SECTION 2

Cities

UNLOCKING THE INCLUSIVE GROWTHPhoto

STORYcredit:
OF THEFlickr:
21ST CENTURY 67
Trevor Dobson
Cities, with their concentration of people, economic inequalities and reshaping sustainable urban planning
activity, and infrastructure, offer unique opportunities and development.477 The higher population densities
to reduce poverty, deliver greater prosperity, and of urban areas increase the need for risk-reducing
tackle climate change. Today, 3.9 billion people live in infrastructure and services, such as drains, sewers,
urban areas, and the urban population is expected to piped water, and paved roads, to reduce vulnerability
grow by another 2.5 billion people by 2050.468 By then, to climate change. Balancing urban and rural
two-thirds of the world’s population will be living with development and managing urbanisation well will
the infrastructure and planning decisions we make also be essential for ensuring resilience. Generating
today. If done right, the cities of tomorrow can be positive momentum from in-migration for better
places where people enjoy healthy, active, productive growth is possible but it will require adequate capacity
lives. More compact, connected, and coordinated in housing, transportation and other infrastructure
cities are worth up to US$17 trillion in economic and social services as well as consultative mechanisms
savings to 2050.469 Cities can be engines of economic for including migrants and other marginalised
growth, generating opportunity and wealth for the communities in decision-making. Institutions for
whole country. And their density and dynamism planning, provision of infrastructure and other services
offer governments the possibility of achieving human will need reforming to ensure that all city dwellers
development goals while reducing environmental enjoy a high quality of life and can enhance their
impacts. economic productivity.

Yet urban areas are not fully realising their enormous Unlocking the power of cities to deliver economic
potential to drive sustainable development. Nearly a development in a sustainable way requires ambitious
billion urban residents live in informal settlements action. At its core, this depends on compact,
without access to decent housing, secure tenure, or connected, and coordinated use of urban land.
improved water and sanitation.470 Urbanisation is Promoting density is critical to avoid locking in
occurring in places with much lower average levels of sprawling, inefficient and climate-vulnerable modes of
income than historical averages, particularly in sub- growth, but the kind of density matters. 'Good density'
Saharan Africa,471 and new urban areas are emerging. means functionally and socially mixed neighbourhoods
Over 60% of the land projected to become urban by with access to green spaces, comfortable, affordable,
2030 has yet to be developed,472 and smaller cities are and climate-smart housing for all, and high-quality
growing faster than mega-cities.473 More mature cities public transport networks.478 When done right,
are struggling with chronic congestion and toxic air compactness improves residents’ access to jobs,
pollution, yet private car ownership is projected to services, and amenities and, compared to sprawl,
increase by as much as 60% in developed countries could reduce infrastructure capital requirements
and up to 500% outside the OECD by 2050.474 For by over US$3 trillion between 2015 and 2030.479
cities to achieve their potential, it will be important Densification is also more carbon efficient (see Figure
to reduce the expected pressures resulting from 9) and resilient to climate change and disasters.480
the explosive rural-urban migration by balancing Promising examples of good density in action can be
sustainable urban development alongside sustainable found all over the world today from Barcelona’s car-lite
rural development.475 Superblocks (see Box 25) to Singapore’s green canopies
(see Box 26), which are estimated to build resilience by
Tackling inequality alongside climate change and other reducing local peak temperatures by as much as 5°C,
environmental challenges is central to sustainable while also reducing energy costs associated with air
urban development. Soaring house prices are also conditioning.481
contributing to growing inequality within cities and
countries but there are also other drivers.476 More
extreme weather events—from extended heat waves
to rising sea levels and flood risk—are exacerbating

68 UNLOCKING THE INCLUSIVE GROWTH STORY OF THE 21ST CENTURY

Figure 9
The Relationship between Population Density and Per Capita Carbon Emissions
in Urban Areas.
4

3
Log (per capita CO₂ emissions [tCO₂])

-1

-2

-3
0 1 2 3 4 5 6 7
Log (Urban Density [people per square kilometer])

Note: A Pearson’s correlation on a dataset of 127 cities found that r=-0.3383, with p<0.05. Source: Coalition for Urban Transitions.
Data source: Oxford Economics, 2014.482

To achieve greater compactness, established cities will At the same time, care should be taken to avoid the
need to retrofit, repurpose, or replace much existing displacement of low-income or other marginalised
infrastructure, and in some cases relocate people urban residents as inner-city areas become more
settled in increasingly areas increasingly vulnerable attractive. New York’s High Line, an abandoned
to disasters (for example, coastal zones), while elevated train line spur converted into an aerial
fast-growing cities need to steer investment to new greenway, displaced residents by boosting nearby
infrastructure and housing stock (see also Section 1.C property values a staggering 103% in eight years,
on building efficiency). In both cases, governments despite a recession.485 Inclusive urban planning, as
will need to reform spatial plans, building codes, modelled by Thailand’s Baan Mankong programme
and tax incentives that favour sprawl483 and that (see Box 27), will be key to increasing density while
might exacerbate vulnerability to climate change and enhancing the resilience and well-being of the urban
disasters.484 poor.

The most important factor in increasing the resilience Efficient, clean transport systems are essential for
and adaptive capacity of the built urban environment good density. Cities must avoid being physically
is to guide development that is out of harm's way locked into car-based transport systems and prioritise
at the systems and planning phase. Urban sprawl is active and shared transport. Making walking and
often accompanied by an increase in vulnerability cycling safe and convenient is a universal priority,
particularly amongst the poorest, who may be located with particularly large potential in smaller and lower-
in areas prone to flooding or landslides, and who lack income cities. Public transport is more complex, but
adequate housing and infrastructure services. Planning there are opportunities to learn from front-running
for the multipurpose use of assets, such as connectivity examples. Since the successful experiments in Curitiba,
and flood protection, can reduce risks at low cost. Brazil, and Bogota, Colombia, for instance, 164 cities
When infrastructure is at the design phase, choice worldwide have built bus rapid transit (BRT) systems,
of materials and other design features can be guided carrying close to 33 million passengers a day (see Box
by the need to increase resilience to extreme heat, 2).486 There are also opportunities to harness exciting
flooding and storms. new innovations in urban mobility, such as ride-hailing

