Ontario watchdog report projects the cost of climate hazards to public infrastructure

The Financial Accountability Office of Ontario (FAO) released its final report in the Costing Climate Change Impacts to Public Infrastructure (CIPI) series. This report projects the budgetary impacts of extreme rainfall, extreme heat and freeze-thaw cycles on public infrastructure in Ontario.

Much of Ontario’s public infrastructure was designed based on historical climate data, and the climate is changing, leaving the $708 billion portfolio vulnerable to climate hazards. In the absence of adaptation, more frequent and intense climate hazards are projected to add $4.1 billion per year on average over the century to the cost of maintaining existing public infrastructure in a medium emissions scenario. The additional climate-related costs of this “no adaptation” strategy represent a 16 per cent increase in infrastructure costs relative to a stable climate base case.

Adapting public infrastructure to withstand these climate hazards can help lower climate-related infrastructure costs. In a proactive adaptation strategy, where all public infrastructure is adapted over the next five decades, climate-related infrastructure costs would add an average of $3.0 billion per year over the century. In a reactive adaptation strategy, where public infrastructure is adapted more slowly at the end of their useful lives, climate-related costs would add $3.5 billion per year.

Climate-related infrastructure costs will affect provincial and municipal budgets over the long term, with the impacts depending on the extent of climate change and the asset management strategies undertaken. In a medium emissions scenario, 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. These budget impacts are not likely to significantly influence the province’s fiscal sustainability.

However, the impact of climate-related infrastructure costs on municipal budgets is projected to be four times larger than for the province, as Ontario’s municipalities manage over 70 per cent of the portfolio in scope, and their portfolio is more susceptible to these climate hazards.

To illustrate the full magnitude of these budget impacts, funding the climate-related costs of the combined provincial and municipal portfolio would raise 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. For context, Ontario’s net debt rose 27.9 percentage points in the 41 years from 1981-82 to 2022-23.

To learn more, read the full report here.