Managing a low urban emissions world

Managing a low urban emissions world | npj Climate Action

Abstract

We have largely ignored serious organization issues blocking urban greenhouse gas emissions reductions. Most urban climate measures treat decision-making as a black box where sensible solutions are simply implemented. We need to re-examine decision-making assumptions about how city governments and businesses actually collaborate and whether current plans are credible. Significant constraints affect both groups and also limit citizens’ abilities to effectively shape policies and investments. These problems can be addressed by creating a trusted, professional, independent organization to drive innovation and implementation to reduce emissions and moderate urban inequality. This “Lowering Emissions Economy Partnership (LEEP)” can be jointly owned by stakeholders who could pool investments and recover a share of the large resource savings this approach will create. Any city could do this drawing upon a range of start-up capital options. This reduces political and financial risks and it can accelerate emission reductions in a more just sustainable way.

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Introduction

The real problem of humanity is the following: we have Paleolithic emotions, medieval institutions, and God-like technology.

- Edward O. Wilson (2009)

While Covid and Ukraine and Middle Eastern war shockwaves continue to reverberate, $100 Trillion, perhaps the largest concentrated spending in history, will be needed for global urban infrastructure investment through 2050, based upon a number of credible estimates 1, 2, 3, 4. Beyond supplying roads, water, mass transit, telecoms, more resilient health systems, and energy, this investment needs also to reduce greenhouse gas (GHG) emissions, and to support more equitable housing, water, and sanitation for hundreds of millions of people migrating to cities.

Especially after the Covid pandemic, trillions are available at reasonable though higher interest rates and yet accelerating the pace of climate and infrastructure spending continues to be difficult. The $2.5 Trillion currently spent globally per year is half of what is needed. Large new U.S. government infrastructure and climate spending is actually spread over 10 years and the measures will take time to implement. Moreover, the climate spending has been modeled to trigger a net 10–15% reduction in GHG emissions over what had been projected to occur anyway with current expected prices and policies 5. Precise numbers are unavailable because much of the spending is based on estimates of funding authorized vs. what will eventually be actually appropriated and the level of potential tax credits over a decade. The order of magnitude of direct climate-related spending in the 3 relevant signed US bills is $4–500 Billion. This is probably at most ~15% of what is needed to approach a “net zero emissions” state by 2050, based upon a bottom-up (2021 pre-inflation/Ukraine war costs) estimate of $10,000 per capita capital investment, scaled to a US population of 320 M people 6. Some key coordination aspects, particularly permitting and grid expansion, remain unclear as well as how temporary are slowdowns in electric vehicle and wind turbine sales. A future U.S. Congress could still revise spending and other aspects related to potentially huge tax credits over time. To be fair, there will be numerous spill-over effects from the government spending which could increase its impact, strengthen and create markets, and crowd-in future investments 7, 8, 9, 10, 11, 12, 13, 14, 15. But still, a significant gap remains even ignoring possible future political disruptions. Actual disbursement of vast approved public European recovery and development funds has lagged for years. Of the €723.8 billion allocated in 2021 to the European Resilience and Recovery Fund, roughly €144 billion had been disbursed as of February 2024 16, 17, 18. On the private side, investment managers constantly complain “there are simply not enough viable infrastructure projects out there”, as noted for over 50 years since at least the creation of the International Finance Corporation 19, 20, 21, 22, 23.

Meanwhile, we are on track to miss global emissions reductions targets to keep warming below 1.5 °C by a wide margin. Current projections forecast a 9–16% increase in emissions by 2030. Many sectors need an increased effort of 5–10 fold over the current pace of their reductions to stay near the target 24, 25. The 1.5 °C ceiling was at least temporarily breached on average for the entire year of 2023 26. It may be permanently breached as early as 2027, exhausting the entire “carbon budget” remaining to have a 50% chance to stay at 1.5° 27. Moreover, evidence is mounting that current long-term climate models may underestimate key parameters 28: the actual rate of warming; the rates of polar glacier and permafrost melting; the rates of release of GHGs (especially methane); how this may disturb movements of ocean currents; and how even the 1.5° target may risk triggering irreversible cascading “tipping points” whose thresholds may be changing 29, 30, 31, 32, 33, 34, 35, 36, 37, 38, 39, 40, 41, 42.

Paradoxically, we are floundering despite having existing affordable transition technologies, sufficient and cheap capital, extensive knowledge of what to do, and even a broad consensus on what it will cost 43, 44, 45, 46, 47, 48, 49, 50, 51, 52, 53, 54, 55, 56, 57. What we do not have is a clear sense of how on earth all this will actually get done?

As a range of renewable generation and energy storage technologies becomes cheaper, market forces will increasingly underpin parts of the transformation 58. But these need to be buttressed by policy and organization. At the moment, global emissions reductions emerge from a complex set of voluntary national commitments and industry agreements because, at multiple levels, this ad hoc mix is what is politically acceptable from the jockeying of “polycentric” interests 59, 60, 61, 62, 63. To be effective, some measures e.g., carbon taxes, carbon trading, better emissions reporting, carbon import tariffs, and a vast upscaling of inter-connected, load-balancing smart electricity grids need to be implemented at the national if not continental or global levels. Some measures will require a deepening of industry-wide agreements 64, common financial reporting, and shared development costs especially to shift steel, shipping, aviation, plastics, cement, and agricultural production (not merely the energy these use but also the production chemicals) to zero lifecycle emissions processes 65, 66, 67, 68, 69.

Regardless of how these market forces, industrial coordination, and international and national agreements eventually play out, ultimately, this needs strong implementation at the urban regional level which is held to “account” for up to 70% of global greenhouse gas emissions 70, 71. This often-cited but very approximate number includes transportation and industrial emissions that occur within an urban region and aggregates, in a very rough fashion, Scope 3 consumption emissions such as those embodied in construction materials. The 70% estimate would be reduced if e.g., all grid electricity was generated by 100% renewable sources. With many national governments in political turmoil even before Covid, with international climate cooperation under geopolitical strain, and with little consensus about how to manage these higher levels of climate governance, “cities” are increasingly seen as the front line to solve serious social and environmental challenges. A review of recent literature tell us that cities “should” design, finance, and implement all sorts of integrated inclusive systems solutions 72, 73, 74, 75, 76, 77. The question is: will they? To judge the realism of this view, we need a deeper look at how different urban regional actors actually behave and how much influence they have over emissions.

