Cities Low Carbon Transitions and Barriers to Entry

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With global climate change targets set to keep the average mean global temperature from exceeding a 2°C rise, decisive changes are required and cities are at the epicentre of both the causes and solutions.  Urban area’s account for less than 3% of land area yet hold over 50% of the global population [1]. Currently around three quarters of the global energy consumption and corresponding greenhouse gas emissions can be attributed to cities [2][3].  The global population is expected to continue to increase, particularly in the global south. Cities in the global south are growing at such a rapid rate, their development will have profound implications for the mitigation of climate change. 

Decoupling economic activity and finite resource use is imperative for sustainability [4]. This requires a focus on redistribution and divestment from high carbon sectors and full investment into the low carbon sectors. Campiglio [5] explains that current estimates suggest an annual investment in low carbon infrastructure needs to be about $650-$900 Billion annually over the next 20 to 30 years. While Sudmant et al [1] estimates that approximately $1 Trillion needs to be spent annually from 2015 to 2050. The last decade has indeed seen a significant increase in investment towards the low carbon sector, unfortunately the gap between what is invested and what is required to decarbonise the economy is still significant and far more can be done. 

In order to achieve this financial redistribution a number of barriers to entry need to be addressed, government driven policy can be used to remove such barriers. One such barrier is technology, specifically a tech lock-in and our dependency on out dated technologies. This could be overcome by integrating diverse environmental policy targets with technology policies that redirect funding toward clean new technologies. While attracting private financiers through various incentives could act as a catalyst to accelerate the commercialisation of new technologies. Unfortunately, many ‘green’ technologies are undermined by cheap energy prices from subsidies for fossil fuels. Furthermore, large upfront deployment costs, high discount rates on future savings and anticipation for future technological advancement create financial barriers. Additional financial barriers also exist, in part due to a lack of information and knowledge to effectively valuate the risks and returns for investments in green technology opposed to more established and proven fossil fuel technologies. Ultimately this has a trickle down effect on long term urban development and investment. 

The lack of information to investors and the need for supporting policies frequently serve as barriers for cities to implement such carbon reducing measures. As we can see with institutional or behavioural lock-ins that create a significant barrier as current social norms still favour fossil fuel-based technologies, whereby creating a cyclical process of continued investment in high carbon infrastructure. Therefore what is urgently required is flexibility by policymakers when creating regulatory frameworks which can drive new investment. Policy makers could enforce divestment from old technologies and create an investment opportunity in low carbon solutions though a sustainable investment mandate, taking a systematic approach enabling the redistribution of private finance. The complexity here of course is ensuring a just transition.

References/Further Reading:

[1] Sudmant, A., Millward-Hopkins, J., Colenbrander, S. & Gouldson, A. (2016) Low carbon cities: is ambitious action affordable?. Climatic Change138: 681-688. 

[2] Gouldson, A., Colenbrander, S., Sudmant, A., McAnulla, F., Kerr, N., Sakai, P., Hall, S., Papargyropoulou, E. & Kuylenstierna, J. 2015. Exploring the economic case for climate action in cities. Global Environmental Change 35: 93-105. 

[3] Dieleman, H. 2013. Organizational Learning for the resilient cities, through realizing eco-cultural innovations. Journal of Cleaner Production 50(1): 171-180.

[4] Polzin, F. 2017. Mobilizing private finance for low-carbon innovation – A systematic review of barriers and solutions. Renewable and Sustainable Energy Reviews77: 525-535. 

[5] Campiglio, E. 2016. Beyond carbon pricing: The role of banking and monetary policy in financing the transition to a low-carbon economy. Ecological Economics 121: 220-230.

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