Credit iStock.com/Tholer
Credit iStock.com/Tholer
Credit iStock.com/Tholer
Credit iStock.com/Tholer
Public investment management frameworks have a blind spot. The IMF's Public Investment Management Assessment (PIMA) and the World Bank's InfraGov framework have given governments structured tools for evaluating whether investment decisions are well prepared, competitively procured, fiscally sustainable, and properly maintained. Both have raised the standard of infrastructure governance in meaningful ways. Neither treats the costs that infrastructure imposes on communities in its immediate vicinity as a first-order appraisal criterion, which is a significant and increasingly costly omission.
The problem is becoming more urgent. The global energy transition is placing wind farms, solar installations, and high-voltage transmission lines across landscapes that communities have long inhabited. The digital economy is generating demand for large-scale data centers that consume significant power, generate heat, and draw water from local aquifers. Defense expenditure surges in Europe and elsewhere are prompting investment in military infrastructure and logistics hubs that carry real and perceived risks for neighboring populations. In each case, the benefits of the investment are diffuse and national (cleaner energy, digital capacity, security) while the costs fall disproportionately and locally.
Standard appraisal methodologies, as assessed through PIMA and InfraGov, are designed to capture aggregate social returns. A cost-benefit analysis asks whether an investment creates more value than it destroys across society as a whole. This is a reasonable organizing principle for most public investment decisions. It becomes problematic when the distribution of costs and benefits is highly uneven across geography and population groups, and when the communities that bear the costs have had little say in the decision to impose them.
The consequences of this oversight are increasingly visible and fiscally significant. A Berkeley Lab survey of over 120 renewable energy developers, for example, found that nearly one third of wind and solar projects are canceled due to local opposition, with average unrecoverable costs of $7.5 million per canceled wind project. Transmission delays carry their own price tag: a recent study estimates that transmission delays could increase the combined cost of electricity and natural gas by $22 billion, representing roughly a 3 percent increase in economy-wide retail energy spending. These are not marginal inconveniences. They represent a systemic failure to anticipate and manage community costs as part of the investment decision itself.
Neither PIMA nor InfraGov is silent on these concerns. InfraGov's Dimension 4 requires environmental and social impact assessments to be integrated into appraisal and procurement, and calls for effective grievance mechanisms. PIMA's institutional pillars touch on project appraisal quality and fiscal risk management. But neither instrument treats negative externalities as a central appraisal criterion in the way that financial return or carbon cost is treated. The result is that communities affected by infrastructure decisions encounter a process that has assessed their interests as an afterthought rather than as a central input.
Three reforms would bring this dimension into the mainstream of public investment governance.
The first is to require that appraisal methodologies explicitly quantify and disclose localized costs alongside aggregate social returns. This is not a radical departure. Shadow pricing of carbon emissions is already standard in many systems, and noise and air quality impacts are routinely assessed in transport appraisal. Extending this discipline to the full range of localized costs associated with infrastructure siting, including visual impact, water consumption, noise, and property value effects, would give decision-makers and affected communities a clearer picture of what a proposed project actually costs and who bears those costs.
The second is to embed community consultation requirements at the site selection stage rather than the approval stage. Current practice in most systems treats consultation as a step in the regulatory approval process, which means communities are informed of a decision rather than meaningfully involved in making it. Moving consultation upstream, to the point where site options are still being evaluated, creates the conditions for genuine input and reduces the risk of costly disputes later. PIMA and InfraGov could operationalize this by adding upstream consultation as a scored indicator within their respective appraisal and planning dimensions.
The third is to develop compensation and benefit-sharing mechanisms as a standard element of project preparation rather than an improvised response to organized resistance. Several countries have developed local benefit agreements for renewable energy projects, providing affected communities with revenue streams, employment commitments, or infrastructure investments in exchange for hosting facilities. These arrangements reduce opposition, improve social acceptance, and create a more durable political foundation for the investment.
Public investment management frameworks rest on the premise that governments should spend public money well, on the right things, in the right places, and with accountability for results. The communities that live alongside the infrastructure that serves the rest of society are a central part of that accountability relationship. Frameworks that treat their interests as secondary to aggregate efficiency will continue to generate the delays, disputes, and loss of public trust that undermine the returns those frameworks are designed to protect.
