1.1 Green Investment in Asian Cities
The concept of “green growth” is tied to the “green economy for sustainable development and poverty reduction,” the first theme of the Rio + 20 United Nations Conference on Sustainable Development (UNCSD). Furthermore, formulating strategies for making cities and human settlements inclusive, safe, resilient, and sustainable has emerged as one of the 17 Sustainable Development Goals. To effectively achieve green growth, developing a low-carbon society should occur at multiple levels: international, regional, national, and subnational. The Asia Pacific region, the site of rapidly growing populations and economies, can show the global impact of sustainable development partly because this region includes a key advanced economy, Japan, and two key emerging economies, China and Indonesia.
The UN concluded that 50 % of the world’s population lives in cities (2008) and that this percentage will increase to 60 % by 2030. Furthermore, cities account for 90 % of the population growth, 80 % of the wealth creation, and 60–80 % of the energy consumption and greenhouse gas (GHG) emissions across the globe. Thus, it would be most effective to begin building a low-carbon society by developing low-carbon cities. Across Asia, several approaches have previously been employed to low-carbon cities, particularly in the transportation, building, and waste management sectors. Several cities in Japan, China, and Indonesia have already invested in initiatives aimed at developing low-carbon/green cities. Cities require intensive urban infrastructure development to accommodate rapid and substantial growth. However, as a result of the financial constraints on local governments, funding urban infrastructure projects has become a critical issue. Plans to overcome these constraints may prove critical to achieving low-carbon development pathways.
Against this background, this book, which is based on the Asia-Pacific Network for Global Change Research (APN) funded project, explores a new funding mechanism that engages numerous stakeholders in public–private partnerships. The private and public sectors should work hand in hand to foster green investment. As economic and political power has shifted to cities and megacities, particularly in the Asia Pacific region, local economic development has been successfully employed in numerous cities as a strategy to address issues involving uneven growth and extreme poverty (SDSN 2013). Cities also play a critical role in national growth and in generating environmental externalities. Cities account for 70 % of all public direct investment and 50 % of all public procurement. Moreover, cities offer economies of scale for measures designed to address climate change adaptation (OECD 2014).
1.2 Methodology and Approaches to Addressing Green Investment in Asian Cities
This research project uses explorative qualitative and quantitative approaches to define, measure, and monitor green investment at the city scale in Jakarta, Yokohama, and Shanghai and in certain slum areas in India. Several methods were applied in this study, including risk analysis, cost–benefit analysis, integrated assessment modelling, input–output analysis, and comparative analysis. Chapter 2 examines the effect of feed-in tariff (FIT) and other renewable energy investment policies; we examine variations in expected returns and risks under different FIT conditions. We also study investment returns and risks by examining net present value (NPV) and internal rate of return (IRR) measures using the discounted cash flow (DCF) method. The DCF method is used as an investment analysis and evaluation model. NPV estimates future cash flows, and IRR can determine investment benefits by estimating the rate of operating revenues against investment. Larger revenues from business gains and faster returns from revenues result in higher IRR. In the case of solar photovoltaics (PV), IRR values that exceed 10 % before tax and 7–8 % after tax are preferred.
Chapter 3 presents a combined qualitative and quantitative analysis. The qualitative methods used in the study include literature and comparative analyses. Information was identified and collected, and the necessary comparisons were made by means of the literature review. First, main international green codes (i.e., LEED, BREEAM, and CASBEE) are presented and China’s Green Standards (i.e., the Evaluation Standards of Green Building) are introduced—and green building development trends in China are described—in the literature review. Research objectives, questions, and frameworks are reasonably determined from the results of the literature analysis. The goal of employing quantitative methods is to quantify the incremental costs of green buildings and to compare the relation between subsidies and incremental costs. The incremental costs of green buildings per unit floor area can be calculated using the initial cost and unit floor area of a sample building.
The results presented in Chap. 4 were generated from the ExSS (Extended Snap Shot) nonlinear programming model, which uses the GAMS (General Algebraic Modeling System) v 23.3 that is supported by various technical, economic, and social parameters (Dewi et al. 2010; Dewi 2012). The back-casting method was engaged first to determine a set of desirable goals and then to determine how to achieve these goals, which involved (1) setting a framework, including the base year (2005) and target year (2030), the environmental target, the target area, and the number of scenarios; (2) describing and quantifying socioeconomic assumptions; (3) exploring energy technologies to achieve low-carbon targets; (4) estimating GHG emissions for the base and target years; and (5) analysing low-carbon measures that can achieve low-carbon city targets. The projection scenarios developed in this study include business as usual (BaU) and mitigation scenarios; BaU scenarios envision development paths and associated GHG emissions without considering mitigation efforts, whereas mitigation scenarios envision development paths to achieve low-carbon city targets.
