4. Managing environmental and energy transitions in cities

Cities, confronted with challenges such as climate change and the sustainable use of natural resources, are increasingly at the centre of the debate and action related to environmental and energy transitions. Reaching the objective of the Paris Agreement to limit global warming to well below 2 °C above pre-industrial levels and to pursue efforts to limit the increase to 1.5 °C requires transformative and co-ordinated action by all levels of government. The important role of cities in sustainability transitions is also mentioned in the Sustainable Development Goal 11. It aims to “make cities inclusive, safe, resilient and sustainable”. The United Nations has adopted a 'New Urban Agenda' (United Nations, 2016[1]). In the European Union, the 2016 Pact of Amsterdam created the Urban Agenda implemented through a new multi-level governance working method to address societal challenges in cities and better include the urban dimension in policies at various levels (European Union, 2016[2]). The EU’s European Green Deal makes explicit reference to cities to reach the EU’s climate-neutral and circular transition objectives.

Cities are contributing to and can mitigate environmental pressures such as climate change and the sustainable use of natural resources. More than half of the world population (54%) lives in metropolitan areas, which contain cities and their commuting zones (OECD/European Commission, 2020[3]). Between 2015-2050, city populations are projected to grow by 50%, creating further pressures but also opportunities for more efficient resource use. Cities are responsible today for 70% of consumption-based (see also Box 4.1 on consumption-based vs. production-based city emissions) energy-related CO2 emissions, and about around two-thirds of global energy demand (IEA, 2016[4])They are major innovation hubs, provide great opportunities for learning and networks and offer the possibility of achieving whole system transformation at local scale. On the path towards 2050, when many countries aim at reaching net-zero greenhouse gas emissions, cities will play a key role in transforming their building stock, mobility systems, enterprises and industries, and urban infrastructure. This will require significant investments, but could also lead to many positive impacts, in addition to urban sustainability. These include business opportunities locally, better well-being, including substantial health benefits, accessibility, improved public services, and increased growth for all.

Urban transitions are critical to address the intertwined issues of climate change, biodiversity loss, and sustainable development. The circular economy is gaining momentum as a means to combat climate change and contribute to environmental sustainability by tackling waste as a resource. Yet, the potential and limitations of urban actions towards environmental and energy transitions have only recently received extensive and critical scrutiny. More work needs to be done on translating sustainability ambitions into concrete policies and actions for cities. This chapter, therefore, provides insights into why cities matter for sustainability transitions and explores how cities can manage environmental and energy transition in different domains such as urban planning, buildings, transport, and energy. 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 cities”. 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: A Place-Based Approach”.

  • Bulkeley (2019), “Managing Environmental and Energy Transitions in Cities: State of the Art & Emerging Perspectives”, Background Report for an OECD/EC Workshop Series on Environmental and Energy Transitions for Regions and Cities, OECD, Paris, 7 June 2019.

  • Schultz (2019), “A New Global Research Agenda on Cities and Climate Change: Innovate4Cities”, Background Report for an OECD/EC Workshop Series on Managing Environmental and Energy Transitions for Regions and Cities, OECD, Paris, 7 June 2019.

Cities are important places for sustainability transitions (see Chapter 1) to emerge and unfold because of their large contribution to emissions in critical infrastructure such as energy, water, waste and transport. In addition, the potential for local wellbeing benefits from climate policy is large for cities, notably through less air pollution and congestion as well as increasing green infrastructure (Chapter 2). At the same time, cities depend on national governments in important areas of climate and environmental change such as energy supply, transport, buildings and waste legislation. Such dependence on co-ordination across levels of government calls for an integrated approach towards environmental and energy transition (Matsumoto et al., 2019[7]). A large number of cities have made commitments to sustainability transitions, some of them with even more ambitious local targets and policies than European Union (EU) or national pledges (Box 4.2).

Cities present several advantages for managing environmental and energy transitions in terms of governance, stakeholder relationships, and institutional support mechanisms.

First, cities are important places for environmental and energy transitions to emerge and unfold through urban experimentation and innovation (Frantzeskaki et al., 2017[8]). One case in point is the proliferation of Urban Living Labs (ULL), which are urban sites devised to design, test and learn from social and technical innovation in real-time (Marvin et al., 2018[9]). Cities can also experiment with projects before they are rolled out more widely in other cities. For example, the Parisian bike-sharing Vélib started with about 7 000 bikes and gradually expanded to over 20 000 bikes in the city and suburbs (DeMaio, 2009[10]) as well as to other cities.

Second, city agglomerations provide a favourable context for social and technological innovations because they are associated with connectivity, creativity, and innovation. Since cities are in close contact with users, citizens and local businesses, they are in a better position to influence consumer and producer behaviour and to provide opportunities for these groups to engage in the implementation, learning and adjustment. Comparative research on the four cities Budapest, Genk, Stockholm and Dresden has found that multi-stakeholder spaces help cities make sense of urban sustainability transitions and examine how innovative urban solutions help foster the transition (Frantzeskaki and Rok, 2018[11]).

