The economic case for low carbon cities

This is a repository copy of The economic case for low carbon cities. White Rose Research Online URL for this paper: http://eprints.whiterose.ac.uk/82868/ Article: Gouldson, A, Colenbrander, S, McAnulla, F et al. (6 more authors) (2014) The economic case for low carbon cities. A New Climate Economy. Reuse Unless indicated otherwise, fulltext items are protected by copyright with all rights reserved. The copyright exception in section 29 of the Copyright, Designs and Patents Act 1988 allows the making of a single copy solely for the purpose of non-commercial research or private study within the limits of fair dealing. The publisher or other rights-holder may allow further reproduction and re-use of this version - refer to the White Rose Research Online record for this item. Where records identify the publisher as the copyright holder, users can verify any specific terms of use on the publisher s website. Takedown If you consider content in White Rose Research Online to be in breach of UK law, please notify us by emailing eprints@whiterose.ac.uk including the URL of the record and the reason for the withdrawal request. eprints@whiterose.ac.uk https://eprints.whiterose.ac.uk/

THE ECONOMIC CASE FOR LOW CARBON CITIES Andy Gouldson, Sarah Colenbrander, Faye McAnulla, Andrew Sudmant, Niall Kerr, Paola Sakai, Stephen Hall, Effie Papargyropoulou, and Johan Kuylenstierna CONTENTS EXECUTIVE SUMMARY EXECUTIVE SUMMARY 1. INTRODUCTION 2. METHODOLOGY 1 2 4 In this paper, we conduct a comparative analysis that examined the economic case for investment in 3. RESULTS 8 4. CITY CASE STUDIES 5. DISCUSSION 6. CONCLUSIONS 5 14 20 22 country contexts to invest, at scale, in cost-effective that these cost-effective investments, for example 14-24% 1 relative to business-as-usual trends) in these investments would be equivalent to between low-carbon investments can appeal to local decision-makers and investors on direct, short-term economic WWW.NEWCLIMATEECONOMY.NET 1

1. INTRODUCTION that assessed the potential for cost-effective investments in low-carbon measures across different sectors 2 it reveals the presence of substantial opportunities for economically attractive forms of low-carbon we examine whether, and how, these economically attractive opportunities could lead to the deeper, transformative low-carbon transitions that will be needed in the world s cities if we are to achieve climate 2 THE ECONOMIC CASE FOR LOW CARBON CITIES NOV 2014 WWW.NEWCLIMATEECONOMY.NET

economically attractive options are to be widely exploited, and in a way that moves the city towards deeper, THE ECONOMIC CASE FOR LOW CARBON CITIES NOV 2014 WWW.NEWCLIMATEECONOMY.NET 3

2. METHODOLOGY 2.1 Setting the scope and boundaries of the city studies 4 has to be demonstrated before policy-makers can start to consider potential investments and their wider 2.2 Calculating business-as-usual trends 4 THE ECONOMIC CASE FOR LOW CARBON CITIES NOV 2014 WWW.NEWCLIMATEECONOMY.NET

2.3 Identifying and evaluating low-carbon options 2.4 Calculating potential savings at the city scale THE ECONOMIC CASE FOR LOW CARBON CITIES NOV 2014 WWW.NEWCLIMATEECONOMY.NET 5

measures were not included in the cost-effective scenario because they were mutually exclusive with more be adopted at no net cost on commercial terms over all of the measures lifetimes, with the returns from 2.5 The TREBLE point with investment in low carbon measures to reach the level that would have been realized without such 2.6 Assumptions and limitations 6 THE ECONOMIC CASE FOR LOW CARBON CITIES NOV 2014 WWW.NEWCLIMATEECONOMY.NET

THE ECONOMIC CASE FOR LOW CARBON CITIES NOV 2014 WWW.NEWCLIMATEECONOMY.NET 7

3. RESULTS 3.1 Business-as-usual trends low-carbon measures considered have lifespans beyond their payback periods, the investments made would measures up to the point where all investments would be cost-neutral then levels of investment would at 3.3 TREBLE points: The impacts in a longer-term perspective 8 THE ECONOMIC CASE FOR LOW CARBON CITIES NOV 2014 WWW.NEWCLIMATEECONOMY.NET

