Can sustainable disruption and technology deliver decarbonised cities?

Technology has a crucial role in helping consumers, businesses and organisations meet their climate change objectives, and cities and urban environments will be crucibles in which the impact, the scalability and the investability of these innovative approaches can be tried and tested. 

As the 26th session of the Conference of the Parties to the UN Framework Convention on Climate Change, COP26, looks to coordinate action on global decarbonisation and net-zero targets, the first content from new research by Economist Impact, part of the Economist Group, has been released. The research identifies both the role of technology on the decarbonisation journey and 12 specific technologies that can help cities achieve their carbon-emission targets, create jobs and improve quality of life.

The research programme, which has been supported by Osborne Clarke, Sustainable Disruption: 12 Decarbonising Technologies for Cities, focusses on the role of technology in this transformation and offers a methodology which can help businesses and consumers assess their potential. The full report on the research's findings will be published in November, but the newly launched content includes an infographic highlighting key findings, a scorecard of how the longlist of technologies were rated for impact, scalability and investment plus the availability of public investment at city level, and a detailed data workbook.

Tech focus

Introducing a webinar to mark the launch of the research, James Watson, international head of decarbonisation at Osborne Clarke, said: "Climate action on the part of businesses and consumers is essential to complement the efforts of governments and businesses to tackle climate change. Technology is making a real difference on the road to net zero."

Cities are a vital focus for climate change innovation and action. They consume two-thirds of global energy resources and account for more than 70% of CO2 emissions worldwide, according to the C40 Cities Climate Leadership Group. And more than half of the global population currently lives in urban areas where this percentage expected to reach 68% by 2050, the United Nations estimates.

"That's why the focus on cities is crucial and, as leaders meet at COP26, can really help with global progress," said Martin Koehring, senior manager for sustainability, climate change and natural resources at Economist Impact. 

Twelve technologies

The study identifies 12 technologies that could help cities and businesses decarbonise and create jobs, lower energy costs and improve quality of life. Koehring said these are not only good for the environment: "The Sustainable Development Goals are about environmental, social, and economic progress."

The dozen technologies have been drawn from a longer list of 26 across three thematic sectors: building and construction; city infrastructure, including energy; and transportation. The highlighted technologies within the building and construction sector include building automation systems, "digital twins", high-efficiency heat pumps, and low-carbon cement and concrete alternatives. Featured city infrastructure technologies were district heating and cooling systems, smart grids and meters, unified communications, and waste robotics. Transportation technologies highlighted in the research included autonomous vehicles, hydrogen transport vehicles, mobility as a service, and vehicle-to-grid technologies.

Although technology has a major role in this transformation, there are gaps in the public and private investment that is needed to implement large-scale change. Watson added: "Businesses are transforming their activities in response to the pressure for sustainability and this change has brought a wave of technological innovation and opportunity that is scalable but needs investment." 

But there are risks. "The increased use of the Internet of Things comes with a greater cyber risk," Watson continued. "While collaborative activities and industry standards can be challenged under competition law, and, in some cases, new contract frameworks and oversights will need to be developed."

Legal and regulatory know-how

Moreover, businesses will need legal and regulatory, as well as financial advice, to achieve this goal, and a strong understanding of the changing legal and regulatory environment. Legislators are already playing a central role in tackling the carbon challenge. For example, France is debating a new law to reduce the environmental footprint of digital technologies. 

Meanwhile, the UK government has released its net-zero strategy, which includes plans for funding for new technology in the transport, energy, and infrastructure sectors. "But developing new tech is not all that's needed," says Watson. "Scaling up existing tech is vital in the short to medium term. That's what's really interesting about the 12 technologies. They are real."

The research analysed ten cities – Barcelona, Seoul, Paris, New York, London, San Francisco, Delhi, Berlin, Singapore, Florence – with all the main business sectors covered by the technologies. With technologies offering a big part of the solution for sustainable cities, the research has scored them against their impact, scalability and levels of investment. 

Three criteria

The evaluation criteria for impact looked at how well the technology functions in comparison to traditional alternatives. Is there evidence that the technology helps to reduce emissions? Does the technology offer other benefits? Could it cause harm? 

The scalability criteria included to what extent the technology is developed. "How high are the initial investment costs for governments and individuals?" added Koehring. "And what is the technology's ease of integration into a city, and what additional infrastructure is required?"

The evaluating criteria for private and public investment looked for: the total equity funding amount in US dollars for companies producing a technology; the total number of investment firms and individual investors investing in companies that produce the technology; and the national, regional and city regulations that exist to support technology and research and development investments.

Buildings and energy infrastructure 

The buildings and construction sector research took a close look at technologies that help to increase the energy efficiency of existing buildings, as well as reduce the carbon footprint of the construction sector as a whole. According to a UN Environment Programme report in 2017, buildings and construction are responsible for over 36% of global energy consumed and 40% of energy-related CO2 emissions. 

Koehring said: "With over half of the world’s population living in cities, the energy consumption of cities has a disproportionate impact on CO2 emissions, making the technologies and infrastructure which ensure the smooth running of a city so important for decarbonisation."

