Climate Change, Digital Transformation and RoI models

In a previous blog we argued that cities were the greatest challenge to Climate change and that although we are beginning to create the data we need, we do not have the RoI models that would unlock the investment needed to tackle the problem.

What if we could advance the common goals and aspirations of combatting climate change into a data-driven approach, one that was harmonised across continents and aligned with internationally recognised and agreed Sustainable Development Goals?

It is possible, with leadership at an international level, to demonstrate the power of data-driven approaches to advanced digital urban infrastructure that could massively impact climate change and many of the deeper social, economic and environmental challenges cities face. We need to shift perceptions. It is counterproductive to continue the current piecemeal approaches to many of the global challenges faced by rapid urbanisation. The cities landscape is crowded by siloed players promising to deliver solutions without an analysis of near and medium-term impacts. We need a centralised framework and processes that are harmonised, to promote transparency and accountability at a global level. For example, there has been interesting work on standards but what is the RoI of implementing those standards and, if they are not mandated, what is the incentive for compliance? We need more than the current blunt instruments of GVA, NPV, IRR et al. We now need to create Data Deltas that give us insight across multiple verticals. For instance, what if we could demonstrate across cities, a behavioural shift where citizens were incrementally moving to greener modes of transit. Where investment in green modes of public transportation yielded not only a cost savings across OPEX for city officials but, reduced C02 emissions by 70%. By creating Data Deltas, we could then analyse the impact on health and wellbeing as we now have the ability to track active modes of mobility and what the well-being outcomes looked like. This is an insight into how we can begin to analyse the vast amounts of data available to us in a centralised framework to encourage other cities to adopt solutions that are working, thus cutting out the guess work associated with trial and error and inappropriate imitation.

Digital “Smart City” innovations have tremendous potential to both improve and empower cities to manage their increasingly urgent and complex environmental, social and economic challenges posed by rapid urbanization and climate change through a data-driven approach. According to the UN Environment, cities are responsible for 75% of global CO2 emissions, with transport and buildings among the largest contributors. It is evident with rapid urbanisation, innovations across transport and the built environment have the potential to yield the biggest impact for cities however, we need to enshrine a data-driven approach across the narrative of Sustainable Development Goals for cities. Given that the ratio of the world’s urban population is expected to increase from 55% in 2018 (some 4.2 billion people) to 68% by 2050, which will mean that the world’s urban population will nearly double,[ii] what can be done to meaningfully combat climate change, further environmental degradation and increasing social challenges?

Whilst rapid and unplanned urbanisation is a major contributor to climate change, it is siloed governance within and across global cities that poses the biggest barrier to achieving successful impact. It is cities that are the economic engines of national economies contributing an average of 80% of GDP, it is therefore cities that should be driving the agenda on climate change with national and subnational governments incentivising meaningful data-driven approaches that can be replicated and scaled enabling other cities to share best practice and lessons learned.

  • For this to be successful, we need to first understand what new and emergent technologies have done and/or have the potential to do. (Cities need to understand the business case and the subsequent key targets possible by onboarding new solutions)
  • We then need to have a framework and harmonised tools in place to assess and monitor impact. This will enable a meaningful assessment of in-situ performance via a data-driven approach.
  • We need frameworks that promote transparency especially across headline impacts and are accessible to other cities to quickly onboard solutions that are working and can deliver meaningful impacts.
  • We need this harmonised framework to be embraced with urgency at the highest levels of National Governments and multi-lateral organisations such as the UN, World Bank etc. for cities to adopt. It is the scale of deployment and standardisation of metrics which has the potential to provide sustained impact against climate change and other social, environmental and economic challenges.
 

https://ec.europa.eu/knowledge4policy/foresight/topic/continuing-urbanisation/developments-and-forecasts-on-continuing-urbanisation_en

At www.urbaneconomic.co.uk we are working on what the future of RoI models for advanced digital transformation should be and would be keen to hear others thoughts, so do get in touch with either Meagan Crawford or Joe Dignan.

The business case for sustainable urban transport

With such a strong business case and demonstrable ROI to speak for investments in sustainable transport, governments have a moral obligation to act.

Transport: it’s an indispensable part of modern living. The composition of our society’s infrastructure gives vehicles a pivotal role in our daily lives. Yet, at a time when the effects of climate change are clearly visible, it’s untenable that the world’s fastest growing source of energy-related carbon emissions should remain unchecked.

But what can we do? It’s a problem that feels too big to be surmounted, too expensive to be economically viable — which leaves it in real danger of being ignored.

The reality is that investment in low-carbon passenger transport has the potential to deliver enormous economic and social returns, and the ability to make a significant positive environmental impact.