UNLOCKING THE INCLUSIVE GROWTH STORY OF THE 21ST CENTURY 69

networks, car- and bicycle-sharing systems, mobile tax system right to maximise public fiscal capacity and
trip-planning, and ticketing apps.487 Where cities create incentives for sustainable urban development;
already have substantive car-based infrastructure, apportioning revenue collection and borrowing
electrification can reduce noise pollution, air pollution, responsibilities and revenue allocations across different
and carbon emissions. China is already seeing many of jurisdictions (including city governments); and
these benefits (see Box 30). implementing comprehensive, climate-smart national
urban policies, including platforms and partnerships to
Analysis undertaken for this Report using the E3ME finance the deficit in sustainable infrastructure in urban
model suggests that a global shift to EVs could create areas.492
about 11 million jobs by 2040, compared with the
baseline, and would increase GDP (see also Box 4 on Within these national urban frameworks, effective,
modelling). This is a scenario whereby new EV sales accountable governments and institutions can facilitate
would climb to just over 1 per 100 people globally by public participation and develop and implement spatial
2030, and to a level whereby almost one in ten people plans and policies. Civil society organisations can foster
have EVs by 2050.488 To maximise the climate-change environmental citizenship and harness community
mitigation benefits, electrification of transport needs capabilities, for example to define sustainability in
to be accompanied by a growing share of renewables in local terms and prioritise actions to build resilience to
the electricity mix (see Figure 9).489 natural disasters. Domestic financial institutions, such
as commercial banks and asset management companies,
Because cities are shaped by governments but often can provide much of the necessary investment, perhaps
built and financed by private actors, ambitious, working with ministries of finance and development
integrated, and accelerated action in cities will require banks to increase bankability of projects and lower the
collaboration and coordination among many different cost of capital. And property developers, engineering
actors. (See Box 24 on finance for cities). Aligning firms, and construction companies can bring important
actors’ behaviour and incentives behind a shared vision technical and management capabilities to infrastructure
can make it easier to achieve compact and connected and service delivery. Partnerships among these diverse
cities. National urban policies can provide an overall organisations will be key to realising the vast potential of
framework to guide sustainable and inclusive urban cities to create jobs, foster innovation, and advance the
development through coordinated policies across national economic interest.
different sectors. This includes more traditional ‘urban’
sectors like housing and transport, but also others not This chapter identifies three key priorities that can anchor
necessarily considered as urban, such as tax policies.490 compact urban form today and lay the foundation for
National and local governments need to work together thriving cities of the future: densification to revitalise
to further develop of such frameworks, and this in sprawling cities; the provision of sustainable and
turn, can provide a foundation for building climate affordable housing; and investment in shared, electric,
resilience and environmental sustainability.491 Effective and low-carbon transport.
national-urban policy frameworks include: getting the

Photo credit: Flickr: ruich_whx

70 UNLOCKING THE INCLUSIVE GROWTH STORY OF THE 21ST CENTURY

Figure 10
Locations of Transformative Examples in Cities Highlighted in this Report.

Box 24
Finance for Cities

NCE estimates that roughly US$2—3 trillion per year will be required between 2015 and 2030 to fill the sustainable
infrastructure financing gap.493 Infrastructure related to sustainable urban development is estimated to account for
between two-thirds and three-quarters of all infrastructure investment to 2030.494 There is also scope to lower the total
investment needs though safeguarding and enhancing natural infrastructure, both blue and green (see Section 3). Yet
governance and market failures are driving a financing gap of roughly 50%.495 Investing in sustainable urban infrastructure
does not mean it has to be more expensive. Indeed, making cities more compact and connected will lower investment
requirements by as much as 10%.496 Yet there remains substantial need to mobilise new resources to fill the financing gap.

Public finance has traditionally been a significant source of urban infrastructure investment, but public budgets are
often insufficient for larger or more complex projects (with the notable exception of China). This is particularly true in
the context of austerity, limited ability to collect revenues, or competing priorities for public budgets. The financing gap
is most evident in cities in low- and middle-income countries: While Freiburg (Germany) and Bristol (United Kingdom)
have per capita budgets of US$3,638 and US$4,907 respectively, Iwo (Nigeria), Pekalongan (Indonesia), and Feira de
Santana (Brazil) have per capita per year budgets of only US$14, US$101, and US$399 respectively (see Figure 12).497
Municipalities in developing countries typically have limited capacity or authority to raise revenues, but also the largest
infrastructure deficits.

Although public budgets may be insufficient to meet investment needs, national governments have a critical role
to play in raising and steering finance for sustainable urban infrastructure.498 They have large opportunities to
simultaneously increase the fiscal envelope and to create incentives for households and firms to behave in a sustainable
manner through tax reform. This may be through urban-influencing policies, such as standards for weatherisation of
built infrastructure, removing fossil fuel subsidies and introducing a carbon price, or urban-specific policies, such as
eliminating subsidies for parking or reforming land and property taxes to favour densification.499

UNLOCKING THE INCLUSIVE GROWTH STORY OF THE 21ST CENTURY 71

Box 24
Finance for Cities (continued)

National governments also have responsibility for boosting revenue-generation capacities at the local level. One study
suggested that only 42% of countries devolve fiscal or legislative powers to subnational governments,500 which means
that many cities are almost entirely dependent on financial transfers from national governments. Clear legal frameworks
outlining what revenues local governments can use will help incentivise them to improve the efficiency of both revenue
collection and expenditure, thereby growing public fiscal capacity at local level.

Cities also have substantial scope to improve the efficiency of revenue collection and expenditure. Kampala, Uganda,
offers an extraordinary success story, tripling its revenue in a five-year period by improving administration and
compliance. Kampala Capital City Authority invested in an electronic platform called eCitie, which allows citizens to
pay business licences, hotel taxes, property rates, ground rents, and other fees on their mobile phones. This increased
people’s willingness to pay, as they did not have to wait in long queues.501 The platform eCitie also helped to tackle
corruption and tax avoidance, as city officials could more easily track payments. Kampala Capital City Authority is now
undertaking an ambitious valuation programme in order to update land and property registries, which is expected to
triple revenues from the business district.502 Many cities around the world, including Kampala, are working to increase
their creditworthiness in capital markets. Creditworthiness effectively serves as a useful proxy for the quality of public
finance administration, as it encompasses multiple factors including own-source revenue collection, asset management,
and reliability of debt repayments.

Even if both national and local governments optimise their tax systems, there is a need to find new sources of public
revenue and mobilise private investment. Governments and DFIs can use public finance strategically to leverage private
finance by ensuring that urban infrastructure projects are bankable (by improving returns or de-risking investments)
and by ensuring government entities are creditworthy.503 Governments can tap into a large array of instruments for this
purpose, including bank lending, bond issuance, public-private partnerships, land value capture (LVC), guarantees, and
insurance.504

Local governments in developing countries can deploy these finance instruments more effectively with enabling national
policies and technical assistance from DFIs, and DFIs are increasingly able to support cities’ to take infrastructure
investment to scale. The World Bank, for example, launched the “City Resilience Program” to work with cities on a
pipeline of well-prepared and bankable investments to enhance urban resilience; it also acts as the banker for the city,
improving access for private and institutional investors and facilitating strategic investments to build resilience.505

The case of bonds is also illustrative to attract private investment. Before cities can issue bonds, they need national
legislation to clearly articulate whether they can borrow and under what conditions, including from which institutions,
how much, in what currencies, and using what collateral. South Africa is a notable success story, explicitly and
constitutionally enshrining the rights of municipalities to borrow. This has enabled both Johannesburg and Cape Town to
issue municipal green bonds.506 For example, Johannesburg’s 10-year, 10.18% note raised more than US$125 million for
investments in renewable energy, landfill methane capture, and hybrid-fuel buses.507

