Mission Area:

Climate-Neutral
and Smart Cities
Foresight on Demand
Brief in Support of the
Horizon Europe Mission Board
Mission Area: Climate-Neutral and Smart Cities. Foresight on Demand Brief in Support of the Horizon
Europe Mission Board

European Commission
Directorate-General for Research and Innovation
Directorate G — Policy and Programming Centre
G1 — R&I Strategy and Foresight
Contact Jürgen Wengel
Email juergen.wengel@ec.europa.eu
RTD-PUBLICATIONS@ec.europa.eu
European Commission
B-1049 Brussels

Manuscript completed in August 2021

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 EUROPEAN COMMISSION

Mission Area: Climate-Neutral

and Smart Cities
Foresight on Demand Brief
in Support of the
Horizon Europe Mission Board

Authors:

Michael Dinges (AIT)

Judith Borsboom (Locality)

Mario Gualdi (ISINNOVA)

Gudrun Haindlmaier (AIT and University of Vienna)

Sirkka Heinonen (Finland Futures Research Centre, University of Turku)

2021 Directorate-General for Research and Innovation EN

Foreword

In 1969, the first human set foot on the moon. “A small step for a man. A giant leap for mankind”
was what audiences across the world heard. The Apollo mission showed the world what directed
science, research and innovation could make possible. It proved what humankind can achieve in not
even a decade, by setting a clear goal, which manages to capture public imagination, and by investing
the necessary resources into it.

The mission approach, directing and combining different resources and actors towards a common
goal, is becoming a key element of transformative R&I policies in a world of increasing global
challenges. The Commission introduced missions as a new instrument in Horizon Europe and
appointed Mission Boards to elaborate visions for the future in five Mission Areas: Adaptation to
Climate Change, Including Societal Transformation; Cancer; Healthy Oceans, Seas, and Coastal and
Inland Waters; Climate-Neutral and Smart Cities; Soil Health and Food.

EU R&I policy missions are ambitious, yet realistic and most of all desperately needed in light of
today’s challenges. They endeavour to bring together policies and instruments in a coherent, joined-
up approach, and tackle societal challenges by setting and achieving time-bound, measurable goals.

In September 2020, the Mission Boards handed over their reports to the Commission. Five foresight
projects carried out in close interaction with the Boards supported their work. These projects provided
advice on trends in the respective areas, elaborated scenarios on alternative futures, scanned
horizons, and made aware of weak signals, and emerging new knowledge and technology, helping
the Boards imagine how the future may evolve and how to shape it.

With the launch of the five Missions in Horizon Europe, we are making this valuable work available
for the broader public. I am confident that the comprehensive material, creative ideas and exciting
examples in the Mission Foresight Reports will prove useful to all those engaged in the Horizon Europe
Missions.

Jean-Eric Paquet
Director General
Research and Innovation
Table of Contents
BACKGROUND AND ACKNOWLEDGEMENTS ...........................................................4
MISSION AREA: CLIMATE-NEUTRAL AND SMART CITIES. FORESIGHT ON DEMAND BRIEF
IN SUPPORT OF THE HORIZON EUROPE MISSION BOARD ..........................................6
1 INTRODUCTION ..............................................................................................6
2 SETTING THE STAGE .......................................................................................8
2.1 Working definitions .................................................................................................... 8
2.2 Accounting climate neutrality ........................................................................................ 9
2.3 Trends, potential disruptions and key challenges ................................................................ 12
3 PATHWAYS TO CLIMATE-NEUTRAL CITIES ...........................................................17
3.1 Feasibility of climate neutral cities .................................................................................. 17
3.2 Possible pathways .................................................................................................... 18
3.3 All things said, where do we go from here? ....................................................................... 29
4 ENABLING SMART AND CLIMATE-NEUTRAL CITIES ................................................31
4.1 How to make change happen ....................................................................................... 31
4.2 The importance of a systemic, integrated approach ............................................................. 32
4.3 Principles of policy delivery .......................................................................................... 34
5 THE ROLE OF THE MISSION ..............................................................................36
5.1 City contracts .......................................................................................................... 36
5.2 Selection of 100 cities ................................................................................................ 37
6 CONCLUSIONS AND RECOMMENDATIONS ...........................................................40
6.1 Conclusions ............................................................................................................ 40
6.2 Recommendations on further development and implementation of the city contracts ..................... 41
6.3 Recommendations on knowledge gaps concerning smart and climate-neutral cities ...................... 43

3
BACKGROUND AND ACKNOWLEDGEMENTS

Missions and Horizon Europe

The notion of “missions” as one of the novel cornerstones of Horizon Europe, the European Framework
Programme for Research and Innovation 2021-2027, was introduced in the course of the programmatic
debates about the orientation of the EU’s future R&I policy, in particular through the Lamy Report. This
report, which was presented in July 2017, recommended adopting “a mission-oriented, impact focused
approach to address global challenges”. Missions would serve as targeted and longer-term ambitions
around which to build a portfolio of Horizon Europe research and innovation projects.

The idea of mission-oriented research and innovation was subsequently further specified through
various studies and reports, in particular also by two reports by Mariana Mazzucato, which inspired
policy debates at European as well as national level. In line with this preparatory work, missions shall
have a clear R&I content EU added value and contribute to reaching Union priorities and Horizon
Europe programme objectives. They shall be bold and inspirational, and have scientific, technological,
societal and/or economic and/or policy relevance and impact. They shall indicate a clear direction and
be targeted, measurable, time bound and have a clear budget frame.

As a result of debates at European level, the European Commission (EC) proposed five initial broad
Mission Areas in autumn 2018. This initial list was subsequently adjusted in interaction between the
EC and Member States, leading to five Mission Areas:
i) Adaptation to climate change including societal transformation,
ii) Cancer,
iii) Healthy oceans, seas, and coastal and inland waters,
iv) Climate-neutral and smart cities, and
v) Soil health and food.
As spelt out in the specific request, these missions will be anchored in the pillar “Global Challenges
and Industrial Competitiveness”, but may well reach out to the other pillars of Horizon Europe.

Within each of these Mission Areas, a limited number of specific missions shall be defined in the context
of the next framework programme, with a first set of missions to be launched in 2021. To this end, the
EC has established Mission Boards of about 15 outstanding members for each of the five Mission
Areas. Mission Board members were appointed in August 2019 and they started their work in
September/October 2019. They presented their recommendations to the EC at the EU R&I days in
September 2020. The titles and descriptions of the actual EU Missions launched by the European
Commission are found here: https://ec.europa.eu/info/research-and-innovation/funding/funding-
opportunities/funding-programmes-and-open-calls/horizon-europe/missions-horizon-europe_en

Foresight on Demand

Against this background, a request for services with five lots was put out under the Foresight on Demand
Contract (FOD) of DG R&I to support the five Mission Boards. The five projects started in autumn 2019.
For around a year they worked for and with the Mission boards, providing foresight expertise and
methodology. They were aimed to feed the reflections of the Mission Boards with future-oriented inputs
on challenges and options in the respective areas.

With the launch of the missions in Horizon Europe, this valuable work is now public as a part of the
Foresight Papers Series. The five mission foresight reports give a detailed overview of the alternative
futures, and the future perspectives in science and technology in the five mission areas build part of the
basis for the considerations of the Mission Boards. They may serve as background material and a
source for examples and ideas for coming mission activities.

4
Mission foresight project “Climate-Neutral and Smart Cities”

The foresight project “Climate-Neutral and Smart Cities” (Framework Contract 2018/RTD/A2/OP/PP-
07001-2018-LOT1) aimed to support the reflections of the corresponding Mission Board by providing
future-oriented inputs on challenges and options in the area. The overarching goal of the project
proposed was to complement the Mission Board’s deep and wide-ranging expertise with a foresight
perspective.

In particular, the project intended to develop a forward-looking perspective on the importance and future
significance of the mission area. Starting with a systemic analysis, the FOD team identified urban
challenges in existing forward-looking studies in order to determine the thematic scope together with
the Mission Board, collected data about consolidated external and internal drivers, trends and practices
as well as weak signals, potential disruptive events or incremental changes with a potentially substantial
positive impact on cities. We would like to express our gratitude to the entire Mission Board for Climate-
Neutral and Smart Cities for their help, input and suggestions. In addition, the authors want to thank
Paul Tuinder and Laura Hetel of Future Urban and Mobility Studies of European Commission DG-RTD,
for their feedback, guidance and practical help.

The emergent need for climate change adaptation and mitigation measures in cities as well as the
Covid-19 crisis and its potential impact on climate-neutral and smart cities have shown that cities and
other authorities require different priorities in order to effectively accelerate their pathways towards
climate neutrality (no one size fits all). However, it will for sure require a co-evolvement of technological
innovations, knowledge capacity building within city authorities and businesses, large scale public and
private investments in physical infrastructures and buildings, new business models and services that
induce behavioural change of actors, and incentive systems and regulative actions at national level. For
all domains (urban mobility and transport, building and retrofitting as well as urban energy systems),
digitalisation can play a key role besides calling the entire coalition of urban stakeholders to action in a
coordinated and holistic approach.

The analyses fed a joint scoping workshop with the Mission Board as well as an analytical review and
feedback on its interim draft. Finally, it form part of the basis for the Mission Board’s final report “100
Climate-Neutral Cities by 2030 - by and for the citizens” (2020).

5
Mission Area: Climate-Neutral and Smart Cities.
Foresight on Demand Brief in Support of the
Horizon Europe Mission Board

1 Introduction
This chapter describes the projects’ main goals and how the project has been executed.

The main objective of the project was to support the reflections of the Mission Board for Climate-Neutral
and Smart Cities with foresight processes and forward-looking evidence in order to help identify and
evaluate the potential of different directions for concrete missions in relation to smart and climate-neutral
cities.

Therefore, the services were designed to create forward-looking evidence and develop a better
understanding of the most relevant drivers, trends and emerging phenomena with the potential to
influence the urban future. The services pursued three objectives:

1. To identify internal and external trends and drivers that are likely to influence how and along
which pathways European Climate-Neutral and Smart Cities will develop in the future
(differentiated between short-medium-long term perspective).

2. To identify relevant actors as well as innovative practices and technologies that could shape
the future in different directions.

3. To identify key challenges, threats and opportunities emerging from socio-economic,

environmental and technological changes that will trigger the need for new research and actions.

In this way, the project has provided the basis for the identification of possible mission topics addressing
transformative solutions for cities and their citizens.

The work in the study was operationalised in three different tasks as follows:

The project started with compiling, categorising, analysing and summarizing the most relevant literature
on existing challenges, emerging issues and external and internal drivers that influence the future
development of climate-neutral and smart Cities. The study team pursued a systemic approach,
focussing on:

 the identification of agreed city challenges in existing forward-looking studies in order to

determine the thematic scope with the Mission Board 1;

 collecting data about consolidated external and internal drivers, trends and practices
(likely to influence the future);

 identifying and selecting specific phenomena at the periphery (i.e. weak signals, potential
disruptive events, discontinuities etc.), or incremental changes with a potentially
substantial positive impact on cities.

Subsequently, the findings of this analysis informed a Scoping Workshop with the Mission Board and
the Foresight on Demand project team, which was organised in Brussels on 15 November 2019. The
identified drivers, trends, threats, challenges, options and opportunities were discussed with and

1 e.g. Vandecasteele I., et al (2019), The Future of Cities – Opportunities, challenges and the way forward, EUR
29752 EN, Publications Office, Luxembourg, 2019, ISBN 978-92-76-03847-4, doi:10.2760/375209,
JRC116711

6
exemplified for the Mission Board members in order to evaluate their relative importance. In addition,
the uncertainty of emerging drivers, trends and practices was discussed, and areas in need of additional
research and evidence identified. In addition, feasibility of city contracts was briefly discussed. Based
upon the identification of the most pertinent and significant issues, a Flashnote paper was established
which addressed the main topics and questions raised during the meeting with the Mission Board and
the Foresight on Demand project team on 15 November 2019. The Flashnote deepened, amended
and completed where needed the findings from the Scoping Paper in the following way:

 It provided an outline on the development of EU greenhouse gas (GHG) emissions and

the role of European Cities in the state of play of GHG emissions, including a short reply
to the GHG accounting system for European cities.

 It shed light to the question, whether pursuing a 100% climate neutrality target is an
ambitious, yet useful aim and how behavioural aspects, autonomous driving,
electrification of transport, avoidance of traffic and freight transport, building retrofitting as
well as synergies between land use and transportation play a role for reducing GHG
emissions.

 By focusing also on policy delivery, the Flashnote pointed out on the need for pursuing a
systemic, holistic approach, considering the diversity of cities and respective city
typologies, as well as design elements for city contracts in a systemic overview.

In the beginning of February 2020, an analytical review and feedback to the Interim Report of the
Mission Board on Smart and Climate-Neutral Cities was provided to the European Commission. The
review used the results of the rapid data gathering in combination with the analytical findings of the
forward looking sources, in order to assist the Mission Board in its task to propose a list of themes that
emerge as promising candidate missions (Task 3). In particular, the review provided an input to the
European Commission and the Mission Board on matters how relevant questions concerning climate
neutrality and cities can be addressed, and whether a climate city contract is a realistic approach for
arriving at climate neutrality by 2030.

Based upon the data collection, analysis and interaction with the Mission Board, this report summarises
the main outcomes of the entire research done in this study.

7
2 Setting the stage
Chapter 3 sets the stage for the project. It highlights common working definitions for key concepts and
terms in this study, explains how climate neutrality can be measured, and describes how trends and
potential disruptions affect or may affect cities, resulting in key urban challenges.

2.1 Working definitions

As there are different understandings of the related concepts, it is important to specify the definitions of
“city”, “climate-neutral city”, and “smart city” as used in this report.

What is a city?2

From a functional perspective, cities are interlinked complex systems of buildings, people and
industries, and networks of transport, energy, water, waste, food, information and goods. 3 People use
these systems and networks to meet their everyday needs, using services like health, education and
culture. They are governed and influenced by local, national and EU policies. Each city forms the centre
of its own commuting zone, indicating functional ties between core city and surroundings, but can also
be part of a polycentric, overlapping structure comprising multiple cities.

