Green Investment in Asian Cities to Reduce Natural Disaster Risks

In recent years, large-scale natural disasters have frequently occurred in various parts of the world, and the associated losses have increased. As a result, there have been growing concerns over the protective measures needed, particularly with respect to energy and infrastructure systems within cities that are also experiencing mounting risks and exposure levels.

In order to avoid risks and damage, and to strengthen resilience to natural disasters, national and local governments need to be prepared. At the local level, authorities must take action to construct policy packages that include locally based risk prevention facilities as well as risk finance and risk transfer systems.

A proposal for the establishment of a risk management facility has been submitted by the Parties and other organizations to the United Nations Framework Convention on Climate Change (UNFCCC). The proposal by the Munich Climate Insurance Initiative consists of a three-tier risk management module for the international level, an international risk pooling mechanism for developing countries, an insurance assistance facility to cover medium-level risks, and a prevention pillar to achieve risk reduction.

In addition to governments and private enterprises that offer financial support and the provision of necessary goods and services to cover losses post-disaster, risk financing and risk transfer tools such as insurance, reinsurance, and catastrophe-linked securities are key. Such tools help to reduce the negative economic impacts of extreme risks.

This article discusses the risks associated with natural disasters, with particular focus on the vulnerability of energy systems. It examines the opportunities for local/community-based infrastructure to prevent risks through installing locally based energy systems, financing mechanisms to prevent risks and risk transfer systems as well as the associated challenges that exist with respect to their establishment.

Natural disasters and risks

As Aekapol Chongvilaivan noted in his 2012 paper, natural disasters, such as the 2011 floods in Thailand, have had huge impacts on urban systems and their associated infrastructure.

The nuclear power plant accident at Fukushima in Japan on 11 March 2011, a result of an earthquake and tsunami, highlighted the constraints of the existing energy system in Japan as well as its vulnerability to extreme events. Japan’s energy system is very centralized and dominated by ten regional electrical companies — according to data from Japan’s Agency for Natural Resources and Energy, about 90 percent of the country’s power generation. For example, electricity in the megacities of Tokyo and Yokohama is provided by the Tokyo Electric Power Company, which depended on nuclear power plants for 29.7 percent of its total generated electricity.

The 2011 catastrophe increased public awareness on energy security, making it apparent that a review of energy security was necessary for the country, and that both a nationwide recovery plan and city-level recovery plans were needed. This has also emphasized the need for an innovative and resilient energy system with a diversified and decentralized energy supply and management system, including the development of more flexible, locally based energy supply and risk prevention facilities to quickly respond to risks.

Locally based development for enhancing resilience

More than a decade has passed since the Kyoto Protocol to the United Nations Framework Convention on Climate Change (UNFCCC) was adopted (in 1997), which commits its Parties to reduce their greenhouse gas (GHG) emissions, thereby setting mitigation targets and related climate change policy at the national level. This has also prompted individual cities to do the same, oftentimes more successfully.

For example, many local programmes and initiatives have been established in various countries, e.g., the Future City initiatives in Japan, Tianjin Eco-City in China, Thailand’s Low Carbon City pilot project and the Low Carbon Society project in Iskandar, Malaysia.

In Japan’s case, these city-based developments were launched as part of the National Strategic Projects in its “New Growth Strategy”, published in June 2010. The New Growth Strategy policies (blueprint for revitalizing Japan) were set up as a result of a Cabinet decision in 2010. One of the components is “Revitalizing rural cities and towns by utilizing regional resources; revitalizing big cities to serve as engines of growth”. The targets to achieve by 2020 are to utilize regional resources to the greatest possible extent and to increase regional power, as well as to make strategic, prioritized investments in airports, ports, roads and other infrastructure in major urban areas.

In consideration of natural disasters, which are expected to become more frequent and severe as a result of climate change, governments must be proactive and take a preventative approach to constructing resilient infrastructure and management systems within the city or community in cooperation with private and local non-profit organizations. Assessment of the damages of disaster risks and the costs associated with natural disasters ex-ante is also important. Therefore, for fully effective risk management and implementation, locally based facilities in line with an international risk management facility are needed.