Third, cities have significant procurement powers in areas such as public real estate, school buildings, land allocation tenders. Cities can use public procurement to encourage the circular economy, for example by subjecting land allocation tenders to circular criteria. They can also opt for re-used or re-usable products and develop recycling streams, for example for electronics or office furniture. The Amsterdam Metropolitan Area, for example, has set a target of 50% circular procurement by 2025 (Amsterdam Smart City, n.d.[12]) The Circular Economy partnership of the Urban Agenda for the EU recognises public procurement at city level as an important policy lever to foster the circular economy.

Fourth, cities can support social innovation and local grassroots initiatives. They can provide institutional support, such as political commitment and risk reduction and access to unused urban space. Some cities are actively supporting sustainable heating (e.g. renewable energy in district heating), transport programmes (e.g. through providing charging points for electric vehicles) and green infrastructure (e.g. green roofs, urban trees). Other cities are supporting more sustainable food systems, for example, the marketing of healthier food, produced locally and with less pollution (Ellen MacArthur Foundation, 2019[13]) or to support urban farming and gardening (Gernert, El Bilali and Strassner, 2018[14]).

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

  • New investment needs to avoid lock-ins. Cities have over decades locked in a pattern of energy-, building- and transport-related carbon emissions that needs to be undone. The long service life of buildings, transport systems and other infrastructure means delays result in higher costs, as new investment that is inconsistent with energy and environment transition targets will need replacement for the end of its economically useful life.

  • Cities are complex. Environmental and energy transitions require coherence across all policy domains and sectoral and administrative boundaries. Strategies have to be congruent with a wider set of objectives. Doing may offer important benefits beyond climate, for health and economic performance. However, negative impacts on vulnerable populations also need to be minimised.

  • Transition can lead to conflict. Citizen and stakeholder engagement does not mean that urban initiatives are consensual and conflict-free. A recent study of two projects in Copenhagen revealed that contestation and conflicting interests, can lead to failure and abandonment (Madsen and Hansen, 2019[15]). In addition, transforming urban infrastructure in order to promote renewable energy development and a more circular economy, for example by installing PV cells on rooftops, often leads to refusal on aesthetic grounds. The identification and handling of conflicts should therefore be an important dimension of managing environmental and energy transition in cities. They do not imply abandoning transition projects, but anticipating conflicting interests.

  • The state of understanding of local well-being gains is still inadequate. Urban and regional policy makers have an interest in supporting well-being gains from environmental and energy transition on health and productivity because they often accumulate in regions and cities taking action. There is, however, a lack of knowledge on how to account for well-being gains and how to emphasise them in policy.

  • Lack of knowledge sharing. Lessons from individual initiatives often remain with local participants if dedicated learning and sharing are not stimulated. Cities need to compare experiences and circulate and aggregate best practices. Learning should lead to portfolios of best practices that take account of structural, cultural and geographical differences across cities.

Subnational governments often depend on some form of external support from higher levels of government. Central governments can for example earmark subnational funds for environmental and energy projects and provide leadership on climate policy. At the EU level, a number of funding mechanisms are available to support urban environmental and energy transitions. One important instrument is the European Union’s Cohesion policy, which supports integrated urban development strategies.

Cities have numerous functional relationships with their urban hinterland, particularly with regard to energy, mobility and food systems. Cities are interdependent in designing, implementing environmental, and energy transitions. New forms of administrative co-operation and multilevel governance are important. Functional Urban Areas (FUAs) reflect this relationship by encompassing the economic and functional extent of cities based on daily people’s movements (Dijkstra, Poelman and Veneri, 2019[16]). FUAs often constitute an appropriate level of intervention for many challenges, including through Cohesion policy funding for sustainable urban development.

Multilevel governance presents a challenge for managing environmental and energy transition because of the complexity of transition and the large number of actors involved. Policy actions at different levels of government need to reinforce each other, for example, linking local government agendas to EU and national-level targets, without preventing them from going further. In some instances, national-level action can hinder the spread of local initiatives by withdrawing funding or blocking progress (OECD, 2019[17]). A useful starting point to make complex policy schemes more coherent involves mapping responsible actors for various policy decisions and potential inconsistencies between policies at different governance levels.

National and regional scientific climate or environmental sustainability policy advisory committees can help with co-ordination. Examples are such as the Finnish climate change panel, the Environment and Nature Council of Flanders, and the German Advisory Council on the Environment. They aim to provide policy makers and authorities with independent expert advice. To various degrees, they are integrated with relevant actors, typically at the national or regional level, to align policy with scientific evidence. For example, in the United Kingdom, the 2008 Climate Act established the Committee on Climate Change, which provides independent advice to the government on setting and meeting greenhouse gas (GHG) emission targets. It also reports on progress to parliament and makes its assessments public. Providing an integrated approach to environmental and energy transitions would require including cities and their policies in higher-level climate policy frameworks.

