Authors: José Gómez-Ibáñez, Zhi Liu
Major trends and events including climate change, automation, the sharing economy and the COVID-19 pandemic have brought radical uncertainties to humanity. These factors not only affect the current operation of infrastructure, but will also shape its future development. The new book Infrastructure Economics and Policy: International Perspectives, published by the Lincoln Institute of Land Policy, discusses how the infrastructure sector should respond to such uncertainties. Three chapters of the book are dedicated to the interactions between climate change, automation, the sharing economy and infrastructure, exploring how public policies can tackle challenges brought by uncertainties. The COVID-19 pandemic broke out while the book was being written, and sufficient evidence was unavailable at that time to assess its impacts on infrastructure. Now, with growing data and empirical studies, we share our reflections as follows.
Climate Change
Extreme weather and natural disasters triggered by climate change can severely disrupt infrastructure services and even destroy infrastructure facilities, including public transit lines and energy transmission pipelines. Climate change exerts vastly different impacts across regions. For instance, wildfires constitute a primary threat in California, while rising sea levels represent an imminent crisis for Miami. Therefore, Henry Lee, author of Chapter 18 and Director of the Environment and Natural Resources Program at the Harvard Kennedy School, argues that effective adaptive policies should be led by lower-level governments and advanced through bottom-up approaches.
Lee holds that countries will make unprecedented investments in climate-resilient infrastructure over the coming decades. He analyzes the features of such investments and elaborates on transformations required in the transportation, electricity and water sectors. After identifying governance challenges underlying all climate mitigation and adaptation solutions, Lee proposes governance reforms to facilitate more effective infrastructure planning, delivery and management. His core viewpoints are listed below:
To fulfill national commitments to net-zero emissions by 2050, unprecedented investment in infrastructure will be required.
Given the varying nature and severity of climate damages across locations, local governments will likely take the lead in formulating adaptive policies.
Emission mitigation efforts will exert the most profound impacts on the power sector. Electricity will replace the direct combustion of fossil fuels in transportation, heating, cooling and manufacturing. Meanwhile, as countries scale up solar, wind and other renewable energy sources, more sophisticated, extensive power grids and standby capacity will be needed to guarantee system reliability.
Changes in precipitation patterns will force some regions to import water, expand desalination capacity, and encourage local water conservation via higher water pricing.
Transportation infrastructure will be the least affected sector, even though most vehicles will shift to electric or hydrogen power.
Four governance transformations are necessary to deliver successful climate adaptation investments: (1) reduce the number of government agencies and administrative tiers with overlapping responsibilities; (2) streamline the facility siting process; (3) address shortages of financial and human resources; (4) prioritize preventive disaster investment over reactive disaster relief spending.
Autonomous Vehicles
The second radical uncertainty examined in the book is automation and other emerging technologies that have advanced rapidly thanks to breakthroughs in cloud computing, the Internet of Things, artificial intelligence and other information technologies. In Chapter 19, Shashi Verma, Director of Strategy and Chief Technology Officer at Transport for London, focuses on whether these new technologies will revolutionize the infrastructure sector. Verma reminds readers that fundamental transformations in infrastructure usually unfold at a slow pace. Taking autonomous vehicles (AVs) as a case study, he analyzes the economics of AVs, their impacts on alternative transport modes and user behavior, as well as institutional barriers to widespread public adoption. His recommendations are as follows:
Autonomous vehicles may bring fundamental technological shifts comparable to the invention of the internal combustion engine, and will exert disruptive influences on cities.
Policymakers should prepare for the arrival of this new technology, covering driver licensing, road space allocation, financial support for public transit, and price regulation.
Between half and three-quarters of taxi fares cover driver labor costs. If AVs eliminate such expenses, travel demand will surge and pose an existential threat to public transit. Public transit can only compete with AVs during peak hours and when free from traffic congestion.
Without a substantial rise in ride-sharing, growing AV usage will drastically worsen road congestion. The only unambiguous benefit will be a sharp reduction in urban parking space demand.
The Sharing Economy
The third radical uncertainty discussed in the book is the sharing economy, an economic model that enables people to access, provide and share goods and services via online platforms. How will the sharing economy affect infrastructure services and assets? In Chapter 20, Andrew Salzberg and O.P. Agarwal address this question using urban transportation as a case study. Salzberg serves as Director of Public Policy at Transit, a leading North American transit mobile application, and previously held an executive position at Uber. Agarwal is a former Indian civil servant and World Bank specialist, currently Chief Executive Officer of World Resources Institute India.