50 GDP per capita 60 Total energy consumption per capita 40 50 Thousand US$ 30 20 10 0 15 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 Annual emissions per capita MWh 40 30 20 10 0 2.5 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 Carbon intensity of the city economy 12 2.0 tco 2 -e 9 6 3 0 40 35 2000 2002 2004 Annual total emissions 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 kgco 2 -e/us$ 1.5 1.0 0.5 0.0 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 30 MtCO 2 -e 25 20 15 10 0 5 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 Leeds Johor Bahru Lima Palembang Kolkata OECD Figure 1: Historic and projected business-as-usual trends in GDP, emissions and energy consumption THE ECONOMIC CASE FOR LOW CARBON CITIES NOV 2014 WWW.NEWCLIMATEECONOMY.NET 9

Leeds Johor Bahru Lima Palembang Kolkata Cost-effective scenario Investment needs <1 2 -e) 11 Cost-neutral scenario Investment needs 21 2 -e) 10 * Time to Regain BAU Levels of Emissions: the number of years earlier or later that a city reaches the BAU level of emissions it would have had in 2025, due to the emission reductions from low-carbon investments. A positive value indicates that anticipated emissions growth has been pushed back. A negative value indicates that anticipated emission reductions have been brought forward. NA indicates that emissions levels after low-carbon investment do not regain the levels projected under BAU conditions for the foreseeable future. the impact of the cost-neutral bundle of measures is sustained, these cities could effectively shift to low- that, in some cities at least, economically neutral levels of low-carbon investments could have a durable 2 2 10 THE ECONOMIC CASE FOR LOW CARBON CITIES NOV 2014 WWW.NEWCLIMATEECONOMY.NET

3.4 Global implications cities were to identify and exploit similar opportunities, then this would lead to very substantial investments small sample), then very cautiously we could estimate that cities could achieve reductions equivalent to analysis presented here, and those of the individual city studies, therefore provide an important THE ECONOMIC CASE FOR LOW CARBON CITIES NOV 2014 WWW.NEWCLIMATEECONOMY.NET 11

scenarios, showing TREBLE (reference year: 2025) Note: TREBLE = Time to Reach Business-as-Usual Levels of Emissions 200 Leeds Percentage of 2014 level Percentage of 2014 level 150 100 50 0 300 250 200 150 100 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Johor Bahru 2013 2014 2015 2016 2017 2018 2019 Cost-effective TREBLE point -6 Cost-neutral TREBLE point -7 2020 2021 2022 2023 2024 2025 Cost-effective TREBLE point +11 50 0 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 Lima 12 Percentage of 2014 level 250 200 150 100 50 0 2000 2002 THE ECONOMIC CASE FOR LOW CARBON CITIES NOV 2014 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 Cost-effective TREBLE point +7 Cost-neutral TREBLE point +15 2034 2036 2038 2040 WWW.NEWCLIMATEECONOMY.NET

Figure 2, continued Palembang Percentage of 2014 level 500 400 300 200 100 Cost-effective TREBLE point +8 Cost-neutral TREBLE point +10 0 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 250 Percentage of 2014 level 200 150 100 Cost-effective TREBLE point +15 50 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 THE ECONOMIC CASE FOR LOW CARBON CITIES NOV 2014 WWW.NEWCLIMATEECONOMY.NET 13

4. CITY CASE STUDIES of the city to illustrate its relative carbon intensity and development level, and explore the economic and The Leeds City Region, UK 2 14 THE ECONOMIC CASE FOR LOW CARBON CITIES NOV 2014 WWW.NEWCLIMATEECONOMY.NET

Sector focus: Residential buildings in Leeds measure in the domestic sector, but because the scope for deployment is comparatively small, Johor Bahru, Malaysia returns on these investments in other low-carbon measures could enable investment in a cost-neutral THE ECONOMIC CASE FOR LOW CARBON CITIES NOV 2014 WWW.NEWCLIMATEECONOMY.NET 15

Sector focus: Industry in Johor Bahru Lima-Callao, Peru 10 11 2 10 11 16 THE ECONOMIC CASE FOR LOW CARBON CITIES NOV 2014 WWW.NEWCLIMATEECONOMY.NET

Sector Focus: Transport in Lima 2 2 intersection improvements, and driver education) could dramatically increase the number of Palembang, Indonesia 12 12 THE ECONOMIC CASE FOR LOW CARBON CITIES NOV 2014 WWW.NEWCLIMATEECONOMY.NET 17

