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SEI working paper

The economic case for low carbon cities

This paper, a contribution to the New Climate Economy project, compares the opportunities or economically attractive low-carbon investment opportunities in five cities.

Johan C.I. Kuylenstierna / Published on 25 November 2014

Gouldson, A., Colenbrander, S., McAnulla, F., Sudmant, A., Kerr, N., Sakai, P., Hall, S., Papargyropoulou, E., and Kuylenstierna, J. (2014). The economic case for low carbon cities. New Climate Economy contributing paper.

Five recently completed studies examined the economic case for investment in low-carbon development in Leeds in the UK, Kolkata in India, Lima in Peru, Johor Bahru in Malaysia and Palembang in Indonesia. This paper compares the results of these studies and demonstrates that there is a compelling economic case for cities in both developed and developing country contexts to invest, at scale, in cost-effective forms of low-carbon development.

These investments could lead to significant reductions (in the range of 14-24% relative to business-as-usual trends) in urban energy use and carbon emissions over the next 10 years. They would also generate financial savings equivalent to between 1.7% and 9.5% of annual city-scale GDP. Securing these savings would require an average investment of US$ 3.2 billion per city, but this investment could be paid back by the financial savings in an average of around two years at commercial interest rates.

Thus, large-scale low-carbon investments can appeal to local decision-makers and investors on direct, short-term economic grounds. They also indicate that climate mitigation ought to feature prominently in economic development strategies as well as in the environment and sustainability strategies that are often more peripheral to, and less influential in, city-scale decision-making.

However, the studies also demonstrate that, in rapidly growing cities, the carbon savings from cost-effective investments could be quickly overwhelmed – in as little as seven years – by the impacts of sustained population and economic growth. They therefore highlight the pressing need for wider decarbonization (particularly of electricity supply) and deeper decarbonization (through more structural changes in urban form and function) if truly low-carbon cities are to emerge.

Download the paper (PDF, 1.5MB).

Read the New Climate Economy report (external link).

SEI author

Johan C.I. Kuylenstierna

Reader / Research Leader

SEI York

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