Development of tools that allow Local Governments to translate climate change impacts on assets into strategic and operational financial and asset management plans.

Adaptation Research Grants Program
Dr. Jacqueline Balston
Local Government Association of SA
South Australia

Executive summary from final report

The International Panel on Climate Change (IPCC) Fourth Assessment Report (AR4) (IPCC 2007) states that the warming of the climate system is now “unequivocal”. As a result, southern Australia is likely to experience changes not recorded over the past century that include continued increases in temperature, changes in rainfall, an increase in evapotranspiration, a likely increase in the number of extreme fire danger days, sea level rise and increased frequency and height of storm surge events. Currently, Australia’s 560 Local Governments are responsible for the management of a range of assets valued at approximately $212 billion, many of which have a life span greater than 50 years and so will be affected by climate change.

To date, the maintenance and replacement of hard infrastructure by Local Government has been guided by the principles, models and tools provided in the International Infrastructure Management Manual (IIMM), developed by the Institute of Public Works Engineering Australia (IPWEA) in conjunction with Councils, engineers and manufacturers of various components and materials. However, these tools do not incorporate climate change impacts or calculate the likely flow-on effects to asset and financial management and so Local Governments have been limited in their capacity to estimate these changes. This project has aimed to address this gap in understanding between climate change impacts and likely costs associated with infrastructure asset maintenance and management by developing a financial modelling tool for integration into an existing IPWEA decision support tool for use by Local Governments staff.

A detailed outline of the scope of the study is given in Appendix 1 and includes a description of the structure of this report and the methodology used. Ten collaborating Councils across South Australia, Victoria, Western Australia, and Tasmania were involved in the project from the early stages and attended stakeholder meetings, provided input to the methodology, asset and financial data and gave feedback on the tools developed. The first stage in the project involved a review of the climate changesalready recorded and those that are likely for southern Australia out to the year 2100. Climate data for use in the development of a climate change asset management financial tool was identified.

The second stage of the project involved a detailed review of the literature on the value and type of asset classes of importance to Local Government in Australia and the deterioration of materials widely used in significant Local Government infrastructure construction: concrete, steel and bitumen. Climatic factors likely to increase the speed of materials deterioration were also identified. On the basis of findings from the climate and literature review, and detailed discussions with the Local Government Association South Australia (LGA SA), the Institute of Planners and Water Engineers Australia (IPWEA) staff, technical and stakeholder team members, roads were identified as the key asset of most value that will be affected by climate change. Roads represent approximately 80% of the value of Council assets and so the development of a useful decision support tool that allows Local Governments to translate climate change impacts on road assets into strategic and operational financial and asset management plans focussed on three road asset classes: sealed roads (hot-mix and spray-sealed) and unsealed roads.

To support the development of a financial model, over 20 mathematical engineering models that estimate road deterioration were reviewed and their appropriateness for application to the present study evaluated. The analyses concluded that for sprayed seal roads, climate change impacts on the deterioration of the seal surface can best be assessed by Martin’s model and the maximum service life of the spray sealed surface Quantifying the Cost of Climate Change Impacts on Local Government Assets can be determined by Oliver’s model. The maximum service life of asphalt (hot/mix) surfaces can be determined using an equation by Choi and the deterioration of the road surface and sub-base by models by Austroads and the Australian Road Research Board (ARRB). Giummarra’s model was identified for calculating climate change impacts on unsealed roads. In each case temperature and rainfall parameters were required to model the impacts of climate change on each of the road assets.

The third and fourth stages of the project involved the development of the financial asset management model and tool for use by Councils. The Financial simulation Model developed was created in Excel ® and was designed to integrate with the existing IPWEA NAMS.PLUS software tools. The software provides a clear, comparative analysis of the financial impacts of climate change for each of the three road types for which there were valid mathematical models (asphalt/hotmix and spray sealed bitumen roads and unsealed roads). The model uses Monte Carlo simulations and options pricing as methods of uncertainty analysis to deal with the highly variable nature of data inputs that include the non-static components of climate change scenarios and impacts on the useful life of roads, and economic and price fluctuations.

Historical monthly temperature and rainfall data for the period from 1911 to 2010 were extracted from the Bureau of Meteorology High Quality National Real Time Monitoring (RTM) gridded data set (previously known as the Australian Water Availability Project data set (AWAP)) as an LGA area averaged, monthly data set for each of the ten collaborating Councils. This data was then used to calculate long-term climate distributions for each of the four climate variables required for the models: mean monthly precipitation; monthly mean minimum temperature; monthly mean temperature and the Thornthwaite Index. Distributions for the twenty years corresponding to the 1990 baseline years used by most Global Climate Models (GCMs) were then calculated for each LGA and each climate variable. To keep the tool simple and avoid the need to update the data with global climate model outputs either currently available or likely to be generated for the CMIP 5 runs currently underway, the model was designed to be able to alter the mean and distribution of each parameter based on user defined climate changes. This approach allows the user to test the impact of any selected climate change scenario if the projected change in annual mean rainfall or temperature compared to the 1990 baseline is known. To reduce errors associated with changing only the mean of the distribution, adjustments to rainfall data were made at the monthly scale prior to calculating annual values, to take into account the uneven distribution of rainfall throughout the year. For testing of the Model and the calculation of results for the report, the historical climate distributions were adjusted according to the CSIRO OZCLIM projected changes in mean temperature and rainfall corresponding with the IPCC Fourth Assessment Report A1FI scenario for the years 2050 and 2100. The climate change impact in terms of changes in road maintenance and repair costs is determined as the difference between the total present value of costs with and without climate change. Using an annuity formula, these costs were also transformed to the impact in terms of useful life. As the equations for the impact of climate change are different for each road asset class, they are treated separately in the model.

The fifth and final stage of the project involved testing of the software tools by eight of the collaborating Councils using their own data. It is noted that there were significant differences between Councils on data availability and accuracy, in part because of different types and stages of asset management system implementation. Key conclusions derived from the pilot modelling were: (1) Over the periods modelled the incremental impact of climate change on road infrastructure of all three types appears to be generally small and positive, with respect to both useful life and costs; and (2) Results across Councils clustered around the mean for asphalt/hotmix and spray 4   Quantifying the Cost of Climate Change Impacts on Local Government Assets sealed roads, but across a significantly wider range for unsealed roads. Trends evident in the 2050 scenario were amplified for the 2100 scenario.

The development and trialling of the Financial Simulation Model on selected case study Local Government areas has shown that climate change is likely to have an impact on the life of road assets, both unsealed and sealed, even though that impact is calculated to be quite small, in comparison to current life expectancy for the asset class. As the Model combines economic modelling, asset deterioration models, climate data and the option to test a range of climate projections to provide life cycle estimates as an output, it is well suited to interface with the NAMs industry standard asset management practice framework. In summary, the project has succeed in developing a rigorous model and user friendly input tool that are compatible with the current Excel ® based asset and financial management tools and that are able to calculate the cost of climate change on three asset classes (spray sealed, asphalt (hotmix) and unsealed roads) and which takes into account the uncertainty associated with financial and climate uncertainties. IPWEA are now examining the options for commercialisation of the tools at a national scale.

Read the final report and addendum.