Sector Focus: Electricity in Palembang 2 2 18 THE ECONOMIC CASE FOR LOW CARBON CITIES NOV 2014 WWW.NEWCLIMATEECONOMY.NET

Kolkata, India 2 Sector focus: Waste in Kolkata THE ECONOMIC CASE FOR LOW CARBON CITIES NOV 2014 WWW.NEWCLIMATEECONOMY.NET 19

5. DISCUSSION: OPPORTUNITIES AND PRECONDITIONS 2 if the returns from the cost-effective options could be recovered and reinvested in additional low-carbon 2 2 2 5.2 Preconditions for change political commitment, and this is an and sustainability but also in areas such as economic development that tend to feature more prominently 20 THE ECONOMIC CASE FOR LOW CARBON CITIES NOV 2014 WWW.NEWCLIMATEECONOMY.NET

policy framework. THE ECONOMIC CASE FOR LOW CARBON CITIES NOV 2014 WWW.NEWCLIMATEECONOMY.NET 21

6. CONCLUSIONS rather than a threat, by city-level decision-makers, and they need to be taken from the periphery of urban need to be established to ensure that the transition is not a technocratic exercise but is socially steered 22 THE ECONOMIC CASE FOR LOW CARBON CITIES NOV 2014 WWW.NEWCLIMATEECONOMY.NET

REFERENCES THE ECONOMIC CASE FOR LOW CARBON CITIES NOV 2014 WWW.NEWCLIMATEECONOMY.NET 23

APPENDIX SUMMARIES OF CITY-LEVEL DATA AND PROJECTIONS Leeds City Region Key economic, energy and carbon indicators for Leeds City Region and the United Kingdom, 2014 UK Leeds City Region 2 2 Source for national data: World Bank Development Indicators. For sources of city-level data see Gouldson, Kerr, Topi et al. (2012). 200 Emissions Emissions per unit GDP Emissions per capita Emissions per unit energy percentage of 2014 level 150 100 50 2000 26.9 2001 2002 2003 10.9! 28.6 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Commercial Domestic Industry Transport 33.2 6.9! 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Historic and projected greenhouse gas emissions per unit of energy, per unit of GDP and per capita in Leeds City Region, 2000-2025, indexed to 2014 30.4 33.6 29.5 Projected shares of economic savings (left) and emissions reductions (right) by sector in Leeds City Region in 2025, with the adoption of the cost-effective bundle of measures 24 THE ECONOMIC CASE FOR LOW CARBON CITIES NOV 2014 WWW.NEWCLIMATEECONOMY.NET

Leeds City Region, continued The economic case for investment in low-carbon measures at the city scale, Leeds City Region Cost-effective scenario Cost-neutral scenario Investment needs Investment needs as a share of city GDP Annual savings Payback period Carbon savings in 2025 2 -e 2 -e Carbon savings in 2025 as a share of the BAU scenario League tables of the 10 most cost-effective (left) and carbon-effective (right) low-carbon measures at the city scale for Leeds City Region Most cost-effective measures per unit of carbon saved a Most carbon-effective measures b Sector Measure Net cost (US$ /tco 2 -e) Sector Measure Emissions saved 2012-2022 ktco 2 -e) 210 only) Mini-wind turbines tariff extra hour household insulation pump with feed-in tariff Micro hybrid vehicles vehicles boilers thermostats a Net cost to the city of saving 1 tco 2 b Total emissions saved if measures were implemented throughout the period indicated. Note that the periods and calculations 201 141 THE ECONOMIC CASE FOR LOW CARBON CITIES NOV 2014 WWW.NEWCLIMATEECONOMY.NET 25

Johor Bahru and Pasir Gudang Key economic, energy and carbon indicators for Johor Bahru and Malaysia, 2014 Malaysia Johor Bahru GDP per capita (PPP) US$ 16,919 2 2 Source for national data: World Bank Development Indicators. For sources of city-level data see Gouldson, Colenbrander and Paprgyropolou et al. (2014). percentage of 2014 level 250 200 150 100 50 0 2000 2001 2002 2003 Emissions 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Emissions per unit GDP Emissions per capita Emissions per unit energy 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Historic and projected greenhouse gas emissions per unit of energy, per unit of GDP and per capita for Johor Bahru, 2000-2025, indexed to 2014 0.8 1.2 11.4 14.4 1.6 Commercial Domestic! Industry! Transport Waste 52.2 8.7 19.6 18.3 71.8 Projected share of economic savings (left) and emissions reductions (right) by sector in Johor Bahru in 2025, with the adoption of the cost-effective bundle of measures 26 THE ECONOMIC CASE FOR LOW CARBON CITIES NOV 2014 WWW.NEWCLIMATEECONOMY.NET

