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Explained: Cost & Co-benefits in Climate Investment Plans

Manon Morel Thu, 26 January 2023
The upsides of city climate action are many. And investors want to understand the full picture before investing in climate projects. They want to know projected emissions reductions as well as the cost, return on investment and, increasingly, the co-benefits.
 
The more co-benefits, the better the business case and the more likely for the project to be bought into. This article will cover the importance of co-benefits for successful Climate Investment Plans. It will also go over how you can leverage digital platforms to maximize co-benefits in your plans.
  • Climate Action Plans (CAPs) must include Climate Investment Plans (CIPs) to attract funding. 
  • Quantified co-benefits in CIPs are becoming signposts of an attractive funding opportunity. 
  • Cost and co-benefit calculations are a powerful way of making the case for climate action.
  • Digital platforms help cities calculate economic factors and externalities that make up co-benefits.

What are co-benefits in city climate planning? 
To understand co-benefits, let’s first establish costs are in the context of city climate planning. 
 
Climate Action Plans lay out the initiatives a city will take to abate carbon per their target. CAPs are generally uncosted. Climate Investment Plans come in to display the costs of these initiatives. These can range from necessary funds for new technologies, policies or infrastructure changes. 
 
Now, what about co-benefits? Each mitigation initiative is likely to generate a positive benefit.
 
Take a look at the modal shift from petrol car to walking and cycling for 15% of commutes within a city. On the one hand, this will incur new costs in sidewalks, bike lanes or infrastructure. On the other, more active travel will generate improved air quality and healthier communities.
 
 
Screenshot 2023-01-26 at 14.23.56
 
The concept of co-benefits has been hard to use in practice for a simple reason. It is already hard to quantify emissions reductions. Adding costs and co-benefits to the equation adds yet another layer of complexity. Co-benefits are rarely identified and when they are, their impact is not quantified. Neither in monetary terms nor in terms of their broader impact on society. 
 
Current practices resemble a ‘tick-box’ approach, telling little to future investors about the scope of the project. Plans use words, rather than numbers to talk about resulting job creation or pollution reduction.
 
Research shows that this precedence of the qualitative over the quantitative is due to ‘gaps in data and technical capacity’.
‘Gaps in data and technical capacity for analysing data are major barriers to implementing policy actions that maximise co-benefits.

Why should we include benefits in Climate Investment Plans? 

Co-benefits provide a more holistic and complete picture of acting on climate issues. This is proving to be a powerful way of getting climate action over the line. Why? Because: 

  • Including economics of co-benefits makes the plan more investable 
Co-benefits are very powerful indicators of the potential success of the transition. And of its total business case. They are the determining factors for getting the project funded, or not. When we only take cost into account, there is less incentive for investors to get involved. 
 
Investors have a stake in seeing the far-reaching impact of urban transitions. Not only in terms of immediate profits, but also in the returns implicit in a better city. 
  • Including social factors makes the plan more supportable 
Articulating the ROI and co-benefits of the transition is crucial for investors and political backers. But it is important for everyone in the city. Citizens will rally round a project if they know their daily life will improve. Research shows that “communicating co-benefits could motivate action on climate change where traditional approaches have stalled”
 
How can a digital platform include co-benefits in my plan? 
Using powerful models and softwares that do the math for you, you can not only connect emissions to targets and actions, but also to cost and co-benefits. Our digital platform, ClimateOS provides the necessary tools and impact intelligence to understand the full impact of carbon abatement decisions. It helps you include co-benefits in your Climate Investment Plan by: 
  • Gathering the necessary data for you
We provide emissions data and economic parameters for your city, including cost data and data on externalities. ClimateOS gets its numbers from leading peer-reviewed sources for each market. You can refine the data but this provides a good starting point for you to get over the initial data gap.  
  • Calculating otherwise complex measurements
ClimateOS helps you with the calculation of carbon causal chains, emissions reductions, associated project costs and co-benefits as well as their economic value. When you’re doing a basket of projects, like bike lanes or public transport networks – it’s crucial to get a bigger picture. Automatic modelling should show interdependencies and trade-offs between competing objectives to reflect the complex, constantly evolving real-world setting.
  • Providing a framework to establish cost and co-benefits for all your transitions
By using a modular, shift-by-shift-approach in ClimateOS, you will be able to model every shift that your city is undertaking. As such, you get a systematic approach to calculating each transition. This goes beyond quantifying co-benefits for each of your transitions. It allows you to attribute costs and co-benefits to stakeholders, providing you with a framework for thinking about each initiative so it leads to the intended outcome
  • Standardizing the way we collectively talk about cost and co-benefits 
The end product of using ClimateOS’ impact intelligence is a report laying out the costs and co-benefits of your transition. You now have a way to show your business case to investors and other stakeholders. And a common language and a standardized way to show the full picture of your transition.
 
 
What’s next? 
When cities add costs to initiatives in their Climate Action Plans, they are creating Climate Investment Plans. When cities add co-benefits – showing carbon savings alongside job creation, healthcare and air quality – they are creating attractive investments for potential partners. Co-benefits in a Climate Investment Plan can make or break an investment opportunity – and the whole city climate transition.


 
Learn more about climate investment planning from Helsingborg’s experience with ClimateOS.