CITIES IN CLIMATE CHANGE MITIGATION POLICY

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OF DEVELOPMENT SYNTHESES OF AFD STUDIES AND RESEARCH

http://www.afd.fr/home/publications/travaux-de-recherche/ publications-scientifiques/question-developpement

The international community wants to reach a coordinated commitment to keep global warming between now and the end of the 21st century under the threshold of an average 2°C higher than the temperature of the preindustrial age and thereby prevent irreversible damage from climate disturbance. This comes down to examining the potential of cities to contribute to implementing effective solutions. However, analysis of mid- to long-term impacts of urban development strategies on GHG emissions is still difficult, due to great complexity of the underlying impact mechanisms.

Because of the large number of sectors and services concerned (transportation infrastructures and networks, energy-management services, and urban spatial planning), urban development strategies can simultaneously have a direct and indirect effect on several sources of GHG emissions. They are also highly dependent on each country’s competence level and institutional organization.

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Based on an in-depth review of scientific and institutional literature, this document seeks to identify what urban measures contribute efficiently to low-carbon urban development. It focuses on the complementarity to be found between measures for structuring urban space and measures for changing individual behavior with regard to urban energy consumption (mainly in transportation and housing).

The phenomenon of accelerated urbanization of emerging and developing economies is a potential source of harmful environmental impacts on people’s well-being. Major negative effects can especially be expected on the climate, possibly compromising, in the long run, large-scale local economic development.

This is because the urban environment is characterized by a concentration of activities with high energy consumption (between 56 and 78% of final energy used is ascribable to transportation and buildings, as well as to industries and services). These activities, in addition to generating significant local pollution, are a large source of greenhouse gas (GHG) emissions. Due to divergent methods of calculation as well as to the perimeter of urban activities, there is uncertainty about the exact extent to which these activities contribute to GHG. Nonetheless, a strong increase in the overall impact of cities on climate change can be expected.

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COMPLEMENTARITY OF URBAN SECTORAL MEASURES (ON HOUSING AND TRANSPORT) AND SPATIAL PLANNING, TO HELP CITIES EFFECTIVELY REDUCE GREENHOUSE GAS EMISSIONS

Cities in Climate Change Mitigation Policy

TRANSPORTATION: PRICING AND REGULATORY MEASURES

Despite this complexity, the urgency of the climate issues linked to growing urbanization requires proper identification of the impact mechanisms of city’s physical, economic, and energy systems on GHG emissions.

Two factors behind GHG emissions are both determinants of mobility choices by individuals and dimensions that local city decision-makers can act on: i) transportation volume (in distance covered or number of trips) and ii) modes of transport. Cities have several levers of action available; identifying the most effective ones can enable them to have influence in the climate debate.

Based on a wide-ranging review of scientific and institutional literature (around 100 publications), this article seeks to identify what are the effects of several urban strategy measures on cities’ energy consumption and their associated GHG emissions, as well as how those effects are transmitted. The current analysis focuses mainly on the cities of developed countries, due to data and references availability in these contexts. On the other hand, the tools presented and the mechanisms revealed here have a broader scope and can also be applied to situations in developing or emerging areas.

Thus, within the framework of urban transport strategy, measures affecting the cost of transportation influence demand for individual or public transportation directly and in the short term. These measures can take the form of subsidies for public transportation, to further the modal shift from individual transportation (more intensive in fossil energy) towards public transportation (less energy-intensive). They can also be based on market mechanisms, through the pricing of parking or urban tolls. Finally, these measures can involve a regulatory framework (“command-and-control” type) that limit access or traffic zones for private vehicles (e.g. the lowemissions zones in London or Tokyo).

TWO URBAN SECTORS OF CLIMATE IMPACT: TRANSPORTATION AND HOUSING To understand the complex interaction between urban economic development and climate change, we analyze the relationship between urban form and energy consumption. This relationship can run in two opposite directions. On the one hand, the spatial distribution of economic activities in urban areas determines transportation and housing needs, which are considered as key determinants of energy consumption and GHG emissions (Glaeser & Kahn, 2010). On the other, individuals weigh transportation cost against housing cost (i.e., rent + energy consumption) when deciding where to live (their choice being affected by the evolution of energy prices), thereby determining the spatial structure of the city (Lampin et al., 2013).

The effectiveness of price measures can be altered by factors related to the spatial organization of urban activities and their planning, as we will see further below.

Furthermore, some measures can generate rebound effects: public transportation subsidies encourage modal shift, but in doing so can create windfall effects and generate demand for public transportation that replaces non-motorized means of transportation, leading to potential problems of network saturation.

In a more long-term outlook, cities can reinforce these direct price measures by investing in new infrastructures that will have an indirect impact on transportation demand. For example, reinforcing the supply and accessibility of public or soft (bicycle or walking) transportation furthers the modal shift towards less polluting modes of transportation. However, the cost of such investment can be very high, for public transportation for example, due to maintenance costs and the critical threshold of minimum transport supply required to guarantee efficiency.

