The growing use of public-private partnerships to develop on-the-ground solutions to climate change around the world is likely to be undiminished by any failure to reach a legally binding global agreement at the United Nations Climate Change Conference (COP-15) in Copenhagen.
But a comprehensive global climate and energy policy agreement at COP-15 would do much to enable a wider engagement with the model in a range of new undertakings. Not only would a global deal facilitate public authority planning and cross-border co-ordination in the public and private sectors, it would vastly improve the commercial viability of projects, lowering political and regulatory risks to enable faster delivery and bigger scale. Most importantly, an agreement in Copenhagen would move the world towards mobilising vast amounts of private investment that might otherwise remain on the sidelines.
"The democratic, developed world needs to revolutionise current practice in the procurement of large-scale climate change solutions," says Mark Hoskin, partner at Holden & Partners LLP, a financial advisory firm that specialises in ethical and climate change investing. "An agreement in Copenhagen would help educate the electorates of the scale of the problem, giving politicians the political support and confidence in their home countries to countenance this kind of policy shift and financial commitment."
The public-private partnership model as it is presently being used has been drawing on private capital for nearly 20 years in a variety of projects. In the UK, where the model goes under the name Private Finance Initiative (PFI), it has delivered schools, highways, light rail and hospitals, as well as increasingly complex military procurement projects. Unlike traditional public sector procurement, where the private contractor simply designs and builds what the public authority orders, PPPs involve a competitive tendering process in which teams of private sector companies and their financial backers vie for a contract to design, finance, and manage the risks involved in delivering public assets. In return, the private partners earn fees from the government and/or tolls from users for the long-term operation and maintenance of the asset.
The whole-life costs of these projects can seem expensive, and PFI's adoption in the UK has not been without controversy. Some have argued that the tendering process is cumbersome, that private sector participants profit too much and that risk transfer mechanisms are insufficiently robust to prevent taxpayer bailouts on failing projects. The shadow chancellor George Osbourne recently said he would scrap the PFI name altogether, though it is unclear whether any substantial change in the way the model is used would accompany such a move.
Despite the opposition, the PPP model is being adopted with growing enthusiasm for public infrastructure projects in both developed and developing countries around the world. In the UK itself, notwithstanding the credit crisis, the value of PPP/PFI projects so far this year is £3.6bn, twice the level of a year ago, according to Partnerships UK, a government-sponsored partnership that supports infrastructure delivery. The continued use of PFI is partly driven by the inability of public authorities to close massive and long-standing infrastructure deficits through public financing alone. But there is also pressure to be as efficient as possible with scarce public money.The essence of PPP is that it allows projects to go forward when public sector authorities might not be able to afford them – at least not without borrowing beyond spending limits and risking sovereign credit downgrades, raising taxes, or selling essential public assets outright.
As part of efforts to combat climate change, PPP has been in use in a range of municipal and regional-level projects for cities and their surrounding suburbs for years. Many of these projects have shown promising results in alternative energy, energy conservation and public transportation.
The Chicago Solar Partnership, for example, has vastly improved energy efficiency in the Chicago Metropolitan area while also boosting overall air quality and reducing CO2 emissions since it began in 2000. The partnership has even attracted new industry and technology to the area and burnished its image as an environmentally friendly city.
More recent projects include the installation of energy-efficient street lighting in cities from New York to Bhopal, India, delivering cost savings of 30-40 per cent and reducing pressure on energy grids during peak usage hours. Mexico City's award-winning Metrobus PPP project has reduced carbon dioxide emissions in the world's second-largest city by an estimated 80,000 tons a year by encouraging large numbers of commuters to opt for public transportation and leave their cars at home. There are also major municipal alternative energy PPP projects under way to use wind, tidal energy and gas recovery.
In Copenhagen itself, a free city bike partnership programme operating since 1995 has made available some 2,000 bicycles in the city centre, cutting CO2 emissions in the city significantly by reducing vehicle use. Along the way, the programme has reduced maintenance costs for city centre streets, demand for parking spaces and bicycle theft. It has even created new advertising space for corporate sponsors of the programme on the bicycles themselves.
Many, if not most, climate change solutions such as these will continue to be undertaken at various sub-national levels of government. Quebec premier Jean Charest estimated in a speech at Climate Week NYC in September that 80 per cent of the work involved in implementing any agreement reached at COP-15 will be done by provincial and municipal authorities. This, he says, is because the de-centralisation of government in many countries has put most of the operational decision-making in their hands, rather than at the national level. With a majority of the world's population now living in urban areas, behavioural changes and efficiencies gained in the use of resources in these areas can have a significant impact on greenhouse gas (GHG) emissions globally.
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