5. Managing environmental and energy transitions in rural areas

Rural areas play a pivotal role in the success of environmental and energy transition because of their natural resource endowments. Rural regions are complementary to cities through connections related to the flow of people, goods and services. 20% of the total OECD population live in rural regions close to cities, which are defined as territories less than 60 minutes of driving time from urban centres. 6% live in remote rural regions (OECD, 2019[1]). Rural regions provide an important foundation for human wellbeing through the supply of food, freshwater and other important ecosystem services. Sustainable land use is necessary to halt climate change, biodiversity loss and land degradation (IPCC, 2020[2]). Appropriate action and investment in rural regions is required to meet these challenges. Rural development policies need to take a place-based approach tailored to the diverse needs and characteristics of rural communities.

Rural areas face multiple and specific opportunities and challenges in responding to and preparing for environmental and energy transition. Geographic remoteness, an ageing and shrinking population, the depletion of natural resources, and environmental decay are all challenges that threaten rural sustainability. Rural and remote communities can be impacted by a decline in farmers, loss of forests, declining populations in more remote areas, poor access to jobs, services and education, a lack of mobility options beyond carbon-intensive road transport, and limited community planning capacity. At the same time, environmental and energy transitions also generate economic opportunities, secure jobs and come with health benefits. Innovation projects in rural territories can lead to new or modified products and processes that avoid or reduce negative impacts on the environment. Rural areas can also employ circular economy approaches in sectors such as manufacturing and mining to support sustainability transitions. While some rural areas will win from transition, others are likely to have trouble adjusting. Learning from past experience with industrial transition – for example from those related to ending coal mining – is important for a just transition, i.e. to ensure that residents and communities that face specific difficulties in transition are protected from unique vulnerabilities.

Exploring the potential of rural areas to contribute to environmental and energy transitions has received less attention than urban transition processes. Yet, rural areas are highly important. This chapter therefore provides insights into the role of rural areas for sustainability transitions and explores how rural regions can manage sustainability transitions. The chapter draws from the OECD seminar series on “Managing environmental and energy transition for regions and cities”, and in particular from the seminar entitled “Managing environmental and energy transitions in rural areas”. The main theoretical frameworks and regional case studies were identified in or inspired by the following publications:

  • Chapter 1 of this publication, “Managing Environmental and Energy Transitions in Regions and Cities: A Place-Based Approach”.

  • Halseth (2019), “Peripheries at the Core: Notes from rural places and regions on environmental and energy transition”, Background Report for an OECD/EC Workshop Series on Managing environmental and energy transitions for cities and regions, OECD, Paris, 5 September 2019.

  • Phillips (2019), “Challenges and policies to support rural environmental and energy transitions”, Background Report for an OECD/EC Workshop Series on Managing environmental and energy transitions for cities and regions, OECD, Paris, 5 September 2019.

Rural areas are diverse and have distinct needs. Rural areas are not homogeneous, and are in constant change. Prospering rural regions, often close to metropolitan regions, contrast with remote rural regions with low economic and employment prospects, weak infrastructure and shrinking populations. There is therefore no uniform definition of the term “rural”, but rather very different definitions and the simple demarcation of "rural" as a counterpart to the "city" is insufficient (Box 5.1).

First, rural areas are important to preserve ecosystems and natural capital. Rural areas support human wellbeing and economic development through important ecosystem services, including as providers of food, wood, water, raw materials and energy, as places of recreation, providers of regulating services (e.g. with regard to climate or water), and for conserving biological diversity. Ecosystems in rural areas can help to mitigate environmental pressures and natural threats. As both synergies and conflicts may arise from the use of ecosystem services (e.g. some current agricultural practices have led to diminishing range of species), managing natural capital in rural areas more effectively is key to preserve natural capital (Hardelin and Lankoski, 2018[5]). Rural areas also provide natural carbon sinks by absorbing and capturing carbon dioxide from the atmosphere (IPCC, 2020[2]).

Second, environmental and energy transitions can create new job and business opportunities and come with health benefits. Environmental and energy transitions can bring access to employment opportunities. For example, renewable energy deployment in rural areas has the capacity to promote regional and local development because significant parts of the value chain can be established in regions and municipalities and so have beneficial effects on employment and SMEs. The shift from fossil fuel-based energy towards renewable energy deployment increases employment in the European Union (Duscha et al., 2014[6]). The reason for the positive impact of renewable energy deployment is a higher labour intensity in this sector compared to, for instance, power generation from fossil fuel. Despite an overall increase in jobs, some communities will experience more job losses than others. This is especially true for rural regions with a coal-fired power plant or those that are otherwise economically dependent on fossil fuel. A net increase in jobs does not mean that every displaced worker will be provided with a new job. However, a recent study finds that the deployment of clean energy technologies in more than half of the European Union coal regions could offset job losses induced by the transition by creating up to 460 000 jobs in total by 2050 (Zoi et al., 2020[7]). When it comes to agriculture, decarbonisation policies might help protect jobs that depend on ecosystem services (European Commission, 2018[8]). Transition also comes with a range of health benefits, including health effects in air quality (by phasing out polluting activities such as mining for example), transportation and diet, improved soil and water quality and improved biodiversity (Karlsson, Alfredsson and Westling, 2020[9])

Third, environmental and energy transitions provide an opportunity for innovations in products and practices. Innovation is considered particularly important in facilitating sustainable development frameworks that balance economic growth with the production and protection of ‘public goods’, such as biodiversity and other environmental resources. Innovation processes in rural areas often rely strongly on personal relationships and central actors, combined with the determinant use of institutional devices, local resources and external relational networks. New technologies in information and communication are profoundly modifying the links between activities, knowledge and space, thereby considerably enhancing the innovation potential in rural areas (Carrincazeaux, Doloreux and Shearmur, 2016[10]). Studies show that firms located in rural areas are often as innovative as similar firms located in urban or peri-urban areas (Galliano, Goncalves and Triboulet, 2017[11]). In addition, they point to specific innovation projects in rural territories. These projects are often built on the sustainable use of natural resources and agro-ecology, and have very different paths to those seen in mainstream agro-food systems (Levidow, 2015[12]). The European Innovation Partnership “Agricultural Productivity and Sustainability” is an example of an initiative that aims to strengthen research and innovation in farming and food systems (European Commission, 2020[13]).

