intermediary cities

Intermediate cities: a green and transformative post-COVID-19 recovery?

Development Matters Green transition , , , ,

By Dražen Kučan, Sector Lead / Senior Urban and Energy Efficiency Specialist, Green Climate Fund

Guilty as charged: cities and urban populations are among the core drivers of anthropogenic climate change. Cities produce between 71% and 75% of total greenhouse gas (GHG) emissions1. There needs to be a ‘paradigm shift towards low emission and climate-resilient development pathways’. A shift that can happen in developing countries by supporting and investing in high impact climate mitigation as well as resilience and adaptation initiatives.

While the paradigm shift is defined by the ‘degree to which the proposed activity can catalyse impact beyond one-off project or programme investment’, the reality is not so straightforward in the context of the urban sector. Urban areas are complex, multi-stakeholder environments that require holistic, structurally sound, sustainable solutions. They need transformative investments in energy efficient buildings; decarbonising urban energy systems; compact and resilient urban development (including investment in mass transit and non-motorised transit systems and vehicle electrification); grey to green urban infrastructure upgrading; the circular economy; and methane and emissions-free integrated waste management.     

Demand pressure on developing new urban infrastructure is high: new homes and infrastructure will have to be built at great speed for the approximately 2.5 billion new city dwellers expected by 2050. About 85% of new housing demand is projected to be in fast emerging economies (such as China) and in the majority of developing countries. Furthermore, of the 70 million new residents expected to move to pre-existing urban areas each year, the vast majority will live in intermediary cities, mostly in Africa and Asia. This adds to climate pressures, both in terms of accelerated emissions and enhanced vulnerabilities. 

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Why local? Why now? Strengthening intermediary cities to achieve the SDGs

Development Matters Building resilience, Reviving multilateralism , ,

By Shipra Narang Suri, Ph.D. Chief, Urban Practices Branch, Global Solutions Division, UN-Habitat and Federico Bonaglia, Deputy Director, OECD Development Centre

Cities and local authorities around the world have played a key role in the response to the COVID-19 pandemic, applying prevention and containment measures, providing swift humanitarian response, as well as taking the first steps towards post-pandemic recovery. They implemented nation-wide measures, but also experimented with bottom-up recovery strategies. Local authorities are an indispensable “ring” in the governance chain necessary to prevent and respond to pandemics and advance a One Health Approach.

At the same time, COVID-19 has spotlighted, amplified and exacerbated underlying structural inequities across cities, and the capacity and financing gaps facing local governments, especially in developing countries. The pandemic may have initiated or accelerated a shift towards a new urban paradigm of “inclusive, green and smart cities” but it is still too early to say whether cities in developing countries will be able to embark on this transformation. Confronted with massive increases in poverty and vulnerability, those objectives might look like less relevant, distant or even unattainable goals. Estimates from the World Bank and UN entities suggest that local governments may on average lose 15 to 25 percent in revenues in 2021. First-hand accounts from African mayors confirm they face phenomenal trade-offs and have to repurpose their scarce resources to advance a green transition to tackle the consequences of the pandemic.

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Why investing in intermediary cities should be a priority for a green recovery

Development Matters Green transition , , ,

By Michael Lindfield, Senior Consultant, former Senior Specialist at the ADB

Although the COVID-19 pandemic will change the context for investment decisions – including for climate investment in intermediary cities in emerging markets and developing countries – little has been done to detail these consequences. In general, consequences for financing institutions and cities may include lower inflows to institutions like pension funds and insurance companies, and increased pressure to buy government bonds and lower revenue base, thus reducing cities’ and other urban institutions’ ability to service debt and/or provide availability payments to concessions. Additional consequences include potentially lower emerging market and developing economy sovereign and sub-sovereign credit ratings (increasing the cost of debt), and curbed economic growth, thus curtailing the potential for cost recovery in relation to green projects.    

These consequences are likely to impact intermediary cities more than capitals or megacities because they have lower credit ratings and less technical capacity. However, there will be opportunities if climate investment is integrated into COVID-19 recovery financing, creating the right incentives for investors. The critical alignment relates to the perceived risk/return profile of investments. If the rate of likely return will be sufficient to compensate for the risks of investing, then private, institutional and commercial entities will invest, provided minimum regulatory hurdles, such as minimum credit ratings, are met.

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Raising capital for intermediary cities

Africa, Asia, Building resilience, Development finance, Infrastructure , , , , ,

By Jeremy Gorelick, Senior Infrastructure Finance Advisor, USAID’s* WASH-FIN (Water, Sanitation and Hygiene – Finance) Programme, and Joel Moktar, Project Leader, Open Capital Advisors

This blog is part of an ongoing series exploring the intersection between intermediary cities in developing countries and sustainable development

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Intermediary cities are the fastest growing cities in the developing world. Often referred to as secondary or second-tier cities, intermediary cities typically have a population of between 50,000 and one million people. They play a fundamental role in connecting both rural and urban areas to basic facilities and services.[1] Driven by population growth and rural-urban migration, intermediary cities worldwide are projected to grow at almost twice the rate of megacities (those with more than 10 million inhabitants) between now and 2030.[2] Of these, the fastest growing cities are in Africa and Asia.[3]

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