The document presents a report on the impacts of climate change on infrastructure and the economy, based on a workshop by the Climate Institute and partners. It highlights the vulnerability of businesses to extreme weather events, particularly the 2009 heatwave in Victoria, illustrating the cascading effects on interconnected systems. Key findings emphasize the necessity for comprehensive climate risk management and the importance of collaboration among public and private sectors to enhance resilience against future climate risks.

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2. Infrastructure Interdependencies
and Business-Level Impacts
A new approach to climate risk assessment
April 2013
“Extreme weather and its impact on infrastructure is a multi-million dollar risk
issue…Businesses and other organisations are vulnerable not just to direct
impacts, but also the indirect consequences they‟ll experience via impacts on
infrastructure, supply chains and inputs like labour.”
John Connor
CEO, The Climate Institute
This presentation summarises a report looking at some of the physical impacts of climate change on the infrastructure
sector and the resulting cascade of consequences for the broader economy. The findings come from a workshop
conducted in December 2012 by The Climate Institute, Manidis Roberts (a part of the RPS Group) and KPMG, which
piloted a process for analysing the climate-related risks associated with interdependent infrastructure systems of a
major city.
Image: Michael Hall, Creative Fellow of
The Climate Institute
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3. Record-breaking summer temperatures…
Heat events have killed more people than any other natural hazard in Australia over the
past 200 years (PWC, 2011)
January 2013: Australia’s hottest
month on record
February 2012: sea surface
temperatures show hottest month
on record for Australia’s oceans
Dec 2012-Feb 2013: warmest
summer on record
March 2013: prolonged
heatwave affected southeast
Australia, breaking numerous
Maximum temperature anomaly (departure from 1961–1990 average)
records
for Australia, 1–18 January 2013.
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4. ..and more evidence of our patchy preparedness
“One of the most notable findings was that Australian reviews
virtually ignored the issue of climate change and its impact on
flooding; some reports didn‟t refer to it at all…This contrasts
markedly with overseas reviews”
NCCARF, 2013
“…climate change has generated little interest in either the
ADF or the Australian Defence Department… The UK military
has appointed a star-ranked climate change and energy
security envoy. The United States Navy (USN) has established
a similar position.”
Australian Strategic Policy Institute, 2013
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5. Growing global attention to cascading
consequences
“Projections of damage costs for climate change impacts typically
assess the costs of directly damaged settlements, without taking
surrounding infrastructure into account… A better understanding
of the potential for such cascading effects, their extent, and
potential responses is needed.”
World Bank, 2012
“Conduct case study research to understand infrastructure
and supply chain dependencies for sectors and organisations
at high risk of climate change impacts”
The Economics of Climate Resilience (first
recommendation), UK National Adaptation Program, 2013
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6. Interdependencies Exercise
• There has been and will be a dramatic rise in the number of extreme weather events
affecting every business and organisation - suppliers and markets.
• Those that do not plan for such events face potentially dramatic consequences:
increased operation and maintenance costs, reduced capacity to supply, and even
potential loss of business altogether.
• Understanding the possible impacts on your organisation enables assessment of the
costs and benefits of adaptation strategies.
• This exercise credibly identifies and quantifies climate impacts on infrastructure, and
model the resulting economic consequences for the Melbourne metropolitan area,
under extreme temperature events in 2030 and 2050.
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7. The 2009 heatwave in Victoria
• The 2009 heatwave was exceptional (compared to 100-150 historical records).
• Governments, councils, utilities, hospitals and emergency response organisations plus
the community were largely unprepared.
• Temperatures were 12-15 C above 28-32 C average for many consecutive day –
maximum temps were 46.4 C, with three consecutive days of 43 C. Night time temps
were unusually high.
• The heatwave led to a sharp rise in heat-related illness and deaths (374 excess
deaths) amongst vulnerable groups.
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8. The 2009 heatwave in Victoria* ($* $#&$&+, ) (-. ' #, ) ' . (, /(
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• Heat-sensitivity of interconnected systems – transmission (
networks and supply chains – was particularly problematic.
• The city’s electricity sector stood out as the most (
vulnerable to heat – transmission, transformer and
distribution faults/failure.
• A vicious cycle of interaction developed in the
heatwave, exposing high sensitivity across systems –
power, transport and health systems.
• At the end of the event the electricity sector was in a
severe state of stress and near collapse.
• Cumulative impacts arose from the coincidence of multiple
climate-related hazards – heatwave and bushfire (Black
Saturday bushfires occurred in Phase 2 of the heatwave).
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9. The 2009 heatwave in Victoria
Infrastructure impacts of 2009 heatwave in Melbourne
Sector Sub-sector Impact Description Trigger point and
level thresholds
Electricity High • Record demand • Full operation & distribution
• Compromised supply capacity
• Reduced transmission • Heat lowers performance
efficiency and faults
Energy
Gas Min Resilient No reported sensitivities
Generator Min • Impaired cooling for thermal • Limits on available water for
stations cooling
• Reduced coal production on • Risk of bushfire
high risk days
Train High • 29 points of buckling lines • Signal equipment susceptible to
• Air con failure heat
Transport
Trams Mod • Some trams failed • Engines sensitive to heat
Buses Min • Busses served as backup to • Air conditioners struggle above 35
train cancellations degrees
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10. Climate Scenario:
Extreme Heat 2030
Frequency of summer days over 35
• Extreme heat event - daily recorded degrees in Melbourne.
event over 35 C
• 24 days per summer for baseline
(1990)
• 30 days per summer by 2030 (28%
increase)
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11. Climate Scenario:
Temperature exposure
Temperature rise across Melbourne
to 2030
This figure is a spatial representation of
the temperature change from the 1990
average baseline to 2030. This figure
demonstrates that Victoria will
experience an increase in extreme
temperatures, although Melbourne will
experience a smaller change relative to
the rest of the state. This does not take
account of the urban heat island effect.