Johor Bahru and Pasir Gudang, continued The economic case for investment in low carbon measures at the city scale, Johor Bahru and Pasir Gudang Cost-effective scenario Cost-neutral scenario Investment needs Investment needs as a share of city GDP Annual savings Payback period Carbon savings in 2025 2 -e 2 -e Carbon savings in 2025 as a share of the BAU scenario League tables of the 10 most cost-effective (left) and carbon-effective (right) low-carbon measures at the city scale for Johor Bahru Most cost-effective measures per unit of carbon saved a Most carbon-effective measures b Sector Measure Net cost (US$/ tco 2 -e) Sector Measure biodiesel replaces petroleum products with fuel subsidy petroleum products petroleum products electricity w/ feed-in tariff current tax relief improvements) improvements) dual fuel systems petroleum products with current tax incentive of variable speed drive in electric motors systems replaced w/ dual fuel systems sales tax relief) reduction of excess air in boilers Emissions saved 2014-2025 ktco 2 -e) Note: Measures in the electricity sector were included in the original study, but have been excluded here. a Net cost to the city of saving 1 tco 2 b Total emissions saved if measures were implemented throughout the period indicated. THE ECONOMIC CASE FOR LOW CARBON CITIES NOV 2014 WWW.NEWCLIMATEECONOMY.NET 27

Lima-Callao Key economic, energy and carbon indicators for Lima-Callao, 2014 Peru 1 City 2 GDP per capita (PPP) US$ 10,765 2 2 2 Source for national data: World Bank Development Indicators. For sources of city-level data see Gouldson, McAnulla, Sakai et al. (2014). 150 percentage of 2014 level 120 90 60 30 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Emissions Emissions per unit GDP 2014 2015 2016 2017 2018 Emissions per capita Emissions per unit energy 2019 2020 2021 2022 2023 2024 2025 Trends in greenhouse gas emissions per unit of energy, per unit of GDP and per capita in Lima-Callao, 2000-2025, indexed to 2014! 0.0 7.5 5.6 7.9 10.5 79.1! 7.8 Commercial Domestic Industry Transport Waste 42.5! 15.3 23.9 Projected share of economic savings (left) and emissions reductions (right) by sector in Lima-Callao in 2025, with the adoption of the cost-effective bundle of measures 28 THE ECONOMIC CASE FOR LOW CARBON CITIES NOV 2014 WWW.NEWCLIMATEECONOMY.NET

Lima-Callao, continued The economic case for investment in low-carbon measures at the city scale, Lima-Callao Investment needs Investment needs as a share of city GDP Annual savings Payback period Carbon savings in 2025 Carbon savings in 2025 as a share of the BAU scenario Cost-effective scenario Cost-neutral scenario 2 -e 2 -e League tables of the 10 most cost-effective and carbon-effective low-carbon measures at the city scale for Lima-Callao Most cost-effective measures per unit of carbon saved a Most carbon-effective measures b Sector Measure Net cost (US$ /tco 2 -e) Sector Measure Emissions saved 2015-2030 ktco 2 -e) entertainment appliances air conditioners with hybrid cars entertainment appliances for petrol and diesel private cars with omnibuses Incandescent 2020 conservation in other industrial sectors incinerator day 10% of new cars Incandescent Note: Measures in the electricity sector were included in the original study, but have been excluded here. a Net cost to the city of saving 1 tco 2 b Total emissions saved if measures were implemented throughout the period indicated. Note that the periods and calculations THE ECONOMIC CASE FOR LOW CARBON CITIES NOV 2014 WWW.NEWCLIMATEECONOMY.NET 29