Chapter 5 examines the economic impact of low-carbon investments in renewable energy sectors in Yokohama from 2005 to 2011. In this study, we conducted an accounting multiplier analysis to determine the impact of changes in low-carbon investment in renewable energy from 2005 to 2011. Chapter 6 examines a case in Japan (Yokohama) and summarizes the traits that are typically relevant to four representative city sectors: energy, waste, transportation, and water. The paper also examines policies in these sectors, including regulations, standards, planning and administrative directions, economic measures, voluntary actions, and environmental ethics. The chapter later discusses possible applications of the concept to the context of developing countries—and particularly to slum areas in India—and then presents an example of how concepts from smart city (SC) development may be applied in the energy sector in slum areas in India. Finally, the chapter elaborates upon the opportunities for the application of SC concepts in developing countries and introduces the leapfrogging model.
1.3 The Focus of this Book
This project will be used as guidance that shows how cities in select countries play a key role in the green growth agenda by stimulating growth through smart investment in urban infrastructure: by building physical infrastructure, by using financial and tax incentives, by fostering renewable energy supplies, and by increasing societal awareness of sustainable lifestyles. The roles of cities should also include systematic institutional governance that improves coordination among involved institutions (national and local governments, local communities, academics, and industries).
As for Asia, lessons learned from the three cities examined in our study show that unplanned and unstructured urban growth will significantly increase economic, social, and environmental costs. Funding for low-carbon infrastructure projects in cities may be generated by incentivizing low-carbon technologies such as solar PV and by fostering clean development mechanisms (CDM) and energy efficiency measures through market mechanisms and/or policy interventions such as those employed in Yokohama, Shanghai, and Jakarta. These findings correspond with the findings of the New Climate Economy Report that some cities may serve as powerful evidence that more compact and connected urban development based on mass public transportation can generate cities that are economically dynamic and healthier and that generate fewer GHG emissions.
Chapter 2 first identifies the risks associated with investing in renewable energy and the financial methods that may be used when promoting renewable energy sources (Sect. 2.2). Second, the chapter analyses the current status of global warming action plans and strategies that are designed to promote renewable energy sources using Yokohama as a case study (Sect. 2.3). Third, it describes the methodology and data used for the investment risks and returns analysis (Sect. 2.4). Fourth, it describes the outcomes of renewable energy investments by focusing on solar PV in both the residential and commercial sectors (Sect. 2.5). Yokohama, the second largest city in Japan, offers more opportunities for installation of solar PV than other renewable sources such as wind energy sources, which require regulation and large-scale land acquisition. In fact, solar PV represent more than 80 % of the installed capacity of renewable energy sources in Yokohama, whereas wind sources constitute only 10 % and hydro sources account for 3 % (as of 2011). Thus, in this study, we focus on solar PV investments. Investment challenges faced under the current FIT system in Japan are presented as examples of other risks (Sect. 2.6). The last section includes a discussion and conclusion.
The increase in the number of new green buildings shares represents just a small component of the overall growth trend in the building sector in China in recent years. For instance, in 2003, newly constructed buildings covered a total area of 3892 million metres2, whereas newly built green buildings (including all 1-star, 2-star and 3-star green buildings) covered a total area of 83 million metres2, which accounts for only 2 % of the total building area. Chapter 3 addresses research issues such as the causes of the current status of green building, the barriers and problems associated with green building development, and the possible solutions to such problems. Research methods are designed to address these research questions.
Chapter 4 presents the results of a modelling study on the 2030 Low-Carbon City Scenario for DKI Jakarta. The study aims to identify development paths that will allow DKI Jakarta to become a low-carbon city by 2030. As the energy sector accounts for 89 % of all GHG emissions generated in DKI Jakarta, the study focuses on this sector. Particular emphasis is placed on the selection of energy technologies that are necessary to achieve low-carbon city status. The results of the study may be used as an information source to help prepare development strategies, policies, and plans for DKI Jakarta.
Rather than assessing the environmental and social impacts of renewable energy investments, Chap. 5 assesses the economic effects of renewable energy investment in Yokohama. To determine the impact of renewable energy expansion in Yokohama, we assess economic transactions using the city input–output table.
Chapter 6 includes a policy analysis for Yokohama and the possible application of this analysis to developing countries. The chapter also examines policies in related sectors in terms of regulations, standards, planning and administrative approaches, economic measures, voluntary actions, and environmental ethics. The analysis on SCs in Japan reveals that such cities evolve over decades through steady urban development. The study finds that SC concepts may be applied to cities in developing countries, including informal settlements. Emphasizing informal settlements can be a key for leapfrogging directly to SC development.