Cities can have significant influence in urban and land use planning, transport, buildings, and waste management. Importantly, the environmental and energy transition is not only meant to address the carbon intensity of urban systems, but also extends to consumption patterns (e.g. food production and sharing), sustainable living, urban water security, climate resilience and biodiversity. The main policy instruments used by local governments can be broken down into four key categories:

  • Direct investment and procurement, which include environment-friendly purchases and direct investments in related technologies and materials by city governments, as well as municipal support for investment in environmentally friendly infrastructure in urban areas.

  • Enabling policies, which can help to improve the environment in which citizens and businesses operate and support social and grassroots innovations. This can mean to facilitate the emergence of new business models such as solar leasing, where you enter in an agreement with a solar leasing company that owns and maintains your solar panel system and entitles you to the benefits of the system (i.e., the energy that the solar panels generate) for the term of the contract. It can also refer to community projects such as urban farming or ride-sharing. Cities can also enact policies to reduce administrative and regulatory barriers to investment.

  • Mandates and obligations, such as in waste management or building codes, which can be stricter than national-level regulations. A growing number of cities around the world are using mandates and building codes for both new and existing building stock to support environmental and energy transition.

  • Fiscal and financial incentives, which include grants and tax exemptions to encourage specific behaviours (as well as fees and levies to discourage) and investment choices in cities that have at least some control over taxation. Different policies ideally reinforce each other and therefore have a higher impact together than without each other or cost less to achieve the same impact. The following section will provide examples of policies and instruments in different domains.

Good urban design enables access to jobs and facilities in a way that is consistent with the objective of zero net emissions and circular economy principles while fostering urban economic development. Climate-neutral and circular mobility systems as well as building sectors make use of co-location of employment, mixed-building use residential and commercial densification, and the supply of mobility options, including non-motorised mobility. For instance, walkable, mixed neighbourhoods with close proximity of employment and commercial options improve connectivity and accessibility, while saving on energy and material intensive mobility. They also save space that is otherwise needed to store vehicles and other goods.

Climate-neutral and circular urban strategy development and implementation requires a strong regional and sub-regional urban planning framework. Spatial planning occurs at multiple geographic scales: (i) regions and metropolitan areas; (ii) sub-regions, districts, and corridors; and (iii) neighbourhoods, streets and blocks. All three scales of spatial planning strategies rely on multiple policy instruments and levers. Some instruments intervene in markets, aimed at correcting market failures such as negative externalities through government regulations (e.g. land regulation) or government incentives (e.g. targeted biking and walking infrastructure). Others work with markets, aimed at shaping behaviours through price signals (e.g. congestion charges) or public-private partnerships. Policy mixes to support sustainable land-use and transportation need to be adapted to the unique political, institutional, and cultural landscape of the cities in which they are applied. Successful implementation requires institutional capacity and political willingness to align the right policy instruments to specific spatial planning strategies. It also requires strategic investment in transport, energy, water and waste infrastructure (Seto K.C. and D.B. Müller, 2014[18]).

In addition to urban design, mitigating heat islands and developing green infrastructure are also important policies for cities and regions to achieve environmental and energy transition. Heat islands can cause surface temperature differences between built-up and tree-covered urban surfaces of as high as 30 degrees Celsius. In order to mitigate urban heat islands, cities can

  • promote green infrastructure, especially trees with foliage that actively cool through evapotranspiration and serve as shading for paved and other isolated man-made urban surfaces

  • “cool” surfaces for all man-made isolated surfaces in urban neighbourhoods with higher infrastructure densities

  • discourage mechanical cooling in high-density neighbourhoods and encourage passive cooling techniques in order to avoid the burdening of such neighbourhoods with further heat loads by the waste heat of air conditioning

  • ensure that the built urban infrastructure allows for air movements that can reduce local warming through urban heat islands.

The building sector is not on track when it comes to reducing emissions and neither for going circular. The buildings and construction sector accounted for 36% of final energy use and 39% of energy and process-related carbon dioxide (CO2) emissions across the world in 2018, 11% of which resulted from manufacturing building materials and products (IEA, 2019[19]). Buildings in urban areas account for over half of a total city’s emissions on average (C40, 2015[20]). To meet the goals of the Paris Climate Agreement, which aims to limit global temperature rise to 1.5 degrees Celsius, the built environment’s energy intensity—a measure of how much energy buildings use—will have to improve by 30% by 2030 (UN Environment and International Energy Agency, 2017[21]). Yet, the sector is off track regarding the level of investment and action necessary towards a zero-emission, energy-efficient and circular building sector. On the contrary, final energy demand in buildings has risen (IEA, 2019[19]).

