Appendix D: Future Trends
Futures literature refers to a number of step-change trends in future use of energy and materials which could significantly reduce the environmental impact of future economic activity. While these trends could have a major impact on infrastructure requirements, most of the literature has little to say about the incentives and price conditions necessary to bring them about, or about the timeframe over which they may become technically feasible. Some of these trends are examined in more detail in Maarama Consulting's report on Sustainable Development and Infrastructure (November 2003).
Relating Trends to Infrastructure
The major influences on demand for and supply of infrastructure come in two main categories:
- Trends about which we can have a degree of confidence e.g. population characteristics, because they are predictable.
- Other "more unpredictable: events (shocks) that may affect infrastructure demand and supply.
We preface this with a brief discussion of demand and supply in the context of infrastructure, but without any detailed attempt to differentiate between the four infrastructure components being examined.
Demand for and Supply of Infrastructure
The Stocktake examines four broad infrastructure components, each of which can be further subdivided.
Figure 8: Infrastructure Categories| Transport | Energy | Telecoms | Water |
| Road networks, bridges, lighting, etc. Rail networks, electric power, signals Sea ports and airports | Generation Networks/distribution - national, regional, local Storage Transformers | Networks/distribution - national, regional, local Switches/exchanges Telephone equipment | Development infrastructure - hydro storage, irrigation, water supply storage, treatment, pipelines Defensive infrastructure - flood protection, sewerage networks, and wastewater treatment.) |
Features of Demand
The term "Infrastructure" refers to a form of investment whose output provides services to more than one industry. Many of the above examples are analogous to factor inputs into production, and demand for them is derived from the demand for the final product of the industries being supported by the infrastructure. Demand for these infrastructure inputs thus changes at the same rate as final demand only if the relationship between it and consequent output is constant - unlikely given technological change.
Whether they are seen as "factor inputs" or "final products" these infrastructure components have substitutes and complements. Which of course leads onto the influence of pricing and quality on demand growth.
Features of Supply
The debate on infrastructure usually centres on:
- Regulatory design.
- Timing and size of infrastructure investment.
- Pricing, and who pays.
- Funding of investment as between the public and private sector.
The two main choice procedures are the market and the government. But in this context, the two are heavily intertwined because of regulatory influences which have direct impacts on investment decisions through effects such as ownership structure, financing of investment, pricing and demand growth. A further level of complexity is that investment decisions in infrastructure are not just about timing and quantum of infrastructure but about the "quality" of that infrastructure.
Demand Drivers
The Infrastructure Audit should provide us with a sense, for each of the main infrastructure categories, of where we are now in terms of "capacity" relative to some benchmarks. We may currently have inadequate, adequate or surplus infrastructure capacity depending on the category and the locality.
But, setting aside all the possible complicating factors re starting position, quality, pricing, what - at a very high level - are likely to be the main drivers of demand trends in the longer- term i.e. 10 years or more?
Figure 9: Megatrends That Matter for Infrastructure Policy| | Indicator | Relationships |
| Primary | National population (permanent, temporary) | |
| Regional population (permanent, temporary) | |
| Economic growth | |
| Production structure | |
| Number of occupied buildings | |
| Secondary | Labour force participation, especially the increase in female participation. | Secondary to economic growth |
| A secular decline in the number of people per household. | Occupied buildings |
| An increasing share of service sector value added in overall economic activity. | Structural change |
| Sector specific | Increasing fuel efficiency of the transport fleet? | |
| The move to wireless technology in telecommunications. | |
| Household income elasticity of demand for transport (increase in car ownership rates). | |
| Wall of wood - forestry production past and projections. | |
| Increasing international and domestic tourism | |
| International trade growth, past and projections (consider Doha effects etc). | |
Shocks
We use the term "shock" to represent a rate of change in the underlying trend that is abnormal in some way or distinctive because of its unpredictability.
The items covered include:
- Technological change
- Change of economic agents' tastes
- Policy/political (e.g. Kyoto, trade)
- Natural disasters
- Outbreaks of disease (such as foot and mouth in New Zealand)
- War, terrorism, sabotage
- Technological risks (e.g. computer viruses, Y2K)
- Financial shocks (e.g. tightening of re-insurance markets)
- Economic shocks (including shocks to world energy markets)
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