Fourth, environmental and energy transitions should foster citizen inclusion and rural empowerment. Energy co-operatives, for example, offer the opportunity for participation and engagement of local citizens and can therefore be seen as a useful driver of transition experiments. They increase by being open to all citizens in the affected region and generate profit for the community as well as for each individual. Indeed, a recent report and project on renewable energy co-operatives showed that increased investments in sustainable energy and a stronger involvement of European citizens are needed to achieve the transition to renewable energy and energy democracy across the European Union. A decentralised ownership of projects encourages greater acceptance for renewable energy installations and benefits local communities. This model has proven its environmental, economic and social added value, but still too few renewable energy installations are owned by local communities in Europe (REScoop MECISE consortium, 2020[14]). For rural development in general, the European Union introduced the method of “community-led local development” in the 2014-20 programming period, which supports local action groups to implement their local development strategies.

While environmental and energy transition comes with numerous opportunities for rural areas, it also holds challenges:

  • Rural communities face difficulties diversifying their economies. One of the most fundamental challenges facing rural economies is the impact of restructuring in both agriculture and traditional industry and the associated need for diversification and growth in the non-farm rural economy. In the past, export industries including mining, manufacturing, and transportation services often have driven economic growth and created employment opportunities in rural regions. These sectors are however often inconsistent with sustainability transitions and need therefore progressive phasing out and greening. At the same time, the decline of industrialism has negatively affected many communities, particularly through declining employment opportunities and private sector investment in small and single resource-dependent communities. This highlights the importance of a just transition (see also the next section). Abandonment of smaller, traditional farming and animal husbandry practices has also encouraged ecological degradation (Halseth, 2019[15]).

  • Rural-urban migration is a persistent issue. Difficulties with workplace recruitment and retention along with limited educational opportunities have frequently led to rural-urban migration. Rural-urban migration might come with a shift in political power from rural communities towards urban centres, thereby reducing financial support and assistance to rural regions from higher levels of government (Connell et al., 2013[16]). At the same time, rural population decline induces a loss of the local tax base and diminishes local government spending for infrastructure, public and private services (e.g. post offices, pharmacies), and schools. Population decline also deflates property values, often leaving the elderly abandoned as young people depart for cities. In a vicious cycle, net losses undermine local businesses and community development capacity, prompting further abandonments (Halseth, 2019[15]).

  • Rural areas are vulnerable to climate change and natural resource depletion. Rural areas experience specific vulnerabilities to climate change, both through their dependence on natural resources and weather-dependent activities and their relative lack of resources to deal with climate change and resource depletion. Greater dependence on agriculture and natural resources makes them highly sensitive to climate variability, extreme climate events, and climate change (Phillips, 2019[17]).

  • There is an ecosystem valorisation challenge in rural areas. Rural areas are pivotal to wellbeing and economic development as providers of resources such as food, water, raw materials and energy, as places of recreation, and for conserving biological diversity. Ecosystems in rural areas can help to mitigate environmental pressures and natural threats. However, decisions regarding the use of ecosystems tend to underestimate both the economic importance of ecosystem services and their relevance to human wellbeing. While several methods have been developed for valuing non-marketed ecosystem services, such as payments for ecosystem services (PES) programs, their application is limited due to their complexity and problematic application (Chan et al., 2017[18]).

  • Rural areas often lack capacity for environmental and energy transitions. Rural communities are less likely than urban areas to have the human capital, financial means, infrastructure, or resources to address the environmental and economic challenges they encounter. Limited financial means and capacity have made sustainability planning difficult for smaller communities to achieve (Halseth, 2019[15]).

Given the various social, economic, and environmental concerns that threaten the prosperity of rural and remote regions, it is clear that there is a need for innovative solutions and integrated strategic planning. Place-based sustainability transitions in rural areas have the potential to transform regional rural planning and to help smaller communities navigate ongoing social, environmental, and economic challenges.

Developing environmental and energy transition projects in rural areas requires planning and stakeholder engagement along with greater networking and communication. Developing new value chains can take time. It also requires long-term investments and new knowledge and skills. This means bringing together old and new rural actors to explore, develop and innovate, renewing efforts to engage and empower rural actors who already struggle to have a voice in the more established value chains, such as in the agro-food sector. Doing so requires support, advice and education. This should also include mechanisms that reward first movers and protect them from the risks associated with a sector reliant on an evolving pool of technology and knowledge. Flexibility to adapt will also be important, avoiding system lock-in where choices prevent change.

Institutional capacity is a key factor for the success of environmental and energy transitions. Successfully redirecting action and investment from unsustainable into climate-neutral and circular development pathways in rural regions requires a cultural change and a new mix of skills in rural communities, and incentives for local governments to support environmental and energy transition (Halseth, 2019[15]). Chapter 6 on financing environmental and energy transitions provides suggestions on how particularly smaller administrations can overcome capacity issues: Valuing co-benefits in cost-benefit analysis, peer-to-peer learning between smaller and remote communities and making use of regional experts can help.

Carefully designed policy measures need to be accompanied by social learning and community involvement in rural areas. Involving local stakeholders and in particular local communities and marginalised groups such as indigenous people, women, and the poor enhances effective decision making and governance. In addition, successful environmental and energy transition considers local environmental and socio-economic conditions. Doing so helps take into account local land-use pressures and impacts (e.g. biodiversity decline, soil loss, over-extraction of groundwater, land-use change in agriculture, food production and forestry) as well as preventing, reducing and restoring degraded land. Community involvement can also facilitate the collection of data in order to measure the success and challenges of sustainability transitions.