Decision-making assumptions

Emissions and energy modeling policy and finance work simply assumes that existing organizations which manage urban resource use are up to the tasks, tasks they just need to get on with. The models and policies show the effects of decisions made rationally and which are then implemented in some least-cost, utility-maximizing fashion.

Though rarely acknowledged, there are actually two implicit, competing sets of assumptions that describe urban decision-making to reduce urban greenhouse gas emissions 78:

1. 1.
“Bright Lights Big City”: Existing organizations-governments, businesses, and citizens groups are fit for purpose; we just need to tweak some prices, incentives, or taxes, regulations, and reporting standards and the changes needed will occur organically, at the scale and speed needed. The transition is already occurring within progressive regions and organizations. These organizations behave and make decisions in rational ways that simply need better guidance and reinforcement. The necessary engineering and financing will come together in some coherent fashion. We need merely to encourage behavior through the right policies and prices, let markets work, and then communicate and replicate results.
2. 2.
“Darkness on the Edge of Town”: Governments, businesses, and citizens groups suffer from complex competing interests and deep structural constraints, none of which will self-repair via markets and new finance, and all of which limit organizations from cooperating effectively. In addition, we need to integrate technical systems to a degree that has no historical precedent and certainly not at the scale and speed needed. We have to do this within a very difficult political context, dominated by polarization, inequality, financial stresses, and a mistrust of experts, all of which affect how these groups behave and make decisions. This argues for a new approach and a new type of organization to rebuild trust, to integrate disparate engineering and human systems, and to drive the rapid innovation needed.

Some cities may experience bits of both of these decision-making archetypes, depending upon the particular department or branch of government, or business, and local political and legal cultures involved, etc. But as explained below, the second set of assumptions more accurately describes the situation at the urban level.

At the moment, this decision-making issue is largely ignored, treated just as a black box, and something that just needs tweaking to fix. We need e.g., “green funds”, “a stronger enabling environment”, “more infrastructure deals”, and “blended finance” so “cities” can do things. A strong wise mayor commits to emissions targets and this makes it so. Citizens, businesses, and property developers rejoice using new smart technologies. Levels of government cooperate; building codes, land use, and traffic regulations align. City governments take on more debt but manage risk; banks and businesses will swarm in, and viable low-carbon infrastructure projects will be implemented as carbon prices and markets will work their magic. Growth can become inclusive and use nature-based solutions.

In almost all of the world’s cities, these assumptions are completely unrealistic. They were unrealistic before the Covid disruptions; they are even more so now. Given this, it is worth asking a question rarely asked: are our local institutions actually up to the job of managing a rapid equitable transition to a low emissions world?

Facts on the ground

Let us start with a closer look at how city governments and business organizations make decisions and try to collaborate. On a good day, most urban government departments operate in “silos”, fighting over strategies, budgets, and policies. Salaries and work environments struggle to compete with more attractive private sector conditions, leading often to politicized staff-churning and even corruption. Complex tendering regulations work against least-cost integrated solutions; e.g., even progressive Boston took over 5 years negotiating within its own government bureaucracy to approve least-cost power purchase/energy efficiency agreements for a dozen of their city-owned buildings 79. Building and zoning codes are often manipulated by local elites, even in developed economies 80. Government is often not regarded as a competent neutral party able to balance fairly technical financial and social interests.

In normal times, most city government revenues are hard-pressed to just keep the city running. The direct and indirect costs of Covid-triggered remote working, Ukraine and Middle East war-related supply disruptions, damages from extreme weather, and increased inflation and interest rates are dramatically stressing city governments’ resources. Urban finance is rarely strategic but rather an opportunistic mishmash of local property taxes, permit fees, loans, and a large dependency upon national transfer grants 81, 82, 83, 84, 85. Capital market access remains difficult even as cities are forced to spend more due to central government cutbacks. (Nordic cities are the exception here with far higher shares of national tax revenues and revenues as a share of GDP). City governments’ ability to take on more, or in many places any debt, pushed by new “green” financing instruments, face daunting obstacles. This obviously varies from city to city, and different countries have different regulations regarding municipal debt. But several surveys show many urban budgets now allocate 25% of revenue to service debt and pension obligations 86, 87. All these political financial and management constraints are even more serious in smaller cities, where some models suggest up to ¾ of the global urban emissions abatement opportunities exist 88.

There is a great deal of interest to develop new financing mechanisms and to increase the credit-worthiness of city governments to ease some of the strain on city budgets, to try to boost investments in climate adaptation and mitigation 89, 90. While some of these measures mention the need to strengthen capacity and to provide “loan preparation facilities”, these financing efforts understandably still concentrate efforts upon city governments and implicitly view gaps as technocratic, regulatory problems. The assumption is if we provide city governments with more project finance, get national government policy to support this, strengthen the “enabling environment” etc., things will sort themselves out, many bankable projects will emerge, and bankers can deal with much higher volumes of bundled, standardized lending. However, such ideas have been around for decades 91, 92. A recent study noted that of 500 of the world’s largest cities in developing countries, only 98 had finances of investment grade 93. Given all the serious constraints discussed above, proposed financing changes alone are unlikely to result in a quantum leap in climate-related lending to cities.

Governments also face fiscal pressures working against emissions reductions. Particularly in developing countries, significant city government revenues often depend upon selling government-owned suburban land or levying a surcharge on electricity tariffs. This creates huge disincentives to reduce urban sprawl and energy consumption. US and EU petrol and diesel pump set taxes fund a fair bit of road maintenance; this will need to be re-thought when most vehicles are electrified and if the total number of vehicles eventually decreases due to car-sharing 94.

We will return to finance but first there are issues about which emissions can city governments actually manage or influence? While cities “account” for up to 70% of greenhouse gas emissions, city governments have surprisingly limited influence over these emissions. The Stockholm Environment Institute (2014) modeled 600 cities implementing best emissions reduction practices: better building codes; densely settled transit hubs; energy efficiency retrofits and solar arrays on city-owned buildings; capturing waste dump methane; and employing water and waste recycling, etc. 95. The results showed emissions are reduced by only 15% of the amount needed to keep warming below 2 °C by 2030.