After the recent sequence of natural disasters in Asia — including the flooding in Thailand, earthquake in Indonesia, and earthquake and tsunami in Japan — and their severe impacts on society, city-based risk management has become a major focus, particularly in Japan, and has been added in the components of local development strategies for enhancing resilience at this level.

In Japan, an “autonomous decentralized regional development model project utilizing regional renewable energy” was initiated in 2011. The project was implemented with additional funding of 1.0 billion yen in 2012. The budget was increased to 1.6 billion yen in 2013 under the programme of sustainable regional development (about 33 billion yen is planned to be distributed in 2013), according to the Ministry of the Environment budget request in 2013. The private sector has been a key actor in the implementation and has also included other players such as research institutions and local governments.

Community-based management systems and investment

In order for a decentralized, locally based energy system to exist, funding is required for the installation and operation of new facilities, such as solar power generation stations. In Japan, increasing attention has been paid to the establishment of such financial mechanisms as the result of raised public awareness on sustainable energy and security. Available funds have been identified through government subsidies, but cannot be fully relied upon, making it important to seek out other sources.

Various local funds have been established through investments from the private sector and also from voluntary citizen donations. Financial instruments have included the issuance of certificates, promissory notes, and small-issue bonds through financial institutions. For example, a micro-credit fund is an investment fund designed to finance microfinance institutions (MFIs), which provide financial services such as small loans to small enterprises. MFIs deliver microcredit through local banking, solidarity groups and individual loans.

In the case of Japan, for instance, after the Fukushima accident, the online retail investment fund management company (Music Securities Inc, Tokyo) set up new micro-credit funds to raise capital for small enterprises in the Tohoku region, which has been hugely affected by the accident. However, these instruments and methods vary and are dependent on the specific structures of funding within cities.

A challenge for local low-carbon energy investment availability and feasibility is the high degree of uncertainty and risks inherent in renewable energy technologies. Uncertainty is high due to the lack of experience and history in the case of green energy and community-based projects, and the lack of understanding on the associated social and environmental impacts as well as potential economic benefits. Therefore, local government and investors who provide subsidies or invest in these efforts must utilize proper analytical tools to estimate the cost-effectiveness of the local energy project including any economic, social and environmental impacts of its implementation prior to any decision-making.

Risk prevention and transfer

In addition to the establishment of locally based energy systems, risk prevention or risk transfer systems mitigating the financial impacts of natural disasters must also be established at the local level. Agendas for the formulation of systems to reduce disaster risk and establishment of funding mechanisms, such as risk financing, have been attracting attention. Risk financing can be used to quickly secure funds before and after disasters, and also investigates countermeasures against natural disasters, including methods such as insurance and climate change adaptation measures.

Economic loss attributed to extreme weather events around the world increases demand for the development of risk management and risk transfer schemes. Many nations, including both developed and also developing countries, have established such insurance schemes that improve adaptation capacity to disaster events.

One strategy to support the economic recovery immediately after a disaster includes a weather insurance index. This allows for the benefit of quick payment to aid in recovery post-natural disaster due to the parameters of the index (e.g., the wind speed of a hurricane or the degree of ground acceleration caused by an earthquake) rather than the actual damages that typically determine the conditions of payment. Use of these parameters aids in the liquidity of funding and helps insurees with more immediate recovery, as payments are paid as quickly as possible after the occurrence of disaster.

Development challenges

When introducing such a risk transfer mechanism, challenges are prone to exist in the development, dissemination and design of the risk transfer scheme. Uncertainty is high when disasters occur in places that, in particular, lack appropriate infrastructure for pre-disaster management, lack data related to weather, or have unreliable data with respect to quality. Other challenges include residual risk (e.g., the exposure to loss remaining after other known risks have been countered, factored in, or eliminated), the uncertainty of unexpected events due to the inability to quantify events of rare occurrence, the inaccuracy/unavailability of climate data, or poorly designed risk-mitigation mechanisms and management systems.

These are all of particular concern within developing countries where high residual risk results in high insurance premium costs that small enterprises and citizens in developing countries cannot afford. Therefore, for minimizing the residual and baseline risk, governmental support to cover expected losses and risk premiums, as well as to formulate reliable risk management mechanisms from accurate data (including compiled historical data and capacity development) is necessary.