LVC instruments allow the state to secure a proportion of the uplift in land prices associated with sustainable
infrastructure investment. These are much more effective when integrated into an effective revenue system as well
as when there are transparent land and real estate markets and robust legal frameworks to guide the appraisal,
appropriation and sale of land before and after public improvements. LVC is being deployed in an increasingly diverse
range of contexts, including Addis Ababa, Harare, London, Portland, Quito, Shenzhen, and Tokyo.508 Notably, almost
half of the new Hyderabad Metro in India was funded through LVC instruments, primarily through issuing property
development rights around the planned metro stations.509 In a city where one in four people lives in informal settlements
without clean drinking water, safe sanitation, or decent housing, LVC instruments offered an ingenious way to mobilise
private investment in urban infrastructure. (See also Box 46 on LVC in Morocco). Infrastructure that meets sustainability
standards by delivering low-carbon and resilient transport, water or flood protection services, will have higher value
added over the medium to long-term, and thus provide a more stable revenue source for cities.510

72 UNLOCKING THE INCLUSIVE GROWTH STORY OF THE 21ST CENTURY

2.A. Dynamic Downtowns: a whole. People have to travel farther to reach their
workplace or public amenities, they face greater traffic
Well-Managed Densification to congestion and air pollution, and it is more expensive
Revitalise Cities to construct and operate the infrastructure needed to
service sprawling communities.511 In Sao Paolo and
Millions of urban residents live in private houses with Rio de Janeiro, sprawl costs the cities 8% of GDP.512 In
their own gardens, and many more aspire to this type the United States, sprawl is conservatively estimated
of suburban lifestyle. This cultural norm is reinforced to around 7% of national GDP.513 Increasing urban
by economic drivers, such as the lower cost of land density in ways that enhance residents’ quality of
around the urban periphery or tax policies that favour life—providing green space, locating employment and
single-family dwellings. The result is a global decline in services within walking distance of people’s homes,
average urban population densities (Figure 11). While and regenerating vacant and degraded inner-city
attractive to individual families, this kind of urban areas—should therefore be a priority for cities around
development creates substantial costs for the city as the world.

Figure 11
Average Density of Cities by Region in 2000—2002 and 2013—2015.

East Asia
and the Pacific

Europe and Japan

Land-rich
Developed
Countries

Sub-Saharan Africa

Latin America
and the Caribbean

South and
Central Asia

Western Asia and

North Africa

Southeast Asia

0 30 60 90 120 150

Average Urban Density

(persons/ha)

Average Density 2000-2002 Average Density 2013-2015

Source: Coalition for Urban Transitions. Data source: Lincoln Institute of Land Policy.514

UNLOCKING THE INCLUSIVE GROWTH STORY OF THE 21ST CENTURY 73

Evidence of the Benefits flows of investment, as well as sophisticated planning
capabilities and extensive consultations to design or
The clustering of people and firms in cities yields a
refurbish infrastructure in a way that is climate-smart
wide range of benefits, and these benefits are larger
and meets the needs of affected communities. These
with greater population and economic density.
consultations must involve local residents, as a lack
Densification can help to avoid the high costs
of public support for densification or deep-seated
of sprawl, including congestion, CO2 emissions,
preferences for existing urban forms can hinder
air pollution, traffic accidents, and the increased
government efforts to improve densification.
investments needed to extend critical infrastructure to
more dispersed populations. China alone could reduce Efforts to densify can also be inhibited by zoning
infrastructure spending by up to US$1.4 trillion by requirements that mandate minimum lot sizes,
pursuing more compact, connected urban growth.515 parking requirements, and single land uses; building
Recent IMF estimates suggest congestion costs exceed codes that stipulate low floor-to-area ratios or building
US#350 billion per year, based on lost productivity heights;523 or government mortgage programmes
and health impacts.516 Many of these savings from that preferentially support single-family dwellings.524
densification will accrue to public budgets. These policies may also reduce the supply of affordable
housing within cities. For example, requirements that
Beyond this, densification yields notable productivity
mandate two parking spaces per housing unit increase
benefits. A larger pool of employers creates incentives
housing development costs by as much as 25%.525
for workers to specialise, and a larger pool of
Governments will need to dismantle the legislation
workers allows employers to find the best fit with
that incentivises sprawl and introduce new frameworks
their team, enhancing the economic productivity of
that steer investment into denser and more resilient
both individuals and firms.517 Proximity encourages
urban development.
interactions whereby people can learn from each other
and exchange ideas, thereby stimulating innovation. Densification must be carefully managed to avoid
Evidence from Germany, Mexico, Spain, the United negative spillover effects, such as rising housing
Kingdom, and the United States suggests that doubling costs. Without appropriate safeguards, increasing
a city’s population is associated with roughly a 2-5% the density of people living and working in a city by
improvement in productivity.518 This translates into 10% could drive up rents by US$240 per person with
significant increases in taxable incomes and assets, the burden borne disproportionately by the poor
with commensurate scope to expand public fiscal and the young.526 Densification must therefore be
capacity. In monetary terms, increasing economic accompanied by programmes to expand the supply
density by 10% in urban areas is worth approximately of genuinely affordable housing (see Section 2.B),
US$71 per person per year due to higher productivity, ensuring that compactness does not improve urban
US$62 due to higher job accessibility, and US$49 life for more prosperous groups at the expense of
due to better access to services.519 Higher population lower-income residents. In addition, built-up areas are
density also corresponds to lower per capita emissions typically hotter, so there is a need to maintain urban
(see Figure 9): One analysis suggests that low-density green space to build resilience by tackling heat island
suburban development produces 2.0—2.5 times as effects.527 Benefits of urban forests, parkland, and
many emissions per person as high-density urban core canopy cover include improved air quality, improved
development.520 urban water management, and reduced runoff, which
also enhance climate resilience.528
Challenges
Governments need to take immediate action to avoid Accelerators
further lock-in to inefficient, climate-vulnerable, and • National and local governments can
sprawling urban forms.521 This will require retrofitting, reform zoning ordinances, building
repurposing, or replacing existing infrastructure. codes, and tax incentives that favour
Neighbourhoods with single-family houses will urban sprawl. Depending on the particular
need to be rezoned in order to increase the share of context, this might involve relaxing floor-to-area
medium- and high-rise buildings, and public transport ratios and building height limitations; easing
systems may need to be improved or extended to restrictions for government-backed mortgages;
serve these hubs and improve connectivity.522 This taxing unused property and parking lots; and
transformation will require mobilising substantial new offering density bonuses.529 For example, Toronto