The problem with urban transport

The transport sector accounted for 23% of energy-related greenhouse gas (GHG) emissions in 2010, according to the Intergovernmental Panel on Climate Change. While the environmental implications of this figure is obvious, it also has real human and economic consequences.

The Organisation for Economic Cooperation and Development (OECD) reported in 2016 that if emissions go unchecked, the annual healthcare costs related to air pollution will rise from $21 billion in 2015 to $176 billion by 2060 globally, fueling an additional 2.5 billion lost work days. It is clear that GHG emissions simply aren’t going to reduce without intervention, but the cost-value ratio of that intervention may be better than many think.

A recent report by the Stockholm Environmental Institute for the Coalition for Urban Transitions (SEICUT) found that a bundle of low-carbon investments and measures across 16 city sectors, including transport, could cut global urban emissions 90% by 2050. This would make vast inroads toward preventing global warming that would reach beyond the 2 degrees Celsius “danger line.”

While enhancing sustainability can require substantial investment, the SEICUT report also calculated that these measures could yield returns worth $24 trillion — equivalent to nearly one-third of 2018 global GDP — over the next 30 years. The estimated returns on low-carbon passenger transport were miles ahead of other sectors.

The benefits of sustainable urban transport

Transitioning to a more efficient vehicle fleet in cities worldwide would require a total incremental investment of $8.6 trillion, which includes the additional costs of owning, operating and fueling more efficient vehicles, according to the Coalition for Urban Transitions. It’s an eye-watering sum, but would pay for itself within eight years. By 2030, annual returns would reach $320 billion, with that figure exceeding $1 trillion annually by 2050. 

These returns are direct fuel-related savings. When other economic benefits are taken into consideration – the impact of lower emissions and cleaner air – even higher economic returns could be gained. And that’s before you factor in the 3.6 million jobs that could be created — and the global health benefits.

Should measures be taken to help the public embrace low-carbon vehicles, we could avoid releasing 0.71 gigatonnes of equivalent carbon dioxide (GtCO2-e) into the atmosphere in the next 10 years. Add in the use of clean electricity for our sustainable vehicles and that figure would dramatically increase.

Low-carbon vehicles are not the only solution if we want to solve the associated problems of congestion, pollution and economic efficiency. Investment into mass urban transit could alleviate congestion, provide affordable transport for more people and yield even larger economic returns, as well as providing significant environmental benefits.

A total investment of $4 trillion in public buses, trains and railway tracks would yield $1 trillion in annual benefits by 2030, with a net present value of $19.6 trillion — the largest of any investment modeled. It would pay for itself in just one year. By 2050, this move has the potential to support nearly 12 million jobs and reduce carbon emissions by 0.73 GtCO2-e. And it’s entirely doable, as a handful of forward-thinking cities have already shown.

What are countries doing to reduce transport emissions?

The move toward sustainable transport has been slow, but a notable few have made important strides:

  • In 2018, Shenzhen, China became the first city in the world to electrify its entire public bus fleet.  The city’s 16,000 e-buses are estimated to have reduced annual CO2 emissions by 440,000 tons.
  • Since 2009, Bogotá, Colombia, has been taking a series of steps to enhance public transport facilities, reduce private motor vehicle ownership and encourage the use of bicycles. By 2012, the city was able to reduce CO2 emissions by 3.8 million metric tons and create 1,500 unskilled jobs.
  • Copenhagen, Denmark, pioneered the green transport movement, opening its first dedicated bicycle lane in 1910. Today, there are more bicycles in the city than people. By 2025, it is expected that Copenhagen will become the first capital in the world with neutral carbon dioxide emissions.

Sustainable transport is an entirely viable option, globally. With China creating zero-emission vehicles and major cities like Paris implementing sustainable multimodal transport initiatives, there is both the evidence that the transition is economically feasible and the vehicular means to realize the theory.

The World Health Organization (WHO) estimates there are already 7 million deaths globally each year due to urban air pollution, while the environmental and economic costs associated with climate change are ever increasing. Pollution-related healthcare costs could soar by $155 billion in the next 40 years. Natural disasters already cost about $18 billion every year in lower- and middle-income countries, and trigger wider disruptions for households and firms costing at least $390 billion. 

It’s estimated that climate inaction will push 100 million people into poverty by 2030. With such a strong, positive business case and demonstrable ROI to speak for sustainable transport, governments surely have a moral obligation to act.

Connected Cities: Has the future changed in light of Covid-19?

It’s arguable that Covid-19 has been one of the most impactful peacetime events in our history. It has transformed our business landscape in ways that no one could have imagined. Whole countries came to a complete standstill for months on end, leaving cities – our most vibrant economic and social hubs – as empty husks.

