How will we finance the city infrastructure of the future?

New road tunnels under construction in Rio de Janeiro, Brazil, in 2013. Image: AFP/Getty.

What are the biggest financial priorities for cities in our rapidly urbanising world? Who are the key players to invest in urban infrastructure? What are the most effective, innovative financing mechanisms that cities can adopt?

These are urgent questions that global cities are asking as they face a huge infrastructure funding gap. To find solutions to this major 21st century challenge, the New Cities Foundation has launched the Financing Urban Infrastructure Initiative. Its mission is to produce actionable research and pragmatic recommendations for key urban decision-makers, including mayors, institutional investors and real estate developers, on how we can use innovative financing models that can address this gap.

The Initiative will be led by Dr. Julie Kim who joins us from the Stanford Global Projects Center as a New Cities Foundation Senior Fellow. We caught up with Dr. Kim, to find out more about her planned research.

NCF: How has infrastructure financing changed over the past few decades?

In the past 50 years, we went from infrastructure financing being largely in public hands to increased private sector participation – starting in the mid-80s for emerging economies and mid-90s for advanced economies.

More recently, it came back into the public hands with “remunicipalisation”, especially for the water sector.

Today, there is an unprecedented investor appetite for infrastructure globally and there are more financing options available for cities. As the market becomes more complex with increased demand, a more sophisticated approach is required.

NCF: What are the most pressing priorities in financing cities in the 21st century?

JK: Firstly, cities must strive to be more independent financially. They need to seek local financing capacity while capitalising on all resources available from multilaterals, bilaterals, central and provincial governments.

Secondly, they need to become smarter. The money is there, but packaging bankable projects is difficult. It takes sophistication and financial knowledge to reach well-balanced financing structures, which requires better education, networking and capacity building. This is one of the areas where the New Cities Foundation can play an important role.

Thirdly, cities need to be balanced in their development approach, especially big cities facing rapid growth and globalisation. They must balance the desire to grow economically with the need to address critical environmental and social equity concerns, whilst being sensitive to local needs and promoting inclusivity.

For small to medium-sized cities, it’s important to tap into all external resources – including grants, subsidies, credit guarantees and more.

NCF: It is well documented that cities in the Middle East and Asia face the toughest challenges when it comes to meeting investment resources with demand. How will you go about researching solutions specific to these zones?

JK: These cities need credible institutions and rule of law to attract financing: political instability presents a big challenge. In the short to mid-term, these cities must work closely with multilaterals and other development-oriented institutions to tap into their resources on technical assistance, capacity building and political risk insurance programs. Then, with multilateral backing, they must engage institutional investors for the long haul, in order for economic growth to catch up with the repayment needs.

In particular, they should explore opportunities with sovereign development funds and other impact investors who are interested in socially responsible investments with long-term positive impacts.

NCF: Do you have some standout examples of effective urban financing models that you’ve worked on or witnessed, that you can share with us?

JK: One example related to the local financial independence I mentioned earlier is the Enhanced Infrastructure Financing District (EIFD) model in California.

EIFD allows local and regional agencies new taxing powers – benefits assessment and Tax Increment Financing, for example – as well as multi-agency collaboration across multiple sectors, including transportation, water, waste management, and more. Urban infrastructure projects should not be developed in isolation, but in conjunction with land development that helps to trigger economic growth.

I was also involved in Pusan Centum City in South Korea where a 300-acre former air force base was converted into a major “economic incubator”. This was initially entitled “DMZ” – digital media zone – mixing technology, media and entertainment with education and residential land uses. This was a successful development that succeeded in drawing $2bn in outside investment.

NCF: This June, you’ll be coming to our New Cities Summit in Jakarta: a city that encapsulates many of the issues faced by rapidly urbanising zones in Asia. What interests you most about this city and its neighbouring areas?

JK: I’ll be fascinated to observe how this booming megacity plans to address economic, environmental and social equity challenges within a context of rapid urbanisation and growth. On a personal level I’m fascinated by Jakarta’s incredibly rich culture: its multi-layered, multiethnic population, peaceful and functioning effectively in all aspects.

I think Jakarta can emerge into one of the most unique metropolises in the world, on a par with global cities such as Paris, London, New York, Tokyo, Shanghai – growing to symbolise South East Asia beyond what’s being offered by Singapore.

Dr Julie Kim is a senior fellow at the New Cities Foundation (NCF), an international non-profit organisation. This Q&A was originally posted on the foundation’s blog.

The Financing Urban Infrastructure Initiative is supported by Cisco and Citi.

 
 
 
 

The IPPC report on the melting ice caps makes for terrifying reading

A Greeland iceberg, 2007. Image: Getty.

Earlier this year, the Intergovernmental Panel on Climate Change (IPCC) – the UN body responsible for communicating the science of climate breakdown – released its long-awaited Special Report on the Ocean and Cryosphere in a Changing Climate.