More recent research suggests city “emissions commitments” if fully implemented might lower 2030 global emissions by 30% of the total target 96. A review of this data indicated urban governments can impact 17% of the emissions within their geographic boundaries, but they share responsibility with state provincial and nation governments affecting an additional 19% of urban emissions 97. Analyses (pre-Covid) of US state local government and business current emissions reductions commitments suggest a reduction of 25% by 2030, with a possible 37% reduction if more subnational actors coordinate and intensify efforts 98, 99. A 2023 study of hundreds of European cities’ plans suggests that together these will reduce European emissions by 11–12% 100. This overlaps with two broader problems: (1) overall under-reporting by 15–25% of global emissions 101 and (2) the baseline year chosen from which emissions targets are set. Europe in particular has chosen 1990 which allows it to claim significant emissions reductions due to the collapse of former communist countries economies. Finally to complicate things further, there are questions about the quality of city self-reported emissions data which has been shown to be at variance with more rigorous air modeling and sampling 102, 103.

Often, city government emissions plans are actually very dependent upon higher levels of government or business interventions, especially regional/national grid electricity supply shifting to low or zero emissions sources, or national vehicle standards compelling zero emissions fuel sources and vehicle delivery. These may or may not occur in a timely fashion; if they do not, cities would be forced to offset emissions to meet targets 104. City governments face complex regulatory, fiscal, and political constraints imposed by higher levels of government. Thus, numerous studies show current city governments’ efforts, under the best of conditions of fully financing and implementing all plans and using best technologies, might get us to around a 25–30% reduction in global emissions (vs. the 50% needed to stay at the 1.5 °C warming level) by 2030.

Moreover, city governments have little control over harder to decarbonize sectors (steel, cement, and long-distance transport) which cause up to 30% of global emissions 105, 106. If we count net emissions including cities’ imports and exports, cities’ effective “consumption-based” emissions can increase up to 30–300%, with only limited ways to impact the supply chains involved 107, 108.

Finally, city government “climate action plans” are inherently political documents and city governments are cautious about discussing sensitive details of climate actions that affect taxes, investment, living costs, long-term competitiveness, disposable income, and how these are borne by different interest groups. Of over 850 European cities reporting emissions in 2020, less than half reported city-wide emissions reductions targets or emissions reductions plans 109. A review of Swedish “city climate contracts” shows that these contracts are neither binding nor do they yet have detailed investment plans, which are put off until a later phase 110. City climate plans often rely upon other levels of government or the private sector whose funding and behavior is by no means guaranteed.

Many city climate plans are often well-intentioned “spreadsheets of ambitions”. Climate plans show what needs to be done at a high level, what could be done, they contain lots of energy and emissions data, and they have a number of useful projects underway. But these action plans remain very vague on key details that investors and citizens need to know.

This is a disturbingly common problem. Upon a closer reading of a sample of plans from important cities (Boston 111, 112, New York 113, SanFrancisco 114, Seattle 115, Toronto 116, Vancouver 117, 118, London 119, Amsterdam 120, Barcelona 121, Cape Town 122, Durban 123 and Melbourne 124, 125), it is rarely clear how planned measures suggest detailed annual ex ante emissions targets over time. More worrying, there are almost no simple, cogent summaries of what are the net annual costs of proposed measures, how all this gets paid for and by whom (so “buy-in” is literally clear), how dependant plans are upon other levels of government or companies, and who must do what to implement, enforce, and verify all this. The EC Mission “City Climate Contracts”, only now becoming available for public viewing, are repeating this pattern 126.

For example, Vancouver’s climate plans (2020, 2021) repeatedly estimate there is at least a ~$100 M financing gap constraining implementation. Critical choices are sometimes kicked down the road e.g., London’s plan (updated in 2022) when the choice of whether to build decarbonized heat grids or a massive roll out of heat pumps may emerge by 2025. San Francisco’s plan (2021 p. 323) suggests that a useful next step would be to “do detailed costing of all measures and how they might be financed”. New York city plans to “start” doing detailed climate budgeting in 2024 (2023 p. 16). Bristol UK admits its “One City Climate Strategy” is “not a delivery plan and does not plot the route to achievement…as city partners have been unable to find the resources to lead delivery action beyond their own responsibilities” (2023, p.4).

This is echoed in 2 recent surveys of city climate management performance. A 2024 review of 31 major US cities stated:

“..none are expected to meet their goal of 100% renewable based on existing or planned infrastructure development. On average, these cities are projected to reach only a 10% renewable energy mix within the next 20 years. Even in the four best base scenarios developed, cities appear to cap off renewable energy penetration between 35% and 65% in the next two decades”
127,.

A 2023 survey of data based upon self-assessments from 362 European cities of all shapes and sizes concluded:

“…over 70% of the cities have not yet estimated—not even roughly—the total investment needed to become climate neutral and the majority (i) have experience in financing only a few specific climate projects (ii) are ill-equipped to tap capital markets (iii) have developed only marginally co-financing with the private sector and (iv) have taken no steps to establish an investor-ready pipeline of projects contributing to climate neutrality”
128.

As a result, many city efforts are slowly falling behind 2030 commitments even before the effects of Covid and subsequent supply, property tax, and revenue shocks are included. The striking lack of easy-to-understand credible summaries of all these issues, their financing, and lack of evidence of 3rd party verification undermines investor support and can only fuel citizen mistrust 129. This lack of clarity increases the already all too likely odds that the ~50% emissions reduction needed by 2030 will be very problematic to achieve.

There is much innovative creative work occurring in cities and these efforts will continue to be important as national climate policy and international climate agreements remain insufficient to keep warming below the 1.5 °C target. But there are simply limits to what traditional city governments can do, regardless of their enthusiasm, or their interest in deeper issues, like reducing demand for materials flows to create a more nature-based “circular economy”, to deliver ambitious emissions reductions 130, 131. To really have an impact on reducing greenhouse gas emissions, city governments have to move well beyond cooperation and instead co-develop solutions with external private groups whose separate activities and independent behavior are beyond direct city government control and influence.

Other actors

City governments and businesses talk constantly about cooperating to address climate change, to more effectively harness the vast power and capacity of business, and there are of course numerous examples of how this has been done 132. But more often, businesses and city governments circle each other warily, worrying about high profit margins, dependency upon sole source technologies, incoherent policies, and charges of cronyism or political meddling. Businesses are concerned about endless excessive meetings to get city government departments to speak with a unified voice, with clear contractual obligations that will not change with a change of administrations. Businesses and investors have little interest in funding critical soft, upfront development costs that may never be recovered and which may potentially benefit competitors.

