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Inertia in infrastructure development : some analytical aspects, and reasons for inefficient infrastructure choices

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  • Strand, Jon

Abstract

This paper uses some simple conceptual models to draw out various implications of infrastructure investments with long lifetimes for the ability of societies to reduce their future greenhouse gas emissions. A broad range of such investments, related both to energy supply and demand systems, may commit societies to high and persistent levels of greenhouse gas emissions over time, that are difficult and costly to change once the investments have been sunk. There are, the author argues, several strong reasons to expect the greenhouse gas emissions embedded in such investments to be excessive. One is that infrastructure investment decisions tend to be made on the basis of (current and expected future) emissions prices that do not fully reflect the social costs of greenhouse gas emissions resulting from the investments. A second, related, set of reasons are excessive discounting of future project costs and benefits including future climate damages, and a too-short planning horizon for infrastructure investors. These issues are illustrated for two alternative cases of climate damages, namely with the possibility of a"climate catastrophe,"and with a sustained increase in the marginal global damage cost of greenhouse gas emissions.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 5295.

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Date of creation: 01 May 2010
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Handle: RePEc:wbk:wbrwps:5295

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Related research

Keywords: Climate Change Economics; Energy Production and Transportation; Climate Change Mitigation and Green House Gases; Transport Economics Policy&Planning; Environment and Energy Efficiency;

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Cited by:
  1. Vogt-Schilb, Adrien & Meunier, Guy & Hallegatte, Stephane, 2012. "How inertia and limited potentials affect the timing of sectoral abatements in optimal climate policy," Policy Research Working Paper Series 6154, The World Bank.
  2. Adrien Vogt-Schilb & Guy MEUNIER & Stéphane Hallegatte, 2012. "How inertia and limited potentials affect the timing of sectoral abatements in optimal climate policy," Working Papers 244628, Institut National de la Recherche Agronomique, France.
  3. Strand, Jon & Miller, Sebastian & Siddiqui, Sauleh, 2011. "Infrastructure investments under uncertainty with the possibility of retrofit : theory and simulations," Policy Research Working Paper Series 5516, The World Bank.

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