Even now, with restrictions lifted in many places, the pre-pandemic dynamism remains palpably absent. The economic and social impact has been devastating. Jobs need to be salvaged and new areas of growth discovered. Pandemic spending has risen to nearly £190bn in the UK alone. Globally, the figure has ballooned beyond comprehension. 

With new ways of working and living and the continued need to adhere to social distancing guidelines, it’s impossible to return to a state of ‘business as normal’. Investment needs to be made in areas that will reinvigorate the economy while making allowances for new ways of life. But we can do this in ways that will create a positive environmental impact. 

Pollution has been reducing dramatically during the period of lockdown. One look at the published pollution maps makes this indisputably clear. Across the world, nitrogen dioxide (NO2) levels have plummeted and our cities have become demonstrably healthier places. How do we maintain the environmental gains made, using them as the foundation for greener cities, all while combating inequality, joblessness and a weakened economic state amid a new way of life?

Green Infrastructure 

Green Infrastructure (GI) is broadly embraced as a means of sustainable development but it also has enormous potential for economic growth as well as wider societal benefits. Take cycling as an example. Many cities are already working to create a cycling infrastructure as a means of reducing pressure on public transport and helping to reduce coronavirus contagion points. Berlin, Paris, Brussels and Milan are among the major European cities rolling out both permanent infrastructure and pop-up ‘corona cycleways’, in a wave of investment that includes free bicycle repairs and even cycling lessons. These are worthwhile goals alone, but they have the potential to bring in many more benefits. 

Transport is the world’s fastest growing source of energy-related carbon emissions. It accounted for 23 per cent of energy related greenhouse gas emissions in 2010 . Analysis for the Coalition for Urban Transitions’ recent report found that 16 low-carbon investments and measures in cities, including transport, could cut global urban emissions by 90 per cent by 2050. The ROI on these actions have a present value of almost $24 trillion – equivalent to nearly one-third of the 2018 global GDP.

Cycling has the capacity to bring more direct economic advantages too. A study by TLM calculated 400,000 new cycling-linked jobs could be created in the EU-27 in the future with the cycling share of modes of transport doubling.

Landscape-scale restoration in the form of cycle routes and walking spaces has the power to create a 36:1 social return on investment, according to two new reports from non-profit Restore the Earth Foundation and Social Value International (SVI).

Lastly, increased cycling has the potential to improve fitness levels in cities. A study of 264,337 people found that cycling to work is linked with a 45 per cent lower risk of developing cancer, and a 46 per cent lower risk of cardiovascular disease. Cycling 20 miles a week can reduce your risk of coronary heart disease by half.

These movements would support the UN’s Sustainable Development Goals while building the economy and providing significant social value.

Redesigning commercial real estate

The way that we use Commercial Real Estate (CRE) is changing by necessity. Covid-19 has not only highlighted the flaws of having large numbers of people working in close proximity but also shows the genuine potential of distance and home working.

In the longer term, this opens the possibility of a reformed business structure, where companies could move into smaller, on-demand styled workspaces. This would remove the necessity of large office blocks, which would have a knock-on effect on NO2 emissions. As an additional plus, it could create a more congenial work-life balance, returning hours of free time to workers. 

Covid-19 has unintentionally shown the genuine potential of distance and home working.

At the same time, the use of digital tools, such as Digital Twins, could be employed to better understand and drive top and bottom growth. CRE would be freed for other uses – now, that could be quarantine or testing facilities – and in the longer term, perhaps this is the way towards more affordable social housing. 

Immersive multi-channel retail 

Lastly, as we move away from a metropolitan focus and scenarios that see too many people in too small a space, we need to find ways to encourage retail growth without relying on the established model. Immersive and multi-channel retail and experiential retail is the obvious way forward.

Virtual reality is currently emerging as the preferred way to enhance customer engagement and experience. Shoppers in Asia-Pacific are already using VR to access malls from home. Mixc mall in Shanghai employs it to allow virtual shoppers to take 360-degree tours inside the mall. It generated nearly US$71,000 in sales through its VR channel over Valentine’s Day weekend. And this technology isn’t limited to retail. 

We’ve all known for some time that the established format of city living is unsustainable. Pollution is growing at a frightening rate. Commute times have become untenable. And space has been at a premium for decades. As for the health implications, they’ve never been great, but in April 2020, the NY Times reported a correlation between mortality rates of Covid-19 patients and some of the most polluted areas of the US. While this may have been solely due to population density, it could be further evidence of pollution taking its toll. 

Covid-19 has been a social and economic nightmare of the highest order. But green technology can help us work around the societal restrictions that lockdown has imposed, as well as improve the health of the planet.

Tags: connected cities, covid19, digitisation, future cities, green infrastructure, Mobility, sustainability