In other words, urban form is a determinant of energy consumption but also a result of the latter, through the trade-off between housing and transportation costs.

Understanding these interactions is a precondition to quantifying the long-term contribution to overall GHG emissions by urban development strategies, regardless of whether these latter resort to direct or indirect measures affecting choices of mobility and housing (cf. diagram).

1 Two other GHG emission factors linked to transportation exist: iii) the type of fuel and iv) the

energy efficiency of the vehicles (Grazi & van den Bergh, 2008). While significant, these factors are not among the prerogatives of cities and will therefore not be dealt with here.

Urban areas represent on average between

53 and 87% of global CO2 emissions (IPCC, 2014).

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THE IMPACT MECHANISMS OF URBAN MEASURES FOR REDUCING GHG EMISSIONS

- TAX SCHEMES AND

DIRECT MEASURES

FISCAL INCENTIVES - COMMAND AND CONTROL - AWARENESS-RAISING

HOUSING

LOW-CARBON URBAN DEVELOPMENT STRATEGY

- TAX SCHEMES AND

FISCAL INCENTIVES - AWARENESS-RAISING

- URBAN TOLLS - PRICING OF PARKING - ZONING - INFORMATION - TAX INCENTIVES FOR ENERGY EFFICIENCY

CONSUMPTION FOR TRANSPORTATION

- TAX ON FINAL ELECTRICITY CONSUMPTION (E.G. TCFE IN FRANCE) - INFORMATION - REINFORCEMENT OF PUBLIC

TRANSPORTATION

TRANSPORTATION NETWORK/SUPPLY

- INVESTMENTS IN

TRANSPORTATION INFRASTRUCTURES

INDIRECT MEASURES

ENERGY

REDUCTION OF GHG EMISSIONS

TRANSPORTATION

- ACCESSIBILITY OF NETWORK - DENSIFICATION - FUNCTIONAL MIX

- SPATIAL PLANNING

HOUSING

- TYPE AND SIZE OF HOUSING - FUNCTIONAL MIX - GREENING (AGAINST HEAT ISLANDS)

- SPATIAL PLANNING - ENERGY EFFICIENCY OF BUILDINGS

ENERGY

CONSUMPTION FOR HOUSING

Source: the authors

consumption per housing unit, such as assistance for producing energy-efficiency analyses or financial support for the reinforcement of the energy efficiency of buildings.

HOUSING: FISCAL INCENTIVES AND CONSTRUCTION MEASURES Two factors behind GHG emissions are determinants in the energy consumption of urban households for their housing and are within the scope of decision-makers: i) the source of energy used for heating (oil, gas, electricity, etc.), its price, and how it is billed (individually or collectively); and ii) the type of housing (apartment or house) and its size2. A city can adopt measures that encourage low-carbon energy consumption by targeting consumer behavior and building design.

This last type of measure nevertheless suffers from a potential rebound effect on energy consumption, which may be difficult to support politically, as local authorities generally give priority to social criteria in housing policy.

It is thus necessary to carry out awareness-raising and information campaigns targeting the consumer, such as communication leaflets and the labeling of products, etc.

The effectiveness of this type of measure is based on the fact that they provide information that consumers lack.

The direct measures target mainly the price of energy, the energy efficiency of buildings, and consumer awareness.

For example, fiscal incentives can represent a lever for reorienting individual energy consumption, which is itself a decreasing function of the price of energy and especially sensitive to how the latter evolves. This is the case, for example, of the tax on final electricity consumption in France (TCFE), whose rate is set by the municipality and the province. The establishment of such a tax at the local level is an effective lever of action but requires a national policy decision. Among the direct fiscal incentives, cities can also grant subsidies aid to reduce energy

Other types of measures available to decision-makers relate to regulations on the size and type of housing.

They indirectly act on residential energy consumption by modifying the needs in heating and air-conditioning.

Their effect nevertheless depends on the spatial structure of cities and the climate zone concerned.

URBAN PLANNING: INDIRECT LEVER OF ACTION FOR CONTROLLING CLIMATE CHANGE? In addition to a sectorial approach (transportation, housing, etc.), many public decision-makers, networks of cities, and international institutions believe that an

2 Furthermore, the climate zone where the city is located as well as the insulation standards

when the housing was built are important factors but ones on which a city cannot act via specific measures.

NICOLE MADARIAGA Economist, Local Authorities and Urban Development Division, AFD

Energy economist, Research & Development Division, AFD

OPHÉLIE RISLER Climate Project Officer, Climate Change Division, AFD D E V E LO

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External consultant for AFD

FABIO GRAZI

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integrated approach to urban planning is relevant as a local solution to the overall climate challenge. By pursuing principles of compactness, density, and functional variety, an integrated approach to urban planning that seeks to optimize the impact of sectorial measures to promote sustainable urban development would provide every citizen with all the functions needed for their daily life (housing, employment, shops, administrative facilities, leisure) in a single space.

