The future is approaching rapidly. I don’t know if the flying cars we used to see in sci-fi movies years ago will become a part of our lives, but futuristic innovations like autonomous vehicles are definitely becoming a reality. And with these innovations has come a greater focus on sustainability. Energy efficiency has become a major part of the agendas of many cities and investments in this field continue without slowing down. We live in a world where competition no longer just occurs between nations, but also individual cities. In the face of globalization, government leaders and investors are working to bring a new dynamism into their local economies and smart cities are the key.

The cost of rapid urbanization

The world’s population is expected to exceed 9 billion by 2050. This growth is creating a need for new buildings, roads and transportation systems. Seventy-five percent of the infrastructure that will have been built by 2050 is inexistent today. Cities must already be investing in infrastructure that will be required to bear for decades. With 1.4 million people being added to the urban population every week, cities account for more than 70 percent of greenhouse gas emissions. Meanwhile, traffic crashes claim more than a million lives every year with the highest number of traffic accidents happening in developing cities. Moreover, air pollution is a severe problem in cities. To address these issues, the mayor of London recently announced that the city center would be closed to traffic. Paris, Mexico City and New York City are among others that plan to close their downtowns to private vehicles.

Cities are the solution to global climate change

Climate change is another reason cities have become more of a priority. While countries have signed international agreements to address the causes of climate change, it is mostly the cities that must act and take the steps necessary to carry those agreements out. This year’s United Nations Climate Change Conference was held in Bonn, Germany. The discussions were focused on how to take firm actions towards implementing the Paris Climate Change Agreement, which had been signed with great enthusiasm in 2015. The Paris Agreement is aimed at the goal of cutting down emissions to limit global warming to 1.5°C in the latter half of the century. All nations except Syria, Nicaragua, and the United States are committed to this agreement.

Financing smart and sustainable cities

Since 2015, India, China and Europe have stood out in meeting the Paris Agreement commitments. India announced that all vehicles would be electricity-powered by 2030. Massive investments are being made in solar energy as low carbon transportation solutions are increasingly implemented in densely populated cities. One hundred cities with populations of more
than 100,000 are launching a “smart city program.” Nearly $1.9 billion will be spent with only 15-20 percent of the total cost to be covered by public funds. The rest will be financed by the private sector. 
As cities rapidly adapt to changes, financing could be a concern. But there are many successful examples of the economic gains that can be achieved through the implementation of sustainable solutions in cities.

For example, the initial financial return of Johannesburg’s bus rapid transit system was $900 million. But Istanbul’s system stands out as the most successful example among its peers, leaving behind Johannesburg and Mexico City. The most significant gain of Istanbul’s Metrobus is a reduction in travel time from 2 hours to 45 minutes. Similarly, Singapore is set to cut back on power consumption by 22 percent with improvements in 80 percent of buildings through its energy efficiency program, ‘green mark,’ by 2030. The net savings are expected to amount to $400 million. And Copenhagen calculated that a Cycling Super Highway would introduce a 19 percent ROI per annum.

There is no easy answer on how to finance the projects making cities smarter, sustainable and livable. There is no one size fits all solution either. Sure, transforming cities into seamless ecosystems and improving quality of life with sustainable and smart solutions requires enormous investment. But if we insist on a ‘business as usual’ approach, the cost of urbanization will be even higher in the future. The total cost of traffic congestion for Rio de Janeiro and São Paulo was $43 billion in 2013 alone. This figure is the equivalent of 8 percent of the GDPs of both cities.
In Beijing, the cost of traffic jams and air pollution is estimated to be somewhere from 7 percent to 15 percent. According to the National Climate Economy’s study, the most sprawled American cities spend an average of $750 on infrastructure per person each year, while the least sprawled cities spend close to $500. Sprawled communities costs $400 billion per year in the U.S. In Istanbul, traffic congestion costs approximately $1.5 billion, 14 percent of the Istanbul Metropolitan Municipality’s budget.

Smart cities plans underway

Internet of Things and smart city technology, which describes a broad technological integration at the city level, has been a concept that has drawn the attention
of designers, IT specialists and urban planners who wish to make cities more efficient, more sustainable and smarter. According to a survey, annual technology investments in cities will be $34.4 billion on average until 2020.
Reports that Bill Gates would build a smart city in Arizona with an investment of $80 million made a tremendous impact in the digital world. Plans include 80,000 housing units, a commercial district, and schools. The smart city will have autonomous vehicles, autonomous logistics centers, high-speed Internet, and intensive use of technology in production and distribution. Arizona was reportedly selected because of its leading position in the United States in urban planning and development with solar power, power distribution systems, autonomous vehicle tests, high-speed Internet and data centers.

Similarly, in Melbourne, Elon Musk’s Tesla Town is developing. Tesla will build a suburb with 2,500 houses featuring rooftop solar panels, electrical charging stations, energy efficient lighting systems and energy storage systems. Tesla’s system will supply the entire energy requirement of the Yarra Bend neighborhood where the project is being developed. The plan includes bicycle roads, mass transportation, large green areas and parks similar to those in northern countries while bus stops and the subway stations will be within walking distance. The houses in the neighborhood will carry a price tag of nearly $2 million.

Adapt or lose

Companies will also need to adapt to this transformation and change their business models accordingly. Competition is becoming increasingly fierce. That’s why you will be barred from this revolution unless you adopt innovation in your business. Technology firms are absolutely not the only ones that should be capitalizing on these opportunities. Many industries ranging from construction and energy to financial institutions and health systems will need to transform. The development of new mechanisms and incentives to support creativity and new ways of doing business must also be a priority of companies in the private sector.

When technological innovation meets sustainability, the possibilities are endless. Moving forward, world leaders must harness the power of these two elements to solve the world’s most pressing issues.

 

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