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Are you interested in sustainable solutions but unsure about their economic benefits? Our summary today works with the article titled The costs ad benefits of environmental sustainability from 2021 by Paul Ekins and Dimitri Zenghelis, published in the Sustainability Science journal as an open access article. Since we are investigating the future of cities, I thought it would be interesting to see how the sustainable solutions compare to their financial investments. This article presents that no conventional cost-benefit analysis is appropriate in this case because it can understate the longterm benefits of sustainable solutions.

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Welcome to today’s What is The Future For Cities podcast and its Research episode; my name is Fanni, and today I will introduce a research paper by summarising it. The episode really is just a short summary of the original paper, and, in case it is interesting enough, I would encourage everyone to check out the whole paper. Stay tuned until because I will give you the 3 most important things and some questions which would be interesting to discuss.

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The sixth United Nations Global Environment Outlook, aka GEO-6 focused on the close relationship between human and environmental health. A healthy planet is necessary for healthy people, and an unhealthy planet damages human health. The GEO-6 outcomes aimed for early policy action, and to shape new markets, create business opportunities and induce new technologies and behaviours which will benefit society beyond their environmental value. Unfortunately, societies currently focus on the grow now and clean up later approach – meaning achieving economic growth while damaging natural systems and consequently human health.

The costs of environmental damage become the benefits of environmental protection and restoration if they are mitigated or avoided. There are three broad environmental strategies to deliver such benefits: decarbonising to reduce the level of global warming, detoxification to reduce the emissions or impacts of other pollutants, and dematerialisation to reduce the environmental impacts associated with resource extraction, conversion and processing. Innovation in technology, behaviours and institutions makes the cost result from policy actions, thus making the transition to a sustainable economy a function of today’s decisions.

The common policy to economic development has been to concentrate on getting rich first and hope to have the resources to fix the environment later, aka the grow now and clean up later mindset. This is the way the old industrial countries did it and this is still understood as the way to grow economically despite the international efforts for sustainability. Although this approach brought many benefits, lifting people from poverty and so on, but the evidence now suggests that this approach also brought humanity to the brink of a catastrophe. The grow now and clean up later mindset not just causing climate change with emissions but also has been extraordinarily wasteful in resource use with its related mindset of take-make-use-dispose.

Current evidence from different developing countries, like Singapore, proves that economic development does not need to produce gross pollution. While pollution creates health risks resulting in 16% of human mortality – 254 million people per year, detoxification often makes even economic sense besides causing healthier people. Decarbonising makes even more sense. The estimates of possible damages from climate change are so large, they are quite difficult to comprehend. Increasing the global temperature by 1.5 degrees will cause 15-38.5 trillion USD in damages – which naturally rises as the temperature increase rises. Even though finding a comprehensive and precise answer is almost impossible, moving towards better environments makes sense. Deep decarbonisation makes sense whether looked at from the point of view of global insurance against catastrophe for future generations or health benefits for those currently alive. Material extractions getting increasingly expensive and pollutive, water becomes scarce, and the Earth natural systems are becoming endangered to sustain this extraction. A liveable future will demand dematerialisation and an absolute reduction in the environmental impacts of resource extraction.

Interestingly, the grow now and clean up later approach is now becoming theoretically unsound as well. In local level it could still work, but globally is has problems. With climate change and biodiversity loss there is no return to the status quo, there is no later. Biodiversity loss is hard to express in monetary terms, but the efforts make those numbers horrific. For example, exposure to indoor/outdoor air and water pollution costs at least 9 million lives annually. Large and catastrophic weather events are increasingly frequent and devastating creating more and more economic loss. Of course, carbon-based improvement fuelled the developments since the industrial age. Thus the question emerges: what will be the cost of decarbonisation, detoxification, dematerialisation and repurposing infrastructure and behaviours to deliver a sustainable economy?

If humanity chooses swift decarbonisation, many of the behaviours, technological networks and institutions of the last century need to be devalued or stranded, and innovations will be needed. Economies without flexible and responsive institutions and based on fossil fuels will have higher transition costs. This means that there will be loser and winners in this transition which can lead to delay, backlash, resistance and resource wastage, as it has been evident. But this is the task of policy makers to create actions carefully for transitioning to sustainable and just economies.