Due to conflict-of-interest perceptions and regulatory concerns, it is difficult for businesses to help shape the nature of an urban government’s tender or request for proposal at the prefeasibility design phase, even when using private sector expertise would benefit all parties. Even amongst themselves, businesses find it difficult to cooperate, and to supply integrated optimal “whole systems” vs. those which maximize the profits from their particular piece of the supply chain 133.

All these conditions create what economists call a “Nash Equilibrium” where none of the players has sufficient incentive to cooperate or to move first to fix a problem 134. This impasse, which probably explains a fair bit of the lack of progress reducing emissions, only increases citizen distrust and despair, risking ever more populist, even violent responses. Existing worries about uncertain employment, stagnant incomes, affordable housing, and now managing the financial effects of post-Covid changes and two on-going wars will all be turbo-charged by water, heat, flood, and crop stresses, prolonged supply chain issues, and likely additional disease waves from accelerating climate change.

Thus we have seen an increase in populist backlashes against climate-related measures, such as the “gilets jaunes” protests against diesel price increases in France, Dutch farm protests over more stringent nitrogen use controls, and increased local opposition to shifting to heat pumps and approving wind turbine siting permits in Germany 135. In progressive innovative California, legislation was blocked for decades that would allow denser, more affordable housing development around transit hubs due to a lack of consensus among citizens and property owners 136. Even ignoring a range of related social problems, sky-rocketing central-city housing costs in almost any major city have pushed the poor and even middle classes to ever longer commutes, causing increased congestion, increased energy consumption and emissions. Rather than providing affordable housing at scale, what should be walking, bicycling, or a simple mass-transit commute may eventually compete with thousands-millions of electric semi/fully autonomous vehicles with all the emissions associated with their production, use and disposal, increased congestion, and a further undermining of public transport finance 137, 138.

A range of engineering and financial solutions that reduce emissions are of course a critical part of the mix of tools needed. But we are deluding ourselves if we think we can simply apply technology or finance in some vague technocratic fashion (the “plug and pray” method) to sort out complicated emissions problems that are intimately connected with deeper social issues 139, 140. Citizens have plenty of reasons to be wary of government and business, and to demand more accountability and involvement in important policy and investment decisions. In the late 1960s, New York City introduced computerized management of responding to fires which led to catastrophic results 141. Other examples include: the suppression of data linking smoking and lung cancer; the thalidomide scandal of the early 1960s; the Bhopal, India chemical release; the mismanagement of nuclear power stations at Three-Mile Island, Chernobyl, and Fukushima; the overuse of antibiotics and opioids; poor transmission grid maintenance leading to huge fires in California 142; overleveraged lending practices leading to the 2007-2008 financial crises; poor logistics management leading to huge excess deaths during the Covid-19 pandemic 143, 144, 145; profound uncertainties over the long-term impact of social media 146, 147 and artificial intelligence 148; the manipulation of emissions data from automobile diesel engines; and decades of climate change denial research funded by fossil fuel companies, despite their own scientists predicting accurately the rate and risks of climate change 149, 150. Many of these events had nothing to do with Schumepterian “creative destruction” for some greater good; they were simply betrayals of trust. We underestimate the importance of a widening mistrust of experts on emissions reductions 151. We will return to the “trust” issue shortly.

We also need to overhaul tax-funded public research and demonstration support systems that ostensibly create new markets jobs, promote citizen participation, and stimulate urban innovation to manage climate change. Both the US government and the European Commission (EC) have together spent well over $2 billion on such activities over the past 15 years 152. It is difficult to find credible third-party evaluations of these programs that show clear verifiable results (using transparent benefit-cost analysis) that show why the financed projects made strategic sense, why they needed central government funds vs. other sources, how citizens helped shape investments, and how these resulted in significant permanent, replicable long-term emissions reductions at affordable costs.

Instead, much of this money was, and is being spent on disjointed research or engineering demonstration projects rather than building any sort of permanent, professional long-term capacity to innovate to trigger large-scale investments, and to create permanent markets and jobs. While some of this vast R&D work is useful, too often, it supports conclusions such as: “Finally the urgency and complex character of climate change require trans-disciplinarity (sic) and engagement with social movements, knowledge brokers, and change leaders” 153. The scattered, vague uses of these climate research and demonstration funds reflect a mind-set that needs to be changed fundamentally if we are to make real progress reducing emissions while strengthening local economies. How the new EC belief in “Missions” can address this remains very unclear (discussed further in the Supplementary Information section). We need to make such public expenditures as accountable as reporting in the private sector.

A trusted integration platform

We must avoid the mistakes of the 20th Century where energy, water, sewage treatment, housing, transport, building codes, and land use systems evolved from a haphazard, often brutal jockeying among electricity utilities, oil automobile and mass transit companies, property developers, and various levels of governments, all pushing their particular narrow solutions in ways that created the very problems we now need to solve 154, 155, 156. The European experience is somewhat more positive due to the way denser older cities evolved spatially and by having a culture and tax regime more supportive of public investment. But much of the rest of the fast-urbanizing world in Asia Africa and Latin America is experiencing similar tensions.

In many ways, this is the result from what Charles Lindblom described in his influential paper “The Science of ‘Muddling Through” (1959) 157. Lindblom and various other “bounded rationality” colleagues argued that a disjointed incremental approach is a useful effective way of making decisions, investments, and policies, given changing interests and the limits of what can be known in a very complex world. This argument has been refined recently to include “polycentrism”, “experimentalist governance”, and coalitions of the willing, especially at the sectoral level, as a way to manage emissions reductions 158. However, the incremental “muddling through” approach reaches its limits when special interests can exercise veto power, or when it is confronted by complex investment decisions, or crises that require long-term integrated solutions 159, 160.

The alternative is not to call for some sort of central planning, or complex unworkable international investment coordination, or to demean the important needed work in sectoral technological innovation. Rather, we have to recognize that incremental change will simply not deliver the profound rapid restructuring needed to manage climate tipping point risks, nor to get to a 50% reduction in emissions within 7–10 years, nor is it likely to lead us to net zero emissions by 2050 161. “Whole systems” design can potentially keep us below 1.5 °C warming while accommodating economic growth and generating huge savings 162, 163. But this will require a new mix of incentives, shared costs and benefits, and a new political consensus that is not occurring on its own or at the necessary speed.