Often, imbalances exist in the capacity and incentives of the parties involved in supporting climate-neutral and circular initiatives. Small and medium-sized enterprises as well as municipalities in rural communities may be limited in terms of expertise and resources, while large private operators and firms may be well resourced with considerable financial interests to pursue. Limitations in the capacity of municipalities to manage their roles in environmental and energy transition domains such as waste management, tendering processes or awareness-raising among large players are common obstacles in many rural regions. National governments can carry out capacity building activities to support municipalities in their work. Enabling inter-municipal co-operation can also assist in addressing capacity issues in local governments and help to ensure an efficient scale of management (OECD, 2019[19]). Regarding private actors, especially smaller companies and farmers might benefit from capacity and skill development initiatives that help close gaps with large operators (Box 5.2).

Benefit-sharing agreements such as applied in the sustainable mining industry can be adapted to other transition fields, including renewable energy developments. Benefit-sharing refers to the distribution of the monetary and non-monetary benefits that a mining project generates. The purpose of benefit-sharing mechanisms is to ensure that the region in which the company operates retains a significant part of the accumulated benefits. Monetary benefits include, for instance, development and investment funds, equity sharing and tax sharing with governments. Non-monetary benefits include education facilities, medical facilities, employment goals, local procurement, training of staff and improved service access. These non-monetary benefits can be particularly important as they provide jobs to local people as well as training and education for local municipalities (Söderhalm and Svahn, 2014[23]). Local-level benefit-sharing approaches can also be applied to renewable energy projects such as wind and solar. Experience shows that improved community participation in benefit-sharing can lead to community projects with better outcomes, lasting local impact, and positive perceptions that add to goodwill. Wind and solar projects can also combine proactive environmental responsibility with local benefit sharing through mechanisms such as environmental education, conservation programs, and sustainable tourism activities (IFC, 2019[24]).

Rural policy making has evolved from being sector-focused and centralised to being multi-sectorial, diverse and integrative. As illustrated in Table 5.1, these changes have been summarised as a movement away from an 'Old paradigm' of rural policy making that emerged in the three decades following the Second World War through a 'New Rural Paradigm' that prevailed in the decades around the millennium, and into 'Rural Policy 3.0'. and, very recently, into “Rural Well-being: Geography of Opportunity”. This approach focuses on individual well-being at its core and looks at opportunities of rural policies being determined by economic, social, and economic aspects. Enhancing competitive advantages in rural communities is a key element of this framework, however not the only one. The framework is multi-dimensional and strives to enhance well-being based on integrated investments and the delivery of services that are adapted to the needs of different types of rural areas. It describes a partnership-driven approach that includes government as well as the private sector and civil society (OECD, 2020[4]).

Significant potential synergies exist to link environmental and energy transition with sustainable rural development, but they are mostly underutilised. Sustainability transition contributes to rural development because it can create important well-being gains related to economic performance, but also improved air quality, soil and water quality, biodiversity, and energy security (Karlsson, Alfredsson and Westling, 2020[9]). However, an overall finding from international evaluations suggests that most countries have not developed strategies for linking energy and environmental transition with rural development. For example, a recent report from the European Court of Auditors found that most EU Member States did not employ any form of prioritisation of renewable energy when making decisions concerning rural development projects, notwithstanding the presence of national commitments to expand renewable energy production (European Court of Auditors, 2018[25]).

Local economic development strategies should integrate ambitious and long-term transition pathways for key transition fields, including renewable energy development, rural mobility, sustainable land management and moving towards a circular and bio-economy. This would also help the development of upstream and downstream linkages with important rural industries such as forestry or mining. Importantly, rural development strategies also need to highlight synergies between policy goals –sustainable land management can for example contribute to healthier diets– and potential conflicts in policy objectives, e.g. between competitiveness and transition goals. Making use of existing synergies can help minimise trade-offs (OECD, 2019[26]).

Supporting sustainability transitions in rural regions requires better alignment of food, water, and climate policies. The diverse and complex challenges facing a transition towards sustainable land use are often related to resource competition (e.g. water, energy, biodiversity, land), socio-economic concerns (e.g. rural livelihoods, community development, emerging niche markets), and human health and environmental integrity (e.g. ecosystem health, environmental justice, climate change). Overcoming fragmented land-use governance between sectoral ministries and different levels of government is required in order to facilitate the co-ordination across scales necessary to support transitions towards sustainable land use (OECD, 2020[27]).

Rural areas face unique transition challenges, highlighting the importance of a just transition. Physical isolation, limited economic diversity, high rates of vulnerable populations due to lower incomes and higher poverty rates, combined with lower educational and employment opportunities and an aging population increase the vulnerability of rural communities. Declining public and private services in rural areas and remoteness and limited access also means higher car dependency. Due to limited economic diversity, dependency on transition-inconsistent sectors such as manufacturing and mining is higher in rural areas than in urban areas. Consequently, some rural regions will likely experience employment losses and shifts, which need to be compensated. Particular support will be needed for coal regions and carbon-intensive regions.

Rural residents and local communities can face different types of transition risks:

  • Transition comes with distributional effects. For example, middle-class households tend to be early adopters of subsidised solar panels or electric cars. But this implies a regressive distribution of taxes, with different effects in urban and rural areas. Poorer households in rural areas are benefiting less from the transition (Jenkins, Sovacool and McCauley, 2018[28]).

  • Some social groups may experience vulnerabilities with regard to particular innovations. The roll-out of smart meters, for example, may not benefit certain social groups, such as people with limited computer skills (e.g. the elderly or those with poor education) or people living in rural areas, where smart meters do not function properly (Sovacool et al., 2017[29]).

