Factors Driving and Blocking Adoption of Innovative City Solutions and Role of New Technology in Implementing Sustainable Governance and Finance Models

Table of Contents

1. Introduction.
2. Current state of cities.
3. Key issues faced by cities.
4. Cities and climate change.
5. Theoretical framework.
6. Conclusion.
7. Bibliography.

1.Introduction

 The world is experiencing rapid urbanisation (Godfrey & Zhao, 2016). Urban areas now accommodate over half of the global population (UN, 2014), but generate approximately 82% of global GDP (CCFLA, 2015). The share of global economic output attributable to cities is expected to reach 88% well before 2030 (CCFLA, 2015) and the 750 largest cities are likely to account for up to 60% of global GDP growth between 2012 and 2030 (Godfrey & Zhao, 2016). Scholars have highlighted that the current economic system has developed with no concern for the environment or little interest in recycling (Su et al. 2013).

2. Current state of cities

Cities are the main poles of human and economic activity that hold the potential to create synergies allowing great development opportunities to their inhabitants (Monzon, 2016). But due to the above mentioned environmental aspect, they are now struggling with their distribution, which is considered to be unsustainable (Macharis & Kin, 2016). For years, the topic of city distribution has been neglected by city planners in European cities (Lindholm and Behrends, 2012; Dablanc, 2007; Zunder and Ibanez, 2004). It has only resurfaced recently because its effects on mobility and quality of life have become increasingly apparent (Cherrett et al., 2012; Lindholm, 2013; Stathopoulos et al., 2012). Cities and urban infrastructure are key energy consumers and emitters of greenhouse gases (GHG) emissions; around 70% of global energy consumption and over 70% of GHG emissions are associated with urban areas (Seto, et. al, 2014).

Thus, it is no surprise that rapidly expanding urban settlements in the developing world face severe climatic risks in light of climate change (Tanner et. al, 2009). The main risks urban populations face include vector-borne diseases, heat stress, flooding, air and water pollution (Wilbanks et al. 2001; Parry et al. 2007). Deteriorating water accessibility in cities and an increasing risk of forest fires in peri-urban areas are supplementary dangers faced by urban populations. Climate change has the capacity to modify the climatic potential for urban heat islands, with increases of 30% in some locations, but a global average reduction of 6% (McCarthy et. al, 2010). The absence of long-term stability of carbon price or the lack of public incentives for low carbon initiatives makes investment in low carbon technologies unattractive (Martinez et. al, 2013).  Moreover, the inconsistency in international, national and regional rules and regulations related to environmental policies does not help to scale initiatives (Kinver, 2011). There is also a lack of appropriate and systematic methodologies and metrics for reporting and verifying the investment returns due to smart city technologies (Walravens & Ballon, 2013).

3. Key issues faced by cities

Apart from key social and environmental issues faced by cities that hamper implementation of ground-breaking city solutions, there are economic and financial issues prevalent too that are slowing down public investments (Martinez et. al, 2013). Unavailability of credit and new pressures and regulations on financial institutions is limiting the available cash flows, slowing down private investments (Mulligan & Olson, 2013). Although the idea of a smart city is attractive to policy makers, empirical research is needed to advance our academic understanding of the new ‘‘marriage’’ between technology and urban governance (Meijer & Rodrı´guez Bolı´var, 2015). The focus of ‘‘smart cities’’ research for governments has typically been on how cities might improve urban economies, quality of life, and myriad problems by employing information and communication technologies (Gil-Garcia, Helbig, & Ojo, 2014). Many of the challenges faced by smart cities surpass the capacities, capabilities, and reaches of their traditional institutions and their classical processes of governing, and therefore require new and innovative forms of governance (Rodrı´guez, 2015). Moreover, there are few alternative secondary markets to finance large smart city projects as only grants coming from EU funds or small local initiatives and local philanthropic capital are allowed to run first trials (Ruhlandt, 2018).

4. Cities and climate change

Climate change has the capacity to modify the climatic potential for urban heat islands, with increases of 30% in some locations, but a global average reduction of 6% (McCarthy, Best & Betts, 2010). Keeping this and other important actualities mentioned above in mind, this study will focus on how breakthroughs in technology can help us build self-governing and self-financing sustainable models that will assist us in setting up climate resilient cities through implementation of innovative city solutions.

Cities are under immense pressure to accommodate more and more inhabitants and at the same time address environmental sustainability, urban resilience, and resource efficiency issues (Razaghi & Finger, 2018). Recent technological changes have, however, paved way for the notion of ‘smart cities’ (Caragliu, Del and Nijkamp, 2011). Su, Li & Fu (2011) define smart city as a “city that makes intelligent responses to different kinds of needs, including daily livelihood, environmental protection, public safety, city services, and industrial and commercial activities.” Hartley (2005) states that it is a “city that connects the physical, IT, social and business infrastructure to leverage the collective intelligence of the city.” According to Hollands (2013), the real smart city has to begin to think with its collective social and political brain, rather than through its ‘‘technological tools.’’

