The Financial Accountability Office of Ontario (FAO) recently released its final report in the Costing Climate Change Impacts to Public Infrastructure (CIPI) series which projects the budgetary impacts of extreme rainfall, extreme heat and freeze-thaw cycles on public infrastructure in Ontario.
A significant portion of Ontario’s public infrastructure was designed based on historical climate data. However, with the ongoing climate changes, the $708 billion portfolio is vulnerable to climate hazards. Without adaptation measures, it is anticipated that the annual cost of maintaining existing public infrastructure will increase by an average of $4.1 billion throughout the century in a medium emissions scenario. The extra climate-related expenses associated with this “no adaptation” approach signify a 16 per cent rise in infrastructure costs relative to a stable climate base case.
The report noted that adapting public infrastructure to withstand these climate hazards can help lower climate-related infrastructure costs.
Additionally, in a proactive adaptation strategy, where all public infrastructure is adapted over the next fifty years, climate-related infrastructure costs would add an average of $3.0 billion per year over the century.
In a reactive adaptation strategy, however, where public infrastructure is adapted more slowly at the end of their useful lives, climate-related costs would add $3.5 billion per year, according to the report.
The report noted that climate-related infrastructure costs will affect provincial and municipal budgets in the long run with the impacts dependent on the extent of climate change as well as the asset management strategies undertaken.
Climate-related costs to the Province’s portion of Ontario’s infrastructure portfolio would add 2.8 to 3.4 percentage points to the Province’s net debt-to-GDP ratio by the end of the century, in a medium emissions scenario. These budget impacts are not likely to significantly influence the Province’s fiscal sustainability, according to the report.
The report noted that the impact of climate-related infrastructure costs on municipal budgets is projected to be four times larger than for the Province, since Ontario’s municipalities manage more than 70 per cent of the portfolio in scope, and their portfolio is more susceptible to these climate hazards.
To highlight the comprehensive extent of these budget impacts, funding the climate-related expenses of the integrated provincial and municipal portfolio would result in an increase of the Province’s net debt-to-GDP ratio by 15.2 to 16.7 percentage points by the end of the century in a medium emissions scenario. The report concluded by nothing that Ontario’s net debt escalated by 27.9 percentage points over the 41-year period from 1981-82 to 2022-23.
