Towards a green economy 3 The case for greening cities

The case for greening cities can be made in terms of inter-linked economic, social, and environmental benefits. Economically, the benefits include agglomeration

economies, lower infrastructure

costs and reduced congestion cost while reducing carbon emissions and other environmental pressure. Socially, the benefits include employment creation, poverty reduction and improved equity, and quality of life including improved road safety and community cohesion, among others. Environmental benefits are embedded in most of the economic and social benefits. Additional environmental benefits include reduced pollution, which helps improve public health. Another environmental benefit is the potential for improving ecosystems within urban areas.

3.1 Economic benefits

Agglomeration economies Larger, denser cities – which help lower per capita emissions – are good for economic growth. From an economic perspective, cities matter because they bring people and things closer together, help overcome information gaps, and enable idea flows (Glaeser 2008; Krugman 1991). It is for these reasons that 150 of the world’s most significant

metropolitan economies produce 46 per cent of global GDP with only 12 per

% 6

North America Western Europe

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cent of the global population (Berube, Rode et al. 2010). These agglomeration economies translate into productivity gains for firms, and higher wages and employment rates for workers. For many firms and workers, particularly those in service sectors, there is still a premium on face-to-face contact – to maintain trust, build relationships, and manage interactions that can not yet (and may never) be digitised (Charlot and Duranton 2004; Sassen 2006; Storper and Venables 2004).

Knowledge spillovers between firms and

economic agents tend to be highly localised and die away within a few miles of the urban core (Rosenthal and Strange 2003).

Agglomeration economies exist in both developed and developing countries. Empirical studies in developed countries find that doubling the employment density of an urban area typically raises its labour productivity by around 6 per cent (for a summary of the literature see Melo et al. 2009). The same basic patterns are found in developing countries, with strong evidence that urbanisation boosts productive efficiency by lowering transport costs and widening trade networks (Duranton 2008; Han 2009). Agglomeration economies can also be achieved by connecting several cities as in China’s Pearl River Delta region (Rigg et al. 2009), with the additional benefit of addressing inequality between leading and lagging regions within countries (Ghani 2010).

% 6

North America Western Europe

4

4

3

3

2

2

1 0 1,000 2,500 5,000 10,000 Net density (people per km² of built-up land)

1 0 1,000 2,500 5,000 10,000 Net density (people per km² of built-up land) Figu re 4: Private transport fuel expenditure and urban density of selected cities, 2008 fuel prices (left-hand

graph) and EU fuel prices throughout (right-hand graph) Source: Kenworthy 2003 (1995/6 fuel consumption and density per city), GTZ 2009 (National 2008 fuel prices), PWC 2009 and UN 2010 (City GDP PPP per capita); see Appendix 1

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Annual fuel expenditure per capita (US$ at 2008 national price, as % of GDP PPP per capita)

Annual fuel expenditure per capita (US$ at 2008 EU average price, as % of GDP PPP per capita)