  • Redirecting investments towards a climate-neutral and circular economy may lead to the economic decline of existing industries, often located in rural regions. Renewable energies, for example, are replacing coal-fired power plants and coal-mining regions in Germany (Vögele et al., 2018[30]). This is leading to social resistance and political opposition in local communities and in regions where high-carbon industries are major employers and sources of local tax revenue.

Public authorities in affected rural regions play an important role to mitigate social protests and make transitions more fair and inclusive. Ensuring a just transition requires measures to alleviate negative consequences and help firms, employees and regions to reorient. The International Labour Organization has elaborated guidelines for a just transition, which acknowledge that transitions create both employment opportunities and challenges (ILO, 2015[31]). Addressing rural concerns means listening to stakeholder worries, consulting them in early policy design processes, offering (financial) compensation, and providing assistance or training to vulnerable groups. For the economic decline of existing industries, no easy solutions exist. The past decline of old industrial regions dependent on coal, steel or heavy metals created sometimes long-lasting unemployment and other social problems. Policy needs to assist reorientations in an active manner, including through sustainable industrial policy, robust social protection or safety nets, and wide-reaching labour adjustment programmes (OECD, 2019[32]).

Rural regions can employ a number of proactive strategies to support a just transition to a climate-neutral and circular economy. Rural areas are key players when it comes to achieving environment and energy transition objectives. While the possibilities and fields of action are diverse, they are different from those of cities. The below section provides an overview of the potential of rural communities and outlines some of the success factors and possible challenges.

The share of renewable energy is on the rise in OECD and EU countries. In 2018, the share of renewables in the OECD primary energy supply reached 10.5% (IEA, 2019[33]). In the European Union, it even reached 18.9%, compared with 9.6 % in 2004 (Eurostat, 2020[34]), most of it in electricity generation. The sources of growth have been principally wind power, solid biofuels (including bio-waste) and increasingly solar power. Cost reductions in renewables, in particular wind and solar PV, and advances in digital technologies are opening future opportunities for energy transitions. The Sustainable Development Scenario (SDS) developed by the International Energy Agency projects that the share of renewables needs to rise to two-thirds of electricity generation output by 2040 to be on course towards reaching energy-related SDGs and the Paris Agreement objectives (IEA, 2019[33]). The use of renewable energy has many potential benefits, including a reduction in greenhouse gas emissions, the diversification of energy supplies and a reduced dependency on fossil fuel markets (in particular, oil and gas). The growth of renewable energy sources may also stimulate employment, through the creation of jobs in new ‘green’ technologies. Recent analysis shows that accelerated uptake of renewables could boost total energy jobs to 100 million by 2050, Jobs in renewables could reach 42 million by 2050, some 62% more than under current plans (IRENA, 2020[35]).

Many renewable developments are located in areas classified as rural. For example, hydroelectric power generation in the United Kingdom is mainly located in Scotland, which also hosted over 60 percent of the wind power generation (Phillips, 2019[17]). Beyond the United Kingdom, a recent study has constructed a map of wind turbine distribution across the European Union, and comparison with the urban-rural typology of the European Union's NUTS3 regions suggests that many of the turbines are located in areas beyond urban regions (Mauro, 2019[36]). Rural areas often have locational advantages when it comes to the generation and decentralised use of electricity and heat from renewable energies such as wind, sun, biomass, hydropower or geothermal energy. This includes the availability of open spaces or resources such as biomass. However, not all rural regions are equally suitable. Particularly in the case of wind power, regional disparities can be large. It is therefore important to identify potential based on physical conditions in a certain area (Phillips, 2019[17]).

The development of renewables in rural areas can be an economic driver for these areas, but this is not always the case. A central question is how profits are distributed to benefit social and economic development of rural regions. Key mechanisms are supply chain benefits, community or shared ownership, and community benefits (Clausen and Rudolph, 2020[37]). Evidence is mixed whether construction, operation and maintenance activities from renewable energy projects support local job creation and local procurement, and to what extent locally sourced labour helps long-term rural development. A case study from rural Sweden found that in the absence of community benefit schemes, employment opportunities are very modest and strongly depend on the presence of local manufactures (Ejdemo and Söderholm, 2015[38]). In contrast, a study about very large wind farms in Texas estimated substantial local economic activities during their life cycles, whereas supply chain impacts accounted for more than 50% of generated jobs (Slattery, Lantz and Johnson, 2011[39]).

Citizens’ and municipality participation in the energy transition is vital to ensure community ownership of renewable energy. This can happen for example through civil energy co-operatives or leases of municipal areas to operators of wind turbines or open space photovoltaic systems. To increase the social acceptability of renewable energy development, many energy developers now offer some form of 'community benefit' as part of their developments. The mining industry has a long tradition of benefit-sharing agreements. Local-level benefit-sharing approaches can also be applied to renewable energy projects such as wind and solar (see also the section on capacity building). These benefit schemes can take a range of forms, including:

  • financial payment into some form of 'community fund' that can be used for the benefit of local residents

  • the delivery, either directly or indirectly, of some form of community 'benefit in kind', such as the construction of some community facility or infrastructural improvement

  • 'share ownership' or 'profit-sharing' where residents of an area are given a stake in an energy development such that community benefits are tied to its performance (Phillips, 2019[17]).

Aspects such as regional added value and citizen participation can also increase the acceptance of environmental and energy transition measures among the population. The expansion of and self-supply with energy and heat from regenerative resources also promotes sustainable municipal services, reduces the dependency on imported, conventional energy sources and their price fluctuations and can thus relieve municipal households. In addition, successful and innovative projects in the area of "energy transition" ensure that active municipalities are known across the region, thereby increasing their attractiveness and attracting visitor groups (energy tourism).

