Cities Taxes Cost recovery

Land value capturing Micro-financing

Profit-making public companies

Purchasing pools Carbon credits

Cities need to be able to raise local taxes and service charges as they are the main revenues sources that can be used for public green city strategies

Introduce user fees of municipal services to help greening these services and supporting the development of greener alternatives Financing public transport based on integrated “transport-property” development models

Critical financing opportunity where micro-enterprises are involved in green city strategies, e.g. recycling developing country cities Cities to hold shares of profit making companies, e.g. utilities to allow for long-term green investments

Cities can also work together to purchase technology thereby bringing down the cost Clean Development Mechanisms (CDM) already pay for a range of green city projects in Bogotá, São Paulo and Dhaka Table 9: Selected financing instruments 5.6 Incentives

Information alone is insufficient to change behaviour patterns; it needs to be supplemented by incentives to bring about lasting change. In part, this may be to minimise adjustment costs to citizens and firms. For example, firms and workers in brown industries may face higher prices as cities shift their industrial structures towards greener models. National and city- level policy makers need to compensate these short- term losers while recalibrating urban economies.

Incentives may be within the tax system (e.g. tax breaks or taxing environmental “bads”), other types of charges (e.g. road pricing) or payments (e.g. targeted subsidies). Subsidies were successfully used as part of the policy mix in Bavaria during the 1990s and 2000s. The state’s Future Bavaria and High-Tech initiatives spent over 4bn Euros, mainly on R&D and technology transfer around the city of Munich. The investments helped kick-start the city’s environmental technologies sector, with the city garnering Germany’s highest share of cleantech patents in 2007 (Rode et al. 2010).

Apart from providing direct economic incentives, city governments also provide public services – such as

workforce education and training, business spaces and green infrastructure. Such services not only reduce the costs to business of going green, but also shift the business environment towards one in which low-carbon activity is the norm.

At the same time, full cost pricing (internalising external environmental costs), whether as taxes or user charges is essential for inducing behaviours to be consistent with green city criteria. Full cost pricing measures have been successful in managing demand for energy, water and other resources and find increasing applications in urban contexts. Many cities in the USA have recently introduced impact fees to recover the cost of additional infrastructure, such as roads, telecommunication, or schools, necessitated by new development (Brueckner 2000). They can also help avoid negative rebound effects with over-consumption as a result of efficiency savings. Furthermore, one such measure – environmental tax – can be used to cut costs for labour, thereby proving an impetus for employment creation.

Major pricing tools in the urban context are presented in Table 8: Selected incentives, which summarises some of the most effective instruments that have brought about sustainable change in examples reviewed in this chapter.

Current job Electrician

Offshore oil or gas maintenance technician

Aerospace technician Architect

City trader Facilities manager

Core training requirement

Apprenticeship Apprenticeship

Apprenticeship

Undergraduate degree, masters degree and paid work experience

Undergraduate degree No specific qualification required

Table 10: Top-up training for low-carbon jobs Source: adapted from IPPR (2009)

Additional low-carbon skill requirement

Working on roofs; installation of solar PV panels

Offshore wind technology Technology-specific knowledge

Energy efficiency and zero-carbon knowledge

Carbon literacy, understanding or carbon trading schemes

Sustainability and energy management issues

New low-carbon job Solar PV fitter

Offshore wind maintenance technician Wind turbine technician Low-carbon architect

Carbon trader Low-carbon facilities manager

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