Political and institutional fragmentation is mostly experienced by cities that can result in disagreements, particularly for multi-sectoral issues such as climate change (Blanco, 2013). Strategies following the regular hierarchy often create roadblocks and can be ineffective due to non-static cross-sectoral problems (Pierre, 2011). Keeping this in mind, various governments have shifted to novel forms of horizontal cooperation and mutual support, shying away from hierarchical structures. This mode ensures various actors arrive at decisions mutually and take necessary action as well as aligns institutions and actors well while promoting collective learning, decision-making and planning (Holden, 2011). Following this method makes way for improved learning as well as improved capability to solve difficult issues and enhanced resource mobilization (Giest & Howlett, 2013).

What should be considered as ‘‘smart’’ depends on various contextual conditions such as political system, geographical situation, and technology diffusion (Cosgrave, Doody, & Walt, 2014). When talking about real smart cities, we can enhance the view of Hollands (2013) above and go on to say that not just the social and political but also economic and environmental brains will be needed for smart cities to thrive and combat the effects of climate change. The smart cities market was valued at 528.16 billion in 2018 and is expected to reach a value of USD 1,447.87 billion by 2024 at a CAGR of 18.30% over the forecast period 2019 – 2024 (Mordor Intelligence, 2018). This market is expanding at a rapid rate and so are the issues connected to it with respect to implementation and relevant governance and financing models, which are proving to be acutely inadequate in the face of severe climate change.

5.Theoretical framework

A detailed review of recent literature and analysis of referenced papers proves the actuality that no one city can copy good practices from other success stories, but instead needs to establish its own model that fit its eventualities and formation. When it comes to governance, Meijer, Gil-Garcia, and Bolivar (2015) have argued that many questions remain concerning issues such as government leadership, participative models of governance, and the collaborative structures needed to foster smart city development. But this research has only focused on governance and not how the finances will be arranged to fund the relevant city solutions. Further related to governance is the matter of public value. Meijer & Rodriguez (2013) and Walravens & Ballon (2013) did talk about this value indirectly, but further research is needed to review public value when spoken about with reference to smart cities. Although several researchers highlight the importance of a structured, all-encompassing and practical governance framework for the realization of smart cities (e.g., Dameri & Benevolo (2016), Chourabi et al. (2012) and Nam & Pardo (2011a)) there continues to be an open discussion regarding what smart city governance entails and how it is to be defined.

Meijer & Bolivar (2015) provided an in-depth understanding of current debates on smart city governance. Perhaps a more recent study, Ruhlandt (2018) considered contextual factors regarding smart city governance by pursuing a systematic review approach. He aggregated diverse conceptualizations in smart city governance and identified possible gaps and interventions. However useful, these studies did not focus on the financial aspect and also did not relate the research to disruptions taking place in technology.

Godfrey & Zhao (2016) looked at investment decisions in urban infrastructure and also analysed market and government failures related to financing of innovative city solutions. They provided an overview of financing challenges and opportunities for urban infrastructure, specifically focusing on sustainable infrastructure – one that is economically, socially and environmentally viable. Although this is closely related to the proposed research, more study is needed to analyse how new digital technologies can provide sustainable solutions. CCFLA (2015) provided the argument that today’s financing landscape does not provide cities with adequate access to affordable financing suited to low-emission, climate-resilient infrastructure and emphasized creation of an enabling environment that encourages existing and new financing to flow from a broad spectrum of sources. What this study lacks is how finance has now gone digital and disruptions are forcing us to reimagine finance; as CGMA (2018b) states: as we head into a new decade, the finance world as you know it will continue to evolve at an unprecedented rate and you will be expected to perform new tasks with new technology we have not yet collectively imagined.

However, there have been recent studies that have linked smart cities with disruptions in new technologies. Harmon, Castro-Leon & Bhide (2015) reviewed smart cities and the use of Internet of Things (IoT) for implementation of solutions, stating that IoT represents an integrated smart system architecture of sensors, software, networks, and corresponding interfaces that hold the promise to beneficially transform operations, work, and the life of citizens. Zhang, Dragga, & Arpaci-Dusseau (2014) focused on cloud storage and how a range of weather data coming from a large number of end nodes collected over time can help predict micro-climates in a specific area of the city.

6. Conclusion

The evolving smart cities notion is becoming a persuasive example of how information technologies can enhance the quality of life while optimizing the city operations (Harrison & Donnelly, 2011). The key benefits of applying ICT in cities include reduction in resource consumption (particularly water and energy), reduced CO2 emissions, better utilization of current infrastructure capacity (reducing neeed for new construction) and development of new services for citizens, to name a few (Harmon, Castro-Leon & Bhide, 2015).

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