Conventional top-down or “back-room” measures will not credibly address all the serious organization and implementation problems discussed earlier. Indeed, their presence is central in explaining why progress on reducing emissions remains so slow. We often hear vague calls to “strengthen capacity”, to allow “cities” to make better decisions, and which then somehow leads to increased access to finance 164. We need to think harder about what capacity, whose capacity, and how that capacity will actually get used. There is no shortage of studies, slogans, pledges, and commitments that suggest what should be done. What is missing is clear lines of responsibility and accountability that show who specifically will do what and when; who will manage design, finance, and implementation in specific locales; and making sure they have sufficient political, financial, and technical resources to implement the transition and bring all the necessary pieces together, in a credible, consensual fashion.

Fitting all the pieces together is complex and expensive. It took a 4-person team at the World Economic Forum over 6 months to help Melbourne, one of the most well-networked and respected cities dealing with climate issues, just to connect with financial institutions to discuss financing a large battery storage project. The staff time involved approached 0.1% of the project’s value to manage transactions costs 165. Miami’s climate adjustment planning is literally drowning in transactions costs 166.

We need a proper strategy based upon credible decision-making assumptions that addresses the difficulties governments, businesses, and citizens groups face trying to collaborate. While a lack of finance is an issue, the deeper problem is to how to change the nature of decision-making. Even if national governments somehow allowed local governments to take on vastly more debt, all the deep structural capacity problems (discussed above) and mistrust that constrains working with businesses and citizens groups will still remain. A new approach is needed to bring the players together, to professionalize work, to build trust, to give citizens a more active creative role, and to create a strategy that supports innovation and projects that can be rapidly financed, implemented, and scaled up. Neither businesses nor city governments can deliver this on their own. We cannot use 19th Century organizations and management to solve 21st Century problems. Ignoring this is treating “inconvenient truths with a convenient fantasy” 167.

We can start by creating “Lowering Emissions Economy Partnerships” (LEEP): an urban-region group of business, local government, and citizens’ organizations that jointly develop, cost out, and propose equitable low-emissions solutions to private finance and government, and then help manage implementation. This is not to provide finance and management capacity, or remove debt and risk from government balance sheets like a more traditional Special Purpose (financial) Vehicle, an Energy Services Company, or a Private-Public Partnership 168, 169. Rather a LEEP’s purpose is to build trust, develop consensus, reduce transactions costs, and drive innovation.

A LEEP would be an independent office with a small, diverse, skilled management team. It can think and invest strategically to develop a fully-funded implementation plan to enable an urban metropolitan region to meet needed emissions reduction targets: a 50% drop by 2030 and net zero emissions by 2050. A LEEP would raise seed capital, potentially manage large city innovation funds 170, and it would support needed legal and technical work. A LEEP would be governed by a diverse board comprised of a city’s key public and private stakeholders (possibly including a representative from a regional or provincial government if helpful). Such diversity helps ensure that the investments in emissions reductions strengthen the local regional economy, its social fabric, and its finances.

The LEEP can begin to manage emissions flows from the broader metropolitan region vs. being limited to only a city government’s legal geographic boundary. A purpose-driven organization such as a LEEP can address regional resource flows in ways city governments cannot 171, 172. A LEEP can provide a less formal work space and more options to involve citizens to allow businesses to cooperate in early pre-feasibility planning, and to finance and fit the pieces together in a coherent way. Different regions and cultures will have different solutions about how best to configure a LEEP, how to select its members, how to make them accountable, and the degree to which a LEEP can act independently. Who sits at the table and who defines agendas are of course complicated critical issues, as is the degree of relative openness and honesty of local political and economic cultures. These issues are always present in both public and private institutions. But all urban areas have a clear sense of who are key local stakeholders, and a fair, public, transparent, accountable selection process can be developed if the fundamental choice is made to do so. A city government, a group of businesses, a university, or a citizens housing or environmental group can act as the initial catalyst or convener, starting informally, publicizing organizing events widely to encourage participation and to create a sense of legitimacy. Membership can become broader and more formalized over time as the group sees fit and as confidence experience and finances grow.

As much as possible, the LEEP should be an independent, professional, neutral entity that all parties trust so it can reduce far greater emissions than those under direct government influence. A city government still retains final legal authority over many decisions, and it would be an active member of a LEEP, so the government will keep oversight and power over a variety of decisions. But if they are serious about stimulating the transformation needed, urban governments need to view themselves as a catalyst and a player vs. the key driving entity in local emissions reductions. As discussed earlier, there are a variety of organizational, legal, and asset ownership constraints that support this judgment. This more nuanced view of political and economic power is the reality that local governments need to accept if we are to achieve rapid emissions reductions.

The LEEP would become a “one-stop shop” which provides open access to the latest current regional emissions data, an inventory of related investments, knowledge of projects, and funding options that government, business universities, journalists, developers, and citizens could use to promote innovation and development. A LEEP would clarify which steps and investments need government support and regulation, and which efforts businesses and citizens can do on their own to maximize emissions reductions within their urban area. The LEEP is designed to absorb the “transactions costs” and soft, early investments needed to get parties to collaborate and to attract finance. It would become a good listener and communicator to build trust and trigger experimentation and innovation 173.

A LEEP would maintain a frequently updated local emissions abatement cost curve 174. Abatement cost curves are helpful in starting discussions between government, business, and citizens about how much it is reasonable to pay and when to pay, for different levels of emissions reductions. Too often, both the marginal and absolute costs of proposed measures and targets are not discussed transparently, making trade-offs difficult to assess. The curves do have their limitations: unclear assumptions; clouding issues of optimal sequencing; inter-dependencies among options; omission of co-benefits and externalities; “locking-in” dependencies; and ignoring the relative ease of implementation. etc. But they are a useful way to begin thinking more strategically about emissions reductions options 175, 176, 177.