Individual countries use different definitions for what constitutes a city and until recently, there was no
harmonised definition of ‘a city’ in Europe. Based upon a new Organisation for Economic Cooperation
and Development (OECD) and EU definition in 2011, 828 (greater) cities with an urban centre of at
least 50,000 inhabitants in the EU, Switzerland, Iceland and Norway have been identified. In addition,
the combination of satellite-imagery-based land use data, Functional Urban Areas and administrative
boundaries of cites has led to another satisfying urbanisation classification across Europe. 4

Half of the European cities are relatively small with a centre between 50,000 and 100,000 inhabitants,
with only two global mega-cities of more than 10 million inhabitants (London and Paris). In the European
Union alone, 74% of the population lives in cities. 5 Cities with more than 50.000 inhabitants host about
44% of the EU population, while towns and suburbs below 50.000 inhabitants cover another 30 % of
the EU population.

What is a climate-neutral city?6

Mitigation and adaptation are two sides of an urban strategy for climate neutrality. Such a strategy
suggests that cities aim to achieve net zero emission of Green House Gases (GHG) by reducing these
emissions as much as possible and by developing mechanisms to offset the remaining unavoidable
emissions. Cities also aim to become climate-proof, or resilient to the negative impacts of the changing
climate, by improving their adaptive capacities.

2 https://ec.europa.eu/regional_policy/sources/docgener/focus/2012_01_city.pdf

3 https://exponentialroadmap.org/wp-content/uploads/2019/09/ExponentialRoadmap_1.5_20190919_Single-
Pages.pdf

4 See: https://ec.europa.eu/jrc/en/publication/future-cities

5 https://ec.europa.eu/eurostat/statistics-explained/index.php/Urban_Europe_-
_statistics_on_cities,_towns_and_suburbs_-_executive_summary#City_and_urban_developments

6 https://www.unece.org/fileadmin/DAM/hlm/documents/Publications/climate.neutral.cities_e.pdf

8
What is a smart city?7

A smart city is a place where buildings, infrastructures and services are made more efficient by using
digital and telecommunication technologies for the benefit of its inhabitants and business. A smart city
deploys these technologies for better resource use and less emissions. It means smarter urban
transport and energy networks, upgraded water supply and waste disposal facilities as well as more
efficient ways to light, heat and cool buildings. It also means a more interactive and responsive city
administration, safer public spaces and meeting the needs of specific societal groups, such as elderly
people. Smart solutions are considered here as ICT based solutions contributing to climate-neutral
cities.

2.2 Accounting climate neutrality

Main sources and accounting for GHG emissions

When scoping actions towards climate neutrality, the main sources of GHG emissions, sectors
producing it, and main patterns of consumption and production in cities need to be considered 8:

 On a global basis, GHG emissions causing global warming are by large created by human
activities. Carbon dioxides (CO2) that come from burning fossil fuels, land use (deforestation,
plowing), and industrial processes account for 76% of GHG. Methane (CH4) comes from biomass
burning, rice fields and cattle (16% of total heating). Nitrous oxide (N2O) comes from fertilizers
(6% of total heating), and fluorinated gases (f-gasses) come from refrigerants and industrial
processes (2% of total heating).

 The main sectors being responsible for GHG emissions on a global scale are electricity (25%),
food & land use (24%), industry (21%), transportation (14%), buildings and homes (6%) and other
energy production (10%)9.

However, urban emission accounting is quite complex due to different responsibilities of the main
urban actors and the fact that production-consumption chains exceed urban jurisdictions. For these
reasons, a distinction between 1) internal GHG emissions within the geographical boundary of a
city/urban district produced by core activities such as construction of buildings and roads, transportation,
supply of electricity and water, city industry, etc., 2) external GHG emissions directly caused by core
municipal activities outside the geographical boundaries; and 3) GHG emissions resulting from non-
core activities, i.e. mainly urban consumption of building materials, food, clothing & textiles, private
transport, electronics & household appliances, as well as air travel can be made. 10 Urban Areas form a
metabolism, in which different flows of production and consumption of municipal actors and citizens
within a city’s boundary and the external world cause GHG emissions (see Figure 1).

Current GHG accounting methods are based on either production or consumption-based inventories,
which are difficult to translate to the geographical and administrative boundaries of cities for the reasons
mentioned above. The C40 Cities Climate Leadership Group (C40) report on consumption-based

7 https://ec.europa.eu/info/eu-regional-and-urban-development/topics/cities-and-urban-development/city-
initiatives/smart-cities_en

8 https://globalecoguy.org/the-three-most-important-graphs-in-climate-change-e64d3f4ed76

9 https://www.drawdown.org/

10 https://c40-production-
images.s3.amazonaws.com/other_uploads/images/2259_C40_CBE_MainReport_190613-
HDA3.original.pdf?1561382579

9
greenhouse gas emissions11, carried out for 79 cities, found that a group of large cities across the world
emitted 60% more carbon when considered like this.

Figure 1: Urban Metabolism related to three sources of GHG emissions

Source: CLUE Climate Neutral Urban Districts in Europe (2012), www.clue-project.eu.

GHG emissions in cities

Despite the challenges in accounting for GHG emissions, it is clear that on a global scale, cities are and
continue to be key players in the global fight against climate change, as they account for 60% to 80 %
of global CO2 emissions depending on the estimates. While cities occupy only 2% of the planet’s
landmass, in terms of climate impact they exert an enormous footprint by consuming over 65% of the
world’s energy and accounting for more than 70% of global CO2 emissions.12

Main sources of GHG emissions in European cities are buildings (36%), transport of goods and persons
(35%), production and consumption of goods and services, including food and the provision of energy
and other utilities (in total 29%). Due to de-industrialisation the larger part of GHG emissions for goods
and services consumed in Europe, are generated in other parts of the world, namely 85%. 13

In European cities the building stock is responsible for 40% of energy use and 36% of GHG emissions.
A study of national Energy Performance Certificates (EPC) data of 14 member states shows that
currently about 3% of the buildings has EPC-class A, around 8% EPC-class B, approximately 16% falls

11 https://www.c40.org/researches/consumption-based-emissions

12 https://www.c40.org/researches/consumption-based-emissions

13 Borsboom-van Beurden. J., Kallaos, J., Gindroz, B., Costa, S., Riegler, J. (May 2019). Smart City Guidance
Package. A Roadmap for Integrated Planning and Implementation of Smart City
projects. NTNU/European Innovation Partnership on Smart Cities and Communities, Action Cluster
Integrated Planning/Policy and Regulation. Brussels: EIP-SCC.

10
into EPC-class C and 73% EPC-class D or higher.14 The study concludes that 97% of the current
building stock must be refurbished to attain the 2050 goals, while the Energy Performance of Buildings
Directive (EPBD) had only major effects after 2010. Current replacement rate of 1% per year means
that 75 to 90% of the current building stock will still stand in 2050.

Other objects in the built environment have comparable slow paces of replacement: the average
lifespan of electricity grids is approximately 45 years, distribution networks for natural gas are used for
more than 50 years, and heating and cooling networks for 40 to 80 years. 15 Transport infrastructures
are nearly irreversible and tend to lock in urban development for decades or maybe even centuries 16.

Figure 2: EPC status per country/region

Source: BPIE (2017)

Regarding transport of goods and persons, growth in demand and heavier vehicles largely
compensated for cleaner combustion engines in terms of energy use and GHG emission. The ongoing
globalisation and accompanying further spatial division of labour, the rise of internet shopping and
increasing personal (car) mobility have led to more vehicle kilometres. Due to this, there was hardly a
reduction of fossil fuel use. Electric vehicles have currently a limited market share in Europe of around
2%, although it recently increased by 30% between 2017 and 2018 17.

For the third main category of emissions, with European cities being the main location of both
production and consumption of goods and services in Europe, it is clear that, as mentioned earlier,
GHG accounting must use both perspectives. , Goods and services produced within Europe might be
consumed outside Europe, while goods and services consumed in Europe might be produced
elsewhere, leading to approximately 85% of emissions taking place outside the city boundary. Overall,
production and consumption patterns depend upon the state and structure of the local economy and
resulting welfare of citizens.

14 http://bpie.eu/publication/97-of-buildings-in-the-eu-need-to-be-upgraded/

15 Borsboom-van Beurden, J. (2018), Windows of Opportunity for Smart City Solutions in the Urban Fabric. Paper
presented at 54th ISOCARP Congress 2018, 1-5 October Bodø.

16http://documents.worldbank.org/curated/en/832541468178451551/pdf/801060WP0v20100Box0379805B00PU

BLIC0.pdf

17 https://www.iea.org/gevo2018/

11
2.3 Trends, potential disruptions and key challenges

Trends

In view of accelerating the transition to climate-neutral cities, the following are identified as notable
socio-economic trends to consider. This discussion of trends includes both some very strong trends i.e.
megatrends such as climate change, urbanisation, ageing of population, and digitalisation, and general
trends such as stagnating economy and rise of new modes of affordable housing. The following trends
affecting pathways towards smart and climate-neutral cities have been identified in the course of
the study:

 Urbanisation in Europe is increasing, as is the overall size of land occupied by cities. Europe's
level of urbanisation is expected to increase from today's 74% to about 75% in 2020 and to
83.7% in 2050 (UN DESA, World Urbanization Prospects, 2018).

 Against that, Europe is coping with declining and ageing population, partly offset by soaring
migration flows, with concurrent increased population diversity (regional disparities to be observed
and expected to be prolonged). The European population is projected to increase from 511 million
in 2016 to 520 million in 2070. However, the working-age population (people aged between 15
and 64) will decrease significantly from 333 million in 2016 to 292 million in 2070, with
considerable repercussions on the “old-age dependency ratio” (people aged 65 and above
relative to those aged 15 to 64), projected to increase by 21.6 percentage points, from 29.6% in
2016 to 51.2% in 2070. That equals to shifting from the current 3.3 working-age people for every
person aged over 65 years to only 2 working-age persons. An ageing EU population will require
the further adaptation of infrastructure and services.

 Most European cities are expanding and expected to cover greater areas than in the past. Urban
sprawl is increasing. Cities will have to increasingly re-think how their public space is both
designed and used.

 The tail of the shock waves of the global economic stagnation is to further affect municipal
revenues and consolidate structural unemployment, which in turn will worsen social disparities,
pushing growing shares of urban population into poverty. While future trends are difficult to
calculate, taxes received in Europe by the local level of government as % of GDP have
stagnated in the 2007-2017 period (only + 0,2%), as have taxes received by the local level of
government as % of total taxation in the same period (+ 0,3%). This trend is likely to continue and
to complicate the quest of cities to achieve the climate targets set by the European Union.

 Accelerating digitalisation and the development of artificial intelligence, may widen these gaps,
while their potential might be harnessed to alleviate them. As with previous industrial revolutions,
digitalisation is likely to have two major consequences for enterprises and workers. On the one
hand, they enable enterprises to enhance their efficiency, raise labour productivity and replace
activities, which is likely to lead to a reduction in jobs. On the other hand, it will enable new
enterprises, new business-models and services, which generates new jobs. Accordingly,
estimates of the impacts of digitalisation on employment diverge vastly, depending on the
extent to which broader application of ICT and new digital technologies such as data analytics,
artificial intelligence, 3D printing, cloud computing, the Internet of things (IoT) and robots will
cause change, eliminate existing jobs, and create new activities and jobs. Estimates vary from a
loss of about 35% employment in the UK18 (Frey & Osborne, 2016) to more optimistic outlooks
that include strong employment growth across the architecture and engineering and computer
and mathematical job families, a moderate decline in manufacturing and production roles and a
significant decline in office and administration, and flat trends in business and financial
operations, sales and related and construction and extraction, over the 2015–2020 period (World
Economic Forum, 2016). Linked to that, issues of public acceptance of technologies,

18 https://www.sciencedirect.com/science/article/pii/S0040162516302244

12
 cybersecurity and data ownership (drones, big data, surveillance, Big Five companies etc.) are
potential sources of conflicts (potential solution: User driven design and Co-creation).

 Decreasing affordable housing and the consequent loss of urban identity, especially in high-
priced central districts, is an escalating phenomenon, causing social and residential polarisation,
fuelled by the explosion of home-sharing platforms. Although limited analyses exist, it has been
calculated that even just one of these platforms (Airbnb) can substantially increase the influence
of gentrification: in the U.S. 1% increase in listings is causally associated with a 0.018% increase
in rental rates and a 0.026% increase in house prices. These figures shall be coupled with
Airbnb’s 44% year-over-year average growth in listings, to show that the growth in home-sharing
through Airbnb contributes to about 20% of the average annual increase in rents and about 14%
of the average annual increase in housing prices. (Harvard Business Review, 2019).

 Climate change exacerbates the impacts of natural disasters, energy poverty, water
scarcity, extreme weather conditions, with particularly severe implications for the living conditions
of disadvantaged, vulnerable and marginalised citizens, which will be forced to abandon their
homes. Forecasts posit that there could be between 25 million to 1 billion environmental migrants
by 2050, moving either within their countries or across borders, on a permanent or temporary
basis, with 200 million being the most widely cited estimate (UN International Organization for
Migration, 2019). However, while cities are front runners in fighting climate change, they are
also where the effects of energy poverty and water scarcity etc. will be particularly evident and
felt.

 At the same time European cities are witnessing growing environmental awareness, especially
among the young generations, rising citizen participation in policy processes and strengthened
forms of urban governance incorporating the quadruple helix (public institutions, private
businesses, research organisations and citizens19). Behavioural change related to mobility,
transport and energy can make a positive impact on GHG emissions.

 Growing migration inflows particularly from Africa and Middle East to Europe is unevenly
impacting various European cities. Disadvantaged groups, including immigrants and minorities,
are high users of smartphones and social media, and could theoretically be reached through
these tools20. However, these groups are often thought to be digitally, as well as socially
excluded, and the move by governments to online platforms could exacerbate existing barriers to
accessing public services, in particular when host-country language abilities hinder migrants to
take full advantage of digital government services (ibid.).