74 UNLOCKING THE INCLUSIVE GROWTH STORY OF THE 21ST CENTURY

 has raised US$309 million for public facilities suitable regulatory environment can also ensure
through 'density-for-benefit' agreements whereby that residential construction is climate-smart and
developers can offer cash or in-kind contributions keeps pace with demand, including in smaller, high
in return for rights to exceed existing height and growth and newly urbanising areas.537
density restrictions.530 Sao Paolo has eliminated
parking minimums in favour of parking
maximums, allowing only one space per residential
unit along transit corridors to address crippling Box 25
and costly congestion.531 People-focused Superblocks in
• Local governments can establish urban Barcelona
plans and programmes that promote
connected parks, enhance natural Barcelona is among Western Europe’s densest cities.538
ecosystems, and mainstream urban Although known for its rich culture and pleasant
greenery. The conservation of high-quality, cityscape, Barcelona struggles with air pollution, noise,
accessible, and communal green space is essential limited green space, social isolation and—increasingly—
climate impacts.539 Up to 85% of the city’s area is
for equitable and liveable urban density (see
dedicated to private vehicles (including parking
Box 26). 'Nature-based solutions', such as urban
spaces).540
wetlands and forests, can absorb GHG emissions
while building resilience to climate change and Local authorities in Barcelona are tackling these
providing valuable ecosystem services, including challenges with an innovative Superblock model,
services such as water filtration, flood buffering, piloted in the central neighbourhood of Eixample.541
biodiversity habitat, and temperature regulation.532 Eixample’s widened, octagonal intersections were
For example, Colombo, Sri Lanka, is enhancing meant as meeting squares, but many are now
climate resilience and reducing flood risk by utilitarian, unfriendly intersections dominated by
traffic. Barcelona seeks to revitalise these public
restoring wetlands,533 without which the city would
spaces. Superblocks will form mini-neighbourhoods,
faces losses from flooding amounting to about
typically comprising 12 blocks (400x400 metres) that
1% of GDP.534 Increasing efforts to green low-
house 5,000—6,000 residents.542 The Superblocks’
income neighbourhoods, while welcome, should surrounding roads serve through traffic, but internal
be carefully managed to avoid pricing out and roads are reserved for residents’ vehicles travelling
displacing residents.535 below 10 km/hr. This improves access and safety for
• Local governments should work with pedestrians and cyclists, as well as the quality of public
developers and civil society to ensure that and green space.
densification is accompanied by a sufficient Initial interventions in Eixample require minimal
supply of climate-smart, affordable infrastructure—mostly signage, road markings, and
housing. Proven strategies include fiscal support street furniture. Future plans include permanent
for public housing programmes, comprehensive installations like playgrounds, 300 km of new cycling
protection for renters, legal requirements that lanes (from today’s 100 km) and 23 new ha of car-free
new residential developments include affordable space.543 In September 2017, Barcelona created the
housing, and the formation of public land banks newest Superblock on 40 acres in the El Poblenou
and community land trusts to acquire properties neighbourhood, and another five are planned by
2018.544 In addition to decreasing traffic by 21%,
for redevelopment. Since the 1990s, Japan made
the effort could also reduce emissions by as much as
it easier to re-zone urban land, re-purpose office
75%.545
sites for housing and construct taller apartment
buildings. The expanding housing supply has
meant that rents and house prices have risen at
much slower rates than in many Western cities.
Denver, Colorado, has been one of the most
proactive cities in the United States, creating
the Affordable Housing Trust Fund in 2015, a
revolving fund that offers finance to low-income
housing developers that is anticipated to grow
to US$150 million over the next 10 years.536 A

UNLOCKING THE INCLUSIVE GROWTH STORY OF THE 21ST CENTURY 75

Box 26
Green Spaces in Dense Singapore

Typically, the ranks of the world’s most liveable cities are topped by larger low-density cities, such as Sydney and
Vancouver, or smaller established cities, such as Vienna and Zürich.546 A common exception is Singapore, which squeezes
8,155 people into every square kilometre.

One of the reasons for Singapore’s liveability is the provision of high-quality urban greenery throughout the city, thanks
to policies such as mandatory roadside plantings, which have ensured that trees have been introduced systematically with
enough growing space to provide substantial canopy cover. This creates a pleasant urban environment: Trees, parks, and
other green infrastructure help to reduce temperatures, filter air pollution, and mute street noise.547 Where permeable,
these surfaces can support storm water management as well as prevent overflow from combined sewers handling both
rainwater and sewage. Importantly, Singapore has focused on the distribution and connectivity of parks, not just on the
total area of parkland. Hundreds of kilometres of green, pedestrian park connectors mean that people have easy access to
green space despite higher density living.

Between 1986 and 2007, green cover in Singapore grew from 36% to 47%, despite a 68% increase in population,548 and
reduced average temperatures by between 0.5 and 5°C.549 This builds resilience to climate change while also mitigating
GHG emissions as a drop of 1°C in air temperature lowers peak electricity demand by as much as 4%, which translates
into reduced energy consumption and emissions.550 The government now requires property developers to replace any
greenery lost during construction and covers 50% of the costs of installing green roofs and walls on existing buildings,
spurring innovations to develop lighter and more robust rooftop and vertical greening systems. These systems are also
cheaper: The cost of greening fell from S$150/m2 to S$100/m2 in a two-year period.551

2.B. House Proud: Provide Evidence of the Benefits

Sustainable and Affordable Housing is an important asset to increase economic
security, especially for lower-income groups.553
Housing for the Urban Poor Improving the quality of housing can improve the
productivity of home-based workers, who account
Today, 330 million urban households currently lack for a significant share of urban employment (14%
access to affordable, safe, secure housing—a number in India and 6% in South Africa) and are mostly
that is projected to grow to 440 million households women.554 Safe and affordable housing could also
by 2025.552 Whether, where, and how housing for dramatically improve health outcomes for urban
these people is built will determine the health and dwellers by reducing the health costs associated with
employment opportunities of one in five urban everyday risks and catastrophic events. Flooding,
dwellers. These factors will also shape urban form and disease, pollution, and fire all impose a heavy health
function for decades to come, influencing emission burden that is disproportionately felt by low-income
intensity and vulnerability to climate change and urban residents;555 further, life expectancy for the
disasters. Smaller, fast-growing cities in particular poorest 20% of urban residents hovers at around
have the opportunity to avoid sprawling, incremental, 55 years, compared to over 70 years for the richest
inefficient and disaster-prone development in peri- 40%.556 Experience in Ahmedabad, India, illustrates
urban areas. Instead, governments can establish such health benefits as slum upgrading as more than
policies and plans that will provide low-income urban halving the incidence of severe water-borne disease.557
residents with climate-smart, affordable, efficient, and Increasing the supply of climate-smart, affordable
well-located housing, served by basic infrastructure housing would especially climate urban women, who
such as piped water and sanitation (see also, Section are twice as likely as men to face violence558 and have
4.A). The challenge is to meet demand for housing and fewer capacities and resources to respond to shocks
services today while establishing spatial forms that and stresses.559
can underpin sustained economic development and
maximise resource efficiency in the longer-term while
also limiting the risks of climate change. (See also
Section 1.B on energy and building efficiency).

