Urban Transformation: the World Economic Forum addresses the decarbonisation challenge in cities

Buildings account for about 40 per cent of global carbon emissions, while the wider ecosystems of cities account for some 75 per cent. Given those statistics, our urban environments have to be a focus for efforts to decarbonise. We are looking forward to sharing the output from our project with Economist Impact (part of The Economist Group) on decarbonising technologies in cities in the coming months. In the meantime, the World Economic Forum's briefing paper "Urban Transformation: Integrated Energy Solutions" from earlier in September makes for fascinating reading. There are a number of legal challenges that will need to be overcome in the course of transforming our urban ecosystems.

The WEF paper proposes two foundations for reducing the environmental impact of cities. We need efficient buildings, smarter homes and healthier communities. We also need to address urban mobility, aiming for compact urban form and the electrification of fleets. But those foundations alone will not ensure progress. There also needs to be alignment and collaboration around a common agenda to deliver decarbonisation of the urban landscape.

Standards, financing and smart energy infrastructure

The WEF paper highlights that improving the performance of buildings needs new construction materials, and needs to be incentivised by new green building standards for new and existing buildings. These should, the WEF proposes, include "all electric" targets or roadmaps for mobility, ultra-efficiency in energy supply, consumption and grid activity, use of reclaimed materials or low carbon materials, and the use of local renewables.

Agreeing standards can be done by an industry (taking care over competition rules around collusion – industry discussions have historically been a classic breeding ground for illegal cartels) or by public bodies. Planning legislation is typically essential in this mix, rolling out construction standards through building regulations and driving change with the principles on which planning decisions are taken. We've discussed the in transforming the gatekeeper role of planning urban environment previously. This is, of course, a contentious area with proposed planning reforms in the UK currently on hold.

Low cost green financing will also be essential for the transition. Funding could be public, with incentive schemes, subsidies and financial support (subject in the EU to State aid rules and in the UK to the post-Brexit regime for state subsidies), or private. We are seeing a huge uptick in funding activity around green and clean technologies, digital and otherwise. The availability of funding and the growth of "green finance" are at the heart of transitioning to a low carbon future, as we explored in our recent client webinar. The WEF report highlights, in particular, the need for financial support for retro-fitting and upgrading existing buildings to meet new standards.

The report also considers the role of smart energy infrastructure as "the backbone of a sustainable and resilient urban ecosystem". Rethinking something as fundamental as energy infrastructure is a huge practical challenge. In reality, change will happen incrementally – not least because energy infrastructure has so many component parts. Digitalisation is at the heart of this transformation. Digital platforms and technology are key to optimising these systems, which are typically combinations of Internet of Things connectivity and data flow, AI-boosted analytics and optimisation tools, and potentially blockchain structures to facilitate secure but transparent interactions and automation.

Smart distributed energy is likely to play a prominent role, along with distributed storage systems, supporting grid balancing where generation is reliant on less controllable renewable sources, such as sunshine or wind. The data, tech and interconnected management systems needed to oversee a complex jigsaw of supply, storage and demand will need collaboration, co-operation, integration and data flows across the industry. At the consumer level, smart meters and smart charging will similarly create the transparency and versatility needed to enable active management and optimisation of energy consumption. We expect vehicle-to-grid technology to be part of this mix, as well as creative corporate power purchase agreements.

Our Energy and Utilities sector specialists are supporting clients in every aspect of these transformational shifts.

Urban form, planning and public fleets

Urban mobility is shaped by the structure of the environment it serves. The WEF paper makes the point that "moving towards compact urban form … is often the lowest-cost strategy to reduce mobility emissions" – in other words, structuring cities so that people need to travel less as they live close to where they work and spend their leisure time as well as being close to essential services. Proximity makes active travel such as walking or cycling much more feasible, boosting health. The paper also emphasises the potential improvement to economic productivity, tax revenues and social equality from "intelligent urban form" and convenient public transport.

Achieving "compact urban form" would need a major shift in many cities, replacing distinct areas for business, retail and entertainment, and residential. Again, planning is a gatekeeper for such a change. But equally, we are seeing opportunities arising from the rethinking and repurposing of excess retail space, and an expectation that business areas may also see a softening of their single focus. Urban dynamics are perhaps more unpredictable than ever in light of the impact of the coronavirus pandemic. We have highlighted in our previous articles the importance of collaboration  between the many occupiers of city space in order to create a smart, sustainable city.

The WEF paper emphasises that decarbonising public fleets not only reduces carbon emissions but also reduces noise and enhances air quality. We will explore the issues around the electrification and decarbonisation of public fleets in a client roundtable next month, hosted by our specialists in urban mobility and decarbonising transport and low emissions mobility. Funding both the growth of charging infrastructure and the development of electric vehicles is the foundation of this transition.

Our Transport and Automotive specialists are supporting clients driving the transformation and decarbonisation of urban mobility in all its forms.

The 'to do' list

Finally, the WEF paper highlights some of the tasks to be grappled with:

• Integrated policies and promoting circularity – cities need to achieve a consensus and buy-in across the multiple private and public sector stakeholders in a city environment. This will need public-private collaboration, agreed policy priorities and a focus on adopting "the best technology and behaviours". The development of a circular economy with recycling and reuse at its heart is a focus for policy makers that we are increasingly seeing reflected in legislation. We expect this to be a major regulatory trend over the coming years.
• Collecting data and tracking benefits – data collected across the city ecosystem can improve planning decisions, enable transparent, replicable decision-making, and facilitate the measurement of benefits. The regulatory frameworks around personal data are well known, but it is essential to recognise that practically all data carries a matrix of legal rights and obligations. Understanding that matrix is critical to unlocking the value of data. We are expecting legislation in both the EU and as part of the UK's National Data Strategy that will affect how non-personal data is "owned" and/or "shared", as well as the EU's new data governance legislation that seeks to shape the European data ecosystem.
• Public engagement for an inclusive transition – the imperative of addressing carbon emissions requires changes at every level of society. From a business perspective, we are seeing a huge focus on ESG policies and priorities from our clients, with decarbonisation consistently a central plank.
• Leveraging district projects to mobilise action – very few cities are built from scratch; most are continuously evolving ecosystems. Changing our urban environments, from how they are built and refurbished to how we travel in and through them, is a challenge that needs to be addressed incrementally, piecing together different parts of the overall puzzle. That said, our involvement in a number of projects across Europe to create smart districts in cities or towns chimes strongly with the WEF paper's comment that individual local projects can act as pilots for "the targeted partnerships and commercial models required to deliver urban transformation".

If you would like to discuss any of the issues raised in this article, please contact one of the authors, or your usual Osborne Clarke contact.