Why intermediary cities are vital to breaking dependency on high carbon development

By Dr Michael Lindfield, Senior Consultant and Dražen Kučan, Urban and Energy Efficiency Sector Lead (Green Climate Fund)

More than two thirds of the global population are expected to reside in cities by 2050. Urbanisation offers unprecedented risks and opportunities with respect to the global response to climate change. Cities and urban infrastructure are one of four global systems (others are energy, land and ecosystems and infrastructure) that are key to reducing global greenhouse gas (GHG) emissions and limiting long-term global warming levels to less than 1.5°C above pre-industrial levels according to the Intergovernmental Panel on Climate Change (IPCC). Cities represent at least 58% of direct global emissions – 18% of all global emissions came from just 100 cities in 2017 – and constitute at least 21% of the potential for direct global emission reduction.  

While there is immense and immediate potential for mega and large cities to reduce emissions, intermediary cities are vital to breaking dependency on carbon-intensive development as they grow into large cities. Cities also require adaptation measures to enhance resilience to climate induced natural disasters. Some 85% of cities, with hundreds of millions of the most vulnerable populations, have already experienced major climate effects. Globally, of all the infrastructure expected to be in place by 2050, nearly 75% will be in cities yet to be built.  

However, local governments and other urban institutions are unable to access the finance needed to invest in low emission, climate-resilient urbanisation. Less than 10% of available global climate funds have been disbursed to locally focused climate investments. The urgent challenge is to avoid path dependency in forms of urban development that leads to high GHG emissions and continues to induce vulnerability to urban systems in the face of climate impacts. The Green Climate Fund’s newly- updated Cities, Buildings and Urban Systems Guidance identifies four critical areas, or paradigm shifting pathways, for investment action.

Decarbonisation of urban energy systems by scaling up distributed renewable energy. Given that 56% of energy is used in cities, every quarter of the total global abatement potential comes from decarbonising the energy supply servicing those cities. Cities in developing countries have great potential to achieve reductions through distributed renewables (that is, sources such as roof-top solar installed across many buildings by individuals). Scaling up distributed renewable energy in 60 countries with carbon intensive power systems by tripling the current installed capacity of solar PV would reduce GHG emissions by 108 Mt CO2e, an amount equivalent to the total annual emissions of Belgium in 2012.

Energy efficient building by retrofitting existing buildings and construction of new, green buildings. These approaches use more energy-conscious constructions (e.g. ecosystem-based approaches – EBAs), installations, and appliances. Potential savings in total energy are significant (e.g. a reduction of 33% of total energy used if comprehensive retrofits are carried out). Cool and green roofs can reduce temperatures and help reduce energy demand and CO2 emissions in cities by approximately 3.3 Gt per year. In addition, there is a need to ensure that incentives are in place to minimise embodied energy[1] and promote the use of appropriate local, low-carbon materials.

Compact and Resilient urban development by investing in compact urban growth and transit-oriented development. This includes investment in mass transit and non-motorised transit systems, and vehicle electrification. Energy-related transport investment is shaped by urban development policy. In large, middle-income semi-dense cities, better transit-oriented development could achieve 5% of the required 2030 emissions reduction for the 1.5°C targets. Adaptation and resilience considerations and investments relating to all sectors need to be integrated into planning for urban areas. Particular attention should be paid to the use of EBAs and to ecosystems serving urban areas, which provide essential goods and services, such as clean air, water and food.

Circular urban economy shifting away from our current take-make-waste urban economies. In so called ‘linear systems’, cities consume over 75% of natural resources, produce over 50% of global waste, and are responsible, directly and indirectly, for emitting between 60%-80% of GHG. A circular urban economy aims to keep resources in use for as long as possible, to extract maximum economic value from them while in use, to keep materials out of landfills and incinerators, and to minimise waste by recovering and regenerating products and materials at the end of their service life.

Barriers to achieving paradigm shifting pathways

A range of barriers across cities limits the implementation of these solutions. While their significance varies between cities depending on size and depth of local capital markets, these barriers generally include lack of institutional and technical capacity; lack of upfront financing to create a pipeline of bankable low-emission climate-resilient urban projects; higher upfront costs and longer payback periods of low-emission climate-resilient urban investments; limited access to long-term finance at affordable rates due to shallow domestic capital markets and financing systems; lack of mechanisms to channel private institutional and commercial resources into viable urban climate investments; and limited information on best practice and performance data associated with low-emission climate-resilient urban infrastructure.

The Cities Climate Finance Leadership Alliance estimates that aggregate climate finance flows for cities reached around USD 384 billion annually on average in 2017-2018, far short of urban climate finance needs. Moreover, flows have been heavily concentrated in OECD countries and China. Because of the constraints set out above, cities in developing countries (excluding China) only saw minor volumes of climate investment despite their rapidly growing urban centres.

Working with its accredited entities and direct access entities, the Green Climate Fund will support the financing of these paradigm shifting pathways at scale in mega/large and secondary cities. It will focus on strengthening capacities and enabling environments related to policy, planning and implementing institutions relevant to maximising delivery of climate investment by local governments, other urban institutions, and the private sector, systematically addressing the above constraints.

To upscale both impact and scope of climate interventions in urban areas, the Green Climate Fund will continue to work, alongside key stakeholders, delivery partners and National Designated Authorities in developing countries, on programmatic financing– with a focus on inclusion of intermediary secondary cities in developing countries and urban areas of Least Developed Countries and Small Island Developing States. Leveraging private sector financing; while boosting the role of cities in operationalising and upscaling carbon markets; and building effective partnerships with public and private financing institutions and development assistance agencies are all priorities we will pursue to realise the ambitious role cities can play in alleviating climate change.

[1] Embodied energy is the sum of all the energy required to produce any goods or services, considered as if that energy was incorporated or ’embodied’ in the product itself. The concept can be useful in determining the effectiveness of energy-producing or energy saving devices, or the “real” replacement cost of a building, and, because energy-inputs usually entail greenhouse gas emissions, in deciding whether a product contributes to or mitigates global warming. One fundamental purpose for measuring this quantity is to compare the amount of energy produced or saved by the product in question to the amount of energy consumed in producing it. (Source: Wikipedia 2020)

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