A LEEP would incubate new project ideas rapidly and flexibly, supporting difficult to finance up-front legal and engineering work to design mixed-use affordable housing starting in central “zero-emissions” districts, or to enable building owners, utilities, financial institutions, and new energy and water supply firms to cooperate and accelerate investment. There are similarly complex issues involved in managing stakeholders’ hourly, daily, weekly, and seasonal supply and demand with different scales of energy and temperature grids; managing unintended consequences; or how and when to close waste incineration-based power plants as waste streams decrease to promote circular economies 178. There are other choices to assess: whether PV arrays and storage batteries are better sited with larger community or utility-sized energy farms vs. on individual houses or buildings; trade-offs between density and heat island effects 179; and complex financing issues arising from greater renewables supply in power grids 180. Important recent work shows while there may be good economic arguments for these and other measures, the financial burden will affect different stakeholders in different ways, with some gaining and some losing, and there will likely be local net employment losses in the automobile, steel, cement, chemical and various fossil fuel-related industries 181, 182, 183. There are also strong interests whose profits can be threatened by changing different elements in supply chains which can often explain why the least cost “system” solution may be resisted by pieces of it 184, 185. Some mechanism to structure investment deals fairly will be crucial to sorting out these trade-offs. In any case, integrated “whole systems” design will only happen if a dedicated trusted professional organization drives the integration and delivers it 186. In a sense, this tries to bring and reconcile polycentric interests “in-house”, making this an operational principle 187.

Moreover, whole-systems design is not merely a set of green engineering and financing solutions; it includes bringing citizens into the design, finance, and operations in practical, effective ways. While a city region is unlikely to influence deeper economic forces such as the effect of AI on employment, skyrocketing healthcare or energy costs, and changing terms of trade, it can ensure that sufficient resources are dedicated to deliver affordable zero emissions housing at scale, centrally located. This concrete change would help moderate social tensions fueling populist movements and build political support for further investments in emissions reductions.

Increasingly, we see the need for dedicated organizations to do the integrating to manage complex social problems 188, 189. There is also now a large body of work that shows the critical importance of creating “safe spaces”, pushing decision-making authority down to the lowest level possible level to maximize innovation and creativity 190, 191, and to use informal negotiating fora to resolve conflicts and explore solutions via so-called “track 1.5 and 2” negotiations 192. Finally, there are practical, proven methods used in numerous countries that show how “citizen assemblies” can come together effectively to digest and discuss technical, financial, and legal issues and resolve complex problems 193, 194. This also includes recent tools to promote “robust decision-making”, where policies can explore decisions made under deep uncertainty and even lack of consensus over assumptions, an important asset in polarized political systems 195, 196. This broad outreach and consensus-building would be a critical part of LEEP operations and goes far beyond what governments and businesses can do on their own. Citizen participation in emissions and infrastructure investment and policy decisions can evolve from empty rhetoric into a real, useful, and on-going contribution.

Examples and financing

Pieces of this new approach already exist. Interesting business-government collaborations can be seen in Boston’s Green Ribbon Commission 197; the New York City Energy Efficiency Corporation and New York State Climate Action Council 198; the Leeds (UK) Climate Commission 199; Cape Town’s “GreenCape” 200; Bristol UK’s “CityLeap” 201 Collaboration; “Leuven2030” in Leuven, Belgium 202; the Columbus, Ohio Partnership’s Acceleration Fund 203; New York City’s “AcceleratorNYC" for buildings and Ireland’s “One Stop Shop” program for housing retrofits 204; Mannheim Germany’s “Climate Protection Agency” 205; and the “Energiesprong” integrated deep retrofit model pioneered in the Netherlands 206. Interesting financing examples are found in the Canadian Infrastructure Bank 207 and den Haag, the Netherlands’ “City Fund” 208. Efforts to involve citizens more directly and deeply in policy and development include “participatory budgeting” in several US, EU, and Latin American cities 209 and “citizens assemblies” such as those actually helping develop climate strategies in Ireland and France 210, 211. The kind of permanent, long-term integrated planning capability needed is seen in the Urban and Spatial Planning Institute (IPPUC), Curitiba, Brazil 212. Innovative ownership and economic development models are found at the Mondragon Industrial Group (Basque region, Spain) 213; the community-based micro-grids 214, 215 of Brooklyn 216 NY, and Feldheim Germany 217; the planned Fruitvale “Ecoblock” in Oakland CA 218; the Ecopower Cooperative that provides over 50,000 Belgian homes with renewable energy and energy efficiency services 219; and the 30 + % of German renewable electricity generating capacity owned by private citizens and local cooperatives 220. While none of these examples pulls everything needed together, they do show that the elements are viable.

Going forward, any city in the world could establish a LEEP-type innovation partnership. LEEP office costs would include a minimum staff of 5 professionals (director/energy economist, project/property finance, water, and waste experts, and political/communications specialist 221), IT, rent, overheads, communications, and a €1 M project preparation-revolving fund to support pre-feasibility engineering, finance, and legal costs as needed 222. This approaches a rough cost of €3.3 M per year, or €10 M total per city over 3 years, which is a minimum start-up commitment needed to retain staff, build trust, and achieve results. Start-up finance would come from a sharing of costs between businesses, local governments, national government, and private foundations.

Longer-term, LEEPs can become financially self-sufficient to help scale and replicate the approach in many cities. Each year, a typical middle to high income city region spends (conservatively) about 5–10% of its gross regional income managing energy, waste, and water 223. Increases in energy and water efficiency and local generation would return tens of millions to consumers, net of payments financing capital investment, while providing the small funds needed to support a LEEP office. This is a matter of redirecting a fraction of money already being spent as shown below in Table 1.

LEEP costs are in-line with the 1–4% of total costs needed for feasibility design and contracting observed in many large infrastructure projects 224.

Sharing these costs and benefits can create powerful incentives to collaborate and align interests. A group of local public and private stakeholders could create and own shares in the LEEP entity so that all could profit from recovered fees and savings from projects brokered by a LEEP. If e.g., 19 companies and the city government supplied the €10 M (3-year total) start-up costs, each share (1/20th of €10 M) would cost €500,000 (or 1/3rd of that, €167,000, per year). Using the example in Table 1 above, a region of 1 M people could over time generate a net savings of €100–250 M per year (the higher range reflects upside uncertainty over energy prices). This could entitle shareholders to redemption payments with interest and a built-in profit margin if they so choose within 5 years. In the example above, to realize a 10% rate of return on the €10 M invested, this would mean an additional €2 M paid in year 4 or 5, for a total of €12 M, again taken out of the €240 M saved per year. Or, they could continue holding the shares, reinvest, and participate in possible on-going LEEP project’s future fees. Alternatively, the capitalization could be simply treated as a part of a much larger infrastructure loan with a fixed term and rate structure, that a LEEP would be empowered to guarantee.