 Cities are also moving towards integrated planning and smart concepts by building synergies
across technical, political, social and financial systems for climate-neutral
solutions. These include energy efficiency and local generation of zero-carbon heat and electricity
(up to plus energy areas), shared, active and zero-emissions mobility solutions, community and
nature-driven projects, urban agricultural change, as well as broader concepts of smart cities and
the circular economy. In addition, new forms of urban governance (partly supported by ICT
solutions/services) and increasing citizen engagement is becoming visible.

Disruptions

It has to be born in mind, however, that alongside with paying attention trends and megatrends, one
should also take into account emerging issues as well as possible disruptions. Futures thinking

19 https://futurecitiesandenvironment.com/articles/10.5334/fce.61/

20 https://www.migrationpolicy.org/article/immigrants-smart-city-potential-city-digital-strategies-facilitate-
immigrant-integration

13
acknowledges that sudden unexpected events may require re-configuring of priorities, approaches
and action.

Potential disruptions are events, phenomena, new discoveries, or countertrends that shutter the status
quo of society, and its development along the recognised linear trajectories (Heinonen et al. 2017) 21.
Typically, disruptions arise from technological innovations that enable changing current practices or
business models. For cities, Artificial Intelligence, Big Data, and Internet of Things are potential
disruptive forces connected to digitalisation. Their increasing use may dramatically change the ways
how cities are being constructed and managed. They may change the way citizens live, work, travel,
consume goods and services and spend their leisure time. Another kind of disruption may arise from
the increasing need for citizen’s participation in urban governance. Prosumeristic and peer-to-peer
practices may scramble the power structures in production and planning processes. How well cities can
anticipate such disruptions, also means providing tools for harnessing the power of such disruptions to
expediate the transition to climate-neutral and smart cities.

Disruptions may also arise from external shocks, i.e. dramatically impactful events. Previous examples
of such rare but events are terrorist attack on the World Trade Center in New York in 2001, crash of the
financial housing market in 2008, and shutdown of all European air traffic due to eruption of the
eruptions of Eyjafjallajökull volcano in Iceland in 2010.

A noteworthy current example is the pandemic caused by covid-19 in early spring 2020, hitting the cities
in Europe and in other continents and demanding extra resources for the health services and resources.
Such wild cards may either deepen a trend (economic stagnation, growing need for integrated planning)
or weaken it (focus may shift from environmental awareness to health issues only) or break it (growing
aviation brought at least temporarily to a halt).

The ongoing Covid-19 Crisis is also expected to have a major impact on the future of mobility and the
ways cities operate. In the short-term, the crisis impacts investment behaviours in future technologies
such as autonomous driving etc., due to the harsh negative macro-economic impact of the crisis. The
crisis also has an immediate impact on citizens mobility behaviours. Evidence from Chinese cities
confirms that private cars, walking, and biking have gained the most share since the pandemic began,
while bus and subway ridership declined: People who own a private vehicle will use it increasingly,
while those who previously relied on public transport might switch to another mode, such as biking or
walking instead22. For studying the expected impacts of COVID-19 on mobility, its impact on the
transport sector and on cities, the EIT Urban Mobility provides up-to-date studies on the future of car-
use, changes in behavioural patterns of citizen, and city mobility planning on a dedicated site:
https://www.eiturbanmobility.eu/covid-19-what-is-happening-in-the-area-of-urban-mobility/

Key challenges for European cities

Interwoven with the above trends are the following climate-related key challenges and needed
change areas for effective climate neutrality:

 Being particularly vulnerable to the impacts of climate change, cities need to tackle climate
change by aligning with each other and with national and regional-level actors as much as
possible. While cities have already considerably raised their level of ambition, if they are to play
the pivotal role their carbon footprint demands, they need support and best practice
examples from their partners in national, regional and European governments. This does not only
entail supportive legislation, but also substantially increased funding, possibly linked to concrete

21 Heinonen, S., Karjalainen, J., Ruotsalainen, J. & Steinmüller, K. (2017). Surprise as the New Normal –
Implications for Energy Security. European Journal of Futures Research (2017) 5: 12.
https://doi.org/10.1007/s40309-017-0117-5

22 https://www.mckinsey.com/industries/automotive-and-assembly/our-insights/the-impact-of-covid-19-on-future-
mobility-solutions?cid=soc-web

14
 targets achievement. Coupled with this is the need for cities to raise their ability to engage the
private sector, academia and civil society in collaborative partnerships, while leveraging both the
banking system and innovative financial tools (e.g. green bonds) to spur large climate-supportive
infrastructural investments. A major challenge is who is going to pay for this activity.

 Mobility and transport will continue to be the main source of emissions and pollution after
the energy supply sector, and the principal urban headache when accounting also for the unpaid
externalities generated by congestion, acoustic emissions, accidents, deterioration of public
space and loss of productivity. According to the 2020 European Court of Auditors audit on EU
urban mobility policy and funding, ‘’urban areas need to take action to shift to more sustainable
transit’’. ECA reports that Sustainable Urban Mobility is one of the main challenges facing cities in
the EU and a matter of concern for many citizens. Road transport is one of the main causes of air
pollution and greenhouse gas emissions in urban areas, and the costs of congestion to society
are around €270 billion a year. Here, major negative impacts, such as emissions and noise, could
be removed by electric vehicles, but not all.

 Urban mobility is one of the sectors that will need to change most. Although the ownership
of private vehicles might decrease due to private mobility offered as a service, and shared and
active mobility on the one hand, and stricter regulation for car-free spaces on the other hand,
individual car ownership and use is still on the rise in many countries. In addition, sharing is not a
magical solution and more proof of its impacts on reducing GHG emissions and air pollution is still
needed.

 Integrated planning, particularly combining land use, mobility and transport, as well as the urban
and regional dimensions, will have to be improved to promote compact urban development and
mixed use of land, ultimately reducing trip times and the need to travel. Cities will increasingly
apply new technologies and innovation across a wide range of sectors, from transport and
mobility to citizen engagement. This technology will also need to be interoperable and integrated.

 Public spaces, which make up between 2% and 15% of urban land, can play essential physical
and social functions to relieve pressures exerted by growing populations.

 Urban green, which has increased by 38% over the last 25 years, needs to keep growing to help
cities cope with climate change, as they contribute to improve air quality, provide microclimate
regulation, enhance safety, social integration and public health. (JRC 2019). Vertical farming
and biomimic solutions are promising areas for such efforts. Growing integration between urban
green, sustainable mobility and land use policies is a challenge that holds the promise of affording
major contributions to the preservation not only of cities but also of a healthy planet and its
people.

 Decarbonisation will lead to growth in electricity demand, especially in cities, amplifying the
need for accessible, affordable and possibly locally produced renewable energy. New and
emerging technologies could help cities cut down their emissions and lower their climate impacts
while improving public services, especially in the energy sector. These include, amongst
others: RES, biofuels, hydrogen, and other synthetic fuels; energy storage and conversion
technologies (batteries, heat storage, Power-to-X); intelligent networks and infrastructure for
electricity, heat and gases to include spatial issues and benefits of pooling. (See e.g. Child et al.
2019).

 Climate-neutral cities will have to fundamentally tackle several non-technological challenges,

which are far more complex and difficult to circumvent than technological barriers. Socio-cultural
aspects play a key role in decision-making, both consciously and unconsciously, and behaviours
can change at a much slower pace than technology and economy. The interaction between
humans, technology and society has to be addressed in a balanced way, since not everything that
is technologically feasible and economically viable is socially comprehensible and
acceptable. Analyses show that nearly two-thirds of global emissions are linked to both direct and
indirect forms of human consumption, rendering the potential of changing behaviours in
reducing natural resource consumption an enormous contribution to reducing global emissions.

15
 With the support of technology, cities and society at large need to design innovative solutions that
meet people where they are, using the power of emotional appeals, social incentives, and choice
architecture. It has been estimated that behavioural solutions can mitigate 20% to 37% percent of
global emissions from 2020-2050, with contributions coming from all sectors, agriculture, land
management, food, energy and materials, and transport (Centre for Behaviour and the
Environment, 2018).

With the main elements for climate-neutral and smart cities defined and key urban challenges identified,
the next chapter will explore possible pathways to achieve climate-neutral and smart cities are explored.

16
3 Pathways to climate-neutral cities
Chapter 4 focuses on the main elements that can help to achieve climate-neutral and smart cities. It
focuses on the feasibility of climate-neutral cities, possible pathways towards them and opportunities
that can be seized for promoting them.

3.1 Feasibility of climate-neutral cities

Is it realistic to pursue a 100% target for climate-neutral cities?

Although efforts need to be enhanced to complete the overall ambition for achieving the 2040 and 2050
targets at the EU level, numerous studies and use cases show that it is ambitious, but realistic and
economically viable to aim for 100% climate-neutral cities:

 The Paris Agreement committed the world to limit global warming to well below 2°C and to
keep it as close as possible to 1.5°C above preindustrial levels. In Europe the EU Member
States’ long-term strategic plans can provide favourable framework conditions for achieving
climate-neutral cities and also countries like China, as a major CO2 emitter in the world,
follow a strategic approach to reduce and eventually eliminate emissions from all sectors by
mid-century. “China 2050: A Fully Developed Rich Zero-Carbon Economy”, depicts an
optimistic yet technically and economically feasible pathway to decarbonise the harder-to-
abate sectors of the Chinese economy by mid-century. The transition would cost less than 1%
of GDP, with only a minor impact on consumer prices.

 Gouldson et al (2015, 2018) have evaluated the worldwide economic case for cities to invest
in the large-scale deployment of low-carbon measures in the buildings, transport and waste
sector where cities have the best scope for action, such as heating retrofits, urban planning
and reduced passenger demand, freight logistic and improvements and recycling. They found
for the “medium” scenario a very positive economic case for substantial low-carbon
investments, with the value of annual energy savings (1.58 trillion USD in 2030 and 5.85
trillion USD in 2050) far outpacing the total value of the investments (977 billion USD per year
between 2015 and 2050), with an average payback time for measures of nearly 16 years.

 At the EU level several programmes have demonstrated that it is achievable to reduce GHG
emissions at city level. For example, since 2013 DG-Energy, DG-Move and DG-Connect has
jointly led the H2020 Lighthouse Programme, where cities have been asked to demonstrate
clean mobility solutions, energy-efficient districts with a high share of renewables, and ICT-
enabled, smart integrated infrastructures in 17 projects with between 18-25 Mio € EU-funding.
To ensure replication and scaling-up afterwards, demonstrations in 2 to 3 lighthouse cities are
closely followed by 3-5 fellow cities that plan to take over the baton at a later stage. After 5
years, the programme counts 46 lighthouse cities and 70 fellow cities. While only the projects
which started in 2014 now finalised, the programme has already achieved 53% energy
savings, up to 88% CO2 reduction, more than 17500 smart meters installed and over 1 Mio
m2 floor space refurbished, more than 5270 e-vehicles introduced, nearly 500 e-charging
stations installed, and more than 260.000 citizens engaged in this transformation.

17
Figure 3: Lighthouse (blue) and fellow (green) cities. Source: SCC-01 Coordinators/Veronika Cerna

According to a study carried out by Rocky Mountain Institute (RMI) in 2019, achieving climate-neutral
cities is possible, in the US as in the rest of the world. When looking at good practices, the study
suggests that the common theme is always setting a bold, aspirational 100% target, whether in the
realm of renewable energy supply, net-zero energy buildings, electric vehicles on their roads and
highways, or waste streams free of all organics. Shooting for the moon is the great enabler. 100% goals
bridge between immediate, discrete first actions and a city’s ultimate climate-neutral vision. The end
result of ambitious 100% goals paired with aggressive action is the same: transformational change
mitigating climate impacts. It is about significant, rapid change on a short time frame, rather than slow,
incremental change.

3.2 Possible pathways

Technology alone, will not solve any of a city’s challenges. Transformation towards climate neutrality
will require a coordinated approach including well-thought urban planning, a combination of large-
scale public and private investments, and co-creation between city policy makers, economic actors and
citizens. The reviewed literature shows that seizing opportunities to reduce GHG emissions requires
shaping the transformation process of domains that have a high impact on current and future emission
levels. Particularly relevant areas are 1) Urban Mobility and Transport, 2) City Buildings, 3) and City
Energy Systems.

For each domain pursuing pathways towards climate neutrality will require a co-evolvement of
technological innovations, knowledge capacity building within city authorities and businesses,
large scale public and private investments in physical infrastructures and buildings, new business
models and services that induce behavioural change of actors, and incentive systems and
regulative actions at national level. For all domains, digitalisation can play a key role as a technological
enabler.

18
Digitalisation and climate-neutral smart cities

Digitalisation is a global megatrend which changes many areas of life and work dramatically as
described in chapter 3.3. Better usage of existing urban data, the increasingly available and cheap real-
time information from cameras, sensors and actuators and more and more connected interoperable
ICT provide opportunities to operate cities more efficiently and influence the behaviour of its users via
tools and services.

The wider deployment of digital solutions in energy, manufacturing, agriculture and land use, buildings,
services, transportation and traffic management is highly varied and possibly endless. 23 24

Scarce evidence suggests that digital technologies could help to reduce global carbon emissions by up
to 15% – or one-third of the 50% reduction required by 2030. 25 Similar impacts have been found
regarding water and waste: advanced water metering combined with digital feedback messages, can
nudge people to reduce water consumption by 15 percent in cities with high residential water usage,
while pay-as-you-throw digital tracking can reduce the volume of solid waste per capita by 10 to 20
percent.26

However, ICT applications per se rarely fix complex urban problems but need to be part of a holistic
programme to achieve concrete solutions. To exploit the potential of ICT services for reducing GHG
emissions in cities several challenges must be addressed: 1) On the technical level, standards for
interoperability, safety and privacy-respect of ICT solutions, and the difficulty of making large-scale
investments need to be mentioned. 2) On the organisational level, trustful collaboration between
businesses, policy and civil actors, new roles and capabilities in city agencies (analytical skills), and
fragmented decision-making power constitute important challenges. 3) On the behavioural level,
businesses, providers of municipal services, consumers and policy makers must change behaviour
through awareness raising, creation of incentive mechanisms (e.g. personal mobility), and policies
avoiding rebound effects (e.g. collaborative logistics in road freight transport). Addressing these
challenges is crucial to further develop and deploy digital solutions and exploit their GHG abatement
potential.

