Case Study 7: Financial risks in water infrastructure planning
About the case
The case study on "Financial risks in water infrastructure planning" aims to understand the complexities and controversies around the application of the precautionary principle in the context of urban waste water infrastructure provision.
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While the application of the precautionary principle has resulted in expensive infrastructure projects in London, it has triggered transparent processes and innovation in Milan.
Brief summary about the case study
It examines these dynamics by example of case studies in London and Milan, and begins by outlining the risks and threats associated with the cases and relates them to the conceptual core of the precautionary principle, the risk governance process, and the regulatory and legal history. The case study argues that the application of the precautionary principle through the WFD has significant impacts on urban development and that its application shifts risks from environmental impacts towards long-term planning risks and economic vulnerability of cities. The examination of the risk governance process further shows how the complexity of the water sector challenges good governance practices and how external pressures such as those instigated by the precautionary principle can lead to undesirable reconfigurations.
The London case focusses on an individual infrastructure project and shows how financial innovation has shaped the case, while the Milan case presents a longer-view perspective that shows how structural changes in the infrastructure sector have enabled an environment for sustainable financial innovation.
As a conclusion, the role of transparency and good local governance practices are essential for a successful implementation of precautionary principle requirements in a city’s water sector. A common dynamic in compromised planning processes is the creation of "white elephants", which can be avoided by harnessing the innovation dimension of the precautionary principle in a conscientious manner.
In August 2021, Fritz-Julius Grafe and Harald A. Mieg, who conducted the case study on "Financial risks in water infrastructure planning" have published the article “Precaution and Innovation in the Context of Wastewater Regulation: An Examination of Financial Innovation under UWWTD Disputes in London and Milan”, on the Sustainability journal.