrence of future disasters due to climate change.  

 

“Early results  have demonstrated that incorporating a climate and disaster risk stress test is far from straightforward.”

How can the methodology be implemented?

The report provides step-by-step guidance for considering and incorporating climate risk stress testing into a project’s economic analysis, and general and sector-specific climate and disaster information resources to support the analysis. To assist with the implementation of the stress testing, an accompanying Excel-based Risk Stress Test (RiST) Tool has been developed to illustrate how the three components of climate and disaster risks can be incorporated in a project’s economic analysis, how climate and disaster impacts can be reflected in components of project costs and benefits, how decision metrics can be evaluated under alternative climate scenarios, and how key assumptions and inputs (such as the discount rate) may change the results of the analysis. Moreover, the tool can help determine threshold conditions under which a project may become economically undesirable and thereby help project teams identify possible risk reduction measures. A series of short one to three-minute training videos are provided to demonstrate the applicability of the RiST tool.

Are there any examples of how the methodology has helped project teams identify possible climate and disaster risks and evaluate project robustness?

Illustrative applications are provided for projects in energy, transport, water infrastructure, and agriculture. One of these projects is the  Integrated Transport Project in the state of Meghalaya, India. This project aimed to improve transport connectivity and efficiency and modernize transport sector management. Given that Meghalaya is in one of the wettest regions in the world, the analysis accounted for climate risks by estimating the impact on the costs and benefits of the project of changes in average conditions (i.e., temperature and rainfall patterns) and natural hazards (i.e., landslides and flooding), considering current and future frequency and intensity. The analysis demonstrated that even with a pessimistic baseline scenario (assuming delays in implementation and increase in costs) and a high-end climate impact scenario, the project is still anticipated to generate a positive Net Present Value, even though the expected net benefits can be halved by disaster and climate risks.

Beyond the result of the analysis, the implementation of the stress test guided the team in its exploration of possible disaster and climate risks and provided important information to help assess the project’s economic feasibility, therefore contributing to proper climate and disaster risk management and reduction, and increasing our confidence in the project’s ability to deliver its expected results in spite of today’s and tomorrow’s climate risks. 


 
 
 

Farmers learn climate adaptation in ‘open sky’ schools in India

In the drought prone district of Marathwada, a group of farmers eagerly inspect small plots of india_farmer_blog_heroland where pulses, fruits and vegetables are being cultivated. The curious farmers ask several questions to the landowners – how did they select which crop to grow, what fertilizer did they use, and most importantly how did they irrigate their fields? The monsoons had been weak, and water was not available in abundance. The farmers are eager to learn and the landowners are keen to share their experience.

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India’s Youth Rise Up to Fix Country’s Toxic Air Problem

Seeing bluer skies in India—a nation known for its alarming air pollution levels—remains a major

governmental priority. In recent times, the country launched its flagship National Clean Air Program (NCAP) to provide a roadmap to prevent, control, and reduce unhealthy air and mitigate its effects on development. Yet, much remains to be done, and one can still cough up troubling statistics on the lack of clean air in India: On an average, 248 million Indians lose 8 years of their lives due to exposure to poor air quality. And 1.67 million deaths were attributable to air pollution in India in 2019.

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In India, air quality has been improving despite the COVID-19 lockdown

India is home to some of the world’s most polluted cities. An unintended but welcomeshutterstock_761795974 consequence of the lockdown to contain the coronavirus has been improved air quality throughout the country.  Our assessment of India’s air quality trends has found another underlying and positive trend: air quality has been improving across the country since 2018, and this has nothing to do with the COVID-19 lockdown. 

Growing Threat of Air Pollution

Poor air quality has come to be recognized as a serious health risk and drag on economic development in India. Air quality has been deteriorating across the country since the 1990s, and in 2017 as much as 97 percent of the country’s population was estimated to be exposed to unhealthy levels of ambient PM2.5.  Though there are many types of air pollutants, these small particulates in the air, about one-thirtieth the width of a human hair, are the most harmful to human health.  They can penetrate deep into the lungs, enter the bloodstream and cause deadly illnesses such as lung cancer, stroke, and heart disease.

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In India, women’s self-help groups combat the COVID-19 (Coronavirus) pandemic

Meeting the shortfall in masks, sanitizers and protective equipmentSHG-Didis-Fight-Corona-India-2

Now, more than ever, these women – many of whom escaped poverty through the SHG route and know what it is like to be destitute and poor – are living up to their motto of self-help and solidarity.

Groups across the country are working furiously to make up the shortfall of masks and personal protective equipment (PPE). In Odisha, for instance, poor rural women who were once engaged in stitching school uniforms are sewing masks instead. Over the past couple of weeks, these women have produced more than 1 million cotton masks, helping equip police personnel and health workers, while earning something for themselves.