Urban mobility and transport

In the urban mobility and transport sector a number of key technological and societal trends are
converging, for which the total impact on GHG emissions is quite uncertain, but as a result – urban
mobility is likely to have a radically new look in just ten to 15 years.27 The convergence of these trends
will result in key disruptions as defined in Chapter 2, which will change existing value chains, business
models and modes of operation, and have a major impact on urban mobility. However, they will also
provide unique opportunities for and pathways to more climate-neutral, smart cities, for example
through:

E-mobility: the market share of electric cars is increasing worldwide and prices for batteries are
decreasing faster than projections. Electric and plug-in hybrid vehicles are expected to represent

23 https://www.ifi.uzh.ch/dam/jcr:066776d8-d2b0-4c7c-b75d-
6b7283cb5791/Study_Digitalization_Climate_Protection_Oct2017.pdf

24 https://www.weforum.org/agenda/2019/01/why-digitalization-is-the-key-to-exponential-climate-action/

25 https://www.weforum.org/agenda/2019/01/why-digitalization-is-the-key-to-exponential-climate-action/

26 https://www.mckinsey.com/industries/public-sector/our-insights/thriving-amid-turbulence-imagining-the-cities-
of-the-future#

27 https://www.mckinsey.com/business-functions/sustainability/our-insights/urban-mobility-at-a-tipping-point#

19
between 20% and 70% of worldwide vehicle sales by 2030 28, but major growth is not taking place in
Europe. Electrification of transport, based on renewable energy, starts with cars and busses and will
later move into freight traffic. Furthermore, automated road and air-transport could help in reducing
congestion and pollution, although they could also lead to negative socio-economic consequences. Key
challenges are limited resources for battery production and waste management of batteries, hydrogen
and biofuels as competing renewable sources, and the development of the charging/fuelling
infrastructure and standards.

Mobility as a Service: On average cars are parked 95% of the time and service offers through fleets
of shared zero-emissions vehicles show potential to decrease GHG emissions from cars. However, a
simple replacement of car ownership with shared systems may not be the answer, as there are also
adverse effects: cities with increasing use of car sharing already exhibit a decline in use of public mass
transit. Multi-modal interfaces which combine public transport, car-sharing, ride-sharing, bike-sharing,
micro-mobility, rental cars etc. are more promising in this respect 29. However, while new types of e-
mobility services are developing fast (e.g. e-scooters) many cities struggle to adapt and integrate their
legal systems and their road infrastructures to this.

In-vehicle connectivity through built-in connectivity or mobile devices is increasing and allows real-
time analytics and data on traffic conditions. Used wisely in software applications, this could avoid traffic
jams and congestion. This technology is particularly useful in logistics.

Autonomous driving is turning into reality and McKinsey projects that by 2030 up to 15% of vehicles
sold will be fully autonomous. The main technological challenge for fully autonomous driving is enabling
reliable high-speed data connectivity. 30 In addition to this technological challenge, concerns about
safety and legal obstacles exist, while its full impact on mobility is not yet known. Existing research does
not draw clear and consistent conclusions about the impact of autonomous vehicles on the environment
generally and climate specifically.31 Autonomous vehicles might affect GHG emissions in multiple ways,
including reduced vehicle ownership, increased vehicle use, and a changed vehicle fuel consumption
rate. 32 In the shorter term, congestion could worsen as autonomous vehicles join the fleet without
displacing traditional vehicles, increasing transport volume.

Next to technological solutions, other interventions can be very impactful as well. Compared to light
private vehicles, mass transit saves energy, reduces greenhouse gas emissions, improves health and
lowers pollution. However, in city areas mass transit is being challenged by cheap private ride-hailing
services, which risks an increase in congestion. The overall use of public transport is driven by the costs
of public transport and its quality compared with other means of transport.

Furthermore, active mobility, i.e. walking, traditional cycling and electric bikes are among the most
low-emissions modes of transport, manual or e-motorised, that exist today. Active mobility promotes a

28 https://webstore.iea.org/global-ev-outlook-2019

29 https://population.un.org/wup/Publications/Files/WUP2018-Report.pdf

30 https://www.autonomousvehicleinternational.com/opinion/connectivity.html

31 https://www.americanprogress.org/issues/green/reports/2016/11/18/292588/the-impact-of-vehicle-automation-
on-carbon-emissions-where-uncertainty-lies/

32 Feiqi Liu, Fuquan Zhao, Zongwei Liu, Han Hao (2019) “Can autonomous vehicle reduce greenhouse gas
emissions? A country-level evaluation,” Energy Policy, Volume 132, Pages 462-473 doi:
10.1016/j.enpol.2019.06.013

20
healthier lifestyle, increases accessibility and makes the urban environment more attractive while
reducing noise and polluting emissions33.

Another opportunity for reducing emissions constitutes a reduction of commuting emissions. More
flexible working conditions, creation of co-working hubs and digital solutions for conferencing etc. can
help reducing commuting emissions for many people. But also car sharing and car pooling
opportunities, and better connections between the places of work and living can help to achieve this, in
particular for low-density areas. Mass car ownership and higher wealth since the 1960’s have led to
dispersed urban systems and urban sprawl34, often threatening the financial viability of public transport
operations, so densification and repurposing of derelict areas, especially when combined with
investments in light rail and the realisation of attractive public space 35, can help to reduce commuting
distances.

Apart from these disruptions which may provide opportunities, important elements in any policy mix
and nudged behavioural change will be more traditional means as influencing the modal choice by
making (electrified) public transport and healthy transport modes as walking and cycling more
attractive and discouraging the use of fossil-fuelled private cars, e.g. by parking fees, closing down
streets and establishing low emission zones. This will also lead to better road safety. In addition,
profound integration of land use and transportation planning in combination with densification of
the urban fabric and repurposing of derelict land 36 37, can safeguard proper service levels for public
transport and promote urban “walkability and cyclability”. Lastly, encouraging more sustainable
freight and last-mile transport of goods, can help to lower its carbon footprint. The Covid-19 crisis
has amply demonstrated the complicated and globalised chains in production of food and goods, and
the handling of waste, so apart from low emission vehicles, principles underlying more circular
economies might help to close local and regional resource cycles and reduce freight traffic flows. The
development and implementation of a proper long-term vision for mobility, e.g. in the form of a
Sustainable Urban Mobility Plan (SUMP), which can include aforementioned elements, can hugely
contribute to improving the carbon footprint of mobility and logistics.

The 2013 Urban Mobility Package38 set out a concept for SUMPs that emerged from a broad
exchange between stakeholders and planning experts across the European Union. Since 2013, the
Commission recommends urban areas to adopt a long-term vision, implement a SUMP and therefore
reimagine the relationship their city (and its functional area) has with transport while cooperating across
institutional boundaries and involving citizens in the process. While the original concept still stands, the
Guidelines for developing and implementing a Sustainable Urban Mobility Plan have been revised in

33 M. Stevenson, J. Thompson, T.H. de Sá, R. Ewing, D. Mohan, R. McClure, I. Roberts, G. Tiwari, B. Giles-Corti,
X. Sun, M. Wallace, J. WoodcockLand use, transport, and population health: estimating the health
benefits of compact cities, Lancet, 388 (10062) (2016), pp. 2925-2935

34 European Environmental Agency (2019) Land and soil in Europe — Ever-sprawling urban concrete? Website
article December 2019. https://www.eea.europa.eu/signals/signals-2019-content-list/articles/land-and-soil-
in-europe

35 Tillie N., Borsboom-van Beurden J, Doepel D, Aarts M. Exploring a Stakeholder Based Urban Densification
and Greening Agenda for Rotterdam Inner City—Accelerating the Transition to a Liveable Low Carbon
City. Sustainability. 2018; 10(6):1927.

36 EEA, METREX, ICLEI, University of West Midlands, ACE, NEAA (2009), Ensuring Quality of Life in Europe’s
Cities and Towns: Tackling the Environmental Challenges driven by European and Global Change. EEA,
Copenhagen.

37 Synergo & ENU (2016), WP D – MaxLupo. Guidelines for the integration of Mobility Management with Land
Use Planning. https://www.eltis.org/resources/tools/maxlupo-guidelines-integrating-mobility-management-
land-use-planning

38 https://ec.europa.eu/transport/themes/urban/urban-mobility/urban-mobility-package_en

21
201939. More than 1000 cities in the EU have a SUMP now, with countries such as Italy or Romania
linking accessing regional development funds to the existence of a SUMP. Recently, the European
Court of Auditors recommended that the Commission should collect more data on urban mobility from
Member States and publish it, and should link access to funding to the existence of robust sustainable
urban mobility plans (SUMP)40

The challenges for managing the transition towards carbon neutral mobility and logistics in cities are
manifold as only a mix of regulatory policies, investments in infrastructures, platforms, support for
emergence of new business models need to be combined, which trigger also behavioural changes of
firms and citizens.

Citizens’ health and wellbeing

The health and wellbeing of citizens is not always at the heart or urban policies, and should instead be
one of the main drivers of the cities of the future. Cities have historically been mainly shaped by drivers
such as functionality, real estate interests and financial investments, locational preferences of
individuals and companies, with marginal regards for health and well-being. Bringing human health at
the heart of urban policies entails a cultural paradigm shift that will require time and considerable efforts
from a cultural and political standpoint. However, there already are interesting examples that offer a
glimpse into what the future could look like. There are cities across the globe that have started to
reinvent themselves, working with entirely new and breakthrough urban developments or re-shaping
the existing urban fabric so as to provide citizens with environments that are conducive to healthier,
more natural and pleasurable lifestyles. This vision is delivered through plans and investments in
solutions that combine the benefits of urban greening and farming, biodiversity conservation, urban
water, active, shared and micro mobility, social spaces creation. Pioneering cities include Amsterdam,
Copenhagen, Berlin, Vancouver just to name a few.

Making buildings energy efficient

The building sector refers to the residential, public and commercial sectors that use buildings and
involves not only the building industry, but all activities that use existing buildings41.

In August 2018, the mayors of 19 cities—including New York, London, Tokyo, and Johannesburg—
declared that they will enact policies and regulations that will make all new buildings carbon neutral by
203042. However, the key challenge is to make existing buildings more efficient, as the existing stock
of buildings in OECD countries is expected to account for 65% of all building.

For realising climate-neutral cities, a rapid adoption of highly efficient, low-carbon solutions for buildings
and construction are needed. These include: rigorous and widespread application of building energy
codes, broad-scale renovation of the existing buildings stock, aggressive deployment of high-
performance technologies and a strategic shift away from fossil fuel use in buildings 43: Building
envelope design, materials and construction all have a large influence on heating and cooling loads in
buildings and represent an enormous energy saving potential. Enforcement of building energy codes
for new construction and scaling up of deep building energy renovations requires aggressive scaling

39 https://www.eltis.org/mobility-plans/sump-concept

40 https://www.eca.europa.eu/en/Pages/DocItem.aspx?did=53246

41https://www.greengrowthknowledge.org/sites/default/files/downloads/resource/UNECE_climate_neutral_cities_

e_0.pdf

42 https://www.c40.org/press_releases/global-cities-commit-to-make-new-buildings-net-zero-carbon-by-2030

43 https://www.worldgbc.org/sites/default/files/UNEP%20188_GABC_en%20(web).pdf

22
up of deep building energy renovations of the existing global stock. Appropriate financing mechanisms
and costs of solutions constitute key challenges.

The technological choice for energy-efficient and low-carbon heating and cooling technology
investments could reduce final energy demand in buildings by 25 % over current levels. Adoption of
energy‐efficient technologies (e.g. condensing boilers, heat pumps and more recently solid‐state
lighting [SSL], such as light‐emitting diodes [LEDs]) has helped to curtail energy growth in the buildings
sector in recent years.44 In addition to solutions for individual buildings, district heating and cooling
(DHC) systems can improve energy efficiency and enable to increase the share of local renewable and
recycled energies in heating and cooling and can facilitate the integration of intermittent renewable
energy (RE) in the electricity mix45.

As for the other areas, market incentives to address consumer decision-making, play a key role. In
investment decisions, often upfront costs dominate over life-cycle cost-effectiveness. For private
consumers, this entails for example energy efficiency of heating and cooling systems sales, which are
far below available technology standards in many countries. Thereby, a combination of regulatory
measures (i.e. setting standards) and demand side measures is needed. Policy effort that is required
concerns - scale up actions across the entire sector, including applying a sound balance of regulatory
instruments (e.g. building energy codes and standards), incentives (e.g. financing schemes),
information and capacity building (e.g. information campaigns and training), and support for research
and development (R&D) of high‐performance solutions for buildings 46.

Key challenges for increasing energy efficiency in the building sector are split incentives or principal-
agent problems (e.g. owners vs. tenants), poor enforcement of standards, lack of awareness,
fragmentation of the buildings, territorial inequalities, lack of affordable technologies, lack of public
funding.

Energy production and consumption

The energy sector is driven by the emergence of the energy cloud, a shift towards distributed and
renewable energy sources47. The emergence of the energy cloud is driven by new technologies
including the impact of smart grids, digitalisation, and the Internet of Things (IoT).

Distributed energy resources with multiple inputs and users, supporting two way-energy flows require
1) digitalisation of the electric-mechanical infrastructure (smart grid and behind the meter energy
management systems) and 2) digital systems for making the energy system resilient and managing the
complex market structures and transactions. Regulatory policy plays a key role for allowing micro-
providers entering the market and needs to change rapidly around renewables and their distributed
generation. From a technological point of view, also advancements in storage technologies become
increasingly relevant, because some renewable energy technologies – such as wind and solar – have
variable outputs and storage technologies may ensure that the supply of generation matches the
demand.