While arrangements will vary from city to city, the shareholders would agree that large supplier contracts would have a provision to provide a small finder or developer fee to keep the LEEP solvent and on-going. The option chosen will respond to local conditions and interests. What is important is that are ways to capitalize the team needed to drive innovation rather than only relying upon often very complex, burdensome, distant government financing programs.

An example: imagine a range of local interest groups wants to build a large $100 M zero emissions mixed-use mixed-income development in a city, involving several thousand apartments and a range of stores and services. This can be a group of citizens groups, property developers, circular economy engineering firms, financial institutions, etc. These groups either form a LEEP or work with one already set up. The LEEP helps sort out all up-front political, legal, engineering, and financing issues. It facilitates extensive public discussions and supports critical engineering, financial, or legal studies that can identify and unblock investment obstacles.

Energy, water, waste, food, and mobility systems have to all fit together in some coherent viable fashion. Zoning and permitting changes may be required. Complex issues and trade-offs need to discussed. How much electricity should be produced or stored on-site? Are there opportunities to install larger, ground-based heat pumps? Do vertical growing systems have a role? Can food wastes be digested locally, combined with heat recovery from local decentralized waste-water treatment, to generate affordable energy on-site? What agreements are needed with regional or even national utility companies to balance hourly electricity loads? Will deep electrification permit all sorts of new reduced maintenance costs and how can those benefits be shared? What coordination is needed with other levels of government? How can tax credits be optimally and fairly allocated? What will be the role of energy demand management? How should car vs bicycle parking space be allotted given vehicle-sharing and charging needs? Who will finance and support vehicle charging stations? Should a site-owned micro-grid be developed? What proportion of apartments need to be affordable, to which income groups, and will some units subsidize others? How can this investment support long-term inclusive growth? How can developers and citizens provide effective input throughout the process? How best to sequence development to leverage a range of local state/provincial and national financing and tax programs to “crowd-in” investments etc.?

To arrive at politically acceptable solutions that can be financed, a LEEP team is critical to building the trust and support needed amongst all these interests and systems. This process then leads to the compromises, consensus agreements, permitting, and financing needed to implement the overall effort that balances politics, engineering, and finance.

In the example above, for all this integrated support, the LEEP could receive a negotiated fee e.g., 2% (of $100 M) = $2 Million, that could also be financed as part of construction loans. The LEEP has facilitated and financed the effort and supported all the complex upfront discussions, some technical and legal work, and negotiations that individual suppliers and local government could not do easily (if at all), and everyone wins. The LEEP shareholders can decide if the $2 M fee is used to start to repay start-up capital. Or they can decide the funds remain with the LEEP entity because all the shareholders have found either its services or information flows useful and wish to build on this for future developments and projects. Over a decade, many such projects can be developed.

While individual parties could still enter into separate supplier contracts, it is likely such contracts would not have been possible without the LEEP group’s efforts which absorbed many transactions costs, costs that companies and the city government would otherwise have to bear individually. In addition, firms and the city government might wish to recoup their investment with a small return. Thus cooperating (even between competitors) to make the LEEP successful is in everyone’s interest. This could transform a set of competitive power relations into a collaborative sharing of risks costs and benefits. This joint ownership of a LEEP would incentivize co-operation, reduce the risks of conflicts of interest, moral hazard, free-riding, and even enable repaying the start-up investment within a few years.

In Europe, start-up funding could draw upon a €500 M–1 Billion share of the €10 billion currently proposed for climate and energy research part of the proposed €100 Billion research budget for the EC “Horizon Europe” 2021–2027 program. This share could easily capitalize 3 years of LEEP operations in 100 European cities. Versus the current complexity, such an effort would be quite simple to manage, requiring only a few deliverables over several years: build the organization; deliver a funded plan; implement and verify emissions reductions; and release funds upon an agreed schedule as each step is begun and then successfully completed.

Much of this paper has focused upon conditions and examples found in developed country cities. But there is no reason the model cannot be extended to cities in developing countries, where the problems of capacity, elite capture, and multiple financial and legal constraints are even more acute. There are constant discussions to create new financing facilities that support pre-feasibility work and some of these can be helpful 225. None of this is to suggest any of these public funding sources are easy to navigate or manage. To the extent possible, city stakeholders should develop mechanisms to marshal the resources needed from local sources, taping and leveraging the large spending on energy, waste, and water management already occurring, as discussed above. It will not be easy, there will always be difficult political conflicts to sort out, but ultimately this is a way to move at the speed and scale needed.

Table 2 below summarizes why a dedicated local organization is needed to drive down urban GHG emissions:

Implications

As envisioned here, a LEEP has a somewhat limited scope; to jump-start innovation, investment, and implementation of measures to reduce urban emissions, in a way that promotes more inclusive economic growth. While a well-functioning LEEP will certainly help, by itself, it cannot cure a range of deeper political, social and economic issues plaguing many urban regions 226. Nevertheless, these challenges set the context within which a LEEP operates and to which it must respond to be successful.

With significant financial stimulus available and with increased acceptance of government intervention in markets, there is now an opportunity to invest in a greener, more resilient way. Yet current assessments of the $14 Trillion spent by G20 nations on Covid-triggered stimulus measures suggest only 6% went to measures that would also reduce emissions 227. It remains to be seen how well these investments and recent large US and EU climate-related subsidies will also address the longer-term revenue and employment losses, triggered by the pandemic, and subsequent financial and geopolitical upheavals 228, 229, 230. These shocks are challenging climate-related spending in many countries and regions facing polarized electorates, stretched finances, and regional and ethnic tensions, all of which are only increasing 231. The LEEP idea puts consensus-building, participation, and transparency front and center to try to reduce some of this increasing polarization, and to show how climate investments can improve people’s lives.