Over the past decade, new shared mobility models have expanded globally, including shared cars (Zipcar, Car2Go, Uber, Lyft, Didi, Ola) and small electric micro-mobility vehicles such as e-bikes and electric scooters (Bird, Lime, Gojek). Salzberg and Agarwal explore the potential benefits, costs and risks of shared mobility. They argue that the sharing economy can boost fixed asset utilization and expand access to services. Nevertheless, experience in the United States shows that market penetration remains low, as most consumers still prefer private mobility services. It remains uncertain whether shared services will expand to a large scale. The authors predict new regulatory frameworks will be introduced to mitigate disruptive impacts on traditional industries. More importantly, public policies governing road pricing, parking fees and congestion charges will determine the future of the sharing economy in urban transport. Key takeaways from the chapter include:
The sharing economy is not altruistic neighborhood exchange, but digital transactions connecting asset owners and users enabled by technological advances.
In theory, car sharing can greatly raise asset utilization, as private vehicles are only in use for around 5% of the time. Simulations show that a comprehensive shared mobility network deploying appropriately sized vehicles (including autonomous cars) to fulfill all motorized trips can drastically cut peak-hour congestion, reduce the number of vehicles on roads, and lower required roadway and parking infrastructure for a given travel volume. However, these simulation results are optimistic, assuming all travelers will adopt system-efficient shared mobility. In reality, the long-term decline in carpooling demonstrates the difficulty of persuading multiple passengers to share a single vehicle.
Infrastructure authorities can incentivize sharing via per-vehicle congestion charges or dedicated high-occupancy vehicle lanes.
The development of micro-mobility services such as e-scooters and e-bikes particularly relies on well-designed street space that allows safe operation for riders of all skill levels.
The COVID-19 Pandemic
During the writing of this book, researchers actively studied two-way interactions between infrastructure and the COVID-19 pandemic. Chapter 3, authored by Sameh Wahba, Somik Lall and Hyunji Lee of the World Bank, delivers one of the earliest analyses on how infrastructure shapes pandemic risks. They argue that inadequate infrastructure and unaffordable services have exposed low-income neighborhoods in developing cities to higher COVID-19 infection risks. By contrast, many major cities in China and Europe adopted lockdowns, quarantines and other restrictive measures limiting access to transport infrastructure to curb transmission. Debates persist regarding the effectiveness of such measures in curbing disease spread and whether their substantial economic costs are justified. Key insights derived from the pandemic are as follows:
Public transit systems worldwide suffered steep declines in ridership and ticket revenue. Even after the pandemic ends, full recovery is unlikely. Commuters have grown accustomed to remote work and online meetings, and perceive crowded public transit as a health hazard.
A long-term shift from public transit to private cars will trigger financial collapse for transit operators and severe gridlock in large congested metropolises. Public policies are needed to revitalize public transit and prepare systems for future pandemics.
Increased public infrastructure investment constitutes a core component of post-pandemic economic recovery agendas. Such funding aims to create jobs and revitalize the economy; it can accelerate delayed public infrastructure projects, clear backlogs of maintenance work, and finance ready-to-build initiatives. A critical question remains whether this is the appropriate time to launch large-scale new public infrastructure megaprojects.
Policymakers often assume infrastructure investment generates strong multiplier effects across the economy. However, Chapter 2, written by Gregory Ingram (former President of the Lincoln Institute) and Zhi Liu, reviews empirical studies of economic stimulus programs and reaches a different conclusion. In developed economies, infrastructure spending delivers almost no stimulus effects in the first several years after a crisis, even without fiscal intervention economic growth would resume naturally. While infrastructure investment yields clear long-term economic benefits, its short-term stimulus impact is negligible, for two reasons: lengthy preparation and construction timelines for projects, and crowding-out effects on private investment. Therefore, stimulus packages should prioritize high-value, shovel-ready projects.
About the Authors
José A. Gómez-Ibáñez, Derek C. Bok Professor Emeritus of Urban Planning and Public Policy, Harvard University
Zhi Liu, Senior Fellow and Director of the China Program, Lincoln Institute of Land Policy
