Despite the outcome of the U.S. presidential election, we no longer live in an era of climate doom and gloom. While 2016 will set yet another record as the warmest year in history, it’s also the third year in a row in which the global economy grew but global greenhouse pollution remained flat.
As the world looks to keeping warming well below the agreed upon 2 degrees Celsius, we know the benchmarks global actors must meet and we have the solutions that can get them there. Unlocking the potential of cities to develop sustainable infrastructure has the power to keep us on an accelerating path towards progress, despite any roadblocks thrown our way, as we continue on this historic journey towards global climate cooperation and action.
To meet the goals of the Paris Agreement, the world must phase out all possible emissions of anthropogenic climate forcers by 2050 and develop carbon storage strategies for what remains. This means looking at opportunities like zero carbon electricity, shifting to efficient green and electric transportation and ultra-efficient appliances and machinery, ending direct combustion for heating and cooling, rapidly dematerializing manufacturing, and transforming the way we approach agriculture and forestry.
The enabler to scaling these strategies lies in financing the development of modernized urban infrastructure. This work is already taking place in cities around like world from Vienna, to Los Angeles to Seoul. Local leaders are cracking down on air pollution, sourcing 100% zero carbon power, maximizing local power generation and load management, pursuing large-scale transit share systems, investing in net zero buildings and retrofitting current ones, building zero emissions sewer and waste management systems, optimizing efficiency and resiliency of water and storm protection systems, and leveraging ecosystems to reduce urban heat-island, flooding and storm risks.
However, barriers remain for what cities can accomplish. The New Climate Economy estimates a total infrastructure spend of $90 trillion by 2050, whether we invest in sustainability and resiliency or not, and seventy-five percent of that spend will be in cities. That’s an urban bill of $2 trillion a year, yet most cities are severely handicapped by a lack of fiscal flexibility to meet that bill, especially cities in the global south.
So how will we unlock the potential of cities and rapidly implement these climate solutions? Fiscally empowering cities will be the key to creating economically viable infrastructure. In order to do this, we must first begin to solve the issue of access to global climate finance for the private sector, but also for long-tenure public investments and climate-friendly infrastructure. Solutions like renewable energy, green transportation and net zero buildings are cheaper to operate but more expensive to build, making finance costs higher.
Cities are increasingly hubs for private sector investment and local leaders must continue to work to spark private sector profits. Investing in urban infrastructure is profitable — cities are places to push the needle, aggregate projects and create wealth and private sector infrastructure flows from properly functioning markets. Clean air and water, transit and mobility, public safety, education, effective sewer and waste systems, natural disaster management are all key ingredients to creating a vibrant metropolitan economy that can spur investments. When properly implemented, cities can recapture these infrastructure investments from the wealth those investments create.
Outside of private sector investments, the global capital cities need is available, but greatest needs are in the developing countries where capital markets are not deep enough, and interest rates too high, to support a climate-friendly infrastructure build. Cities in the global south are often denied access to climate finance based on their national economies. In the global north, banks and investors are currently seeking yield for the capital that they have. In fact, the next few decades may offer only sluggish growth due to a lack of investment opportunities.
What about building $90 trillion of largely urban, innovative, climate-friendly infrastructures in cities proven to generate the maximum return? Investing in sustainable urban infrastructure can solve the problems of both limited access for cities and limited investment opportunities for banks and investors. The key is to loan cheap capital from the industrial world to clean energy and infrastructure projects in developing nations, and to enable cities, where most of it is needed, to access those funds.
The technologies themselves are not risky: Solar panels and wind turbines generate electrons for decade, but to mitigate investment risk in developing markets, multilateral development banks–led by the World Bank Group–are the logical institutions to de-risk sustainable infrastructure investments. Collectively, they have the capital to do the job but it hasn’t been used despite the urging of G7 countries to banks to leverage their balance sheets. It’s time for financial institutions to move past outdated hierarchies and modernize lending arrangements so that investors can support the most viable projects, while ensuring their risks are properly insured by the global community.
To meet global climate goals, we must empower cities to meet our demand for sustainable infrastructure. It’s time for industrial nations, the birthplace of the climate crisis, to deploy the financial creativity to overcome it. Without such liquidity, cities will not be able to meet the climate-friendly infrastructure challenge. With it, we can meet our well-under 2-degree goal.
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