Such an approach should pursue at least three objectives: i) urban planning aiming at effective spatial distribution of activities and services, with preservation of open green spaces; ii) efficient transportation planning (including price systems and an adequate offer of alternative transportation); and iii) measures to promote the stabilization of residential housing prices in downtown areas (e.g., through the maintenance or construction of public housing).

What can we learn from empirical economic literature concerning the effects of measures to structure urban spatial form on global warming? This literature especially investigates the effect of densification, because it is easily measurable (through the density of the population, of buildings, or of buildable land) and also very directly influences urban form. It focuses on changes in urban form over time, in relation with the dynamics of energy consumption associated with urban activities (especially individual mobility). It turns out that increase in urban compactness has historically been accompanied by improved energy efficiency, mainly thanks to reduction in the average commuting distance (Karathodorou et al., 2011). In other words for a given spatial distribution of economic activities, increase in urban compactness would be compatible with preservation of the environment.

Yet, implementing densification measures requires taking into account other indirect mechanisms that may change the picture in the long run. For example, reinforcing density has consequences on prices, wages, 3 From viewpoint of economic theory, any action aiming at planned urban density would be ac-

companied by a loss of individual utility due to the imposed reduction in space. On the other hand, this loss may be compensated by gain in social well-being induced by increased urban compactness.

and land value, which may lead to a spatial redistribution of economic activities, with potentially opposite environmental effects (Gaigné et al. 2012).3 An optimized urban form may indeed lead to a rise in housing prices, prompting households to review their trade-off between housing cost and transportation cost. This could further suburbanization, whose effect would be a lengthening of commuting distances (Lampin et al., 2013). Furthermore, if we consider demand in residential energy, the net effect of densification is uncertain, because it depends essentially on the initial compactness of the city (energy savings are weak when collective housing is already substantial) and on its climate zone, with a potential rebound effect on the forming of heat islands (i.e., localized rise in urban temperatures compared to rural areas or regional averages) in the hottest zones.

COMBINING LOCAL STRATEGIES AND NATIONAL PUBLIC POLICIES Developing a low-carbon urban development strategy requires rethinking patterns of energy consumption, by taking into account the major economic, social, and environmental effects for the city. To do so, we need to see to it that there is good complementarity in measures that act directly on energy consumption linked to the demand for housing and individual transportation (such as tax schemes or fiscal incentives) and an urban planning strategy with “climate co-benefits.” Combining these measures, which are prerogatives of the city administration, with public policies such as the carbon tax or emissions trading schemes (some of which, in China for example, are currently being experimented at the city and province levels) makes it possible not only to maximize the chances of success in the fight against climate change, but also to reduce the socio-economic cost associated with a rise in energy prices following an overall climate agreement.

BIBLIOGRAPHY Gaigné C., S. Rious, and J-F. Thisse (2012), "Are Compact Cities Environmentally Friendly?", Journal of Urban Economies, 72(2), 123-136.

Glaeser E.L. and M.E. Kahn (2010), "The Greenness of Cities: Carbon Dioxide Emissions and Urban Development", Journal of Urban Economics, 67(3), 404-418.

Grazi F. and J.C.J.M. van den Bergh (2008), "Spatial Organization Transport and Climate Change: Comparing Instruments of Spatial Planning and Policy", Ecological Economics, 67, 630-639.

IPCC (2014), "Human settlements infrastructure & spatial planning" in Climate Change 2014: Mitigation of Climate Change, 5th Assessment Report.

Karathodorou N., D.G. Graham, and R.B. Noland (2010), "Estimating the Effect of Urban Density on Fuel Demand", Energy Economics, 32(1), 86-92.

Lampin L.B.A., F. Nadaud, F. Grazi, and J.-C. Hourcade (2013), "Long-term Fuel Demand: Not only a Matter of Fuel Price", Energy Policy, 62, 780-787.

A QUESTION OF DEVELOPMENT is an AFD Research Department publication which presents syntheses of studies and research initiated or supported by AFD. This series aims to summarize the questioning, the approach, the lessons and the prospects of the study presented. Thus, it intends to open new avenues for action and thinking. The analyses and conclusions of this document are formulated under the responsibility of its author(s). They do not necessarily reflect the point of view of AFD or its partner institutions • Publication director: Anne PAUGAM • Editorial director: Gaël GIRAUD • Agence Française de Développement: 5, rue Roland Barthes - 75598 Paris Cedex 12 • Copyright: March 2015 • ISSN: 2271-7404 • Conception: Layout: Eric THAUVIN