Framing Climate Change Implications for Infrastructures and Urban Systems - Climate Change and Infrastructure, Urban Systems, and Vulnerabilities - page 32

Risk management is especially salient for many kinds of infrastructure investment
and management, because the decisions tend to be large-scale in so many ways: large
institutions making decisions about large structures involving large investments and
long expected lifetimes. Risks that a structure may have to be decommissioned before
the end of its designed lifetime can imply high costs, and risks that an infrastructure
may have to be retroited during its lifetime to adapt to change conditions also can
imply high costs. As a result, in times when external conditions appear likely to change
over periods of decades, risk management is vitally important, involving such issues as
estimates of the economic costs of disruptions and potentials for flexibility over a struc-
ture's lifetime - in contrast to rigidity and inflexibility.
Applying risk analysis to infrastructure projects
The Transportation Research Board (2008) states that new methods are necessary for
addressing the impacts of climate change in transportation decision making on infra-
structure and services. In particular, the report cites the need for probabilistic meth-
ods, like risk assessment, to be used in lieu of the more deterministic methods currently
employed. Making the principles of risk assessment operational for transportation and
other infrastructure managers is a critical next step in decision support.
The fundamental equation of risk analysis is: risk equals the product of probability and
consequence . The idea is that if one can quantify the value of the investment at risk, this
can be compared to the investment necessary to avoid that risk and sound economic
decisions can be made. In very simplistic terms if the investment to avoid the risk is less
than the value of the risk to the infrastructure itself then the investment is sound and
should be made. If it is not, then it is beter to accept the consequences and repair or
rebuild as necessary.
Recent atempts to apply risk analysis to climate change adaptation have sometimes
been unclear about the meaning and application of probability and consequence. Some
have directly applied the probability that a climate stressor -- such as a heat wave -- will
occur to indicate the probability of damage. However, this presupposes that the infra-
structure will necessarily be damaged if the stressor occurs which is not always the case.
Probability, in the case of infrastructure services, more appropriately refers to the prob-
ability of degraded service in the event of a climate stressor.
To be sure, the probability of degraded service depends on the probability of the
stressor occurring in the first place. But these probabilities are related by the ability of
the infrastructure to withstand the climate stresses, including both exposures to stress
and vulnerabilities to stress. For example, a 100-year storm may occur, yet a robust pow-
er plant may withstand that storm and continue to provide full service without interrup-
tion. Hence the probability of reduced service in this example is zero, even though the
probability of the climate stressor is 1 percent.
There are concerns in the identification of the consequences as well. Some analysts
have only included the loss of the infrastructure itself, sometimes employing replace-
ment costs and other times the depreciated value of the structure. Either approach
ignores the true benefit to society of the infrastructure, i.e. the value of the service pro-
vided. While this may be a challenging variable to estimate, failure to do so greatly
underestimates the true consequences. A more complete analysis of the consequences,