The Public–Private Partnership Legal Resource Centre’s reference guide defines a public–private partnership (PPP) as “a long-term contract between a private party and a government entity, for providing a public asset or service, in which the private party bears significant risk and management responsibility, and remuneration is linked to performance” (PPP Knowledge Lab, 2017, p. 1).
PPPs are created following a rationale that they deliver public assets or services more cheaply and effectively than projects purely funded and steered by the public sector and that they optimally divide counterparty risks between public and private partners. In other words, risks that are best borne by the public sector should remain with the public sector and the same principle should apply to risks and the private sector.
There is no standard formula on how risks should be allocated; this depends on the characteristics of the projects and their revenues, the expertise of the private counterparty, and the institutional strengths of the public sector.
The World Bank and the Global Center on Adaptation have noted that PPPs can be a key tool for integrating adaptation and resilience into infrastructure projects. The greater the proportion of public finance included in an investment, the greater the influence that this finance could have on ensuring that projects are developed/implemented in a manner that accounts for projected physical climate hazards and risks. The Global Center on Adaptation offers a course on climate-resilient infrastructure in PPPs, the World Bank provides resources on climate-smart PPPs, and the Public–Private Infrastructure Advisory Facility has developed climate toolkits for infrastructure PPPs.
Current or potential adaptation-relevant sector applications:
- crop and food production – including agroforestry; livestock production; fisheries (marine, freshwater, and aquaculture); irrigation;
- ecological services and management – forest management (including afforestation and reforestation); wetlands; ecosystem and biodiversity protection, conservation, and enhancement;
- water supply (infrastructure) – water management;
- energy infrastructure – energy generation (including renewables);
- transport infrastructure;
- other built environment and infrastructure – urban development; and
- social infrastructure – education; health facilities.
Additional insights:
- This is a mature instrument, with PPPs becoming widely recognized in the 1990s. They have been implemented in many countries, mainly for infrastructure projects.
Considerations for entering into PPPs:
- PPPs require long-term contracts, legal expertise, and the definition of strict terms and conditions. This complexity means that technical assistance may be needed by parties interested in creating a PPP.
- Fulfillment of PPP conditions requires monitoring and evaluation capabilities.
- Public entities may be uncomfortable with private ownership of traditionally owned public goods.
Adapted from the following sources:
Global Center on Adaptation. (2023). Knowledge module on PPPs for climate-resilient infrastructure. https://gca.org/knowledge-module/
Public-Private Infrastructure Advisory Facility. (2023, July 20). New: Climate toolkits for infrastructure PPPs. https://www.ppiaf.org/feature/new-climate-toolkits-infrastructure-ppps
Public-Private Partnership Legal Resource Centre. (2017). What is in the PPP reference guide? Public-private partnerships reference guide (Version 3). https://ppp.worldbank.org/public-private-partnership/PPP_Online_Reference_Guide
World Bank. (2022). Climate-smart PPPs. https://ppp.worldbank.org/public-private-partnership/energy-and-power/climate-smart-ppps-1
World Bank (2023). Public-Private Partnership Legal Resource Centre. https://ppp.worldbank.org/public-private-partnership/