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12. Climate Scenario:
Community vulnerability & population density
Please reference the
Figure 3 represents the report for more
community vulnerability in the detail.
greater Melbourne region.
Figure 4 represents population
density.
Taking Figures 3 and 4 together, it
is possible to identify areas of
particular vulnerability within the
community. Vulnerability is
characterised by both high
sensitivity to external events such
as heatwaves, and low capacity to
adapt to such events.
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Figure 4. Population density

13. Mapping Interdependencies
A high level risk-mapping exercise identified impacts from the 2009 extreme heat event in
order of their flow-on effect.
The increase in frequency and severity of heatwaves produced by climate change means
that these impacts are likely to intensify, unless we take steps to prepare for them. The
2009 Melbourne heatwave was estimated to cost the economy $800 million. Ensuring
future heatwaves do not inflict major economic damage requires climate risk management
to be undertaken system-wide.
Example of flow-on impacts in an extreme heat event
Economy-
First order Second Fourth order
wide
heat effects on order Third order Stranded
Loss of
materials + Track Track closure assets +
service +
structures buckling patrons
productivity
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14. Mapping Interdependencies
Please reference the report for more detail.
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15. Hypothetical Company – GoodCo
Using inputs from an extreme temperature event in 2030, we modelled a number of
potential impacts on a hypothetical Melbourne business, called „GoodCo‟.
• GoodCo is a large manufacturer and wholesaler of a
wide range of consumer goods.
• Head office is within the CBD and 50 per cent of
products are manufactured within the greater
Melbourne metro region.
• The company employs 2,000 FTEs around the
Melbourne metro region. 500 are in head office, with
the remainder in production and distribution.
• Inputs and outputs are delivered via a variety of
transport networks.
• Head office relies on power and communications
networks to operate.
• Manufacturing requires significant inputs of power and
water to operate.
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16. The Scenario – GoodCo
• The greater Melbourne area is affected by extreme heat over five days.
• Some employees cannot work due to loss of transportation and/or illness and
subsequently work overtime to make up for lost production.
• Some employees cannot make up for lost production and planned production falls.
Scenarios Employment profile
• Scenario 1: assumes that 20% of Of the 2000 FTE employees in Melbourne,
employees cannot get to work on • 500 are able to telework so there is no
a given day of extreme heat. loss of production.
• Scenario 2: assumes 50% of • 500 are able to work overtime to
employees cannot get to work on compensate for lost output, increasing
a given day of extreme heat. GoodCo’s labour costs.
• Scenario 3: assumes 100% of • 1000 employees can neither telework
employees cannot get to work on nor work overtime. GoodCo suffers from
a given day of extreme heat. a fall in revenue due to reduced
production.
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17. The Results – GoodCo
It was found that extreme heat could negatively affect GoodCo through:
• increased labour costs resulting from more overtime being paid; and
• lost revenue as a result of a supply shock.
The net impact on GoodCo was estimated to be a decrease of 0.2-1.1 per cent
of total revenue depending on the severity of the heat wave and the number of
employees affected.
This is a considerable impact arising from modelled losses
(transport, labour, demand for goods etc.) and totalled roughly $1-5 million.
The estimated impact is the result of disruptions to labour supply only (which
leads to either increased costs or reduced production); significant additional
costs from supply chain disruption could also be reasonably be expected.
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18. Key Findings
• Businesses and organisations are largely unprepared for a heatwave event of
magnitude. The consequences for operations, infrastructure capacity, coping ranges
and system interactions would be severe.
• Mapping the interdependencies and impacts of the heatwave shows both the range
and paths of its cascading consequences. It also shows that while costs arising from
such an event may be extremely high, they are diverse, and spread across multiple
parties.
• Responsibility for planning and actions to reduce vulnerabilities lies with multiple
parties, and failure by any one party to take such actions may have severe adverse
impacts on others. It is essential that climate risk management take place at the
systems level rather than just the organization or even sector level.
• Modelling showed that the degree of cost impacts was highly dependent on the
specific characteristics of the individual business.
• While much of the costs were imposed by external factors, in many cases firms may
be able to moderate costs by taking steps to reduce their exposure (eg. back-up
power sources; flexible labour arrangements).
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19. Recommendations
For public and private sector infrastructure owners and operators
• Develop common methods and tools for interdependency analysis to inform strategies
to improve infrastructure resilience.
• Establish city-wide taskforces with private and public sector participation to share and
better coordinate information and climate risk management strategies for each of the
major capital cities across Australia.
• Disclose material climate risks, both indirect and indirect, to major infrastructure
systems.
• Disclose and update plans for management of these risks.
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20. Recommendations
For Government
• Implement a national initiative to better identify current and emerging climate risk
impacts for interdependent infrastructure networks and engage stakeholders in cross-
sectoral collaborative solutions.
• Expand the approach for ―critical‖ infrastructure taken by the Federal Critical
Infrastructure Program for Modelling and Analysis (CIPMA) to all other key infrastructure
assets and industry sectors.
• Require private-sector proponents or owners of infrastructure—especially those seeking
Commonwealth approval or funding—to disclose how their assets and
interdependencies will manage climate risks under likely and plausible climate scenarios
such as 2 and 4 degrees of warming.
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21. More information
Visit www.climateinstitute.org.au
Or connect with us on Facebook or Twitter for the latest news…
www.facebook.com/theclimateinstitute
www.twitter.com/climateinstitut
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