Retrofits and deep renovations will be a crucial part of decarbonisation: up to 85% of existing buildings in the EU will still be in use in 2050 (BPIE, 2018[22]) and not even 1% of buildings are net-zero carbon today (World Resources Institute, 2019[23]). The main challenge for policy in high-income countries therefore is the decarbonisation of existing building stock. Deep retrofits (here defined as achieving close to the Passivhaus level of energy performance without counting building-integrated energy production, i.e. the use of up to 15kWh/m2/yr for heating and cooling) are extremely rare still, and the majority of building retrofits do not save more than 20 – 40% energy (Ürge-Vorsatz, Boza-Kiss and Chatterjee, 2019[24]).

Sustainable building designs and construction concepts such as passive houses, and net-zero or energy plus buildings are available, but remain underused. A “passive house” sets a standard of efficiency for space heating and cooling, saving 70 – 95% of thermal energy demand. A net-zero carbon building produces as much power as it consumes over the year and it uses power from renewable sources on site or nearby. The IPCC Fifth Assessment Report in 2014 shows the feasibility of retrofits to passive house levels. Passive house levels are still extremely rare, mostly demonstration projects or heavily subsided (Ürge-Vorsatz, Boza-Kiss and Chatterjee, 2019[24]).

Recent analysis shows that a pathway consistent with limiting global warming to 1.5°C requires deep renovation rates of 5% in OECD countries per year. This stands in stark contrast to existing renovation efforts in the EU and other developed regions. Retrofits also need to be deep enough to be zero carbon consistent. Making all new buildings zero-carbon consistently saves costs (Climate Action Tracker, 2016[25]).

Energy-efficient buildings do not only mitigate GHG emissions and foster the circular economy; they also provide several wider benefits such as health benefits, productivity benefits, and local employment generation. Recent estimates point out that in Europe, on average 4.5 sick days/person per annum can be avoided with deep retrofits, to reach passive house level as defined above (Chatterjee and Ürge-Vorsatz, 2018[26]). Workers in energy-efficient buildings are 1-16% more productive, due to an improved working environment and lower rates of illness. In addition, by investing in upgrading existing buildings and raising the energy efficiency of new buildings in OECD cities, 2 million net jobs could be generated annually in the period to 2050. The same amount of investments in non-OECD cities could result in creating between 2-16 million net jobs annually in the same period (Gouldson et al., 2018[27]).

City policies in many OECD and EU countries support green building transitions by introducing or improving building codes, subsidy schemes, or other incentives at various government levels. An increasing number of cities adopt energy-efficiency approaches in the built environment. The City of New York is an example of a place that has taken action to support retrofitting of existing buildings (Box 4.3).

Progress is insufficient. A diverse set of barriers can hold back sustainable building construction. These include, but are not limited to, misplaced incentives, a lack of awareness and information, long payback times, and fragmented market structures. The main barriers can be summarised as follows:

  • Risk of lock-in into shallow retrofits: Many cities in OECD countries have instruments and policies in place to promote energy-efficient retrofits. However, a high number of building renovations results in modest energy savings, resulting in “shallow retrofits”. While these only save 20 – 30% heating energy, best practice retrofits can save 80-90% of heating energy and even 100% or higher savings are possible. The difference between the two, i.e. the 50 – 80% energy saving potential remains locked in. Once a building envelope is built or retrofitted, it is extremely expensive, or sometimes even physically impossible, to revisit it and capture this remaining locked-in potential for several decades. Avoiding such shallow retrofits requires a clear policy for deep whole-of-building retrofits. Cities and regions can promote deep retrofits by suggesting step-by-step retrofits that allow for smaller steps, which are sequenced to arrive at deep retrofits cost-effectively. One-stop-shops in cities providing information and taking care of necessary arrangements can greatly reduce transaction costs and complexity of deep retrofits (Ürge-Vorsatz, Boza-Kiss and Chatterjee, 2019[29]).

  • Change in business models: The dominant energy business model is still based on selling and purchasing electricity and heat. Alternative business models can provide smart energy management. Enabled by increased digitalisation and servitisation, new business models can offer building maintenance with energy efficiency improvements at the core, integrating the provision of new technology through energy services and the use of data to improve energy management (Brown, Sorrell and Kivimaa, 2019[30]). Cities and regions can help district heating related companies in the transition towards lower energy buildings, for example by incentivising them to take a new role in the provision of deep retrofits.

  • High upfront costs for private households and investors: Governments will need to provide targeted support to households with low income and wealth and address credit constraints. Mobilising private sector financing to finance small-scale projects is possible, but often imply high transaction costs for institutional investors (see also Chapter 5 on financing). An innovative business model has emerged with the Dutch initiative Energieprong: a mix of funding from national and EU sources as well as local authorities and industry partners has supported the creation of a market for net-zero energy homes. Renovations were carried out by an intermediary organisation and financed through loans taken by the housing associations with the objective to renovate overall 111 000 housing association properties. It was agreed that individual households would pay higher rent to the housing association to enable them to pay back the loan. The amount of additional rent equals what they would have paid in higher energy bills without the renovation, resulting therefore in gross rent-neutral retrofits (Brown, Kivimaa and Sorrell, 2018[31]).