76 UNLOCKING THE INCLUSIVE GROWTH STORY OF THE 21ST CENTURY

There are significant opportunities to steer planned
investment in shelter and related infrastructure and
services towards low-carbon and climate-resilient
options. For example, in waste management, recycling
and composting require substantially less capital
expenditure than landfill or incineration infrastructure.
Using renewable energy and passive design to improve
the energy efficiency of urban housing can enhance
resilience to climate change. Distributed renewable
energy generation (particularly photovoltaic solar
or biogas) can be more economically attractive than
connecting to the grid and may also allow the state
to defer capital investments to maintain and upgrade
grids.560 For the very poorest, there is scope to improve
the availability and cost of low-carbon, local building
materials (such as bamboo or compressed earth
blocks) that could also enhance the durability and
resilience of self-build housing.

It is important that new housing stock is constructed

in places that help cities to achieve good density and
resilient development, particularly by aligning spatial
and infrastructure planning in a sustainable way. Photo credit: Flickr: Visty Banaj
This could yield immediate fiscal savings: Higher
population densities offer economies of scale for
with access to so-called improved water, namely
infrastructure561 and service provision,562 enabling
from public taps, boreholes, protected springs,
governments to reach more residents at lower
or other sources that do not necessarily provide
cost (see also, Section 2.A). To realise these gains,
safe or reliable drinking water in crowded urban
governments will need to align land-use, housing, and
contexts.567 By applying a stricter classification
transport policies.563 Complementary investments
that would more reliably indicate a safe water
in mass transit can effectively expand the supply of
supply (such as water piped to a dwelling, yard
urban land, thereby driving down housing costs while
plot, or neighbour), an additional 80 million urban
cutting demand for transport energy. In Mumbai,
Indonesians would be designated as slum dwellers.
for example, the construction of feeder BRT systems
Applying more rigorous standards to 10 of the
would make new housing settlements on the urban
most rapidly urbanising countries suggests that
periphery more financially viable to low-income
official figures may understate the number of people
residents.564 In some cases relocation or retreat of
living in slum conditions by at least 190 million
existing settlements will be required to move them out
(Figure 14)—nearly equivalent to the populations of
of harms’ way.565 However, care must be taken not to
Germany, France, and Spain combined.
exclude or push poor residents to the peripheries of
cities. Strong public institutions are needed to achieve The urban infrastructure deficit is likely to increase
this. Ultimately, building housing and infrastructure in with rapid urban population growth. Most of the
a coherent way today will be much more cost-effective projected growth to 2050 is expected in smaller
in the long-run, enabling cities to avoid retrofitting, cities, many of which are the least prepared to
relocating, and re-densifying in the future. manage such growth.568 Municipal authorities in
the most rapidly urbanising regions typically also
Challenges have the smallest per capita budgets (for example,
see Figure 12) and limited technical or institutional
About 881 million people live in slum conditions,
capacities.569 These constraints make it difficult
primarily in sub-Saharan Africa and Asia, according
for governments to address pressing development
to UN Habitat (see Figure 13).566 These estimates,
needs, let alone shape urbanisation towards
however, understate the scale of the shelter deficit. In
resilient, compact, and connected forms.
Indonesia, for example, UN Habitat calculates that 27
million people live in slums. This excludes residents

UNLOCKING THE INCLUSIVE GROWTH STORY OF THE 21ST CENTURY 77

Figure 12
Cities in the Global North Typically Have Much Larger Budgets Per Capita Than Cities in the
Global South, Irrespective of Population Size.

16 $16,000

14 $14,000
City population (millions)

City budget Per Capita

12 $12,000

10 $10,000

8 $8,000

6 $6,000

4 $4,000

2 $2,000

0 $0
Accra
Mombasa
Nairobi
Lagos
Durban
Johannesburg
Colombo
Bangalore
Surat
Ahmedabad
Mumbai
Medellín
Bogotá
Mexico City
Porto Alegre
São Paulo
Rio de Janeiro
Belo Horizonte
Seoul
Chengdu
Qingdao
Wuhan
Guangzhou
Tianjin
Beijing
Shanghai
Yokohama
Copenhagen
Singapore
New York
Note: Budget data represent years 2010—2016. Source: Beard et al. (2016).570

Policy distortions can further reduce the supply markets have developed in many cities.572 In sub-
of urban land and housing and therefore increase Saharan Africa, for instance, over 75% of all housing
their costs. Combined with low per capita incomes, stock is constructed informally.573 Conventional
increased costs keep many urban dwellers from urban planning, meanwhile, is often used to justify
participating in formal property markets. However, the eviction of low-income urban residents from
it is not solely economic factors that contribute well-located land.574 This perpetuates poverty by
to the chronic shortage in affordable, decent, reducing access to jobs, services, and amenities
formal housing. Discrimination in labour and and contributes to sprawling urban forms with all
land markets and a lack of legal or political rights their concomitant externalities, including increased
means that the urban poor are vulnerable to abuse vulnerability of the poor to climate change and
and exploitation.571 As a result, informal shelter disasters.

78 UNLOCKING THE INCLUSIVE GROWTH STORY OF THE 21ST CENTURY

 Figure 13
Official Estimates of the Proportion of the Urban Population Living in Slums are Based on the
Number of Households Lacking Access to (i) Improved Drinking Water Sources; (ii) Improved
Sanitation Facilities; (iii) Durable Housing; and (iv) Sufficient Living Space.575
300

250
Urban Slum Population at Mid-Year (millions)

200

150

100

50

0
Nothern Sub-Saharan Latin Eastern Southern South-Eastern Western Oceania
Africa Africa America Asia Asia Asia Asia
and the
Caribbean

1990 1995 2000 2005 2010 2014

Source: Coalition for Urban Transitions. Data source: UN Habitat.576

UNLOCKING THE INCLUSIVE GROWTH STORY OF THE 21ST CENTURY 79

Figure 14
Underestimations of the Slum Population in Ten Rapidly Urbanising Countries.

12,074,338
Bangladesh
SANITATION

4,468,331
Egypt OVERCROWDING

4,161,756

Ethiopia SANITATION

13,262,908
India WATER

79,321,754
Indonesia
WATER

3,107,924
Kenya
SANITATION

34,611,711
Nigeria WATER

12,864,925
Pakistan DURABLE HOUSING

13,098,602
Philippines WATER

5,848,777
RDC SANITATION

7,614,494
Tanzania* SANITATION

0 20 40 60 80 100 120 140

Urban population (millions)

Official Estimate of Slum Number of People Difference
Dwellers Share Lacking Access to One in
Four Key Amenities

Source: Coalition for Urban Transitions. Data source: UN Habitat577 and national demographic and health surveys.578
Note: This figure shows official estimates of the urban population living in slums contrasted to the number of people lacking access to
decent housing and basic services using more rigorous metrics: a piped water supply, a flush/pour latrine, durable housing and no more
than three people to a room.