For cities, the transformation of the energy sectors with rapid technology innovation and changing
customer demands, constitutes opportunities for pursuing the transition toward climate neutrality, as

44 https://webstore.iea.org/download/direct/1058?fileName=Energy_Technology_Perspectives_2017.pdf

45 https://www.euroheat.org/wp-content/uploads/2017/01/study-on-efficient-dhc-systems-in-the-eu-dec2016_final-
public-report6.pdf

46 https://www.euroheat.org/wp-content/uploads/2017/01/study-on-efficient-dhc-systems-in-the-eu-dec2016_final-
public-report6.pdf

47 https://www.navigantresearch.com/-/media/project/navigant-
research/reportfiles/navigatingtheurbanenergytransformationpdf.pdf

23
there are close interconnections between energy, transportation and building sectors. Cities can
1) accelerate the shift to renewable energy and set respective targets, 2) drive grid improvements by
increasing integration of renewable energy resources in the infrastructure, 3) increase energy efficiency
by tackling consumption across residential and commercial properties while lowering energy prices, 4)
focus on increasing resilience of the energy grid system, and 5) shaping the local energy market in a
pro-active manner.

City dwellers’ lifestyles can help significantly reduce their climate footprint, such as adopting healthy
diets, reducing waste, using active, shared or public mobility or choosing sustainable energy source,
even producing their own energy e.g. from rooftop solar panels. Digital technologies can in this sense
prove to be powerful enablers, allowing citizens to becoming service prosumers and more active
participants in public policy making.

A key challenge for cities is to create the conditions under which stakeholders can create scalable,
and replicable platform solutions in which technology development and business models emerge
together and large- and small-scale energy initiatives and solutions are being integrated, including
major infrastructure investments, citywide improvements in energy efficiency, and distributed energy
resources (DER)48.

What is the role of behavioural aspects in achieving GHG emission potential?

It is without a doubt that changes in behaviour can lead to big reductions in greenhouse gas emissions
in the European Union, particularly in the areas of transport, housing and food. Behavioural changes
can complement technological changes and can allow emission reduction targets to be reached
more cost-effectively overall. Demand-side solutions for mitigating climate change include strategies
targeting technology choices, consumption, behaviour, lifestyles, coupled production-consumption
infrastructures and systems, service provision, and associated socio-technical transitions (Creutzig et
al. 2018). Demand side-oriented policies may cause change in several respects: Conditions for
product development and/or marketing strategies may change; the types of products that consumers
demand may change (including shifting to locally produced or green alternatives); and the level of
demand from consumers may change. For measuring the impact of demand side mitigation policies,
tools that provide quick, macro-level estimates of the efficacy of consumer-oriented policy measures
can account for system-wide effects, such as rebounds, and can help to prioritize relevant policies (see
Wood et al. 2017).

A study by the Center for Behaviour and the Environment 49 identified 30 behavioural solutions that can
mitigate 19.9-36.8 % of global emissions from 2020-2050. These are solutions at the global level, with
clear implications for the urban dimension. The conclusion, well known by anyone involved in EU-
funded research and innovation projects, is that solving the global climate change crisis is going to rely
on, in one way or another, changing human behaviour. And that is by far the most challenging battle
to be fought. The 2018 IPCC report concludes that a fundamental transformation of demand, including
efficiency and behavioural changes, can help to significantly reduce the reliance on risky technologies,
such as BECCS, and thus reduce the risk of potential trade-offs between mitigation and other
sustainable development dimensions.

An EU funded study conducted by CE Delft (Faber et al. 2012) identified 36 options for behavioural
change that would cut greenhouse gas emissions. Of these, 11 particularly relevant options have been
studied in detail, including shifting to a more healthy and balanced diet, eating less meat and dairy
products, buying and using a smaller car or an electric car, teleworking, adjusting room temperature
and optimising ventilation. For each of the behavioural changes studied in depth, emission reduction
potentials have been quantified for 2020, 2030 and 2050 taking into account barriers for implementation

48 https://www.navigantresearch.com/-/media/project/navigant-
research/reportfiles/navigatingtheurbanenergytransformationpdf.pdf

49 https://rare.org/wp-content/uploads/2019/02/2018-CCNBC-Report.pdf

24
and rebound effects. The results show that the behavioural changes that could take place
simultaneously have the potential to save emissions totalling up to about 600 million tonnes of CO2-
equivalent a year in 2020. This is about one-quarter of the projected annual emissions from sectors not
covered by the EU emissions trading system.

Overall, there are promising disciplinary frameworks to estimate demand-side, consumption-based, or

lifestyle-based approaches for climate change mitigation, but a comprehensive assessment of the
underlying science and methods needed to provide realistic assessments of their potential is still
missing, due to a) competing frameworks and paradigms; b) lack of research synthesis; and c)
predominant focus on techno-socio-economic scenarios within the IPCC framing (Creutzig et al. 2018).

Will autonomous driving endanger public transport?

The scoping paper of the FOD-project already showed that automatic (autonomous) transport holds
many promises in the realm of climate neutrality, but also as many potential threats. The ideal
scenario is one in which autonomous transport powers shared fleets of vehicles, replacing,
progressively but entirely, the use of private vehicles. From this perspective the future of our cities looks
like one in which private vehicles (cars mostly) are gone, road space is made available for fleets of
public (mostly) and private shared fleets of electric vehicles (buses and small buses mostly), as well as
for active modes. Impacts would benefit primarily air quality, noise pollution, congestion, safety and
quality of urban space, with massive reductions in the externalities of transport.

However, this scenario, which could materialise within 20-40 years depending on the estimates, greatly
depends on the ability of policy makers to drive change. More negative scenarios foresee autonomous
transport to exacerbate congestion and dependency on motorised transport, trouncing active modes
and public transport.

The example of autonomous driving can be seen as one of a technological breakthrough that apart from
the inevitable considerations of ethical, ICT and economic nature (pitfalls on employment mostly),
requires strong vision and policies that shape the future of transport from the full governmental chain,
from Europe down to cities.

How to avoid more traffic?

In order to avoid more traffic, the Avoid-Shift-Improve (ASI) approach50 allows to categorise policy
options and to enable cross-sectoral learning by comparison. Policies to limit GHG emissions in the
transport sector should consist of measures aimed at: (a) avoiding the need to travel, e.g. by improved
urban planning, or teleworking, (b) shifting travel to the lowest carbon mode, e.g. cycling; and (c)
improving vehicles to be more energy-efficient and fuels less carbon intensive. A number of good
practice examples exist in this regard:

The Netherlands - a policy shift towards cycling: After it appeared that mass car ownership and
foundation of New Towns at considerable distance of the core city were leading to disastrous increases
in volumes of car mobility, most municipalities started more actively to develop policies for cycling in
the 1970’s and 1980’s. Soon it was realised that several preconditions need to be fulfilled to prevent
private car mobility being the default mode of transport: clearly indicated safe, separate cycling lanes
with route signs to major destinations, priority at crossings, optimisation of traffic lights for cyclists,
provision of parking spaces (preferably guarded), optimisation of specific local and regional routes in
so-called bicycle highways, and good connection to the public transport. Most cyclists use bicycle route
apps, also forecasting weather conditions. Icon of this successful policies is the New Town of Houten
(50.000 inhabitants), which has been fully developed around a dedicated directly connected cycling
infrastructure, where cycling traffic flows are entirely prioritised over car traffic that is discouraged by
slow maximum speeds and urban design of public space after entering residential areas from the ring

50 See: https://www.sutp.org/files/contents/documents/resources/E_Fact-Sheets-and-Policy-
Briefs/SUTP_GIZ_FS_Avoid-Shift-Improve_EN.pdf

25
road (Houten, 2019). However, all villages and cities have implemented these concepts, e.g. the
construction of huge underground bicycle parking near main railway stations (e.g. capacities Delft
10,000 and Amsterdam Central Station 22,000 places).

Amsterdam - reduction of individual transport through reduced space consumption for parking
cars: Amsterdam has been empowering its active modes policy (cycling especially) by systematically
stripping its streets of parking spaces. In the summer 2019 it initiated a grand plan seeking to reduce
the number of people permitted to park in the city core by around 1,500 per year. Note that these people
already require a permit to access a specific space (and the cost for that permit will also rise), and so
by reducing these permits steadily in number, the city will also remove up to 11,200 parking spaces
from its streets by the end of 2025. As room for cars is removed, it will be replaced by trees, bike
parking, and wider sidewalks, allowing city inhabitants to instantly see and feel the benefits of what will
still be a fairly controversial policy among drivers. No driver will actually be stripped of the right to park.
Rather than revoking permits, the city will simply not replace any that are given up when drivers leave
the city, give up their cars, or die. In this way, the city reckons it can naturally do away with about 1,100
permits a year. Additional parking spaces will be removed by renovating waterside streets and harbour
quaysides. Some of the removed places will be relocated to underground lots.

Electric bus adoption in public transport can be seen as an example for improving energy
efficiency within the existing structure of transport: Electric bus adoption in public transport urban
fleet is growing all over the world. It started in China, and it has taken a few years for other regions to
start the transition. But now is booming also in the EU: 2019 is the year when the electric bus sales
volumes ramped up. While in 2018 the European electric bus market increased by 48% compared to
2017, in the first nine months of 2019 there has already been a + 100% registrations. However, of the
ca. 400,000 electric buses running worldwide, Europe only hosts ca. 4,000 electric buses (in the
definition are included not only battery electric buses but also plugin hybrids, trolleybus IMC and fuel
cell buses). Roughly 98% of the electric buses in the world are in fact deployed in Chinese cities. At the
end of 2019, in Europe, the share of electric buses on the sales volumes of city buses should overcome
the 10% mark, and according to UITP it is going to rise up to 20% in 2020, thus recording a steep raise
that is destined to continue in the years to come especially if enabling policies are kept in place (with
financial incentives in tow).

Inner-city freight transport: Ever increasing numbers of vehicles frequent our cities to deliver goods
and services with a severe impact on life and air quality. Freight transport represents a large component
of traffic in cities (10-15%) and air pollution. It accounts for up to 25% of carbon dioxide emissions from
transport in cities and 30-50% of nitrogen oxide and fine particles:

 A recent study in London found that a single delivery by an e-cargo bike is twice as fast as an
electric van and emits 98% less carbon dioxide. At a broader city level, by replacing as little
as 10% of conventional vans and trucks with electric cargo bikes, urban logistics well-to-
wheels carbon dioxide emissions can be reduced by up to 20%. Electric delivery bikes are
just one example of how important these vehicles could be to reach a zero-emission Europe.

 Modularity can also provide considerable cuts to CO2 emissions, by having city logistics
break with the traditional urban delivery system to then introduce standardised and modular
load units, such as specific trolley-containers for the last mile.

 Consolidation schemes, together with the modularisation of load units, create the operational
ground for the integration of freight and passenger transportation. Today people and freight
rarely share services (although they often share the same infrastructure), while there are
significant potential gains in the shared use of city infrastructure which could mean new
business opportunities.

It is however to be noted how the persisting fragmentation in the logistics industry, as well as the strong
business interests, still render this goal a difficult one to achieve. Major efforts, regulations and
investments are thus required of cities if the challenge is to be tackled.

26
Building retrofitting is a challenge for cities – are there business models that could be used?

Retrofits of existing buildings is important as buildings are very long-lived and a large proportion
of the total building stock existing today will still exist in 2050 in developed countries. The 2014 IPCC
report states that (1) for detached single family homes, the most comprehensive retrofit packages have
achieved reductions in total energy use by 50–75%; (2) in multi-family housing (such as apartment
blocks), a number of projects have achieved reductions in space heating requirements by 80–90%,
approaching, in many cases, the Passive House standard for new buildings; (3) relatively modest
envelope upgrades to multi-family housing in developing countries such as China have achieved
reductions in cooling energy use by about one-third to one-half, and reductions in heating energy use
by two-thirds; (4) in commercial buildings, savings in total HVAC energy use achieved through upgrades
to equipment and control systems, but without changing the building envelope, are typically on the order
of 25–50%; (5) eventual re-cladding of building façades—especially when the existing façade is largely
glass with a high solar heat gain coefficient, no external shading, and no provision for passive
ventilation, and cooling—offers an opportunity for yet further significant savings in HVAC energy use;
and (6) lighting retrofits of commercial buildings in the early 2000s typically achieved a 30–60% energy
savings (Bertoldi and Ciugudeanu, 2005).

According to the IPCC report, retrofits generally entail large upfront cost, they also generate large
annual cost savings, and so are often attractive from a purely economic point of view: Shallow retrofits
can result in greater lifecycle costs than deep retrofits; Mata et al. (2010) studied 23 retrofit measures
for buildings in Sweden and report a simple technical potential for energy savings in the residential
sector of 68% of annual energy use. They estimated a cost per kWh saved between –0.09
USD2010/kWh (appliance upgrades) and +0.45 USD2010/kWh (façade retrofit). Polly et al. (2011)
present a method for determining optimal residential energy efficiency retrofit packages in the United
States and identify near-cost-neutral packages of measures providing between 29% and 48% energy
savings across eight US locations.

The research on business models with a focus on sustainability is still very limited in relation to the
changes characterizing sustainability-oriented constructions but business model innovation in this field
might represent a powerful strategy to boost the penetration of energy measures in the built
environment, by overcoming the hindrances to energy efficiency investments (Moschetti and Brattebo
2016). The study details that projects of deep energy retrofitting of buildings can be built on (i)
traditional individual solutions and (ii) one-stop-shop concepts. Business models relying on new
and innovative revenue models can derive from the use of available government incentives contributing
to profits. Indeed, incentive schemes (tax benefits), initiated and financed by governments, might help
owners to recover the investment prices, which are higher for deep energy retrofit initiatives than
traditional measures. Business models could be based on feed-in schemes by which the producer of
renewable energy receives a direct payment per unit of energy produced. Revenue streams can also
result from the additional value of a product/service from the environmental, social, and economic point
of view, in relation, for instance, to a high score in a voluntary sustainability assessment scheme. In
fact, the use of a known building label to certify improved qualities of the building might support the
owners to achieve higher rent or sale prices.

Business models based on new financing schemes are built upon programs that support the
overcoming of barriers related to high upfront costs. Considering the usual limits of public budgets, new
and innovative financing schemes, which do not burden government costs, have been increasingly
developed. This kind of BMs can also emerge from regulatory schemes including energy saving
obligations for utilities, which might contribute to the investments in energy retrofit measures in
buildings, through energy saving duties and innovative financing strategies.