  • Lack of adequate information and fragmented market structures: Although the private benefits of deep energy efficiency typically pay for investment over time through saved fuel costs and better indoor ambient quality, widespread market failures such as long pay-back periods, split landlord-tenant incentives and incomplete information may hold homeowners and investors back. Individual cities could accelerate the enforcement of building codes for those most in need (commercial or residential) through public funding or subsidised loans. This may well deliver the biggest gains in energy efficiency and be inclusive, as housing inhabited by low-income households may be relatively poorly insulated. Box 4.4 provides two examples of financing deep refurbishment schemes from Innsbruck and Bolzano. These deep refurbishing schemes do not only save costs but help inclusivity by providing improved health, thermal comfort, living conditions and productivity of residents, especially for residents of relatively lower socio-economic standing.

Local assessments need to determine what type and extent of retrofit acceleration makes sense in a given area based on local characteristics and policy goals (Ürge-Vorsatz, Boza-Kiss and Chatterjee, 2019[24]). For example, it needs to be carefully assessed whether still functioning building components should be put out of use rather than refurbished to reach a good compromise for reaching climate neutrality and circularity targets. All cities can accelerate the adoption of passive house buildings through clear policy ambitions such as:

  • City role model function: Cities play an important role model for achieving energy efficiency targets in buildings. The city of Vancouver, for example, has renovated public buildings in accordance with passive house standards, thereby providing private developers with a blueprint. In addition, removal of regulatory barriers, city staff training, incentives, leader dialogues, and tours and trainings provided by city partner organisations have led to a rise in voluntary adoption of passive house certified buildings (NAPHN, 2019[32]).

  • Support for front-runners and knowledge dissemination: Front-runners need support during initial phases of development to overcome barriers that arise for the first time. This can entail financial support and the provision of technical expertise. For example, the New York State Energy Research and Development Authority (NYSERDA) initiated a subsidised training and development program to promote skills and services related to improving building energy efficiency. The training program has generated a significant momentum to help drive early passive house adoption in New York City (NAPHN, 2019[32]).

Addressing environmental and energy transition in the building sector is not just a matter of energy efficiency. It also depends on changes in existing construction practices and business models. This is also where transportation comes into play as the “what and where of construction”. Avoiding urban sprawl and fostering dense buildings also saves energy as well as infrastructure material needs and costs, and building amenities such as on-site bike storage integrates policy response across domains. Several institutions have published guidebooks to help regions and cities re-use space and buildings, as for example the sustainable and circular re-use of spaces and buildings guidebook from the Urban Agenda (Urban Agenda, 2019[33]).

An increasing share of CO2 emissions is associated with road transport in and around cities, driven by urbanisation, population growth and rising incomes in middle-income countries. Transport emits around 23% of energy-related CO2 emissions, mostly road transport. Around half of passenger transport takes place in urban areas and urban transport accounts estimated 40% of transport energy use (IEA, 2016[4]) . It is the sector with the highest growth rate of GHGs (ITF, 2019[34]). Without immediate action, its share could reach 40% by 2030, as demand for transport may continue to grow.

Transport systems often present problems for environment and health, including climate change, local air pollution, noise and accidents (EEA, 2019[35]). Congestion and land used with transport infrastructure raise economic costs and threaten biodiversity (Goodwin, 2004[36]). There are also several notable social problems associated with transport, as congestion and sprawl reduce access to basic services in some regions (Marozzi and Bolzan, 2018[37]). However, transport is crucial for economic competitiveness as well as for commercial and cultural exchanges (Mullen and Marsden, 2015[38]). Furthermore, the automotive industry is among the largest manufacturing sector in the world and is one of the major generators of wealth and employment in the EU (European Commission, 2020[39]).

The problem for society – and policy – is therefore how to retain the social and economic benefits associated with accessibility and connectivity while reducing the negative environmental, economic and social impacts from transport. Meeting the demand for access to jobs and facilities while minimising environmental and public health impacts will require finding solutions that reduce greenhouse gas emissions, congestion, local air pollution, and improve energy efficiency. Steps to meet these needs with fewer vehicle kilometres will be particularly effective in reducing all of these impacts at the same time. By reducing the material input required in energy infrastructure and vehicle construction, they also advance the circular economy agenda.

Urban policy solutions to tackle these persistent problems have focused on improving technologies and (to some extent) encouraging modal shift. These have done little to address the growth in mobility and emissions. A transition with radical systemic innovation in road transport is therefore necessary (Frantzeskaki et al., 2017[8]). Such a transition will require both technological and institutional changes (e.g., electric vehicles, customised mobility, teleworking, zoning policies).