80 UNLOCKING THE INCLUSIVE GROWTH STORY OF THE 21ST CENTURY

 Photo credit: Flickr: Kzoop

Accelerators with an annual interest rate of 10%, compared to

16% from commercial banks and 22.6% charged
• Local governments can make serviced land
by microfinance institutions, to pay for land
available to low-income households at
acquisition, greenfield housing development, and
affordable prices and with occupancy rights.
in-situ slum upgrading.582
This may need innovative titling arrangements
to manage the risk of sale and gentrification, for • MDBs should collaborate with grassroots
instance, supporting collective tenure as the Baan organisations of the urban poor to ensure
Mankong programme did in Thailand (see Box 27). that marginalised groups have avenues to
Local authorities and utilities should preferentially shape policy and programming. Ensuring that
extend trunk climate-smart infrastructure to low- connectivity, inclusivity, and resilience are at the
income neighbourhoods, as the per capita costs heart of urban planning processes will be essential
of networked solutions (such as sewers) are much for resilient, prosperous cities. Community-based
cheaper than for individual solutions (such as septic organisations, such as those federated within
tanks). (See also Sections 4.A and 4.B on water and Shack/Slum Dwellers International and the Asian
resilient infrastructure). Involving local residents in Coalition for Housing Rights, can construct housing,
planning and implementation can also dramatically co-produce infrastructure, and shape urban land
reduce the costs of sustainable infrastructure use in an inclusive and environmentally efficient
development. In Karachi, Pakistan, for example, way.583 MDBs and development agencies can
the cost of community-financed and managed empower these organisations by providing bridging
infrastructure came in at a quarter of the cost of capital and project management expertise and by
government-developed sewage systems.579 fostering relationships with commercial banks
and other private investors.584 This assistance
• National and local governments should
can unlock substantial public and private capital,
relax restrictions that constrain the supply
including mortgage finance, to scale affordable
of low- and middle-income housing and put
housing projects. For example, community
in place enabling policies, that can unlock
engagement is key in a number of ADB projects
investment. Building codes should be reformed
supporting urban redevelopment and services in
to permit smaller plot sizes, higher floor area
Ulaanbaatar, Mongolia, including a pilot on green,
ratios, and support for incremental construction
affordable housing which is co-financed by the Green
to enable self-build housing, while also ensuring
Climate Fund and will be driven in part by private
it is climate-smart.580 In Windhoek, Namibia, for
investment. These projects are using community
example, this approach enabled the creation of
development councils to advise on project
affordable, formal housing units by low-income
implementation and increase community-based
urban residents.581 Financial organisations can also
monitoring and control over service provision.585
be created, supported, or mandated by governments
Engaging early with public and private stakeholders,
to provide low-cost microloans to formal and
from governments to local businesses, potential
informal households or communities. In Kenya, for
investors and community-based organisations, will
instance, the Akiba Mashinani Trust provides loans
help to ensure projects are bankable.586

UNLOCKING THE INCLUSIVE GROWTH STORY OF THE 21ST CENTURY 81

Box 27
Improving Housing Conditions in Urban Thailand

Between 2003 and 2010, the Baan Mankong programme in Thailand improved the housing security and conditions
of over 80,000 households across 249 urban areas.587 The programme channels government funds, in the form of
infrastructure subsidies and soft housing and land loans, directly to poor communities, which plan and carry out
improvements to their housing, environment, and basic services themselves. In most cases, communities pursued in situ
upgrading, secured legal tenure and connected to water and sewage systems. The programme also enabled communities
to relocate to reduce their exposure to environmental hazards, which was critical, given the 13 million people affected by
the 2011 floods in Bangkok.

The Baan Mankong programme was introduced and coordinated by the national government, which established
a revolving fund to provide housing loans with subsidised interest rates and long repayment periods, as well as
infrastructure subsidies to low-income residents living in informal settlements.588

The programme established a unique city-scale approach to slum upgrading, integrating low-income households into
the social and physical fabric of the city. Local governments worked with low-income communities to secure legal
tenure in their existing settlements or nearby parts of the city, using a combination of new planning permissions,
leasing arrangements, land-sharing with formal land owners, and cooperative land titles.589 The programme emphasised
collective approaches to planning and upgrading, which helped build social capital and capabilities within low-income
neighbourhoods.

The fund was initially capitalised with public capital but is now substantially resourced through private banks and
loan repayments.590 The total public investment of less than US$100 million,591 translated to less than US$1,250 per
household, further reinforcing the cost-effectiveness of community-driven upgrading, compared to conventional
approaches.

The programme is still running in Thailand, and key features, such as the revolving fund and community-led upgrading
processes, have been adopted in over 200 urban areas across Cambodia, Nepal, the Philippines, and Sri Lanka.592

2.C All Aboard: Shared, Electric, Air quality is even worse in cities of the global
South, where as much as 90% of air pollution can be
Low-Carbon Transport attributed to cars in some cities.597 Dependence on
private cars also leads to more road crashes (which
Urban dwellers need transport to access jobs, services, costs up to 5% of GDP in developing countries)598 and
and amenities. However, urban transport networks more congestion (which costs 5% of GDP in Beijing,
are often not convenient, flexible or affordable. Where Sao Paulo, and Bangkok).599
they already exist, many struggle to keep up with
increased ridership or maintain aging infrastructure. Urban form and transport modes must shift for cities
Existing urban transport systems are also responsible to meet 21st century challenges. Larger cities in North
for over 11% of total global energy use—equivalent America and Oceania have typically invested heavily
to about double the entire energy consumption of in car-based transport systems, with much urban
Africa593—and about 18% of global CO2 emissions.594 land used for roads and car parks. Counterparts in
Where urban areas and transport systems are yet to Europe and Latin America are more likely to have
be built, planning needs to embrace public and non- well-developed public transport systems and cycling
motorised transport.595 networks. In urban Africa, widespread poverty means
that a large share of trips continue to be made on
The more private cars there are on city roads, the foot. Asian cities are more varied, but the trend is
greater the costs associated with air pollution, noise towards increasing dependence on private cars and
pollution, congestion, traffic accidents, and sprawl. commensurate urban sprawl. Historical patterns of
In 2010, OECD countries incurred health costs of and behavioural preferences for different types of
US$1.7 trillion from transport-related air pollution.596 urban transit continue to determine how people move

82 UNLOCKING THE INCLUSIVE GROWTH STORY OF THE 21ST CENTURY

around cities today, as well as the strategies available that swaths of new urban infrastructure will soon be
to cities to enhance accessibility and decarbonise built, particularly in the developing world, offering
transport. However, rapid population growth means opportunities to leapfrog directly to active and shared
transport modes.

Figure 15
Modal Share for Five of the Ten Largest Cities in Each Region, Divided into Non-motorised
Transport (Walking and Cycling), Public Transport, and Private Motorised Options.