1. Are there synergies between spatial planning/land-use and transportation?

The synergies between land use and transport are as essential as those between the skeleton and the
circulatory system to the human body. Taking care of one while ignoring the other simply kills the
ecosystem. Land use and transport planning integration is the key to clean, healthy, efficient and
thriving cities. Investing in sustainable planning integration (with densifications, mixed-use
developments, transport networks integrations and prioritisations, pedestrianisations, etc.) does much

27
more than “just” contributing to climate neutrality (e.g. in terms of reduction of CO2 emissions and
mitigation of heat waves):

 it rebalances (some say re-democratises) the urban space, removing cars and freeing space
for people and other modes of transport (public transport, walking, cycling, micro-mobility);

 it provides space for green, blue and social areas, integrating nature into cities and
expanding the opportunities for socialisation (parks, urban gardens, squares, fountains, lakes
and rivers, playgrounds, swimming pools etc.);

 it improves public health, bettering air quality, reducing noise and improving physical activity;

 it boosts the economy, by improving productivity and business turnover through enhanced
accessibility, quality and appeal of the urban space;

 in a nutshell, it elevates the individual and collective quality of life, creating urban
environments that are more attuned with the human aspirations.

2. Key barriers and obstacles51

While many European cities are embracing the climate-neutral, smart city concept, developing climate-
neutral smart city strategies and implementing projects, a widespread breakthrough seems not yet to
be taking place. A couple of persistent barriers and obstacles result in lengthy planning and
implementation phases, or sometimes even in cancellation of smart city and low energy district projects.
These barriers and obstacles have been analysed thoroughly. 52 The most common barriers are 1) high
initial and operational costs of smart city solutions, 2) lack of financing and appropriate business models,
3) siloed governments, 4) lack of technical skills in staff, 5) risk aversion by financial organisations, 6)
split incentives, 7) inconsistent government policies, 8) prohibitive legislative frameworks, for instance
for pre-commercial procurement, 9) lack of proven solutions and validated examples, and 10) difficulties
with engagement of local stakeholders.

The multitude of interdependencies existing between urban actors, technologies, and climate change
makes it even more complicated to align interests and create a common operational picture, especially
when concessions are granted to best-value-for money without sustainability criteria. Limited
knowledge on interaction, dependencies and feedback between different technologies may lead to
unintended negative consequences such as rebound effects, e.g. a reduction in vehicle emissions of
vehicles being offset by growth in km travelled or increased energy consumption due to digitalisation.
Also social segregation, due to polarization of urban areas & deprived neighbourhoods, energy poverty
and unequal access to infrastructure may rise, as financial capacity plays a distinct role for policy
options. However, those interdependencies, if used wisely, can also lead to co-benefits, as for example
investments in urban water infrastructure not only help to reduce heat islands and managing excess
water, but also increase mental and physical health and wellbeing of citizens.

Furthermore, the direct impact of implemented smart city projects can be limited due to their usual
“pilot-like” character: more or less singular, tailored to a specific context and situation, with a limited
scope, subsidy-dependent, quite small and sometimes lacking a truly holistic perspective. While these
complex projects provide invaluable information and lessons learned, and are quintessential for building

51 Mosannenzadeh, F., Bisello, A., Diamantini, C., Stellin, G. and Vettorato, D. (2017). ‘A case-based learning
methodology to predict barriers to implementation of smart and sustainable urban energy projects’, Cities,
60, pp. 28–36. doi: 10.1016/j.cities.2016.07.007. Vandevyvere, H. (2018). Why may replication (not) be
happening? Recommendations on EU R&I and Regulatory policies. D32.3A. EU Smart Cities Information
System. Retrieved from https://www.smartcities-infosystem.eu/sites/www.smartcities-
infosystem.eu/files/scis_library/scis_-_why_replication_may_not_be_happening.pdf

52 Ibid. and PWC, DTI, ISIS and Sigma Orionis (2016) Analysing the potential for wide scale roll out of integrated
Smart Cities and Communities solutions. Final Report, June 2016. Brussels: EU

28
a learning community, market acceleration of successful technologies, products and methods is lagging
behind.

3.3 All things said, where do we go from here?

Irrespective of the operational tools that the Mission will employ to push forward effective impact
delivery, a structured overview of opportunities for GHG emissions reduction in cities can be
beneficial, so that systemic flows of key pathways of intervention can be visualised by urban realm, and
namely: i) Energy grid, ii) Buildings energy use, iii) Sustainable mobility and land use, iv) Waste
management, and v) Green and food system.

For each flow, the figure below provides an assessment in terms of: i) Potential for GHG emissions
reduction, ii) Potential to generate additional benefits for society, iii) Main associated
complexities, iv) Estimated investment volume, v) Investment priority by city typology, and vi)
Lifespan of investment.

In reading the illustration shown below, please note that:

 The classification of city typologies has been derived by a 2018 ETC/ULS Report that
delved into the analysis of similarities and diversity of European cities. The study identified 5
main clusters of cities, that we incorporated in the imagine with the following adapted
nomenclature: 1. Transition Cities, 2. Mediterranean Cities, 3. North Western Cities, 4.
Diverse Cities, 5. Metropolitan Cities. For additional details on the features of each cluster,
please refer to „Similarities and diversity of European cities: a typology tool to support urban
sustainability“, Gregor et al. (2018).

 While the assessments informing the image reproduced below build upon existing studies,
projects and extensive collective expert knowledge, it is important to remark that the flows
thus shown have been developed inside the stringent flash note’s time constraints, and had
to reckon with the inherent complexities governing the realms of urban climate neutrality. it is
not be underestimated that this is a subject matter that draws diverse and sometimes
opposed viewpoints, scenarios and interpretations, both in the literature as in practice.

 Despite these caveats, the flow chart provides a solid reference structure that may prove
beneficial in negotiating the manifold challenges of the Mission.

The next chapter will discuss in more detail how potential opportunities for climate-neutral and smart
cities can be deployed, and which preconditions should ideally be in place to be able to do so.

29
Figure 4: Opportunity pathways by urban sector and type of intervention

30
4 Enabling smart and climate-neutral cities
After possible avenues for change and opportunities for intervention have been roughly sketched in
Chapter 4, this chapter will set out what is needed to make change happen. It focuses in particular on
principles of policy delivery and on the importance of a systemic, integrated approach.

4.1 How to make change happen

Change can and should be driven by cities, as they are both the main origin and potential solution to
the problem owing to their positioning at the heart of two crucial nexus:

1. Closer relationship and spatial proximity to businesses, residents and institutions than any
other form of government. This allows for new policies and solutions to be implemented more
quickly and efficiently.

2. Cities are the melting pot where decarbonisation strategies for energy, transport, buildings and
even industry and agriculture coexist and meet. As the volume of energy use and density of
infrastructures is much higher in cities, there is a high potential for cross-sectoral integration
and circularity. A concentration of capital and know-how intensive partnerships allows to
leverage economies of scale when adopting decarbonisation strategies. 53

Making cities climate-neutral and smart requires leadership and involvement of all city actors, i.e.
public employees, private sector companies, and residents of all ages and backgrounds, and from all
neighbourhoods. Leadership is important as leaders are those championing and driving the mission.
However, to create a real breakthrough, different actors need to co-develop and take joint ownership
of the missions’ aim.

City politicians and administrations: leading and enabling

In view of contributing to the implementation of smart and climate-friendly solutions, city politicians and
civil servants shall orchestrate the work of a broader ecosystem. This requires effective social and
institutional capacity, which is (1) adaptable to the feedbacks of other actors and processes, (2)
flexible in the usage of instruments and (3) dynamic in the way the portfolio of projects and programmes
is managed in order to re-orient according to the emerging opportunities.

Climate neutrality pathways require a mid-to-long-term perspective for politicians and administrators
to follow, working in synergy. Politicians have the difficult responsibility of ensuring long term vision,
consistency across political cycles, motivation and pro-action of both administrative structures,
companies and citizens. Administrators are entrusted with maintaining the sense of direction, instilling
motivation in their staffs, procuring for the necessary resources, keeping capacities up-to-date.
Unfortunately, the prevailing political mind-set is often at odds with the advocated breadth of
perspective and city administrations are frequently hampered by insufficient human and financial
resources.

Companies: investment capacity, new business models and service for the people

Smart cities offer new business models both for large and small firms and new goods and services
for citizens. A rebalancing from market- to people-driven service mind-set is however needed, as there

53 https://ec.europa.eu/info/publications/final-report-high-level-panel-european-decarbonisation-pathways-
initiative_en

31
is a danger of techno-determinism, monopolisation and vendor lock-in, with specific groups being left
behind.

The aim should be to encourage corporate involvement and investments both by major companies
anchoring the innovation ecosystems and providing the investment capacity, and disruptive scale-up
firms who may challenge or even replace incumbents. Where the mission is strongly socially oriented,
the anchor role may have to be taken directly by government.54

The investment role of companies is crucial for the acceleration of pathways. Providing services,
products and/or know-how is not enough in historical times in which cities lack the financial strength to
deliver neutrality. The private sector needs to step in and be “helped” in finding it economically and
morally advantageous to invest in climate neutrality, through the provision of enabling legislative,
fiscal and organisational frameworks.

Universities and research institutes: knowledge capacity

Public and private research institutes should provide neutral knowledge and system thinking on
climate-neutral and smart solutions and strategies. They are supplying the necessary intellectual
and methodological capacity to cities, including bringing R&I funding and projects.

Citizens: awareness and informed choices for climate neutrality

Digitisation is shifting power to consumers and users who make choices (or even turn into
prosumers), increasing the accountability of city governments. Similarly, individual accountability is
to be emphasised, as climate neutrality is a quest that can be won only by combining top-down and
bottom-up approaches. Because more information does not automatically lead to more acceptance
and ownership, it is imperative that cities foster participative and co-creative methods (nurtured by
digital technologies and social innovation/gamification) to boost solutions ownership and
effectiveness, as well as a culture of cooperation and community action. Changes in lifestyle can help
city dwellers significantly reduce their carbon footprint, such as shifting to a healthy diet, reducing waste,
using active or public mobility modes or choosing sustainable energy sources. Investments in
awareness and education, starting with primary and secondary schooling, should be considered
moving forward, as changing behaviour later on is more difficult and less effective.

4.2 The importance of a systemic, integrated approach

As remarked, smart cities require interdependency, interdisciplinarity and synergy between actors and
sectors. Evidence shows that cities still lack the needed horizontal co-ordination, co-operation, and
collaboration, as well as acceptance between vertical departments. Smart city projects are often
managed by vertically structured departments (silos) without a specific department having the clear
mandate (or ability) of coordinating and pursuing the targets of such a cross-domain endeavour. This
can lead to lengthy negotiations between stakeholders due to the manifold interdependencies between
them, result in delays or even postponement of the implementation of the project.

Lack of integration means that decisions on e.g. new transport, ICT, energy, real estate developments
are taken without concertation and with impacts that will affect cities for decades to come. That is why
it is essential to share a vision with major stakeholders, investors and especially citizens.

A holistic approach to planning and implementation considers not only the functioning of the urban
system as a whole, but also the full life-cycle of the planned investments, thereby preventing (climate-
neutral and smart city) projects from failing during preparation and increasing their success rate during

54 https://www.ri.se/en/about-rise/our-mission/our-vision-and-mission

32
implementation. Taking a holistic view means looking at the “big picture” and systemic approaches that
enable a holistic view. Even minor changes in subsystems can have drastic impacts on other sectors
or subsystems. The table below provides an overview of key issues in the transition to climate-neutral
and smart cities, issues that necessitate a holistic, systemic view.
Key issues in planning and implementation of
smart city and low energy district projects ….
More often than not, the timeframe of policies and
decisions is limited to the current political cycle,
what makes it difficult to fulfil long-term obligations and
ambitions the city has committed itself to, regarding
adaptation and mitigation of climate change,
enhancing energy affordability and security, improving
environmental quality. For example, SDGs, COP21,
national and EU policies need a long-term vision to
plan things within a certain timeframe.
Generally speaking, the focus is on specific issues
and technologies, without taking much of a holistic,
interdisciplinary approach. As a result, potential
synergies remain usually unrevealed when projects
are prepared, while they might significantly contribute
to meet the targets. Synergies need to be identified
and seized long in advance and can save money by a
smarter use and operation of the built environment,
often with the help of ICT and sensors, but also by
better planning. For this reason, a holistic approach is
closely linked to a long-term perspective.
The involvement of many government and business
sectors while lacking experience in interdisciplinary
collaboration or having unclear mandates, can lead to
the so-called “siloes”, hampering smooth
collaboration.
Key stakeholders as citizens and local businesses,
but also energy network and transport operators,
might be difficult to engage or having other
priorities. Besides, many interdependencies exist
among these stakeholders during the planning and
implementation phases of smart city projects. Each
stakeholder possesses a piece of the jigsaw puzzle but
must be willing to put it in place. Deregulation and
privatization of local government entities in the past
might have led to other priorities, such as operational
reliability and profitability, over energy efficiency and
sustainability.
Business cases and business models might be less
attractive than regular investment opportunities.
… and features of a holistic approach addressing
these key issues
A genuine long-term perspective beyond the current
political cycle, agreed upon with the stakeholders, is
key to ensure that short-term actions during the
political cycle contribute to long-term aims, and helps
cities to fulfil their obligations. 80% GHG reduction in
2050 is a result of energy and mobility decisions taken
now. What is more, the long-term perspective makes
the long-term aims resilient and robust through
endorsement of the local community.
The holistic, interdisciplinary and multi-sectoral
approach identifies and stimulates to exploit
potential synergies, such as the deployment of bi-
directional exchange of energy between buildings and
electric vehicles in districts. The advantage of
contemplating different options and their pros and
cons from the viewpoint of potential synergies, has
been amply demonstrated in the eea cross-sectoral
approach, where an external advisor educates staff in
inter-disciplinary thinking. What is more, it ensures that
added value is created for citizens by high-quality
smart sustainable development.
Internal and external vehicles for collaboration in
smart city projects, such as interdepartmental
taskforces, special staff units, or legal entities as
associations and public- private partnerships (PPPs)
are needed to overcome siloes within government
sectors and businesses and to enable public-private
collaboration.
Wide, early and in-depth stakeholder engagement
is needed to achieve agreement on the final aim of the
project and the proposed measures, and to tie in
other benefits important to the users and owners of
the buildings and infrastructures, such as more
comfort, a new kitchen, less air pollution or more
playgrounds. Co-design, co-creation and co-
production are therefore quintessential features of
integrated planning and implementation, based on a
holistic or systems perspective.
An early exploration of new business opportunities, of
possible changes in value chains not only in the private
33
 While the financial burden of refurbishment and
upgrading of urban infrastructures and buildings can
be too heavy for individual owners and operators,
proposed investments in projects are often too small
for finance industry, leading to higher transaction costs
and thus less profitability. Besides, innovative
solutions are often perceived as riskier, while financial
industry might lack the technical skills for proper
assessment of perceived risks. As a result, an
aversion to these risks makes it difficult to finance
smart city projects
but also in the public sector, of preconditions of
different sources of financing and of instruments to
“de-risk” investments, can help to develop better
business cases and find investors, while developing
the contours of the smart city plan. By creating more
trust, plans are de-risked and become more
attractive for financial investors. A systematic scan of
areas where particular smart city solutions could be
applied within the local governments’ jurisdiction, can
help to bundle demand and define better business
cases or set-up instruments such as revolving funds.