Moreover, the challenges to the development of disaster risk insurance are profound in cities of developing countries that are disproportionately impacted by natural disasters such as typhoons, floods and drought — usually exacerbated by high population density and inadequate infrastructure. These challenges usually stem from the weaknesses that exist in observation systems including quality of data, availability of data, weather observation stations, the automation of the weather observation system to record and compile the data at the local/regional level (not only at the national level), and ageing facilities and equipment.

Therefore, for the improvement of risk prevention mitigation, first, the improvement of quality data and facilities to more accurately forecast and estimate risks is needed. The expansion, modernization and strengthening of a meteorological observation network is also necessary. Improvements in data processing are essential for the development of basic meteorological data for building a risk financing system, regardless of the field and approach of risk insurance or risk transfer mechanisms.

A policy package to prevent natural disaster risks at the local level — including low-carbon infrastructure, risk assessment for investment and risk transfer systems — are needed. Future disaster preparedness requires the establishment of risk financing systems. It is necessary to have not only locally based infrastructure systems such as community-based energy management and supply systems and financing mechanisms, but also risk transfer mechanisms including risk insurance for natural disasters.

In addition to the establishment of these systems at the local level, a basic infrastructure of data for risk assessment and estimates is required, and also a strengthening of regional or informational cooperation between cities or countries across both the developed and developing world.

Finally, it is imperative, as in the case of Japan, to develop and build a collaborative environment for public institutions and private companies for the success of these locally based initiatives.
Photo credit - Mark Garten Content Courtesy - Unu

Urban Regeneration and Climate-friendly Development: Lessons from Japan

As part of their research within the United Nations University Institute of Advanced Studies (UNU-IAS) Sustainable Urban Futures Programme, Postdoctoral Fellow Osman Balaban and Assistant Director/Senior Research Fellow Jose Antonio Puppim de Oliveira examine the potential role of urban regeneration in climate change mitigation and adaptation.

Cities have a central role to play in tackling climate change as well as in adapting to its effects as they contribute much to it and are under severe threat from its impacts. Because urban spatial policies have long-term effects, they are key for tackling climate change and it is through such policies that city governments can guide climate-friendly planning.

Spatial policies cover a range of issues from a regional scale to individual buildings, including promotion of compact cities, provision of green spaces and water bodies (retention and detention ponds, water canals, etc.), retrofitting existing buildings, infrastructure renewal, and increasing non-motorized and public transport coverage. They may further be useful in achieving climate change mitigation and adaptation goals simultaneously. For instance, green spaces mitigate emissions through carbon sequestration and help combat impacts like heat stress, air pollution and flooding.

Introduction of such spatial policies necessitates certain forms of intervention in existing urban areas. “Urban regeneration” inherently comprises such interventions, from renewal to rehabilitation, and thus can provide opportunities to introduce spatial policies that address climate change.

However, urban regeneration research has so far focused on community-based issues, governance aspects and even sustainability, but not much attention has been paid to climate change. With our recent paper we intended to contribute to the literature by enhancing understanding of the potential role of urban regeneration in climate change mitigation and adaptation.

We undertook a close examination of how and with what effect different forms of policy responses to climate change are emerging in urban areas. We also examined how and to what extent urban regeneration, as a major field and instrument of urban policymaking, could be linked with these policy responses and thus turned into a city-based response to climate change.

The research was based on two case studies in Japan where the focus of urban planning has shifted from growth to reorganization that is designed to create compact cities in the country’s era of depopulation. There are recent attempts to convert existing regeneration sites into smart districts, where carbon emissions and environmental footprints are lowered. However, further research that strengthens the links between urban regeneration and climate change is required to foment the scale-up of these initiatives.

Urban regeneration evolves

Urban regeneration is a way to reorganize and upgrade existing built environments rather than planning new urbanization. It is an old concept that has evolved over time. Its roots can be traced back to the 1970s when many cities in Britain and the United States started initiatives, referred to as “urban renewal” or “area improvement”, that focused on physical renewal of inner cities identified as “areas of social deprivation”.