All told, more than 19 million masks have been produced by some 20,000 SHGs across 27 Indian states, in addition to over 100,000 liters of sanitizer and nearly 50,000 liters of hand wash. Since production is decentralized, these items have reached widely-dispersed populations without the need for complex logistics and transportation.

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eC2: Improving access to sustainable water and sanitation services in rural areas of Punjab.

Deadline: 24-Feb-2020 at 11:59:59 PM (Eastern Time – Washington D.C.) waterkraan-nieuws-header

The World Bank is assisting the government of Punjab in improving access to sustainable water and sanitation services in rural areas. The project will provide water and sanitation infrastructure as well as a range of behavior change interventions at the household and community levels. Assessment will be for 28-30 selected villages across project tehsil. Study villages will be provided to the firm. Study villages will be provided to the firm. Key areas of work of this assignment are:
1. Assess ground water availability and quality for domestic use, from a technical, cost effectiveness and resource sustainability perspective.
2. Examine shallow aquifer characteristics on canal banks to determine the reliability of canal water as a source of ground water recharge for water supply provision.
3. Advise on the minimum distance between adjacent tube wells on canal bank (for the pre-identified canals) and optimum rate of abstraction for resource sustainability.
4. Conduct a shallow groundwater salinity assessment
5. Conduct Water Quality testing
6. Feasibility study report capturing the various scenarios and technological options, and the preliminary cost estimates;
7. Preliminary designs of all the technological options for the selected villages detailing the technical requirements, and financial and economic analyses.

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eC2: INDIA: Due Diligence for Installing Floating Solar Project in Omkareshwar Reservoir, Madhya Pradesh

Deadline: 25-Nov-2019 at 11:59:59 PM (Eastern Time – Washington D.C.)

Madhya Pradesh, the central state of India, has been in the forefront to contribute

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significantly towards promotion of clean energy solutions in the country as well as globally. To take such initiatives forward, Government of MP through its agency Rewa Ultra Mega Solar Limited (RUMS) – has requested the World Bank to support them on new technologies such as floating solar. On request of the Government of India, World Bank is already supporting Solar Energy Corporation of India Limited (SECI), under Innovations in Solar Power & Hybrid technologies project, to invest in early demonstration projects but with an objective to also build a robust pipeline of such projects while developing the policy and regulatory ecosystem. As part of deepening the market for floating solar projects in the country, engagement with MP will be an important step. This is specifically important as lack of experience in deploying several of these technologies in India, and globally, at scale is considered as a major constraint by various developers, financiers and other stakeholders.
World Bank will support RUMS and Narmada Hydroelectric Development Corporation (NHDC) in exploring potential of floating solar project in one of the states water bodies Omkareshwar Dam in Khandwa district of MP.

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eC2: Enabling Private Sector Participation in Electricity Distribution

Deadline: 14-Nov-2019 at 11:59:59 PM (Eastern Time – Washington D.C.)

U.S. Electricity Output Rose 6.2% From A Year Earlier

Policy makers acknowledge the role of private sector in distribution but would want to understand business models that may be suitable considering the local context of states in India. Till date only two cases of private sector participation in the Indian electricity distribution (under Licensee mode) have been tried in the states of Delhi and Odisha with mixed results. Beyond these two examples, other models of private sector participation (PSP) such as distribution franchises are also prevalent in the country and have met with mixed results. Further, Govt. of India in the past had also drafted an amendment bill to Electricity Act for introducing carriage and content separation, which may be another approach to encourage competition in the electricity distribution sector.

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eC2: Solid Waste Management Consultant

Deadline: 11-Nov-2019 at 11:59:59 PM (Eastern Time – Washington D.C.) solid waste

The overall scope of work involves providing technical advice and support to the team on municipal solid waste management including policy, regulatory and institutional issues, developing plans and strategies for addressing service delivery and infrastructure issues in sustainable manner, review of technical documents and designs, ToRs for hiring of consultants, bid documents and other outputs, and advising the Bank team regarding the design and engineering aspects of the various infrastructure interventions on solid waste management.

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eC2: Consulting Assignment for a Consulting Firm for the Better Life Farming Alliance Project in India

Deadline: 03-Oct-2019 at 11:59:59 PM (Eastern Time – Washington D.C.)Picture1

The Consulting Firm is required to undertake the following activities under the assignment which will be divided into two phases. The second phase of the assignment will be extended to the Consulting Firm contingent on satisfactory delivery and submission of all deliverables outlined under the scope of Phase I.
PHASE I : Under Phase I, the Consulting Firm will provide support in the design of the technical assistance and capacity building strategy of the project.
PHASE II: The second phase of the project will primarily be on the design of the training modules by IFC and delivery of entrepreneur trainings on ground based on TNA.

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