For example, smart grids and meters can lead to a 12% reduction in energy and CO2 emissions and to benefits such as more efficient electricity transmission, faster restoration of electricity after power disturbances, reduced costs for utilities (and lower power costs), reduced peak demand, and integration of large-scale renewable energy systems that reduce the grid's CO2 emissions. These benefits are coupled with high levels of support from government and private sector investors.

Transportations footprint

One-fifth of global CO2 emissions emanates from transportation. In high-income countries, transportation can be the largest segment of an individual’s carbon footprint. Koehring explained: "From large, sprawling mega-cities to small towns, transportation systems play a key role in the functioning of urban life."  

The research looked at multiple types of transportation technology. These include mobility as a service (MaaS), which draws on the interconnected nature of transportation and the city. MaaS uses phone and web apps and integrates different methods of public and private transport and other mobility services (including ride-sharing and e-scooters) to allow users to plan multimodal journeys to travel door-to-door with a single interface.

There are potential security risks and significant logistical and technical challenges for roll-out of a MaaS system, which the research reflected in a medium score for impact and investment. However, the emerging technology scored high in scalability as it can be implemented across all the countries in the study, has relatively low costs, and offers opportunities in tandem with existing transport infrastructure. Meanwhile, vehicle-to-grid (V2G) technologies for electric vehicles (EVs) were      identified as an area with high impact, whereas investment levels are still low. 

Policy and leadership

City polices are already in place to drive sustainability. The Smart City Challenge funds initiatives across the US, including for example in New York City, to create an integrated and smart transportation system to achieve efficient low-carbon mobility, which has resulted in $350m in public and private funds to support ideas including MaaS. Barcelona has benefitted from an EU mandate requiring at least an 80% uptake of smart meters by 2020, with Spain becoming a leader in smart meter proliferation (almost 100% of homes have implemented some form of smart meters). In Seoul, South Korea, a pilot scheme is in place to incentivise zero-energy building developments by subsidising 80% of the cost of installing building automation systems. 

The adoption, roll-out and investment in EVs in urban areas is another area that requires joined-up city policy. Johnny Munro, public policy manager at Bolt, an app-based mobility business offering vehicle for hire, car-sharing, and other services, said that reliable public charging infrastructure is vital to encourage drivers to switch to EVs. "We're trying to solve the problem of drivers not wanting to switch to an EV because of poor infrastructure, while installers are not installing chargers because of a perceived lack of demand." In the meantime, the solution from the international Estonian-based company is innovative action. "We're installing the chargers ourselves", Munro said.

Businesses like Bolt are taking action, but why should mainstream corporate leaders and policy makers read the research? Koehring noted that although city sustainability is high on the agenda, there hasn't been much evidence-based research until now. "Cities have such a huge contribution to make in terms of the environmental impact of the trajectory of urbanisation, but they are sometimes neglected as a unit." And, as well as acting as a  convener for local stakeholders, cities can be models for big developments and best practice that can help businesses and organisations navigate their route to net zero.

Investable potential?

And how investable are the 12 technologies? "The 12 that we highlighted have investment potential but some more than others." Koehring explained. Smart grids and smart meters have a huge potential given their importance for the energy transition in cities; integrated unified communications systems showed during the pandemic that they have huge investment potential; and electric and autonomous vehicles are attracting investment because of the link with the broader electrification of cities. He added: "Some technologies need a little bit more government support to get private investment rolling."

Caroline Saul, decarbonisation stream lead at Osborne Clarke,  said: "Every one of these technologies requires more funding, whether private funding or public funding or both. Public funding has a limit and a set of criteria. Private funding is more readily available at scale and can be more flexible depending on the source, which could be anything from venture capital through to pension funds. 

"The barrier to private funding is the perceived reliability of the technology available. We've seen a huge change in the last decade in what assets we invest in, in our reliance on subsidies, and in our appetite for risk. However, that change now seems to be exponential. But, without money and without funds, there's no project. The key therefore is education."

However, a major challenge for the roll-out and investment in technologies is regulation trying to keep up with change. Alexander Dlouhy, Osborne Clarke's head of decarbonisation in Germany, explained: "Firstly, the regulatory framework often lags behind new technology. Secondly, there's a continuous flow of new regulation – and you do not today necessarily know what's going to happen tomorrow. Once you are talking about investments, you may well need 10-15 years or more to amortise your investment and need a stable regulatory framework. So it's the quest for sustainable business models – that's the Holy Grail."

Tech and COP26

Catherine Hammon, digital transformation knowledge lawyer at Osborne Clarke, said: "Decarbonisation comes hand in hand with digital transformation, because it's the digital tools that are part of how you increase efficiency, how you reduce waste, how you optimise your operations in order to deliver this lower carbon footprint. So tech procurement becomes part of the decarbonisation journey."

Will technology get the air time it deserves at COP26?  The UK government has announced its net-zero strategy and sees technology companies as part of the solution. "Without technology this is not going to work", commented Koehring. "You can set legal frameworks and put policies in place. But how do you actually meet these kinds of targets? You can only do that with technologies that work and technologies that are investable. This research highlights that technology needs to be more prominent and even further up the agenda."

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