The energy transition is often equated with a “power transition” and is not (yet) sufficiently linked to the areas of heat and mobility. The transition towards renewable energy generation poses challenges of how to most efficiently use green energy, for example, by jointly optimising electricity, heating and transport sectors (so-called sector coupling). It also raises questions on how to effectively store green energy, for example, by using modern hydrogen technologies; and how to control electricity consumption and shift demand in times of underproduction towards times of overproduction (Stötzer et al., 2015[40]). Sector coupling has potential for small, rural communities, for example, to lower the operating cost of zero-emission vehicles, on which rural areas depend more than urban areas (see below). Power-to-heat (converting electricity into heat) or power-to-gas (converting electricity into gas) are further options.

Rural energy transition also comes with some challenges. In many OECD and EU countries, it can be difficult for small municipal energy suppliers and energy co-operatives to remain competitive due to considerable planning obligations or complex competitive tenders. In wind energy, for example, considerable planning work has to be undertaken before a contract is secured. Another area of conflict are the use of land for energy generation from renewable sources (wind farms, open spaces photovoltaics) and the associated interventions in the landscape. The negative influences on the natural environment and biodiversity poses an additional challenge. Finally, social resistance centred on visual impacts and aesthetics remains an important barrier (Phillips, 2019[17]).

Rural and sparsely populated areas face specific opportunities and challenges in the transition to sustainable mobility. The transport sector accounts for roughly a quarter of all greenhouse emissions. While there has been progress in improving energy efficiency and environmental friendliness of vehicles and technologies, the challenges for reaching sustainable mobility are great. The transport system as a whole is facing changes driven by servitisation, increasing intelligence and automation in vehicles as well as infrastructure (ITF, 2019[41]). When it comes to transportation in rural and remote areas, long distances, sparse population and narrow flows of people and goods pose specific challenges related to rural mobility needs (Kostiainen, Aapaoja and Kinnunen, 2017[42]). Rural transport plays an indispensable role in achieving more than half of the Sustainable Development Goals (SDGs) and fulfilling the promise of the 2030 Agenda for Sustainable Development to ‘leave no one behind’.

Effective rural transportation planning at local, regional and national level requires a co-ordinated multimodal transportation system. Such a system provides choices for the movement of people and goods and allows quick transfers between modes when and where they are needed. Transportation linkages should be maintained between rural and urban areas as they are important to the economy, public health, and social structure of rural areas (Saroli, 2015[43]). Effective rural transportation planning should also provide users and stakeholders of the transportation system with the opportunity to participate in the planning process. Rural transport is a public good and should therefore not only be examined from a cost-benefit analysis. There are social and well-being benefits arising from better public transport provision in rural areas, which include greenhouse gas emission reduction, social inclusion, and rural development opportunities, which are often not fully included. For this reason, sufficient public funding is required to support sustainable rural transport provision.

Although the uptake of electric vehicles (EV) in rural areas is lower than in cities, rural drivers and rural economies can save most from zero-emission vehicles. Recent analysis from the United States based on data from the 2017 National Highway Traffic Survey suggests that rural residents have the potential to save up twice as much as urban residents by making the switch from a conventional car to an electric vehicle. These savings are likely to be even greater for drivers of pickup trucks. In addition, emission reduction from EV usage in the most rural counties are almost double the average from EV usage in the US most urban counties (Gatti, 2018[44]). Moving to zero-emission vehicles in rural areas benefits not only rural drivers, but also offers important opportunities for rural economies as savings from lower fuel consumption that rural dwellers can re-invest in the local economy.

A range of barriers persists to scaling-up electric vehicles. First, a lack of charging stations throughout many rural areas restricts the viability of electric vehicles, either for people who live in rural communities or for tourists who wish to visit. Second, although range amongst EVs is improving, as some EVs are having an average range of 150 to 250 kilometres, the fear of running out of battery remains a primary barrier. Third, consumer acceptance and affordability remains crucial for EV adoption (Kester et al., 2020[45]). Bridging the urban-rural EV charging infrastructure gap requires including rural places in plans to expand charging infrastructure. Local authorities in rural areas can work with diverse businesses ranging from popular supermarket chains to retail shopping centres, and EV fleet operators, to help expand the availability of EV charging (Bonsu, 2019[46]). While electric vehicles remain somewhat more expensive in their acquisition (though not in their operating costs) than conventional vehicles, declining battery costs and support for purchase incentives, such as tax relief/taxation incentives on EVs for certain population groups coupled with education programs, can help make electric vehicles affordable for all residents.

Moving to sustainable rural mobility requires decarbonising freight road transport. Goods transport by road consumes around 50% of all diesel fuel and accounts for 80% of the global net increase in diesel use since 2000. Projections see road freight activity at least doubling by 2050, offsetting efficiency gains and increasing road freight CO2 emissions (ITF, 2018[47]). Rural roads often constitute a significant proportion of freight transport. The potential benefits of reduced fossil fuel-dependent freight transport are substantial and include lower energy import dependence, large reductions in carbon emission and net gains in value-added and employment (due to reduced oil imports over time). The transition also lowers the cost of road freight transportation. At the same time, it challenges the competitiveness of the (fuel-based) auto industry and can negatively affect employment across several sectors, for example by shifting jobs from producing traditional motor vehicle components to advanced technologies (European Climate Foundation, 2018[48]). Policy should foster measures such as stricter emission standards, zero-emission zones, recharging infrastructure and incentives for adoption of alternative fuels by large fleets (ITF, 2018[47]). Local or regional planning approaches play an important role in introducing some of these measures in rural transport planning and funding.