By the late 1970s, economic aspects like revitalization of downtown cores or entire cities were incorporated into renewal schemes and urban regeneration became a more comprehensive concept. Property-led urban regeneration projects dominated urban policymaking in British and US cities in the 1980s, based on the understanding that a supply of new premises for office, industrial and retail activities would facilitate local economic transformation. These projects came as part of the strategies to achieve the “entrepreneurial city”, a new form of urban governance to encourage local economic development.

Nevertheless, the ineffectiveness of the property-led approach in addressing issues of social equity and environmental protection led to incorporation of new goals into the urban regeneration concept. During the 1990s, the environmental benefits of improving existing urban areas were recognized and regeneration projects began to be considered as a means of addressing the three pillars of sustainability: economic revitalization, social justice and environmental protection.

There have been recent attempts to associate urban regeneration with climate policy, but these remain in their infancy and require further efforts to improve their theoretical and practical underpinnings. Current progress is limited to a few examples of regeneration projects that are designed to contribute to climate change mitigation and adaptation along with other objectives.

The regeneration process entails different forms of spatial interventions which could change the form and land use structure of cities in a way that could facilitate the implementation of spatial policies that address climate change.

Perhaps the most fruitful form of intervention is effective utilization of inner-city lands. Through urban regeneration, city governments can make the best use of brownfields and underutilized lands, providing the possibility of employing a “grow-in” strategy to concentrate the majority of new developments in existing urban areas, in the form of mixed-use developments.

Such a strategy may help achieve energy and resource efficiency by preventing urban sprawl and, in particular, reducing commuting time and distance. Further, less energy is consumed in compact cities for urban infrastructure operations. We know that 30 percent of urban energy consumption goes to pumping water and collecting wastewater. So, the more area that a city occupies, the higher the amount of energy used in that city to provide water to and collect wastewater from buildings.

Buildings are among the major sources of carbon emissions due to energy consumption for heating and cooling. Further, poor quality buildings and those sited in disaster-vulnerable (eg., on floodplains) areas are the most vulnerable to climate impacts. In many nations, buildings that will be in use in the next decades are already built. Special attention should therefore be paid to turning existing buildings into low-carbon and less vulnerable structures. Urban regeneration could help in overcoming such building-related challenges, either by retrofitting or renewing existing buildings, as part of the renewal and rehabilitation of inner cities.

Urban regeneration in Japan

Japan has been depopulating since 2005 and, according to projections by Tetsuo Kidokoro, the population of cities of all sizes will start to decrease after 2015. Due to this demographic change, the focus of urban planning and development in Japan has shifted from growth to reorganization. More attention is now paid to turning cities into more compact and sustainable places with a high quality of life.

This could be done by addressing urban problems inherited from a previous period of rapid urbanization, such as urban sprawl, decline in city centres and disaster vulnerability. Further, in line with global and national environmental concerns, greenhouse gas emissions in Japanese cities have to be lowered.

Much can be expected from urban regeneration in transforming Japanese cities into more sustainable and low-carbon urban environments in the era of depopulation. We looked at two urban regeneration initiatives in Japan, representing two major approaches of regeneration practices in Japanese cities, namely “project-based” and “plan-based” approaches.

The first case was the Minato Mirai 21 project (MM21) located in the central quarter of Yokohama City in the Tokyo Metropolitan Area.  Although initiated in the mid-1980s, the project is still in progress. MM21 was built on 186 hectares of brownfields and reclaimed lands and is currently a mixed-use district, including offices, malls, residences, hotels, cultural centres, a hospital and parks. The main objective of the project is to increase the self-sufficiency of Yokohama by strengthening its central business district.

The second case was Kanazawa City in Ishikawa prefecture in eastern Japan — a mid-sized historical town with a population of 462,361 people. Kanazawa has been encountering problems caused by urban sprawl, such as decline in the city centre, high reliance on automobiles and an increase in carbon emissions. Since the 1990s, the city government has been addressing these problems through several means, including urban regeneration. The “City Center Revitalization Plan”, which covers an area of 860 hectares and includes actions to regenerate the city center, is the primary component of urban regeneration attempts in Kanazawa.