Adelaide
Perth
OCEANIA

Brisbane
Melbourne
Sydney
Houston
NORTH AMERICA

Los Angeles
Chicago
Philadelphia
New York
Mexico City
L ATIN AMERICA

Bogota
Lima
Rio de Janeiro
Sao Paulo
Minsk
Paris
EUROPE

London
Madrid
Berlin
Abidjan
Dar Es Salaam
AF RICA

Lagos
Addis Ababa
Nairobi
Mumbai
Dehli
ASIA

Tokyo
Shangai
Beijing

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Non-motorized Transport Public Transport Private Cars and Others

Source: Coalition for Urban Transitions.600

UNLOCKING THE INCLUSIVE GROWTH STORY OF THE 21ST CENTURY 83

Evidence of the Benefits with a larger value of the sector’s GDP from higher
sales relative to the base case. Under this scenario,
In the near-term, investing in low-carbon transport
reductions in air pollution could save 385,000 lives
infrastructure creates more jobs than those in car-
globally in 2030.604
based systems. A review across 11 American cities
found that about 50% more jobs were generated by Overall health and energy benefits from improved
investments in cycling projects than road projects, with pedestrian and cycling amenities could recoup more
pedestrian projects averaging between the two.601 In than five times the initial investment cost.605 The
the longer term, net economic savings from reduced transition to walking, cycling, and public transport
transport-related energy expenditure are estimated would particularly benefit low-income groups (see,
at US$10.5 trillion between 2015 and 2050.602 These for instance, the example of Medellin, Box 28), who
gains would be largely enjoyed by the urban poor: are less likely to own cars but are more likely to be
The average urban resident spends as much as 16% the victims of traffic accidents and to live and work
of household income on transport, while the under- in polluted areas.606 It is important that new transit
served resident spends up to twice that share of infrastructure is designed in ways that ensure the
income.603 Results from the E3ME modelling analysis safety of women and other potentially vulnerable
undertaken for this Report indicate that under a groups.607 Harassment and physical abuse on public
scenario of accelerated EV uptake, there would be an transport608 has meant that poorer women lose out on
increase in employment in the motor vehicle sector economic or educational opportunities, while those
engaged in EV production of half a million people who can afford to, switch to private car options.
globally by 2030 relative to baseline. This is associated

Box 28
Medellin’s Cable Car

Medellin, Colombia, sits in a valley, bordered by steep mountainsides that hold the favelas. These informal settlements
were notoriously violent during Colombia’s drug wars in the 1990s and are still among the city’s poorest neighbourhoods.
Traveling to the city centre took several treacherous hours on foot or depended on infrequent and unreliable buses.609
This made it difficult for residents to access jobs, education, and other services.

Since the mid-2000s, Medellin’s favelas have seen a transformation, much of which is credited to the installation of
a cable car system. Opened in 2004, a network of nine cable car lines brings favela residents down the hillsides in 25
minutes for US$0.60.610 About 30,000 favela residents use the system daily,611 doubling residents’ access to employment
opportunities.612 Strikingly, neighbourhoods with cable cars experienced 66% fewer homicides in 2012 than comparable
neighbourhoods without them.613

Challenges remain, including improving the accessibility of the cable cars to all favela areas (walking and queuing times
can exceed one hour at peak); their vulnerability to electricity outages; and their limited usage by women, children, and
the elderly or infirm.614

Given their ability to connect hilltop areas to lower central zones cheaply and with less disruption to existing land uses,
cable cars are growing in popularity.615 Several other urban cable cars projects are operating in Latin America (Rio de
Janeiro, Caracas, Guayaquil, Santo Domingo, La Paz, and Medellín), Asia (Yeosu, South Korea, Taiwan, Hong Kong), Africa
(Lagos, Constantine), and Europe (London, Koblenz, Bolzano). The World Bank estimates that they cost US$10-25 million
per km and can carry 1,000—2,000 passengers per hour in each direction, which compares favourably to BRT systems.616

84 UNLOCKING THE INCLUSIVE GROWTH STORY OF THE 21ST CENTURY

At the same time, improving cycling and walking Effective land-use and transport planning are essential
infrastructure through low-cost interventions—such as to construct compact and connected cities. However,
investing in street lighting, segregating cycle lanes and many governments lack the technical or institutional
bike parking, and separating sidewalks and pedestrian capacities to design, construct, and operate public
crossings—can quickly recover public investments transport systems or to integrate transport with land-
through health savings. For instance, if a quarter of use planning.621 Acquiring land for transport routes
all trips in European cities were by bike, the region is typically expensive and complicated, especially in
could prevent 10,000 premature deaths each year.617 more established cities. If not managed carefully, land
More than 500 cities have constructed bicycle share acquisition can lead to the displacement of informal
schemes in the last 20 years.618 Cities could draw from settlers along proposed transport corridors.
the experience of Rwanda’s capital, Kigali, which has
Electrification of the transport sector has the potential
constructed an elaborate network for pedestrians
to reduce GHG emissions and local pollutants622 and
including car-free streets—or Vienna, Austria, which
has installed additional lighting to make walking at would likely require less radical changes to the built
night safer for women.619 environment than a modal shift away from private
cars to public or non-motorised transport. However,
a transition to EVs will require substantial investment
Challenges in grid capacity and charging infrastructure (see, for
Public transport infrastructure comes with significant instance, China’s example in Box 30). Achieving the
challenges at both institutional and financial levels. full mitigation potential of GHG emissions and other
Mass transit typically requires substantial capital air pollutants from electrification will also depend on
expenditure, and cities in the developing world shifting rapidly to renewable electricity sources to avoid
tend to have limited fiscal autonomy and a narrow trade-offs (Figure 15),623 and this effort will require
resource base, and are often dependent on sale of transit agencies to coordinate effectively with utilities
publicly owned land to developers to raise revenue.620 and energy agencies.
Additionally, governments may adopt high discount
rates or use narrow cost-benefit analyses, which In addition to the institutional and financial
means that they do not always account for the long- challenges, modal shifts and the electrification of the
term economic returns associated with transport transport sector require behavioural changes from
investments, such as reduced expenditure on fuel and city dwellers themselves. Given historical patterns of
improved access to opportunities or agglomeration transport, costs, and the private benefits that can come
economies. with urban sprawl (increased privacy, space, access to
amenities, etc.), transport preferences can be difficult
to change rapidly.

Photo credit: Flickr: New York City Department of Transportation

UNLOCKING THE INCLUSIVE GROWTH STORY OF THE 21ST CENTURY 85

Figure 16
The Mitigation Potential (MtCO2e) Associated with Varying (1) the Share of Low-carbon
Sources in the Electricity Mix and (2) the Levels of Electrification of Transport Modes in 21
Megacities.
Share of Low-Carbon Electricity (%)

100% 134 230 325

MtCO₂ MtCO₂ MtCO₂

50% 67 156 244

MtCO₂ MtCO₂ MtCO₂

97 195
MtCO₂ MtCO₂

50% 100%

Share of Electrification (%)