Sharing transport can help achieve zero-emission targets while improving energy and materials efficiency, thereby supporting the energy transition and a more circular economy. At the same time, it is difficult for conventional public transport to meet different accessibility needs of different user groups in rural areas. There is therefore a need to find alternative, flexible transport supply solutions to address mobility issues. Some examples are:

  • Shared mobility solutions: Shared mobility can be an essential part of the solution set to deal with mobility issues in rural environments, where conventional public transport struggles to meet the actual needs of passengers, and where people are highly dependent on the private car. Informal networks and community goodwill can lead to steady expansion of schemes that have started at a very small scale;

  • Demand Responsive Transport Services: Demand Responsive Transport (DRT) are services that pick up and drop off people in accordance with actual passenger needs. The ability of DRT to provide efficient and affordable transport services has been greatly enhanced by the use of technology. For example, routes can be adjusted in real-time based on traffic and demand (Leiren and Skollerud, 2015[49]);

  • Rail and bus public transport network: Rural buses can lower rural traffic by replacing individual car use. They are essential to combat social exclusion for rural households without a car. Buses enable non-drivers to access jobs, shops, education, and services, all of which are increasingly centralised, threatening rural viability. Buses can also serve to bring in visitors and tourists and ensure that the countryside is visited (Saroli, 2015[43]);

  • Cycling: Cycling, and in particular peddles (motor support when using the pedals) or e-bikes (motor support even without using the pedals) could offer climate-friendly alternatives to the car due to the increased range and possible uses by different people than cyclists, such as older people, (McAndrews, Tabatabaie and Litt, 2018[50]).

Planning sustainable rural mobility in a more comprehensive way may also consider alternative fuel options for shared and individual transport, as well as re-visiting links between passenger and delivery services. Box 5.3 provides examples of rural shared mobility initiatives.

The circular economy can drive sustainability transitions in important rural industries. The circular economy refers to a development strategy that allows economic growth by optimising the use of natural resources, minimising environmental pressures, transforming supply chains and consumption patterns and redesigning production systems (OECD, 2019[51]). Applying circular economy principles can help rural regions to identify place-based, crosscutting initiatives that enhance environmental conservation and regeneration while creating new jobs, improving food and water security, and promoting a transition to a climate-neutral and circular economy. A successful transition will require concerted efforts by the government, industrial companies, and companies in major value chains, and civil society. Rural industries, including heavy industries, mining, and the food system, will be crucial to enable transition.

Resource and energy-intensive industry holds a central place in achieving a climate-neutral and circular economy. Within the European Union, the production of key materials and chemicals – steel, plastics, ammonia and cement – emits some  500 million tonnes of CO2 per year, or 14% of the EU total. Material needs are still growing and emissions from these sectors might increase as well (Material Economics, 2018[52]). Where heavy industry is located in rural areas, it not only contributes to rising emissions, but also affects water and soil, air pollution and biodiversity. A more circular economy can enable a more productive use of materials and deep cuts to emissions from heavy industry. Several pathways to achieving net-zero emissions and a circular economy have emerged:

  • Increased materials efficiency: Many construction projects use 30–50% more cement and steel than would be necessary with an end-to-end optimisation. Opportunities for circularity are wide-ranging and include new manufacturing and construction techniques to reduce waste, co-ordination along value chains for circular product design and end-of-life practices, and new circular business models based on sharing and service provision.

  • Material recirculation: Already produced materials can be re-used. For example, steel recycling is already integral to steel production, contributing to reducing CO2 emissions. With plastics, more recycling and better use of end-of-life plastics (that cannot be mechanically recycled) as feedstock for new production are required. By 2050, 70% of steel and plastics could be produced through recycling using green electricity and hydrogen inputs.

  • New production processes: As many current industrial processes link to carbon for either energy or feedstock, deep cuts often require new and adapted processes and inputs. For steel, production processes that use hydrogen instead of carbon can be explored. In cement, low-CO2 alternatives exist. Many solutions have already been developed and need urgent scale-up and deployment to reach large shares by 2050.

  • Carbon capture and storage/use: The main alternative to mobilising new processes is to fit carbon capture and storage or use (CCS/U) to current processes. This can make for less disruptive change. However, carbon capture and storage requires public acceptance and access to suitable transport and storage infrastructure. These considerations mean that it is not an easy solution applicable to all emissions. Still, it is required to some degree to reach net-zero emissions by 2050. The more cities, regions, and rural areas invest now in circular and climate-neutral measures, the later carbon storage will be needed as an additional measure to reach climate-neutrality (Material Economics, 2019[53]).

The cyclical approach to manufacturing and resource management is also well suited to the rural mining and metals industry. Metals themselves are infinitely recyclable and the sites of mining operations have much scope to adopt a circular approach to business by linking production processes. By-products of mining, for example, can be re-used for construction materials (such as bricks or cement), glass and glazes, in agricultural forestry, or the context of wastewater treatment (ICMM, 2020[54]). Some companies are already actively using circular economy strategies for mining processes such as recycling of electronic waste, as pointed out by the OECD mining case study on Västerbotten and Norrbotten (OECD, 2020[55]).

Reducing food waste and valorising organic waste flows can drive a low-carbon bioeconomy as well as help build soil fertility. Circular food production and food resource management could reduce emissions by 49% or 5.6 billion tonnes CO2 emissions, which almost cut emissions from this sector by half in 2050. Important measures to achieve circularity are designing out waste along the whole value chain and keeping materials in use, combined with the development of regenerative agriculture practices in rural areas. By adopting regenerative practices, farmers can go even further, moving from carbon reduction to carbon sequestration. In this way, the soil and plants that are used to feed a growing population can be transformed into a major tool to address sustainability challenges (Material Economics, 2018[52]). The following section provides examples of circular economy food strategies for rural regions:

  • Designing out waste: Food brands can use ‘ugly’ fruits and vegetables as ingredients for food products, such as baby food and spreads. Digital technology and supporting policy initiatives can play an important role in ensuring any surplus edible food is redistributed for human consumption, helping divert food waste from landfill, and providing high-quality nutrition to food-insecure neighbourhoods (Ellen MacArthur Foundation, 2019[56]).