Cities and their hinterlands play a crucial role in supporting sustainable mobility systems. Cities need to support urban mobility in several ways:

  • Active mobility, such as walking, cycling and public transport provide green mobility options and have multiple implications for health by changing the exposure to certain health determinants like physical activity, traffic incidents, air pollution, and noise. Public transport is an essential component of any sustainable urban transport system. Walking and cycling can make a considerable contribution to sustainable transport goals, building healthier and more sustainable communities and contributing to traffic and pollution reduction. Research indicates that the reach of the existing public transport system can be extended significantly simply by making walking to and from hubs and stops easier, less prone to barriers and more pleasant by creating attractive urban spaces that are well connected to public transport infrastructure (EEA, 2019[35]). Cycling is another transformative option. Various cities in Europe have shown commuting by bicycle can become the dominant mode of transport to and from work. Policymakers should encourage modal shifts towards cycling and walking, including through infrastructures such as mixed-zone developments. However, realising this potential requires an in-depth understanding of the different options, their strengths and weaknesses, and how they affect the mobility system as a whole.

  • Shared mobility solutions, such as digital-based ride-sharing, can lower CO2 emissions sharply. They also deliver substantial reductions of congestion, while improving connectivity and accessibility, provided they replace individual car use. It improves connectivity and accessibility especially for low-income households, who are often less well connected to public transport. In such ride-sharing models, individual private car rides, ideally all rides in an entire metropolitan area are replaced by rides in shared taxis or minibuses. These services are modelled to be available on-demand, at the doorstep or the next street corner. Supply and demand of on-demand services are co-ordinated by a digital platform, which optimises routing (Box 4.5).

  • Another potential strategy for sustainable urban mobility is the electrification of car use and investment in related infrastructure. Electric car deployment has grown rapidly over the past ten years, with the global stock of electric passenger cars passing 5 million in 2018, an increase of 63% from the previous year. While the majority of electric cars on the road in 2018 were in People’s Republic of China (hereafter ‘China’) with 45%, Europe accounted for 24% of the global fleet, and the United States for 22% (IEA, 2019[42]). Many cities support the widespread uptake of electric vehicles. Some cities also have announced specific goals for electric vehicles, as shown in Table 4.1.

Little is known if and how local policies and or strategies affect EV usage and its supporting infrastructure (Roelich et al., 2015[44]) and some studies even consider cities efforts as paying “lip-service mentioning EVs in their climate change mitigation strategies” (Heidrich et al., 2017[45]). Cities need therefore to encourage the uptake of EVs more actively and to improve the infrastructure required for the use of EV. One successful policy has been to invest in public charging infrastructure, which is highly visible and easily accessible for drivers. Cities in the Netherlands (Amsterdam, Rotterdam-Utrecht, Norway (Oslo) and China (Beijing, Shanghai) have the highest concentration of public charging points (Hall, Cui and Lutsey, 2017[43]). The need for public charging varies based on housing stock, private charging availability, and commuting patterns. Electrification of car use will need to come with the adoption of car use charges in order to complement falling fuel taxation (Atkinson, 2019[46]). This will also lower excess driving demand and shift mobility to other modes of transport, reducing overall CO2 emissions (OECD/ITF, 2019[47]). Cities will have an important role to play in setting car use charges.

The development of location-based connectivity and accessibility indicators for all residential areas helps to guide cost-effective investment decisions. It ensures that people are easily able to reach jobs or every-day public services with sustainable transport modes, such as walking, cycling or public transport. This can include, for example, steps to make pedestrian and cycling access to public transport hubs quicker and safer. Transport-oriented development requires integrated accessibility and connectivity for commercial and residential development (OECD, 2019[48]).

Cities matter for the circular economy. Cities are global hubs of production and consumption and this pattern will increase with urbanisation. In high-income countries, the emissions and materials footprint of consumption is likely to exceed locally generated emissions and material use. Driven by rapid urbanisation and growing populations, the world is expected to generate 3.40 billion tons of waste annually by 2050, increasing drastically from today’s 2.01 billion tons (Kaza et al., 2018[49]). High-income countries - although they only account for 16% of the world’s population – are generating more than one-third (34%) of the world’s waste. Continuing on a business as usual trajectory, the consumption and production habits of urban citizens alone put a significant strain on ambitious environmental and energy transition. Transforming urban consumption and production would reduce emissions and the environmental impact of materials use substantially. The City of Lahti in Finland is an example of a mid-sized city that has managed to become environmental-friendly and aims to curb over-consumption (Box 4.6).