In a common municipal culture of outsourcing and
subcontracting, the final performance of subcontracts
and their contribution to cities’ overall aims, is usually
not assessed and thus often unknown. Subcontracting
and tendering is done without a long-term vision in
mind.
Monitoring and evaluation of progress according to
Quality Management Systems approach, ensures
that the cities’ overall end goals are eventually met.
The SCGP lists a few major sets of KPIs, to help cities
and communities to track and evaluate the progress of
their smart and sustainable projects and programmes,
both for sectorial management and reporting or
communication purposes.

Source: Borsboom-van Beurden et al (2019)

4.3 Principles of policy delivery

Close cooperation between different levels of government, and across administrative boundaries and
policy domains is the only likely recipe for climate neutrality. The key is moving along the co-design,
co-creation and co-realisation trajectory, both locally and transnationally, so as to fully account for
potential trade-offs, interlinkages and opportunities.

Key policy delivery principles are:

 Policies for climate-neutral cities require a narrative that resonates with the dreams of citizens
and businesses and builds on values that give them meaningfulness. Engaging the public from the
beginning, not just after specific applications, regulations etc. suddenly appear, can secure
community buy-in and make transformation feel like a necessity, a natural evolution.

 Change needs to take place in an integrated, affordable, just and sustainable way within the
pre-existing urban fabric. In order to do so cities need to employ system thinking and apply it in
spatial terms, thus taking into account the full life-span of building stocks and infrastructures,
path-dependency due to existing infrastructures, sunken costs and past investments, spatial
patterns and urban morphology (land-use etc.).

 Consideration of interdependencies for any intervention: policy mixes can be used to cross-
fertilise specific factors/areas.

 System thinking is also crucial to foster innovation and investments, particularly in the form of
public private partnerships and competitive pre-commercial procurement. From an economic
perspective, a mission-oriented policy can increase the multiplier effect of public R&I investment,
unleashing not only more private R&I investment and market-creating innovation but also opening
up opportunities for new synergies with other public financing instruments.

34
 Cities need to push forward incentive schemes, regulations and public awareness campaigns to
incentivise uptake, punitive measures such as fees, penalties are short lived and lead to
dissatisfaction.

 Couple formal instruments with informal urban governance approaches to foster: (1) harvesting
of information through interviews, campaigns, public discussions, etc., (2) participation through
stakeholder dialogues, policy Delphis, scenario workshops, interactive online maps, etc., and (3)
cooperation with actors networks, integrated planning, mediation, policy competitions, climate
competence centres, etc.55

 Move from singular, customised pilot programs to city-wide initiatives. It has been proven that
demonstration and pilot projects cannot be copy-pasted, as demo sites have specific context-
conditions. Furthermore, many piloted use-cases have by nature yet to become profitable and
continue to depend on public funding. Upscaling thus needs to find ways to compensate for R&D
funding, e.g. by other forms of risk finance.

 Innovation processes can unfold faster and more efficiently if a trustful climate between citizens,
economic stakeholders/entrepreneurs, political actors etc. is established. Therefore, medium- and
long-term orchestration is crucial for providing systemic solutions.

After this explanation of how cities can be enabled to become climate-neutral and smart and of important
preconditions for such a process, the next chapter will discuss in more detail the role of the Mission itself
in making these plans concrete.

55 Fröhlich, Jannes; Knieling, Jörg; Kraft, Tobias Informelle Klimawandel - Governance Instrumente der
Information, Beteiligung und Kooperation zur Anpassung an den Klimawandel HafenCity Universität
Hamburg, 2014.

35
5 The role of the Mission
This chapter focuses on the role the Mission could play in making cities climate-neutral and smart, in
particular regarding possible contracts with city administrations and regarding contemplations of
different key factors in selection of these cities.

“The European Union wants to strive for more by making Europe the first climate-neutral continent. The
Mission proposes, as first Mission towards this goal, to establish 100 climate-neutral and smart cities for
2030, serving as experimentation and innovation centres for at least ten times more in cities in order to
push Europe to become climate-neutral by 2050.” By pursuing this objective, a mission and its aims are
clearly stated outlined in the Interim Report of the Mission Board. However, successful implementation
requires the ability to:

 Set up incentive mechanisms, attractive for cities, public and private R&I actors, and
citizens, so that the mission benefits from a coordinated and participated effort. The proposed
“Climate City Contract” is a novel mechanism tasked with instituting the incentive system,
stimulating commitment, and steering the transition process toward climate neutrality.

 Define a viable and equitable identification process for the 100 cities. Here, the diversity of
European cities should be taken into account, to ensure that the 100 climate-neutral cities are
not only front-runners and include cities that are representative of the complex European
urban mosaic.

 Provide cities with a coherent and clear reference framework of instruments and focus
areas for cities to work with, so that the required transformation proceeds with a sense of
direction and consistently.

5.1 City contracts

Climate City Contracts are meant to steer the process towards climate neutrality in combination with
a synergistic pooling of different lines of EU funding, so as to build a unitary and adequately
endowed pathway leading to large scale transformative projects.

When considering city contracts as a pivotal mechanism, insights from H2020 Smart City Lighthouse
Projects such as Ruggedised have been drawn. These projects show that contracts based on certainty,
with fixed budget, scope and solutions, are not fit to function in the present disruptive times. Accepting
uncertainty in city contracts and allowing for flexibility is unavoidable: times and environments are
changing fast and projects must adapt, else they will lose part of their relevance. Flexibility and the ability
to learn from failures is another key here: contracts should allow for cities to morph their activities,
partners and project plans – provided that they stay within the scope of the mission (for example, include
a specific amount of budget for experimenting, include options for interactive collaboration between the
cities and an overarching team of experts etc.).

It is also crucial to realise that city administrations cannot rely solely on their own resources. Principles
for effective stakeholder engagement, regional cooperation and the use of peer networks should
be considered in the city contracts: citizens, businesses, research and NGOs are essential elements of
any participatory approach, whether at the broader city level or the more local district level. Such
involvement should appropriately be fostered and steered by municipal administrations throughout the
policy planning cycle, thus starting with the definition of a vision, moving on with the identification of
priorities and actions, and continuing with the actual implementation and monitoring of results. Full-
fledged engagement processes enhance the sense of policy/project ownership and acceptance, fulfil
the participatory aspirations of society, contribute to align needs with solutions and provide added
value in terms of creativity and synergy generation.

36
Through efforts made in recent Framework Programmes, and particularly from FP7 onwards, Europe
fostered the establishment of a number of high-profile knowledge platforms and arenas for
collaboration and learning. Among them are the European Innovation Partnership on Smart Cities
and Communities (EIP-SCC)56, the CIVITAS Initiative57 - a platform designed to support cities in
introducing ambitious, sustainable transport solutions and policies, and the Global Covenant of Mayors
for Climate & Energy (GcoM)58. These initiatives share the long-term vision of supporting voluntary
action to combat climate change, a goal partaken today by over 10.000 cities and local governments
hailing from 6 continents and 139 countries. Overtime, these three platforms have generated growing
interest, value and policy influence, allowing cities to join into communities that provide funding,
knowledge, capacity, peer assistance, networking, and, last but not least, the feeling of belonging to a
network that provides validation and reassurance when it comes to making bold, novel and often difficult
choices. City contracts show draw from the lessons learned by these well-established co-operation
pathways.

Even though it may seem self-evident, the concept of climate neutrality should be clearly defined in
the course of setting out the city contracts, as it is important to link it to the monitoring of progress and
targets later on. It is important that the GHG accounting moved from a production-based to
consumption-based accounting system. For doing so, it is important to clarify how the baseline for the
city contracts and respective targets should be set.

Similarly, the understanding of what a city is needs to be made clear to all stakeholders by giving
references to unequivocal working definitions. For example, if the Mission is to target also city districts,
city conurbations or polycentric areas, it is important that working definitions are rigorously presented
has this has implications both for the selection process and the potential targets and impacts toward
achieving the Mission.

5.2 Selection of 100 cities

The starting conditions and challenges that EU cities face in progressing toward climate neutrality are
different, with asymmetries that should be taken into account when selecting cities. The next is a
synthetic overview of the factors to be taken into account:

 Population size and demography (e.g. in terms of age and socio-economic status) defines
the ability to invest in transformative actions: is the city growing or shrinking? Are there mainly
elderly people? What is the well-fare level? Across Europe, a very diverse picture exists in this
regard. Between 2004 and 2014, population change in so-called metropolitan regions varied
between +21% (Luxemburg) and -15% (Galati in Romania). Larger cities have often better-
skilled and more staff, making it easier to develop high-quality plans to address energy
efficiency and clean mobility.

 Geography and climate.

 Closely related to this is the performance and resilience of the local and national economy
and its specific structure, which not only defines the long-term perspective in terms of growth
or shrinkage but also the local tax income and resources available. Differences in economic
performance of European cities are big, leading to a pattern of rich and poor cities, with many

56 https://smartcities.at/europe/networking/european-innovation-partnership-on-smart-cities-and-communities-eip-
scc/

57 https://civitas.eu/

58 https://www.globalcovenantofmayors.org/

37
 former industry cities lagging behind. Both studies also observe an overall pattern of a
continuous shift of jobs and people to high-income cities, often capitals. To give an idea,
unemployment rate as proxy for economic performance varied in 2017 from 3% for Czech
cities to 24% for Greek cities.

 These different demographic and economic trajectories have led to an enormous variation
across Europe in terms of composition of the building stock (type of buildings, age, energy
performance) and of urban infrastructures and utilities, as visible with the organisation of
the transport system and supply of energy.

 Research suggests that different national, regional and local legal frameworks play a key
role, not only in enabling but also in incentivising transformative actions toward climate
neutrality. For example, feed-in tariffs differ highly between cities, connection to district heating
grids is mandatory or not, sustainable, pre-commercial procurement can be allowed or not.

 Planning culture is hugely different between European cities, especially north-south-east-

west, in terms of hierarchy, permissiveness, and trust. This influences how agile and efficient
city administrations can operate, the risks they are willing and allowed to take, and the
openness to facilitate grassroots initiatives of citizens.

 The underlying social model, its inclusiveness towards weaker groups in society, and the
perceived role of government differ also highly between member states and thus between
cities. Nordic countries have a more egalitarian social model, a high level of computer literacy
and high trust in government, making it easier to include all relevant stakeholders and achieve
agreement on plans. Furthermore, in countries with a high degree of deregulation,
privatisation and outsourcing, city administrations need to get to agreement with many more
stakeholders, who might have different interests, such as cheap bids to continue a
concession.

 Finally, climate change vulnerability varies greatly between European cities. Flooding risks,
heat waves, proneness to forest fires, and ability to tackle extreme weather events differ
enormously between European cities, depending upon factors as urban density, greenery, soil
sealing etc.

A possible inspiration for the selection framework can be draw from the C40 report on “Focused
acceleration: a strategic approach to climate action in cities to 2030”, which distinguishes among: 1)
Population density, population growth and income, 2) Status of the carbon-intensity of the energy grid,
3) Built infrastructure: rising demand for heating/cooling, growth in new building, 4) City power: History
of climate action, scope of decision-making power, 5) Urban transit system: car ownership, public transit
and modal split of mobility services, 6). Status of waste management.

Another approach is offered by a project of the European Environment Agency (Gregor et al., 2018),
which identified five clusters of European cities (excl. London) with specificities that differentiate them
from one another59:

 Cluster A is almost exclusively composed of cities from the former socialist or communist
countries in Eastern Europe, except from four capital cities of those countries (i.e. Warsaw,
Prague, Budapest and Bucharest). In the past years, they all experienced a strong population
loss and today consist of a relatively young population.

59 Excluding London, as London always appears as a stand-alone city that does not belong to any of the other
clusters, irrespective of how many clusters were used during the calculation of the typology.

38
  Cluster B consists of cities of three Mediterranean countries, Portugal, Spain and Italy. Due to
the urban development history, Mediterranean cities tend to be very compact and are very
much characterised by their specific climatic conditions. However, it is likely that the most
determinant factor for their grouping is the impact of the financial crisis of the years 2007 to
2009 on their inhabitants. The cities of this cluster have the highest unemployment rates, the
strongest decrease in their government effectiveness and the highest old-age dependency.

 Cluster C is the most heterogeneous one and does also not show a clear geographical
pattern, it is the group with the highest share of green spaces, but at the same time
experiencing a sprawling, low-density development pattern.

 Cluster D coincides with Europe’s most prosperous regions, possesses the highest
government effectiveness index and is the only cluster with cities which do not have an aging
population.

 Cluster E consists of some of the biggest, mostly capital cities in Europe and shows the lowest
unemployment and at-risk-of-poverty rates, so is a kind of counterpart to Cluster B.

With all key elements for the transformation to climate-neutral and smart cities identified, the next and
final chapter will draw overall conclusions and make general recommendations.

39
6 Conclusions and recommendations
This final chapter presents some overall conclusions based on the material produced for and analysed
in this study. In addition, it will make some recommendations for the road ahead and summarise the
most important current knowledge gaps.

