Meeting cities-energy-demand

Meeting Cities’ Energy Demand: What Governments Can Do

William Tompson Head of the Urban Development Programme Regional Development Policy Division, OECD EU-Asia Dialogue Panel Discussion ‘Meeting the Energy Demand of Cities’ Marina Bay Sands Expo and Convention CenterSingapore, 4 June 2014

OECD urban policy expertise

Reviews of metro-regions and national urban policy to identify opportunities to address competitiveness, sustainability and governance challenges Horizontal analyses targeting, for example, urban competitiveness, climate change, port cities and green growth in cities Policy dialogue on urban issues to facilitate knowledge exchange and best practices to inform policymakers’ agendas (Roundtable) Statistical indicators on urban and metro-regions – the fundamental tools for enhancing cross-country comparison and improving policy evaluation

34 metropolitan reviews in 20 countries: tailored studies assessing how a given metro-area can boost competitiveness

New series on national urban policy that impact urban development in a country (completed: Poland, Korea, Chile; potential: China, Mexico)

Thematic work •Green Growth in Cities

•Compact Cities

•Urban Trends and Policies in OECD Countries

•Cities and Climate Change

•Cities, Climate Change and Multi-level Governance

•Competitive Cities in the Global Economy •Global port cities

OECD Roundtable of Mayors and Ministers

Unique global forum for mayors and ministers to exchange best urban policy practices

75 mayors and 47 ministers have participated in four Roundtables since 2007

OECD database on metropolitan regions and OECD regional database

The fundamental tools for enhancing cross-country comparability and improving analysis and evaluation of policies

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1. A LOOK AT GLOBAL ENERGY AND ENVIRONMENTAL TRENDS


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GDP +124%

GDP +478%

GDP +458%

GDP +295%

Source: OECD / IEA database (2012)

A look at the latest OECD population and environment projections…

Where are we headed?


The emergence of 3 billion middle-class consumers will fuel future demand

Global middle class1 Billions of people

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3.23 Latin America

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3 billion

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North America

Europe

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1 Based on daily consumption per capita ranging from $10 to $100 (in purchasing power parity terms) SOURCE: OECD (2011), Perspectives on Global Development: Social Cohesion in a Shifting World.

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Most urban population growth will be in the developing world

Total urban and rural population: world and OECD countries

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Source: OECD calculations based on date from the UN Population Database (2009)

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Energy demand will continue to grow

World Primary Energy Demand and Related Carbon Emissions by Scenario

Source: IEA (2013), World Energy Outlook 2013

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GHG emissions rise even with declining carbon-intensity of GDP

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BRIICS GHG emissions 39 GtCO2e

OECD GHG emissions 19 GtCO2e

World GHG emissions 81 GtCO2e

RoW GHG emissions 22 GtCO2e

RoW GHG emissions 13 GtCO2e

BRIICS GHG emissions 19 GtCO2e

OECD GHG emissions 16 GtCO2e

World GHG emissions 48 GtCO2e



The energy mix must change radically if we are to limit warming to 2 degrees C

Total primary energy supply, 2011 and various future scenarios

Source: IEA (2014), Energy Technology perspectives 2014.

Question: What policies are needed to deliver such change?

• Rapid economic growth rapid urbanisation.

• Rapid motorisation sprawl.

• Informal settlements: tend to be located in environmentally fragile areas. Poor construction quality and infrastructure adds to fragility.

• Industrial structure: cities as industrial centres.

• Location greater vulnerability to climate change.

• Resource and capacity constraints.

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Particular challenges for cities in Africa, Asia and Latin America


• Climate change impacts must be considered in the contexts of other risks and challenges, including, inter alia: 1. Unmet resource requirements and bottlenecks to growth. 2. Congestion and lagging service provision giving rise to

social tensions and public health challenges. 3. Poverty, inequality and social exclusion. 4. Governance challenges.

• Concern with equity and well-being means that growth remains an imperative.

Bottom line: there can be no green without growth in the emerging economies of the global South. And neither will be possible without better governance at all levels.

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Climate change is not the only risk facing cities


• Urban form lasts, so lock-in effects from urban policy decisions endure.

• This means that rapidly urbanising countries have options.

• We are in the midst of what is likely to be the last great wave of urbanisation.

• The choices we make over the next decades will last for a very long time.

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Urbanisation as opportunity


2. GOVERNMENTS, CITIES AND ENERGY


Cities are part of the problem:

• Cities play an outsize role in national growth and the generation of environmental externalities.