Cities and municipalities are increasingly recognizing the potential of the circular economy in waste collection and recycling, which are two of the tasks most commonly associated with the municipal level. Cities across the world have implemented local production, repair and re-use initiatives, such as re-use centres with associated repair workshops, repair cafés, urban mining schemes, circular shopping centres or online market place and support initiatives. However, significant potential to further reduce waste exists. Following the “waste hierarchy”, the environmental impact of materials use, including greenhouse gas emissions, is generally most effectively reduced with waste prevention, followed by re-use, recycling and composting, and energy or material recovery. Cities can work with the private sector and academic community to develop innovative economic models to make the environmental impact of materials use sustainable.

Cities can apply different approaches and use various policy instruments to support the circular economy (see also Chapter 3 on the circular economy). To this end, roadmaps, strategies and political instruments have been introduced in a range of cities. The City of Amsterdam Circular 2020-2025 Strategy proposes to focus on three core value chains to achieve circularity: food and organic waste streams, consumer goods, and the built environment. A concrete policy instrument to support the food and organic waste streams is, for example, the creation of physical places for collection, re-use and closing nutrient cycles. The city also focuses on awareness-raising and uses its influence on social institutions (City of Amsterdam, 2020[50]). The city of Bristol in the United Kingdom has launched in 2018 the “Slim My Waste – Feed My Face” campaign to support household food waste collection and processing. Residents are asked to put their residual waste bins on a ‘no food diet’ and decorate their brown food waste bins with face stickers depicting personalities. The campaign helped to cut down the quantities going into landfill and encouraged residents to recycle their leftovers instead, used to power homes across the city. A partnership between the city and local co-operatives helped distribute bins to those in need of them. Residents were also able to reserve bins online. The campaign was part of the wider strategy on sustainable food in Bristol, co-ordinated by the 2011 created Bristol Food Policy Council (Smart Sustainable Cities, 2019[51]).

Despite their many points of leverage, cities face challenges in their efforts to pursue ambitious strategies for environmental and energy transition. In many cases, municipal efforts are constrained by policies and regulations at higher levels of government. A lack of co-ordination among city departments also can impede progress. The below section provides an overview of some of the key implementation barriers and how to overcome them.

Various factors help explain the significant disparities in progress with urban sustainability transitions and the underlying actions among local authorities:

  • City size is a critical factor, with 80% of cities over 500 000 inhabitants having comprehensive stand-alone mitigation or adaptation plans (Reckien et al., 2018[52]). Larger cities often benefit from conditions, which facilitate innovation and deployment, such as the size and organisational structure of the city; higher-income populations; and higher capacities for environmental and energy-related investment and spending.

  • Urban authorities may face different barriers to entering city networks and benefit from the knowledge sharing that they offer. These barriers can include limited capacity, language barriers and local access barriers. Overcoming these barriers could allow smaller cities to benefit from scale economies.

  • Urban authorities may have different attitudes and willingness to support environmental and energy transitions. Some cities may resist transition because of the importance of local (polluting) industries and the fear of negative consequences for firms, incomes and tax revenues, and workers’ jobs.

  • There can be significant disparities in terms of the skills and competencies of urban authorities to lead transition efforts and to develop appropriate strategies. Small and mid-sized cities – most in need of networks – might be most affected by capacity issues (Chapman, 2019[53]).

Disparities can be reduced by making more resources available for the aggregation and circulation of knowledge. This can include compilations of best practices, using knowledgeable experts and practitioners, implementation guides/guidebooks and evaluation efforts. Enabling the circulation of experts and practitioners across cities and supporting collaboration between city administrations that have contextual similarities can also help address disparities.

Scaling is key to accelerate transition processes. To prevent isolation and fragmentation of individual initiatives, it is important that sequences of urban environmental and energy transition investments and initiatives are scaled-up. The replication, transfer, scaling up and mainstreaming of successful experiments can be supported through expansion of projects, diffusion, and with more systematic co-operation between initiatives and the cities that support them.

Learning is a central mechanism in supporting the diffusion of urban sustainability initiatives. Knowledge about how successful experiments and innovations travel across contexts and how they are transferred is still limited. There are two main ways to support more structured learning in and between cities:

  • Intracity learning focuses on the exchange of information and knowledge between initiatives and actors within the boundaries of a particular city or region. Urban policy makers can promote knowledge exchange and collaboration in several ways. On the one hand, they can bring participants from several urban living labs or experimental districts together for the exchange of experience (e.g. through ad hoc workshops or more systematic exchanges). Alternatively, experts can visit different projects, compare experiences, and abstract more general lessons that can be more widely shared (Bulkeley and Castán Broto, 2013[54]).

  • Intercity learning focuses on the exchange of information and knowledge about practices, experiences and knowledge between cities via networks. City networks can help spread urban innovation by transferring lessons. Examples of city networks are the 2016 Global Covenant of Mayors for Energy and Climate Change, involving more than 7 000 cities worldwide; the International Council for Local Environmental Initiatives (ICLEI), founded in 1990; and the EIT Climate-KIC, which started with 19 cities in 2015 and has grown to a network of 370+ partners spanning universities, businesses, cities and NGOs.