Based on almost 7,000 peer-reviewed research articles, the report is a cutting-edge crash course in how human-caused climate breakdown is changing our ice and oceans and what it means for humanity and the living planet. In a nutshell, the news isn’t good.

Cryosphere in decline

Most of us rarely come into contact with the cryosphere, but it is a critical part of our climate system. The term refers to the frozen parts of our planet – the great ice sheets of Greenland and Antarctica, the icebergs that break off and drift in the oceans, the glaciers on our high mountain ranges, our winter snow, the ice on lakes and the polar oceans, and the frozen ground in much of the Arctic landscape called permafrost.

The cryosphere is shrinking. Snow cover is reducing, glaciers and ice sheets are melting and permafrost is thawing. We’ve known this for most of my 25-year career, but the report highlights that melting is accelerating, with potentially disastrous consequences for humanity and marine and high mountain ecosystems.

At the moment, we’re on track to lose more than half of all the permafrost by the end of the century. Thousands of roads and buildings sit on this frozen soil – and their foundations are slowly transitioning to mud. Permafrost also stores almost twice the amount of carbon as is present in the atmosphere. While increased plant growth may be able to offset some of the release of carbon from newly thawed soils, much will be released to the atmosphere, significantly accelerating the pace of global heating.

Sea ice is declining rapidly, and an ice-free Arctic ocean will become a regular summer occurrence as things stand. Indigenous peoples who live in the Arctic are already having to change how they hunt and travel, and some coastal communities are already planning for relocation. Populations of seals, walruses, polar bears, whales and other mammals and sea birds who depend on the ice may crash if sea ice is regularly absent. And as water in its bright-white solid form is much more effective at reflecting heat from the sun, its rapid loss is also accelerating global heating.

Glaciers are also melting. If emissions continue on their current trajectory, smaller glaciers will shrink by more than 80 per cent by the end of the century. This retreat will place increasing strain on the hundreds of millions of people globally who rely on glaciers for water, agriculture, and power. Dangerous landslides, avalanches, rockfalls and floods will become increasingly normal in mountain areas.


Rising oceans, rising problems

All this melting ice means that sea levels are rising. While seas rose globally by around 15cm during the 20th century, they’re now rising more than twice as fast –- and this rate is accelerating.

Thanks to research from myself and others, we now better understand how Antarctica and Greenland’s ice sheets interact with the oceans. As a result, the latest report has upgraded its long-term estimates for how much sea level is expected to rise. Uncertainties still remain, but we’re headed for a rise of between 60 and 110cm by 2100.

Of course, sea level isn’t static. Intense rainfall and cyclones – themselves exacerbated by climate breakdown – can cause water to surge metres above the normal level. The IPCC’s report is very clear: these extreme storm surges we used to expect once per century will now be expected every year by mid-century. In addition to rapidly curbing emissions, we must invest millions to protect at-risk coastal and low-lying areas from flooding and loss of life.

Ocean ecosystems

Up to now, the ocean has taken up more than 90 per cent of the excess heat in the global climate system. Warming to date has already reduced the mixing between water layers and, as a consequence, has reduced the supply of oxygen and nutrients for marine life. By 2100 the ocean will take up five to seven times more heat than it has done in the past 50 years if we don’t change our emissions trajectory. Marine heatwaves are also projected to be more intense, last longer and occur 50 times more often. To top it off, the ocean is becoming more acidic as it continues to absorb a proportion of the carbon dioxide we emit.

Collectively, these pressures place marine life across the globe under unprecedented threat. Some species may move to new waters, but others less able to adapt will decline or even die out. This could cause major problems for communities that depend on local seafood. As it stands, coral reefs – beautiful ecosystems that support thousands of species – will be nearly totally wiped out by the end of the century.

Between the lines

While the document makes some striking statements, it is actually relatively conservative with its conclusions – perhaps because it had to be approved by the 195 nations that ratify the IPCC’s reports. Right now, I would expect that sea level rise and ice melt will occur faster than the report predicts. Ten years ago, I might have said the opposite. But the latest science is painting an increasingly grave picture for the future of our oceans and cryosphere – particularly if we carry on with “business as usual”.

The difference between 1.5°C and 2°C of heating is especially important for the icy poles, which warm much faster than the global average. At 1.5°C of warming, the probability of an ice-free September in the Arctic ocean is one in 100. But at 2°C, we’d expect to see this happening about one-third of the time. Rising sea levels, ocean warming and acidification, melting glaciers, and permafrost also will also happen faster – and with it, the risks to humanity and the living planet increase. It’s up to us and the leaders we choose to stem the rising tide of climate and ecological breakdown.

Mark Brandon, Professor of Polar Oceanography, The Open University.

This article is republished from The Conversation under a Creative Commons license. Read the original article.