  • Keeping products and materials in use: Surplus organic material (e.g. agricultural by-products, food preparation leftovers and municipal sewage flows) can become feedstock for other parts of the economy. Where waste streams are relatively pure, the materials can be used to produce high-value products such as fabrics for clothes, structural material for packaging and furniture, or innovative new food products. Compost contains nutrients that can strengthen soils, so that using compost in food growing can mean fewer chemical fertilisers and less irrigation are required. This consequently reduces emissions in sectors such as mining (mineral extraction), industry (ammonia production), and energy (pumping power for irrigation) (Ellen MacArthur Foundation, 2019[57]).

  • Regenerating natural systems: Growing food in ways that improve soil health, agrobiodiversity, and local ecosystems help to improve the soil’s physical structure and nurture beneficial microbes, leading to a cascade of system benefits: not only carbon sequestration, but also better water retention and reduced reliance on synthetic fertilisers (OECD, 2019[58]).

Rural areas can stimulate the take-up of circular economy approaches and solutions with strategic public procurement, clear framework conditions, and support to local and regional stakeholders. Local and regional authorities in rural areas can include circular economy considerations in their purchasing decisions by using green public procurement criteria and mechanisms such as pre-commercial procurement. This means in practice to include criteria related to maintenance, recycling and sustainable sourcing of raw materials in the procurement process. More generally, rural areas should also integrate their commitments to a circular economy into relevant strategic documents, setting out local priorities, planned measures and forms of support available. This sends a clear signal to local and regional stakeholders, enabling them to plan their activities in the long term. Creating a dedicated entity supporting regional governments to implement circular economy strategies and principles can also foster the circular economy (OECD, 2020[59]).

The bioeconomy can support environmental and energy transition in rural areas because it helps preserve natural resources and supports the restoration of environmental and ecosystem health. In the bioeconomy, all materials, chemicals and energy are developed and derived from renewable biological resources (Birner, 2017[60]). It focuses on reducing waste streams of bioresources, as well as developing new products and economic value chains based on such waste streams. According to the European Commission’s new Bioeconomy strategy, a bioeconomy relies on renewable biological resources (e.g., crops, forests, animals and organic waste) and their conversion into food, feed, products, energy and services. A bioeconomy includes all primary production sectors (agriculture, forestry, fisheries and aquaculture) and all economic and industrial sectors based on biological resources (European Commission, 2018[61]).

The development of a bio-economy is often seen as a stimulus to rural development as biomass production is usually located in rural areas. The transition to a bio-economy might stimulate new business opportunities in rural areas, for example, around the development of bio-refinery facilities. The development of sustainable rural bio-economy value chains, whether product-based or service-based, offers great opportunities for rural actors in economic (i.e. generating income), social (i.e. job creation in local communities) and environmental (i.e. reduction of GHG emissions) terms (OECD, 2018[62]). One of the opportunities in developing new sustainable rural bio-economy value chains lies in strengthening the linkages between rural and urban areas, and developing new ways of ensuring that value, materials, nutrients and energy can be made to flow back to these primary sectors, to farmers and foresters.

There are overlaps and differences between the bioeconomy and the circular economy. The bioeconomy is closely linked to the circular economy agenda, as it also highlights resource efficiency, the re-use of resources, and more sustainable consumption and production patterns. However, the bioeconomy is not fully part of the circular economy as most material flows, including fossil, biomass, metals and minerals are not yet circular. In addition, many elements of the bioeconomy go beyond the objectives of the circular economy. These include aspects focused on product or service functionality such as new chemical building blocks, new processing routes, new functionalities and properties of products (OECD, 2018[62]). The Green Lab Skive in Denmark provides an example of a circular bioeconomy cluster of different firms and municipal services such as waste management and district heating that unites businesses operating with renewables and bioenergy (Box 5.4).

Different territorial approaches exist to support the bioeconomy. Action plans for bioeconomy are designed at increasing speed all over Europe at the level of nation-states, regions, and cities. Compared to national approaches, regional strategies include the possibility to tailor the bioeconomy strategy more closely with local strengths and weaknesses. In general, the promotion of bioeconomy and related strategies is highly uneven across Europe, with a few leading regions but many more still not using their potential. Existing barriers to the bioeconomy include incompatible regulations and standards around bio-wastes; conflicting policy objectives of different ministries and departments; uncertainty over environmental impacts; “one-size-fits-all” policies; and simply an absence of consideration to rural development issues or objectives. Moreover, in countries and regions where fossil fuel economies are well developed, there are significant path dependencies caused by sunk-investments and interest groups, which bio-economy interests have to address.

Sustainable land use plays an important role in rural economies and beyond. Agricultural systems, which include non-food as well as food products, livestock, fisheries, and forestry, provide the main source of food for rural and urban dwellers alike. Agriculture also contributes to economic development in rural areas, for example by providing employment. It also provides important agro-environmental services to society, such as flood risk mitigation, and resilience to droughts. Importantly, agriculture and forestry have the potential to remove carbon dioxide from the atmosphere, which can provide a significant contribution to environmental and energy transition (OECD, 2019[58]).

However, the current food system is not sustainable. It is responsible for around 30% of global greenhouse gas emissions, of which agriculture directly contributes approximately 12% of global GHG emissions and is responsible for an additional 9% of global GHG emissions each year from changes in land use, such as the conversion of forestland to cropland and grassland. The collective global effort to mitigate GHG emissions in the agricultural sector has been weak (OECD, 2019[58]). The current food system also negatively affects other aspects of well-being, such as health and the environment. Agriculture can be highly resource-intensive, using over 70% of freshwater available globally (Gruère and Le Boëdec, 2019[63]). It is also a major source of biodiversity loss, land degradation and water pollution. Agricultural fertiliser, pesticide use and livestock effluents contribute to disappearing species in fauna and flora, the pollution of waterways and groundwater, and harm a number of important ecosystem services such as pollination (IPCC, 2020[2]). In addition, malnutrition affects an estimated 2 billion people and nearly one-third of the food production is lost, causing health and sustainability issues (FAO, 2019[64]).