Source: Westphal and Kennedy (forthcoming).624

Accelerators can make walking and cycling more attractive and

safer, especially for women. Bicycle share schemes
• Local governments should prioritise
have proliferated over recent decades. Kigali625 and
investments in active, non-motorised, and
Vienna626 are exemplars in terms of pedestrianising
shared transport and disincentivise the
and making walking at night safer for women.
use of private vehicles. This will help avoid
Complementary policies can be adopted to deter
'green congestion' or 'electrification of congestion'
car use. Stockholm, Singapore, Milan, and London
and favour the expansion of pro-poor mobility
have adopted congestion pricing,627 while Nanjing
networks. Low-cost interventions, such as street
Road in Shanghai, Broadway in New York, and
lighting, segregated cycle lanes, bike parking,
Jalan Sudirman in Jakarta are car-free spaces.
separated sidewalks, and pedestrian crossings,
Reducing the availability and increasing the cost of
parking spaces has proven highly effective in many
European cities in incentivising non-motorised
transport use.628

86 UNLOCKING THE INCLUSIVE GROWTH STORY OF THE 21ST CENTURY

• State and local governments should • MDBs and development agencies should
accelerate the deployment of land value support governments, particularly in
capture (LVC) instruments to finance new low-income and lower middle-income
transit-oriented infrastructure, enabled countries, to maximise financing and
by national governments. LVC instruments increase technical assistance to accelerate
allow governments to capture a proportion the development of public transport in
of the uplift in land and property values cities. Mass transit must be tailored to local
associated with public investments. The use of contexts and constraints, as with Nigeria’s
LVC instruments at the local or regional level Lagos BRT-Lite system (Box 29) and Colombia’s
typically needs to be enabled by constitutional, Medellín Metrocable (Box 28). While eight MDBs
statutory, and policy frameworks created by the have committed to provide more than US$175
national government.629 LVC instruments have billion in finance for sustainable transport over
been used in such diverse cities as Bogota, Hong this decade (2012—2022), road projects still
Kong, Hyderabad, and Tokyo,630 but they remain dominate their investments.635 The MDBs need
under-utilized in the developing world (see Box to shift more investment to sustainable urban
46 on LVC in Morocco). In Hong Kong, the “Rail transport and planning. An example is the ADB's
Plus Property” LVC model has allowed the Mass US$35 million loan to co-finance a bus rapid
Transit Railway (MTR) operator to capture the transit system and other transport innovations—
increase in property values along transit routes from paid parking to better pavement for
to fund railway maintenance and expansion. The improved walkability—in Vientiane, Lao PDR.636
government grants development rights around MDBs and development agencies also bring
railway stations and depots to the MTR operator, substantive expertise in context-specific planning
which then builds properties in partnership with and construction in ensuring gender-sensitive
private developers. MTR receives a share of the and climate-resilient transport provisioning and
profits from these properties, which it uses to in helping local agencies to procure equipment,
cover their capital and operating costs. MTR is operators, and digital technologies. DFIs can also
77% owned by the government, which received play a key role in working with governments to
a financial return of about US$18 billion on its manage early project risk to crowd in finance from
investment between 1980 and 2005.631 private sources.637
• Central governments should coordinate
with national and local planning, energy
Photo credit: Flickr: David Megginson
and transport agencies in order to
support the electrification of transport.
This might entail planning, procuring battery
electric public transport, and financing in
charging infrastructure, as China has done
through its New Energy Vehicle programme (Box
30) or incentivising EVs through subsidies or
low-emissions zones in cities like in Norway and
the Netherlands.632 This should be accompanied
by city-led pilots and targets for electrifying
public fleets, as Bogota has done by replacing
diesel buses with electric or hybrid buses. To
deliver the full climate and air quality benefits,
governments and utilities must increase the
capacity and reduce the carbon intensity of
the electricity grid. At scale, electrifying the
transport sector could mitigate 7% of global
GHG emissions,633 roughly equivalent to India’s
share of global emissions.634

87
Box 29
Lagos BRT “Lite”

With a population of 21 million, Lagos in Nigeria is the largest city in Africa and the seventh fastest growing city in the
world. Like many rapidly growing cities, Lagos’ economic growth and development has been hampered by its transport
system. Chaotic, slow, and unreliable, transit in Lagos has been dominated by thousands of yellow mini-buses called
Danfos. In 2008, Lagos became the first African city with a BRT.

Lagos’s 'BRT-Lite' opened on a 22 km,638 65%-segregated route with three terminals.639 At just US$1.7 million per km, it
cost a fraction of the US$6 million per km average of premium BRTs. The public transport operator, LAMATA, dropped
features like level loading and fancy stations that did not fit Lagos’s budget, enabling them to recoup their investment in
just 18 months.640 LAMATA was also able to secure substantial private investment: Private operators directly procured
100 new buses and leased a further 120 buses from a state-owned company.641

As of 2017, the Lagos BRT-Lite’s 300 buses carry 200,000 passengers daily, with an average journey of 30—55 minutes. This
is a time saving of 30% on average,642 complemented by reduced transport expenditures of as much as 31% for low-income
households along its route. Along its corridor, the Lagos BRT-Lite carries 25% of commuters while accounting for only 4% of
vehicle traffic. Road accidents have decreased significantly since its construction,643 and the project generated 2,000 jobs. A
final benefit: Carbon emissions are down by as much as 13% along the corridor, and particulate matter reduced by 48%.644

Box 30
EVs Taking Hold in Chinese Cities

Chinese cities are at the forefront of transport electrification, thanks to clear policies and generous subsidies provided
by the national government. China’s ambitious efforts have, in part, been motivated by severe air pollution—up to 70%
of Beijing’s emissions come from transport, and some cities experience up to 129 days of emergency-level smog each
year—as well as by climate mitigation targets and the opportunity to benefit the economy by capturing a growing share
of a valuable new manufacturing sector.645

The national government invested over US$7 billion across every stage of the EV lifecycle.646 This effort started in
2009 with the “10 cities, 1000 vehicles” programme, involving large-scale pilot projects electrifying public fleets with
predictable driving patterns (such as buses, garbage trucks, and taxis). The up-front costs of the large lithium-ion
batteries proved too high for commercial vehicles but are compatible with the investment abilities and long investment
horizons of China’s public agencies. This public procurement policy helped manufacturers achieve economies of scale
and knowledge spillovers for the production of private electric passenger vehicles. The national government also helped
local authorities to install chargers necessary for private ownership of EVs.

In 2015, China became the world’s largest market for electric private passenger cars,647 and the New Energy Vehicles
Programme has a target of reaching 20% of the total vehicle market demand by 2025. As of 2017, the country had a total
of 632,371 private electric cars on the road and an additional 200 million electric two-wheelers, 300,000 electric buses,
and up to 4 million low-speed, two seater EVs.648 Shenzhen alone has 16,359 electric buses and 12,518 electric taxis.649

E3ME modelling results for this Report show gains in employment, health improvements, and value addition from a scenario
of global accelerated uptake in EVs. In China, EV ownership could increase to about 3 vehicles per 100 people by 2030,
leading to an increase in total employment in the motor vehicle sector of more than 126,000 people and value-added gains in
the same sector of more than 6% relative to the baseline. Under this scenario, in 2030, more than 110,000 deaths due to air
pollution could be averted.650

88 UNLOCKING THE INCLUSIVE GROWTH STORY OF THE 21ST CENTURY