6.1 Conclusions

With the execution of the project focusing more on particular information needs of the Mission Board
around feasibility of specific solutions and of contracts with city administrations, and less on trends and
future developments than originally foreseen, this study has arrived at the following main conclusions:

 The current pace of change in cities is prohibitive of reaching the energy and climate goals for
2030 and 2050. Despite many areas of progress, persistent inertia occurs in present transport
and logistics systems, sustainable production and supply of energy to the built environment,
and human behaviour, in particular regarding consumption. This means upcoming windows
of opportunity for introduction of low carbon solutions have to be systematically screened
and deployed.

 Therefore, any monitoring of urban GHG emissions should be based on consumption-based

accounting, to prevent an underestimation of GHG emissions caused by consumption of
goods and services in European cities and an overestimation in other parts of the world. This
has important consequences for follow-up of City Contracts and the expected scope of plans
of cities to reduce GHG emissions.

 Regarding the direction of key trends and possible disruptions, it is clear that continuing
urbanisation for specific cities and demographic and economic polarisation between cities,
in particular when combined with disruptive effects of artificial intelligence, will seriously
influence the basis of local economies and cities’ ability to invest in climate mitigation.

 Due to their densities, cities will be increasingly affected by the impact of climate
change, be it directly through natural disasters as more frequent extreme weather events, or
indirectly, through migration flows. Also external disruptive shocks, like the current Covid-19
pandemic will also affect pathways for reaching smart and climate city targets. The
macroeconomic shock of the crisis may lead to underinvestment and postponement of private
research and innovation investments, and a surge in motorised mobility on the one hand,
which need to be at least partly offset by public policy investments. On the other hand,
alternative pathways for commuting traffic, working lifestyles, and use of roads can be more
easily incentivised and established in a sustainable manner.

 Frontrunners and several national and EU programmes such as SCC-01 Lighthouse projects,
demonstrate that substantial energy savings and GHG reductions, in the range of the
EU’s 2030 targets are achievable. However, it is unknown in how far inclusion of
consumption based GHG accounting might alter this picture.

 Technology alone will not do the job. Crucial for any transition towards climate-neutral
cities is co-evolvement of technological innovations, knowledge and capacity building with city
administrations and businesses, large-scale public and private investments in physical
infrastructures, new business models inducing behavioural change, and incentive systems
next to climate neutrality promoting regulations at national level for each domain.

 City administrations have to orchestrate the transition towards climate-neutral cities, and
need businesses, citizens and academia to co-produce this change. However, for many cities,
this requires a big change in mind-set.

40
  A systemic, holistic approach focusing on the medium to long term is a key to achieve the
aims in an effective way, the more because windows of opportunity and possible synergies
are otherwise easily missed.

 City Contracts are a good means to bring about the desired change in 100 cities but need to
be accompanied by the right incentive mechanisms and instruments. Furthermore, they
need to reflect different realities and contexts across Europe to be able to fulfil the role of
accessible, recognisable beacons of change.

6.2 Recommendations on further development and implementation of the

city contracts

Climate is not always perceived as a daily priority by large segments of the world’s population, and
politicians often act accordingly. Instilling a sense of climate urgency and fostering the necessary
behavioural change in city administrations, businesses and citizens is a formidable challenge that
requires vision, courage, good storytelling and strong incentives. And of course, financial
resources.

The climate city contracts must be able to embrace and support these assets, calling to action the entire
coalition of urban stakeholders in a coordinated and holistic approach. The next are a few pivotal
process dimensions that need precise addressing and describing in the contracts:

 How is the local governance going to function? The participatory development of a

strategic research and innovation agenda for the participating cities is essential, as the
process of co-creation and prioritisation helps to build concrete lines of actions from a jointly
shared vision and an analysis of needs. Governance for implementation needs a clear
framework, with rules, roles, continuity and the shared understanding that the end result will
depend upon involvement, awareness and ownership of all. Thus, contracting cities should not
only subscribe to a notion of participatory governance, but illustrate in detail how the process
will unfold and according to which timeline.

 Legal and regulatory enablers must be put into place to overcome constraints posed by
administrative and competence boundaries (depending on countries, municipal vs
metropolitan vs provincial vs regional vs national attributions paralyse or slow down the
administrative action). Contract subscribing cities should describe the novel regulatory and
legal enablers they intend to leverage to pursue the ambition of the mission. For example,
concerning the energy system of a city, regulatory (experimental) Sandboxes for smart grids
transitions are new, innovative policy instruments for projects, to be tested under experimental
conditions, which would otherwise be hampered by institutional barriers (including energy
legislation, regulation of monopolistic grid operators, market structures, infrastructure
investment mechanisms etc.)60. At city level, they might not only provide an experimental
environment to stimulate and foster innovation, but also facilitate upscaling to the city level
and replication in partnering cities.

 Understanding the behavioural patterns of the city as a system and its implications for
climate neutrality and climate resilience is key for defining actions. Many city administrations
lack the capacity to steer processes, because of too little analytical capabilities. Building up
secure and trustful data infrastructures that allow to analyse current patterns of action and
consumption – for example concerning mobility, electricity use, heating etc. - could be a
cornerstone for developing e.g. instruments that induce behavioural change and better inform

60 https://www.iea-isgan.org/wp-content/uploads/2019/05/ISGAN-Policy-Messages-on-Sandboxes-to-the-Clean-
Energy-Ministerial.pdf

41
 infrastructure investments. For building and utilising analytical capacities, co-operation of city
administrations with research organisations is also a key requirement.

 Digital technologies and urban system modelling are important cornerstones. For
transforming cities into climate-neutral cities, at least the most relevant sector – depending on
the necessity of the city under consideration, needs to be addressed. Aspects addressing
energy efficiency in buildings, mobility and land use need to be taken into account intensively,
as here the strongest saving potentials exist:

o If matters of thermal insulation in building etc. are not being tackled, it will be very
difficult to make significant progress through means like digital technologies. Of
course, there are many great possibilities to better operate buildings and
infrastructures, but they will fail to make the difference for GHG emissions if not
accompanied by a Marshall plan for refurbishment.

o The electrification of mobility and the promotion of healthy, active mobility through
better intermodal use of transport is also important to be addressed in an integrated,
holistic manner. In innovation, the infrastructure(s) for charging electric cars,
distributed energy grid systems, and the development of battery technologies and
recycling are important.

o The potential role of city services, such as for example public transport and local
energy providers play a very important role, especially when being privatised.

Overall, the need for innovative solutions in cities will depend upon the specific local conditions. Care
should be given that the mission is flexible enough to set out R&I priorities that satisfy the needs of the
local circumstances on the one hand, while on the other hand allowing for replication, upscaling and
business opportunities at European and global level.

To lead on the transition, cities need to be confident in the path they are taking and have equitable
access to solutions and funds to enable them. Together, European cities can ensure a growing market
that is led by city-needs and that builds on more common solutions that are more affordable, and that
in turn delivers value to society and the economy. Together, they can also develop business models
that enable larger scale and upgrading which attracts public and private investors. In this sense Europe’s
5-year investment in Smart Cities Lighthouse projects, now involving 116 EU cities, provides an ideal
springboard for scale transformation. The Climate-Neutral and Smart Cities Mission Board and Horizon
Europe now have the occasion to engage, support and benefit from synergies between smart city
lighthouses and an EIP-SCC aligned progress. These might include:

 Building a common business model and financing ‘toolkit’ to support rapid implementation in
the field. Cities and investors could in this sense co-create and co-implement.

 Championing of specific initiatives to ‘package’ solutions that enable scale adoption in the
cities market.

 Facilitating dialogue between cities, higher public authorities, financial and industry
associations.

 Capturing and disseminating structured quality case studies.

 Capacity building programmes for cities and investors on business models and financing.

 Providing for an awards programme to stimulate action and give visibility to best practices.

42
6.3 Recommendations on knowledge gaps concerning smart and climate
neutral cities

The study further showed that there are areas, where scientific information and evidence for policy
and decision making is still under developed, and where the Mission Board and Horizon Europe could
put a more in-depth focus, in order to spur the development of smart and climate-neutral cities. Specific
knowledge gaps the project team came across are the following:

3. Expected costs of making a city entirely climate-neutral in a smart way: So far there is
only anecdotic evidence of all costs and revenues, both in terms of investment and operations,
which can be expected for making a city climate-neutral. Several studies have calculated the
total costs and revenues of the transition to energy-efficient cities at national, European or
global scale, but this information is not available on the level of individual cities. Further, it can
be expected that a considerable amount of these costs can be accommodated in regular
maintenance, upgrading and replacement of buildings and infrastructures. The full extent of
total costs, revenues and savings for different types of cities, and the degree to which they
might be incorporated in ongoing investments, are currently largely unknown.

4. Monetarisation of co-benefits of low carbon solutions: Regular financial calculation tools

do not take into account the value of so-called co-benefits of low carbon solutions, such as
less air pollution, a higher quality of public space, more indoor comfort or less congestion.
Despite ample evidence that these co-benefits are very important for stakeholder
engagement, it is hardly known how they influence the business cases and business models
of climate-neutral and smart solutions in an economic and financial sense. One of the reasons
for this is that there are no sound methodologies yet to monetarise these co-benefits. More
research is needed on how these co-benefits contribute to the production of public and private
goods, and which methodologies are needed to make them a part of financial evaluations of
business cases and business models.

5. Financing the transition constitutes a critical gap for the transition to climate-neutral cities:
cities still often act individually – as ‘city islands’ – thus lacking the capacity to swiftly develop
projects attractive for private or public investors. Despite years of quantitative easing in
Europe and other parts of the world, finance is still insufficiently flowing into energy-efficiency
and smart city projects, even those with a rather favourable business case. Much more in-
depth knowledge is needed on why low carbon solutions apparently miss out on the large
volumes of money circulating so far, which specific obstacles need to be addressed by whom,
and how the attractiveness of business cases can be improved. In addition, research is
needed on how the Covid-19 crisis affects business cases of low carbon solutions in cities,
and how such investments can be related to economic recovery and boosting of local
economies.

6. Windows of opportunity for low carbon solutions: Despite a wealth of valuable pilots and
demonstrations, windows of opportunity for making cities more climate-neutral in a smart way
are often not yet systematically screened by local authorities. Investment decisions taken
today are often irreversible and will impact urban sustainability for a long time to come, as the
lifespan of buildings and infrastructures is at least several decades (Wegener, 1989).
Knowledge on low hanging fruits and upcoming opportunities for making cities low carbon is
often lacking at city level, despite the availability of detailed geographical data. Innovative
tools for systematic screening of windows of opportunity for applying smart, climate-neutral
solutions are needed.

7. Scale and scope for planning and creating smart and climate-neutral cities:
Administrative boundaries usually do not reflect the spatial extent of cities’ urban systems,
including energy systems and socio-economic systems. A taxonomy that allows to city
administrations and other actors to consider the right scale level for their particular city, would

43
 not only provide much-needed guidance but also enable a more systematic and integrated
approach. Possibly this knowledge gap could be addressed by combined efforts of Eurostat,
EEA, and JRC.

8. Vulnerabilities of entire systems of climate-neutral and smart buildings and

infrastructures: The stability and vulnerability of climate-neutral and smart infrastructures is
largely unknown. For example, in case whole cities and communities become all-electric, with
full-scale usage of electric transport of goods and persons, smart buildings and smart grids,
what would that mean for the dimensioning of the current power grid? More research on the
vulnerabilities and risks that might occur, how to mitigate them, and which regulations and
investments are needed.

9. Development of artificial intelligence and the issue of privacy: Digitalisation of the built
environment and an increasing use of urban data, sensors and actuators to operate urban
buildings and infrastructures, e.g. for surveillance, smart meters, smart lighting, smart thermal
and power grids, intelligent transport systems, mobility as a service, autonomous vehicles and
government services, will continue in the near future. Many of these advanced technologies
can help to bring the aim of a smart, climate-neutral city within reach. However, little is known
how this digitalisation process will further evolve, and what will be required to protect security
of individual data in urban contexts.

10. Incentives for behavioural change: Quite substantial research has been done on social
innovation and co-creation and co-realisation with citizens of climate-neutral and smart
solutions. However, how this knowledge can help to induce behavioural change, and which
incentives are key for making more sustainable choices in cities, is far less clear. It would be
very useful if different experiences and outcomes of research could be bundled in guidelines,
supporting local administrations in dialogues with citizens and other key stakeholders, leading
to more sustainable behaviour. In this respect, it is striking that far less knowledge is available
on motivations for companies to make more sustainable choices which contribute to smarter
and climate-friendlier cities. This is a missed opportunity, as companies usually account for a
large part of local GHG emission, e.g. through commuting, logistics and manufacturing, and
their concentration in business and industry parks could potentially enable many solutions,
such as production of renewable energy with PV on roofs of buildings, exchange of heat and
power through smart thermal and power grids, shared geothermal energy, CHP production,
and electric freight transport. A knowledge gap exists on what city administrations can expect
from companies in contributing to clean energy and mobility goals.

44
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For access to legal information from the EU, including all EU law since 1952 in all the official language
versions, go to EUR-Lex at: http://eur-lex.europa.eu

OPEN DATA FROM THE EU

The EU Open Data Portal (http://data.europa.eu/euodp/en) provides access to datasets from the EU.
Data can be downloaded and reused for free, for both commercial and non-commercial purposes.
The EU introduced missions as a new instrument in Horizon Europe.
Mission Boards were appointed to elaborate visions for the future in
five Areas: Adaptation to Climate Change, Including Societal
Transformation; Cancer; Healthy Oceans, Seas, and Coastal and
Inland Waters; Climate-Neutral and Smart Cities; Soil Health and
Food. Starting in autumn 2019, five Foresight on Demand projects
supported them with foresight expertise and methodology.

This report provides the work in support of the Mission Board on

Climate-Neutral and Smart Cities. Starting with a systemic analysis,
the project identified urban challenges in existing forward-looking
studies in order to determine the thematic scope together with the
Mission Board. It collected data about consolidated external and
internal drivers, trends and practices as well as weak signals,
potential disruptive events or incremental changes with a potentially
substantial positive impact on cities.

Studies and reports