Harnessing the Power of Public-Private Partnerships: The role of hybrid financing strategies in sustainable development Samuel Colverson Summit Consulting Group with Oshani Perera IISD February 2012 Acknowledgements In addition to the many conversations and colleagues that have contributed to this paper, IISD would like to specifically acknowledge and thank the following individuals and organizations for their contributions to the discussion and research that have gone toward its development. Abby Semple: ICLEI - Local Governments for Sustainability Caroline Visser: International Road Federation Geoffrey Hamilton: United Nations Economic Commission for Europe Helder Chambal: Universidade Técnica de Moçambique Jamie Brown: Basel Agency for Sustainable Energy (BASE) and eCOS Louise Gallagher: United Nations Environnent Programme Chemicals Branch Michel Crevecoeur: United Nations Environnent Programme Finance Initiative Peter Nohrstedt: Swedish Environmental Management Council Sven-Eric Hargeskog: Affärskollegan Sweden Tina Perfrement: Perfrement Environmental Consulting Ltd (Australia) The authors would like to thank Mark Halle, Executive Director IISD Europe, for his ongoing support in developing a focus on public–private partnerships, along with the project administrators Fabrice Ressicaud and Deborah Roosen for their important contributions. IISD REPORT FEBRUARY 2012 Harnessing the Power of Public-Private Partnerships ii Table of Contents Introduction .........................................................................................................................................................................................................1 PART 1: What Are PPPs? ................................................................................................................................................................................2 1.1 Definition .............................................................................................................................................................................................2 1.2 Points of Clarification ......................................................................................................................................................................3 1.3 Types of PPP .......................................................................................................................................................................................4 1.4 Pros and Cons of PPPs ....................................................................................................................................................................5 PART 2: Global Context ..................................................................................................................................................................................9 2.1 State of Play in PPPs Around the World ...................................................................................................................................9 2.1.1 Statistical Caution ....................................................................................................................................................................9 2.1.2 European Union .......................................................................................................................................................................9 2.1.3 United States ..........................................................................................................................................................................10 2.1.4 Canada and Australia ..........................................................................................................................................................10 2.1.5 Emerging Nations ..................................................................................................................................................................10 2.2 Institutional Structures ................................................................................................................................................................ 12 2.2.1 PPP Market Maturity ........................................................................................................................................................... 12 2.2.2 Dedicated PPP Units ........................................................................................................................................................... 13 2.2.3 The European Commission and PPP .............................................................................................................................14 2.2.4 PPP and the Global Financial Crisis 2007–2008 ...................................................................................................... 18 2.2.5 PPP Toolkits ............................................................................................................................................................................ 19 PART 3: Case Studies .................................................................................................................................................................................... 21 3.1 Lessons Learned for PPPs and Sustainable Development ............................................................................................... 21 3.2 Integrating Ecological Criteria into PPPs: The case of a desalination plant in the State of Victoria, Australia ... .................................................................................................................................................................................................................22 3.3 The Importance of Comprehensive Evaluation and Detailed Specifications to Sustainability: Lessons from .... the Arlanda Express, Sweden .................................................................................................................................................... 31 3.4 The Need for Regulation and Accountability in Dedicated Units: An example from the Dublin Docklands ...... Development Authority, Ireland................................................................................................................................................37 3.5 Innovative Private Sector Solutions to Waste and Power Generation: The story of the Vancouver Landfill, ..... Canada ................................................................................................................................................................................................ 41 PART 4: Moving Forward: The integration of sustainability into PPP .......................................................................................... 47 References .........................................................................................................................................................................................................53 IISD REPORT FEBRUARY 2012 Harnessing the Power of Public-Private Partnerships iii Introduction The last 20 years have seen the rise to power of public-private partnerships (PPPs) as a means of crowding in investment and expertise from the private sector to the delivery of public goods and services. Widely utilized because of their purported advantages in off-budget funding, PPPs are a mechanism that modern governments regularly turn to in order to fulfill their responsibilities on public infrastructure and services. This trend is likely to continue following the 2007–2008 global financial crisis that sees many jurisdictions strapped for cash and seeking alternative methods of meeting the increasing demands for investment in public sector development. Whether PPP is an appropriate, successful, responsible, effective, efficient or legitimate method of public procurement is not the subject of this paper. Similarly, it seeks neither to provide a guide for creating or using PPPs, nor comprehensively explain or assess the issues involved in what are extremely technical and complex legal contracts drawn up between public bodies and the private sector. On these matters there is a myriad of research and discourse in the public domain, all by authors better qualified than we are, and we see no real justification for attempting to re- invent the wheel. What this paper does intend to do, however, is take the discussion around the value and relevance of PPPs and examine it through the filter of environmental and sustainable development, with an eye to future benefits and practices for all nations. As such, the paper starts from the assumptive foundation that PPP is a popular method of public procurement that will remain central to government policy across the developed world in the short- to medium-term future. Furthermore, considering the ongoing acceptance of PPPs in many middle-income economies, and the specialized challenges facing lower-income economies in the provision of public infrastructure and services, it is not difficult to imagine PPP becoming manifestly popular across the developing world. Sitting, as it were, on the cusp of a potential large scale take-up of PPPs that will influence the shape of many projects around the world, it is important to insure the vehicle is properly constructed and reflects international best practices and understandings of sustainability. It is the intention of this paper, therefore, to open the discussion on environment and sustainability within PPP and provide preliminary observations