Economic theory and history also suggest that economies which embrace changes are better able to manage structure adjustment, and they encourage, manage and steer to gain competitive advantages. Implementing and competing in new innovative areas is easier than trying to beat an old economy in their own game. For example, sprawling, congested, polluted cities with inefficient infrastructure and outmoded energy technologies do not in general attract high-skilled labour and act as a drag on GDP growth and well-being. This challenges the fallacy that a transition to a carbon-neutral economy is bound to make us worse off before it makes us better off. Standard growth models and cost-benefit analysis struggle to capture structural change and integrate dynamic, increasing returns. They overstate the cost undermining the case for early action, but it also delays investment and innovation necessary to facilitate a cost-effective transition.

Changing expectations hold the key to unblocking the waiting game. This is underpinned by a growing appreciation of additional opportunities associated with a low-carbon transition, like new clean technologies, but also benefits from reduction in waste and inefficiencies, improved energy security and reduced pollution and congestion. Subsidies are needed to force the reduction of emissions but these can benefit human health, urban traffic congestion, efficiency and energy security and supply. Compared to the business-as-usual, green growth would mean immediate positive effects and co-benefits on the economy, like reduced local pollution or less energy price volatility due to reduced dependence on fossil fuels.

As enough players shift investment to deploy new solutions and technologies, learning and experience will push their price down, making further investment increasingly attractive relative to conventional technologies. For example, few economists predicted the amazing price drop of renewable energies. Solar panels’ costs fell 44% between 2015 and 2017 and they cost less by 88% since 2010 and wind turbines by 35%. Solar panels have already become the cheapest source of energy in many world regions. And the rate of change shows no sigh of slowing. Regardless of reducing emissions, sustainable solutions provide cheaper energy and transport costs.

Current static economic models may not be sufficient to describe the current situations. The approaches adopted by degrowth and wait-for-technology camps serve to delay action, using models which overstate the costs of decarbonisation and discourage businesses and policymakers from investing in new technologies and infrastructure. The problem is worse than just bad forecasts. Those who use static models not only get the future wrong, they make the future wrong. All this suggests that the economic toolkit can be put to better use helping policy-makers understand and steer path-dependent processes. Economics need to become more intradisciplinary.

Agents base their decisions on how they anticipate other will act. This collectively underscore the importance of leadership and clear credible policies to guide these agents and kickstart the green innovation machine through public investment guarantees and risk sharing. Rapid change in technologies, policy frameworks and markets are rendering traditional industrial development routes less viable. Thus, development agencies need to diversify assets and lock into profoundly sustainable pathways.

A key conclusion is that starting early by credibly steering expectations, inducing innovation and directing investment is in all cases better than delay. Grow now and clean up later is the second highest cost option, because only the existential costs of never cleaning up are higher. Early action can induce creativity and innovation and generate tipping points as feedbacks and dynamics become reinforcing. The cost of decarbonising on the long run depends on the choices and actions we take today and in the future. A common understanding that a managed low-carbon transition is both imperative and affordable is the most effective way to induce a rapid transition at least cost. A cost-effective low-carbon, resource-efficient transition can generate a cleaner, quieter, more secure, innovative, and productive economy for all countries at all stages of development.

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What was the most interesting part for you? What questions did arise for you? Do you have any follow up question? Let me know on Twitter at WTF4Cities or on the wtf4cities.com website where the transcripts and show notes are available! Additionally, I will highly appreciate if you consider subscribing to the podcast or on the website. I hope this was an interesting paper for you as well, and thanks for tuning in!

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Finally, as the most important things, I would like to highlight 3 aspects:

1. Starting early by credibly steering expectations, inducing innovation and directing investment is in all cases better than delay because ‘grow now and clean up later’ is the second highest cost option, only the existential costs of never cleaning up are higher.
2. There are three broad environmental strategies to deliver sustainable economies: decarbonisation to reduce the level of global warming, detoxification to reduce the emissions or impacts of other pollutants, and dematerialisation to reduce the environmental impacts associated with resource extraction, conversion, and processing.
3. A cost-effective low-carbon, resource-efficient transition can generate a cleaner, quieter, more secure, innovative, and productive economy for all countries at all stages of development.

Additionally, it would be great to talk about the following questions:

1. How convincing is for you to act now on sustainability for your own health benefits? Does the idea that it can have benefits for you make you do something?
2. What problems do you see in transitioning to sustainable economies?
3. What business opportunities do you see which is beneficial for the planet, creates sustainable outcomes and is profitable?

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