At the urban regional level there are two immediate concerns. First, urban air pollution plays an important role in damaging lungs that weakens people’s ability to resist any respiratory disease, including Covid. Airborne particulates may themselves help spread a virus, they may even trigger cancers, and have been described recently as “the greatest external threat to public health” 232, 233, 234, 235, 236, 237, 238, 239. At a staggering cost, the Covid pandemic may have bought us a little time, and some reduced commuting working at home etc. may result in some small, permanent emissions reductions 240, 241, 242. But air emissions and air pollutants, from the single building level up to rapidly decarbonizing regional electricity generation and motor transport, need to be reduced far more forcefully. A recent study suggests the short-term health benefits from reduced emissions may even exceed reduced longer term damages from climate change 243. Ignoring the difficulties of implementing carbon taxes and removing fossil fuel subsidies, cities could still do much on reducing air pollutants and emissions with a more focused, integrated, and inherently regional approach, which is a cornerstone of the LEEP idea.

Second, particularly local governments’ already constrained attention spans and finances will be stressed dealing with the effects of increased working from home, and then all sorts of supply price inflation and even migration effects from the current on-going wars in Ukraine and the Middle East. Increasing localized heat, flood, fire, and storm damage will only compound this financial pressure. Anecdotally, some early surveys suggested 2020–2021 Covid effects alone caused a 10% reduction in municipal revenues and a 5% increase in costs. Significant commercial property value and tax revenue losses are mounting 244, 245, 246, 247. At least for several years, local governments will be hard-pressed to let emissions reductions efforts drift to cope with financial pressures.

This could not be happening at a worse moment. We have been warned for years that we have roughly until 2030 to cut global emissions by 50% to have a chance to stay under the 1.5 °C warming threshold. This implies a reduction of over 5% per year, almost as much as what resulted from the Covid-induced economic contraction in 2020 248, 249.

Creating the suggested new LEEP partnership organizations quickly would at least give us a chance to meet the 2030 50% urban emissions reduction target. If a dedicated organization can drive emissions reductions strategies and their financing and implementation, this frees up limited local government resources to deal with managing many on-going financial shockwaves.

If there is one point this paper has tried to make, it is that we need to think much harder about what “implementing” actually means: developing the underlying political support; building and staffing an accountable high-performance organization to drive innovation; getting financing in place; developing and approving a plan; and then begin to actually implement change. Just completing those up-front tasks at the city level would optimistically take at least a year, without simultaneously managing the after-effects of a global pandemic, a sharp burst of inflation, and decreasing revenues and tax receipts. All this is needed within, at the most, the decade remaining to slow emissions to have a chance at stabilizing projected warming below very risky levels.

If anything, the Covid experience has shown disturbing gaps in how democratic governments, businesses, and citizens are able to collaborate effectively. Without trivializing the remarkably rapid scientific work involved or the massive complex vaccine distribution effort needed, compared to slowing global warming, managing Covid-19 required “relatively” straightforward changes in some behaviors and rolling out large vaccination logistics programs, using a variety of existing organizations, at the local national and global levels. All this has not gone especially well, with much needless expense, uncertainty, suffering, and death 250, 251.

To be fair, some of this was inevitable given the suddenness, speed and scale of the pandemic and all the surrounding politics 252. But we had been warned for many years that such a sudden, rapidly spreading pandemic was probable 253, 254, 255. We were not prepared; indeed we chose not to be prepared, and the warnings continue even now 256, 257. The Covid-19 experience should deeply shake our confidence in the fitness of our current institutions to deal with long-term threats.

We have also known for many years that the far more complex challenge to slow global warming will require a profound rapid re-tooling of many of our basic systems of agriculture, energy, transportation, and industrial production, and their financial and political underpinnings that we have used for well over a century. The Covid experience strengthens the argument that governments, businesses, and citizens groups need to rethink how they can collaborate better and faster, and why all should be open to experimenting with new approaches.

Finally, some comments on investment levels and cost-recovery are warranted. The complex question of what “needs to pay for itself” is far beyond this paper’s scope and spans issues of what becomes defined as a public good, the roles of state and market, and who defines these boundaries. However, in passing, note that we never ask organizations addressing profound, existential, security threats to somehow recoup their costs from cash benefits (military, police, and fire fighting units being obvious examples). The massive sums spent managing the Covid pandemic will be never be repaid, including vast subsidies to fossil fuel consumption. Ultimately whether an organization or program should pay for its costs from monies saved becomes a political choice 258, 259, 260. There is a larger issue here of priorities. Table 3 above shows some examples of global spending whose costs are not covered by savings 261, 262, 263, 264, 265, 266.

As explained earlier, operating a LEEP costs about €3.3 Million per year, per city. 1000 cities together would need to spend €3.3 Billion ($3.7 Billion) annually. The resources needed to support this are available, and for large middle- or high-income cities the cost would be equivalent to foregoing 3–4 specialized coffees or beers per person per year during a start-up phase. With what we are learning about the health impacts of cleaner air, which could be greatly increased by a LEEP’s regional focus, the charges for merely one less visit to a doctor per person per year would more than cover a LEEP’s annual cost.

Conclusion

We are facing profound security threats from climate change. Business needs to step up and move beyond simplistic, short-term profit-making and proactively collaborate, even supporting up-front costs that can be recovered over time. City governments need to honestly recognize their limits and share governance more collaboratively with business and citizens. Citizens need to be willing to be better informed and demand and take a more active role in shaping a transition to reduced emissions. We have seen there are proven methods, incentives, and experiences that can be drawn upon. At the urban level, the LEEP provides a structure to integrate all this and move toward coordinated, coherent action.

In his 1934 poem “Choruses from ‘The Rock”, T.S. Eliot warned against “dreaming of systems so perfect no one needs to be good”. The dedicated innovation partnership idea outlined here is not foolproof. If members allow, it can be corrupted or rendered simply ineffective. But it does address an important gap that we are currently ignoring at our peril. With sufficient transparency and leadership, we can move beyond the disturbing lack of progress in reducing urban emissions. We cannot do much about the behavioral and technological parts of E. O. Wilson’s lament, noted at the beginning of this paper. But we can do quite a bit about changing our institutions and managing how decisions are made. Rather than becoming mired in despondent, narrow political de-construction, we can start constructing the missing management capability needed to deliver trusted, effective solutions to build a more just and a more sustainable world.

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Lichtman, R. Managing a low urban emissions world. npj Clim. Action 3, 44 (2024). https://doi.org/10.1038/s44168-024-00117-1

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DOI: https://doi.org/10.1038/s44168-024-00117-1