There are important synergies and trade-offs in land use. Land use has multiple objectives such as ensuring food security and contributing to healthy diets, limiting climate change, preserving a healthy and safe environment, and ensuring the sustainable management of natural resources. Policies encouraging food production with lower emission intensity may have a significant mitigation potential while also benefitting health (IPCC, 2020[2]). For example, a dietary shift from animal-based proteins towards plant-based proteins leads to lower CO2 emissions while also resulting in better health outcomes (Aleksandrowicz et al., 2016[65]). Important trade-offs can arise between climate policy and food security. Stringent climate mitigation policies can increase the risk for people at hunger while the amount of food that needs to be produced by 2050 to feed an estimated world population of 9.3 billion will rise by 60% (FAO, 2019[64]). Policies aiming for food-competitiveness may be incompatible with the objective of protecting the environment, too (which might entail rising rather than falling production costs). Unsustainable land management also leads to bad health and environmental outcomes and threatens ecosystem services.

An important part of sustainability transitions is that it needs to be economically viable for rural residents, including farmers and local retailers, to be accepted and implemented. This implies the need to restructure food value chains and to create new opportunities for farmers through alternative land-management opportunities. Several policy approaches can support the transition:

  • Policies that look at food value chains, including those that reduce food loss and waste and influence dietary choices, enable a more sustainable land-use management, enhanced food security and public health, and lower emissions trajectories (OECD, 2019[26]). Roughly one-third of all food produced is lost (WRI, 2018[66]). Improving local waste management at every stage of the food chain reduces food loss and waste. Where food loss cannot be avoided, it may be re-integrated into natural nutrition cycles. Organic waste from municipal waste or crop residues can replace synthetic fertiliser. Waste can also be used to create energy, contributing to environmental and energy transition objectives (Tomperi et al., 2017[67]).

  • Land-management responses, including those that enable alternative forms of agriculture, such as organic agriculture initiatives. Organic farming promotes the use of natural fertilisers and ecologically based pest controls derived largely from animal and plant wastes. Organic farming is growing across the OECD and covers between 10 and 20 percent of total agricultural area in some countries, notably Austria, Sweden, Estonia and the Czech Republic (OECD, 2019[68]). Organic farming can come with multiple benefits such as new business opportunities, job creation, improved ecosystem services, and positive environmental effects on soil, water and biodiversity. Effects are mixed on greenhouse gas emission reduction (OECD, 2016[69]). Barriers that prevent farmers from adopting organic farming approaches are that it requires different equipment and other costly up-front investments. It also requires more labour (Stephenson et al., 2017[70]). Rural policy makers can support organic agriculture with certification and labelling frameworks, financial incentives as well as regulations (OECD, 2016[69]). The French strategy for organic farming, Organic Ambition 2022, is an example of a strategy that aims to reach 15% of all agriculture being organic in 2022. The strategy focuses on production and consumption development and the provision of training in the agriculture and food industries (Agreenium, 2018[71]).

  • An important tool for rural regions in the transformation process will be digitisation. Digital technologies can help reduce water and fertiliser consumption without reducing yield. However, the use of digital technology in land use in rural regions in the European Union and the OECD (Organisation for Economic Co-operation and Development) is, on average, low. A lack of technical infrastructure (e.g. broadband connectivity), as well as high start-up costs with a risk of insufficient return on investments seem to be key obstacles for the adoption of digital practices in rural areas (OECD, 2016[69]). Key elements to build effective digital strategies are the provision of infrastructure (and technology) and access to adequate financing instruments. Skills development, education, and training, covering several aspects from access to basic ICT skills in rural communities to keeping up with new developments in knowledge and technology are equally important issues to consider fostering digital farming methods such as precision farming (Box 5.5).

Improving soil and water management practices can boost crop yields and ensure sustainability. For example, agroforestry, or incorporating trees on farms and pastures, can help regenerate degraded land and boost yields. When it comes to water, the agricultural sector is increasingly affected by climate-change-induced water shortages while also being a major source of water pollution. This trend is encouraged by the fact that irrigating farmers in most countries do not pay for the full cost of the water they use. Policy at farm, community, and national level needs to improve information systems on water resources, quality and risks as well to build local resistance against uncertainties associated with weather events and climate change. Water charges need to reflect its full price, including the opportunity cost of water withdrawals, accompanied by a transition policy to compensate poor farmers (Gruère and Le Boëdec, 2019[63]).

Productivity gains should be linked to the protection of natural ecosystems. Policies can affect agriculture’s environmental performance by stimulating (or harming) the provision of environmental services such as carbon storage, preservation of rural landscapes, resilience to natural disasters, or pollination. Most OECD and EU countries have policies to overcome market failures to provide ecosystem services in agriculture, although the effectiveness of some of them needs improvement in order for agriculture to provide more ecosystem services (Hardelin and Lankoski, 2018[5]). This also includes reforming policies that pose a barrier to providing ecosystem services such as market price support and area-based crop-specific payment (Chan et al., 2017[18]). A widely used instrument for biodiversity conservation are Payments for Environmental or Ecosystem Services (PES). In PES schemes, people managing and using natural resources (typically forest owners or farmers) are paid to manage their resources to protect watersheds, conserve biodiversity or capture carbon dioxide (carbon sequestration). PES programmes differ in the type and scale of the ecosystem service targeted, the payment source, and the type of activity paid for (OECD, 2013[75]). Agricultural subsidies can be reformed in order to align direct payment systems with biodiversity conversation. Switzerland, for example, has reformed its direct payment system by removing direct payments to livestock farmers and increasing payments to farmers able to meet biodiversity goals such as extensive upland grazing. Transition payments were used to minimise negative impacts on farmers and environmental groups were instrumental in ensuring that those who stood to benefit from the reforms were informed (OECD, 2017[76]).

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