We analysed the impacts of these two initiatives to tackle climate change by breaking them down by the following aspects: economy and work, buildings and land use, transportation and mobility, infrastructure for resource efficiency, energy consumption and efficiency, and community-based issues.

In addition to the scope and extent of their climate benefits, both cases presented a series of lessons on transforming urban regeneration projects into opportunities to reorganize cities in climate-friendly manners as described below.

Flexibility in project conception and design

Flexibility in the design of regeneration projects can help to incorporate them with new concepts that emerge over time. A main feature of the MM21 project is the delay in its completion due to the economic recession in the 1990s.

Slow realization of the project turned out to be an opportunity to eliminate the shortcomings in project design regarding environmental issues. Contemporary concepts like waste recycling, green buildings and smart grids — that did not exist at the time when the project was initiated — began to be incorporated into the project over time. Further, as the project has not yet been fully implemented, city government has had the opportunity to apply new environmental technologies to turn MM21 into a smart district. MM21 is one of the major “Yokohama Smart City Project” areas.

Participation and political commitment

Although community participation is important, it cannot guarantee a climate-friendly and low-carbon city. In the Kanazawa case, where varied stakeholders are involved in decision-making, the overall impacts of the plan have been relatively minor. This is mainly due to the main actors’ weak political commitment and lack of resources to pursue climate change mitigation and adaptation.

Therefore, in order to benefit from community engagement, participation mechanisms need to be supported with political commitment and the two should complement each other. Only then can a balance between technical top-down and participatory bottom-up approaches be achieved throughout regeneration practices.

Coordination between city divisions and policies

A sectoral approach dominates policymaking in both cities. Different city administration divisions are in charge of different sectors regarding urban development and environmental management. However, coordination between them seems to be insufficient. For instance, the Waterworks Bureau of Yokohama City takes no particular action on water issues directly related to climate change, as a separate division of the city government is in charge of global warming and climate change.

Considering a similar problem, Kanazawa’s environmental plan draws attention to the need for effective coordination between city divisions to facilitate the implementation of environmental strategies. For instance, Ishikawa prefecture has developed an “Eco-House Project” to raise citizens’ awareness of green buildings and encourage them to install green technologies in their houses. However, lessons from this prefectural project seem to have not been reflected in Kanazawa’s City Center Revitalization Plan.

Binding and structural measures

A main factor that limited the positive impacts of the revitalization plan in Kanazawa is the reluctance of the city’s government to introduce binding measures. Instead, it chose to adopt “soft” measures aiming to achieve behavioral change in the long-run. For instance, the plan avoids restricting car use, although it aims at decreasing the use of private cars for inner-city trips.

Such an approach seems to have prevented the plan from being supported by strong and complimentary measures. Likewise, the limited capacity of the city government to introduce structural measures in certain policy fields resulted in similar outcomes. As Kanazawa’s bus system is run by the private sector, the city government couldn’t introduce structural regulations on the system, and soft policies have been ineffective in overcoming the structural deficiencies in the system. This illustrates that binding and structural measures should be introduced as part of regeneration projects, particularly to ensure compliance and behavioral change.

The crosscutting potential

Our case studies demonstrated that urban regeneration is an instrument of urban policy that has the potential to facilitate the introduction of spatial policies to address climate change.Interventions inherent to the regeneration process could be used to upgrade existing urban environments and hence change the form and land use structure of cities in climate-friendly manners.

As a crosscutting field of urban policy, urban regeneration could also help in bridging the “mitigation and adaptation dichotomy” and create synergies between two major targets of climate policy, helping to achieve mitigation and adaptation goals simultaneously. In the MM21 project, adaptation actions like provision of green spaces and infrastructure improvements have been implemented together with mitigation actions like a district heating and cooling system.

Of course, achieving this is not straightforward and hindered by multiple challenges, as noted above. Overall, there remains the need to understand conceptually, and in practice, how urban regeneration could help to both tackle climate change and achieve its main objectives of revitalizing certain areas in the urban fabric.

Photo credit - Minato Mirai 21, Yokohama, Japan. Photo: Marc Antomattei. Content Courtesy - UNU.edu