Climate change, cities and the private sector’s golden opportunity

Climate change, cities and the private sector’s golden opportunity

Following the Paris COP 21, countries have come together in an effort to limit their CO2 outputs in a concerted effort to prevent the catastrophic effects of man-made climate change. Yet it is individual cities, not countries, who are leading the charge.

At the crux of the issue: how to promote sustainable development without hindering economic well being? Led by China, emerging economies contested climate change agreements starting with Kyoto in 1992 up until Copenhagen in 2009.

After all, the US and other developed economies had achieved ‘modernisation’ by emitting CO2 emissions without abiding by international standards. So, the logic went: why should emerging economies have to sacrifice their own development, jobs and economic stability that come with it?

Come 2015, consensus emerged – the key was to focus on cities. While traditional thinking held that limits on CO2 emissions meant slow economic growth, modern cities were slowly redefining what could be done about climate change without sacrificing growth. Cities were becoming ‘smart’.

“Smart” cities necessary for limiting climate change

The focus on ‘smart’ cities is important. After all, they account for 70% of greenhouse gas emissions, but only cover 2% of the world’s landmass. In the 1960s, only 30% of the world’s population lived in cities around the world; this has now increased to over 54% and is estimated to reach 70% by 2050. It became clear that cities are the economic lifelines fuelling national growth.

Led by ‘Smart’ and ‘Green’ cities, solutions to manage economic growth and climate change have appeared across the world. Vancouver, for example, implemented a Green City Action Plan, which sought to create economic growth in ways that would minimize the impacts of climate change. Tax incentives were given to buildings which are carbon neutral, while underground landfill sites are turning methane into electricity.

Around the world, cities are using technology to help move in this similar direction. For example, Paris’ RATP mobile app encourages the use of public transportation by providing real time updates on metro, bus and intercity rail links, thereby reducing the dependence on private vehicles.

The coexistence of sustainable development and economic growth

In essence, being a sustainable city is profitable in the long term. As the head of green growth in Portland, a world renowned ‘green’ city, commented: “We’re not doing [sustainability] just to be altruistic. Part of the reason we’re doing a lot of this: There’s money to be made, to be crass.” Private companies in Portland are producing everything from windfarms to electric buses that are being exported overseas, bringing in millions of dollars in revenues every year. 

The development of cities into equitable, economic and environmental spaces (or the 3 E’s as the Asian Development Bank calls it) has consequently become a key concern for municipal governments around the world. Cities in emerging economies are beginning to understand that there is more economic profit to be made if their cities become attractive places to live in. The ‘liveability’ of a city has a direct correlation with an increase in business and consequently, larger tax revenues.

But it’s not just the rich, developed world that is taking an interest in ‘smart’ cities. For example, the Expo 2017 that will take place in Astana, Kazakhstan will focus on issues of future energy and urban sustainability.

Over 80 countries and 15 international organizations will sit down and look at how the experience of trailblazers can be exported elsewhere. Just a day before the Astana Economic Forum began last month, the city of Almaty (the country’s largest) hosted a “Smart Cities Forum” in partnership with the British Council that explored environmentally friendly, sustainable options for that city’s development.

This renewed understanding of sustainable development not as a hindrance to economic growth, but rather as a planning concept that focuses on long term wins, should be promoted far and wide. As the success of these programs becomes apparent, other emerging economies are seeking to replicate these concepts and implement their own Green City Action Plans. The ADB, for example, has Green City Action Planning projects running in several countries across Asia.

However, as good as a plan may be, one problem continues to hold back emerging cities from succeeding with these programs: finance. Take Asia, which faces an estimated infrastructure deficit of $8 trillion. In an era of cash strapped governance, how do countries make their cities more ‘liveable’ without any money?

Public Private Partnerships: the solution

Enter the private sector – which stands to gain significantly from the infrastructure deficit if it can play its cards right. Emerging economies have trouble understanding how to finance or fund projects when the treasury is broke.

Private Public Partnerships (PPPs) can help bridge that gap. While PPPs are extremely technical contracts that are subject to government approval, corruption and unlimited variations, the reward stands to largely outweigh the risks – so long as the government or other insurance providers (such as MIGA – the World Bank’s insurance arm for private investors in risk averse countries) can provide adequate protections.

While the private sector may be keen to pursue such opportunities for business, governments need to facilitate the process of setting up such investment vehicles by making the process as simple as possible. The scope for business is also wide. The simplest of PPPs will involve lawyers to draw up the contracts, engineers to study, design and build structures and administration & operations specialists to run the business and train personnel.

As emerging economies continue to grow, opportunities to meet and share experiences can only be beneficial to the sustainable future of the planet.

About Author

Nicolas Jenny

Nicolas Jenny specialises in European and Asian political risk analysis. He has lived extensively throughout the region and speaks English, French and Mandarin. He holds a double master's from Sciences Po Paris and Fudan University and a BSc in politics from the University of Bristol.