• Past urban development too no account of climate change risks.

Cities are extremely vulnerable to climate change:

• Worldwide, coastal areas are disproportionately urban – and more so in the Tropics than elsewhere.

• Complex urban systems are particularly vulnerable to extreme weather events (the risk of ‘concatenated hazards’).

Cities and the challenge of climate change


Cities must be part of the solution: • Urban policies can lower the abatement

costs of national environmental policy targets. • Cities are key spenders on infrastructure

relevant to green growth. • Concentration of people, activity and

infrastructure can also generate economies of scale, scope or proximity for measures that address climate change adaptation.

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Cities and the challenge of climate change


What policies do we need?

• Make pollution more costly

• Value and price the natural assets and ecosystem services

• Remove environmentally harmful subsidies

• Devise effective regulations and standards

• Encourage green innovation


Changes to:

• Investment policies.

• Regulatory policies.

• Innovation policies.

• Competition policies.

• Mobilisation of the demand side.


What does this imply?

• National policies affect urban development

National legislation establishes the ground rules for cities.

National governments intervene directly in a large number of policy domains that affect cities – yet explicit national urban policies are often narrowly conceived.

Inter-municipal co-ordination needs support from above.

Urban challenges need to be addressed at the level of city systems.

• Competitiveness, environmental challenges and inclusive growth all require a multi-level approach.

Policy coherence across levels of government requires national leadership

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• National environmental policies often reduce the returns to action by cities: carbon pricing, fossil fuel subsidies, etc.

• Fiscal and financial frameworks often contradict sectoral policies. Example: property taxes and urban sprawl. Example: financial regulation and infrastructure investment. Example: rules governing the use of transfers.

• Land-use, economic development and transport planning are often segregated. Example: congestion charges and parking fees. Example: outdated and fragmented planning frameworks.

• Transversal policy challenges are often reframed to “fit” sectoral policy templates. Example: accessibility is redefined as mobility.


Policy coherence is often lacking

Make existing revenue sources

greener

Tap new sources of

finance

Ensure policy alignment across

levels of government

Financing green cities: The Chicago Proposal



greener

Tap new sources of

finance



• National policies are key

• Remove barriers to local government action

• A holistic approach is necessary

• Keep the policy package simple



Tap new sources of

finance



• The overriding aim is to internalise externalities • Road-pricing policies can help reduce traffic and pollution • Transport-related revenue sources require coherent planning • Fees for water and waste services should be more

responsive to actual resource use • Where appropriate, intergovernmental grants should take into

account environmental objectives


greener





• Carbon finance should be more accessible to cities

• Infrastructure needs related to new development should be internalised in the financing of development projects

• National-local cooperation is essential to developing access to new forms of green finance


greener

Tap new sources of

finance



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What are the barriers to institutional investment in green infrastructure?

• Weak, uncertain or counterproductive environmental, energy and climate policies

• Regulatory policies with unintended consequences

• A lack of suitable financial vehicles with attributes sought by institutional investors

• A shortage of objective information and data to assess transactions and underlying risks

Meeting the Energy Demand of Cities

04 June 14

Ensure a stable and integrated policy environment

Address market failures (incl. lack of carbon pricing)

Provide a national infrastructure road map

Facilitate the development of appropriate financing vehicles or de-risking instruments

Promote public-private dialogue on green investments

Promote market transparency and improve data on infrastructure investment

Reduce the transaction costs of green investment

Weak & uncertain environmental,

energy and climate policies

Regulatory policies with unintended

consequences

Lack of information and

data to assess transactions and underlying risks

Lack of suitable financial vehicles


Mobilising investment in green infrastructure

Meeting the Energy Demand of Cities 26

The OECD Policy Guidance for Investment in Clean Energy Infrastructure

Policy areas Questions/issues for policy makers consideration

1. Investment policy • Non-discrimination of foreign versus domestic investors

• Intellectual property rights• Contract enforcement

2. Investment promotion and facilitation

• Removing fossil fuels subsidies and pricing carbon

• Long term policy goals• Policy incentives for investment• Licensing• Policy coherence and coordination

y 3. Competition policy • Electricity market structure

• Non discrimination in access to finance• Competition authority

p y

4. Financial sector development

• Facilitate access to finance• Specific financial tools and instruments• Strengthening domestic financial

markets

5. Public governance • Regulatory quality of the electricity market

• Multi-level governance04 June 14

THANK YOU FOR YOUR ATTENTION.

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www.oecd.org/greencities


Meeting cities-energy-demand

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