Palembang Key economic, energy and carbon indicators for Palembang and Indonesia, 2014 GDP per capita (PPP) US$ 4,876 Indonesia Palembang 2 2 Source for national data: World Bank Development Indicators. For sources of city-level data see Gouldson, Colenbrander, Sudmant et al. (2014). 300 250 Emissions Emissions per unit GDP Emissions per capita Emissions per unit energy percentage of 2014 level 200 150 100 50 0 2000 Historic and projected greenhouse gas emissions per unit of energy, per unit of GDP and per capita in Palembang, 2000-2025, indexed to 2014. 18.2 2001 2002 2003 2004 2005 0.3 4.1 3.5! 73.7 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Commercial Domestic Industry Transport Waste 8.6 15.5 50.9 1.3! 2017 2018 2019 2020 2021 2022 2023 2024 2025 23.6 Projected share of economic savings (left) and emissions reductions (right) by sector in Palembang in 2025, with the adoption of the cost-effective bundle of measures 30 THE ECONOMIC CASE FOR LOW CARBON CITIES NOV 2014 WWW.NEWCLIMATEECONOMY.NET

Palembang, continued The economic case for investment in low carbon measures at the city scale for Palembang Investment needs Investment needs as a share of city GDP Cost-effective scenario Cost-neutral scenario Annual savings Payback period Carbon savings in 2025 <1 year 2 -e 2 -e Carbon savings in 2025 as a share of the BAU scenario League tables of the 10 most cost-effective (left) and carbon-effective (right) low-carbon measures at the city scale for Palembang Most cost-effective measures per unit of carbon saved a Most carbon-effective measures b Sector Measure electricity for diesel centres systems compressors and boilers Net cost (US$ /tco 2 -e) Sector Measure Emissions saved 2014-2025 ktco 2 -e) diesel boilers with solar water heaters and power) improvements) conditioners expansion) recovery) Note: Measures in the electricity sector were included in the original study, but have been excluded here. b Total emissions saved if measures were implemented throughout the period indicated. THE ECONOMIC CASE FOR LOW CARBON CITIES NOV 2014 WWW.NEWCLIMATEECONOMY.NET 31

Kolkata Key economic, energy and carbon indicators for Kolkata and India, 2014 India GDP per capita (PPP) US$ 3,870 City 2 2 Source for national data: World Bank Development Indicators. For sources of city-level data see Gouldson, Kerr, McAnulla et al. (2014). percentage of 2014 level 250 200 150 100 50 2000 49.6 2001 2002 2003 3.6! 18.6 18.0 10.2 2004 2005 2006 2007 2008 2009 2010 2011 2012 Emissions Historic and projected greenhouse gas emissions per unit of energy, per unit of GDP and per capita in Kolkata, 2000-2025, indexed to 2014 Commercial Domestic Industry Transport Waste Emissions per unit GDP 9.3 23.0 27.6! Emissions per capita Emissions per unit energy 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 24.7 15.4 Projected share of economic savings (left) and emissions reductions (right) by sector in Kolkata in 2025, with the adoption of the cost-effective bundle of measures 32 THE ECONOMIC CASE FOR LOW CARBON CITIES NOV 2014 WWW.NEWCLIMATEECONOMY.NET

Kolkata, continued The economic case for investment in low-carbon measures at the city scale, Kolkata Investment needs Investment needs as a share of city GDP Annual savings Payback period Carbon savings in 2025 Carbon savings in 2025 as a share of the BAU scenario Cost-effective scenario Cost-neutral scenario 2 -e 2 -e League tables of the 10 most cost-effective (left) and carbon-effective (right) low-carbon measures at the city scale for Kolkata Most cost-effective measures per unit of carbon saved a Most carbon-effective measures b Sector Measure Metals and fabrication head box Metals and fabrication Metals and fabrication of cyclone system in spray dryers Metals and fabrication Metals and fabrication recovery system in spray dryers Net cost (US$ /tco 2 -e) Sector Measure conditioners households) conditioners conditioners entertainment appliances Emissions saved 2014-2025 ktco 2 -e) entertainment appliances Note: Measures in the electricity sector were included in the original study, but have been excluded here. a Net cost to the city of saving 1 tco 2 b Total emissions saved if measures were implemented throughout the period indicated. THE ECONOMIC CASE FOR LOW CARBON CITIES NOV 2014 WWW.NEWCLIMATEECONOMY.NET 33

ACKNOWLEDGEMENTS 34 THE ECONOMIC CASE FOR LOW CARBON CITIES NOV 2014 WWW.NEWCLIMATEECONOMY.NET

ABOUT THE NEW CLIMATE ECONOMY About the authors How to cite Disclaimer publish it as part of its commitment to provide further evidence on and stimulate debate about the issues