Knowledge about how successful experiments and innovations travel across contexts and how they are transferred is still limited. The emergence of city networks certainly supports learning. Replicating successful initiatives across local settings requires careful consideration of contextual factors. National governments and knowledge sharing initiatives have an important role in the diffusion of urban sustainability innovations, since cities within one country share the same legal environment, geographic proximity and cultural relatedness (Lee and Jung, 2018[55]). National city and municipality networks, such as the Dutch Klimaatverbond, Sweden's Klimatkommunerna and Finland's KINKU network, may be particularly well-positioned to support the diffusion of innovations among its members (Hakelberg, 2014[56]). However, these networks generally appear to be financed by member cities.

Finance is essential for the emergence and diffusion of new technologies and practices, driving long-term economic growth and enabling sustainability transitions. According to recent estimates, emission reductions towards net-zero and the transformation of current production-consumption systems will require supplementary annual investments in the magnitude of around 1 to 1.5% of GDP annually (see Chapter 6). Tackling the financial challenge that arises with managing environmental and energy transitions requires urban policy support in a number of ways:

  • Cities can work with other actors to build bankability and creditworthiness to de-risk investment for environmental and energy projects: Policy frameworks and spatial plans can methodically direct investment towards low-carbon and climate-resilient modes of urban development, while integrated urban development strategies can be used to develop a clear pipeline of climate-compatible projects. It will be important to investigate which of these policy directions will work best for different types of cities with different needs in sectors such as energy efficiency, sustainable transport infrastructure, and low-cost reductions of demand-based emissions, for example with regard to food and beverages.

  • Cities can increase the flow of capital into investments contributing to sustainability transitions. Public-private partnerships, land value capture and dedicated funds from development finance institutions and green banks can help cities narrow the gap between the municipality’s own available funds and what is needed to scale up transition measures (see Chapter 6 on financing sustainability transitions). In particular, land value capture can be a powerful tool for funding large urban transport and development projects. Improvements in transport infrastructure can lead to increased land and property values nearby and this uplift in value can be used as a source of revenue. Cities can equally support shifting finance and investment away from unsustainable practices.

  • Cities can incentivise and enable firms and households to support transition finance. Given the huge investment gap, spending decisions by firms and households (e.g. those owning electric vehicles) will be important in financing transition. In addition, cities can also provide financial incentives for new business models.

  • Cities can shift finance and investment away from unsustainable practices. This requires both re-directing operational expenditures as well as investment spending away from less energy efficient or more carbon-intensive activities to expenditures and investment in line with the net-zero transition.

A just transition approach in cities involves an explicit focus on how a policy could be used to benefit the poorest persons and take measures to address existing and potentially worsening economic inequalities. For example, transport policies that result in significant reductions in traffic volume, private car use and /or large-scale shift to electric vehicles improve air quality, especially in large cities that struggle with high levels of traffic-related air pollution (Gouldson et al., 2018[27]). The health benefits from improved air quality will accrue primarily to lower-income households who are most likely to live in locations affected by poor air quality from road transport (Hajat, Hsia and O’Neill, 2015[57]). As a result, such policies are likely to reduce health inequalities associated with economic inequality. On the other side, urban transport policies will exacerbate existing inequalities if they increase the costs of mobility, reduce the public transport services or involve redirecting public sector funds to subsidies that benefit primarily medium and higher-income households, leaving low-income groups financially worse off (Jennings, 2016[58]).

Well-designed just transition strategies ensure local employment benefits for disadvantaged areas and population groups. Large-scale retrofitting initiatives to improve energy efficiency in existing buildings will create new jobs in construction and the production of energy-efficient technologies (see section above). Localised retrofit programmes can provide employment benefits and positive equality outcomes for disadvantaged areas and population sub-groups by making the job opportunities available (Ürge-Vorsatz, Boza-Kiss and Chatterjee, 2019[29]). Distribution of the employment impacts, however, depends heavily on equitable access to training opportunities.

Just transition strategies in cities need to consider who may be negatively impacted by a given policy as well as why and how this happens. Inclusive and democratic planning processes involving communities, civil societies and citizens can help. The example of the Green New Deal for New York City illustrates how housing advocates, trade unionists and environmentalists worked together and combined social and environmental concerns to push for radical changes to address the housing crisis and the climate crisis simultaneously (Chapman, 2019[53]). The influence of local grassroots movements for a just transition does not only take place at the local level, but can contribute as well to national-level commitments to environmental and energy transition (REN21, 2019[59]). New ways of sharing and distributing information on the co-impacts and inequality impacts associated with various types of environmental and energy transition policies are therefore needed to enable urban policy makers to better consider the complex social impacts that policies may have and how these outcomes emerge.


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