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Towards a green economy
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3 The case for greening cities
The case for greening cities can be made in terms of
inter-linked economic, social, and environmental
benefits. Economically, the benefits include
agglomeration economies, lower infrastructure
costs and reduced congestion cost while reducing
carbon emissions and other environmental pressure.
Socially, the benefits include employment creation,
poverty reduction and improved equity, and quality
of life including improved road safety and community
cohesion, among others. Environmental benefits are
embedded in most of the economic and social benefits.
Additional environmental benefits include reduced
pollution, which helps improve public health. Another
environmental benefit is the potential for improving
ecosystems within urban areas.
3 1 Economic benefits
Agglomeration economies
Larger, denser cities – which help lower per capita
emissions – are good for economic growth. From an
economic perspective, cities matter because they bring
people and things closer together, help overcome
information gaps, and enable idea flows (Glaeser 2008,
Krugman 1991). It is for these reasons that 150 of the
world’s most significant metropolitan economies
produce 46 per cent of global GDP with only 12 per
Expenditure on fuel (US$ per capita/year)
600
500
400
300
200
100
10
100
Europe
USA
R Square = 0.027
R Square = 0.157
1,000
Density
(persons per hectare)
cent of the global population (Berube, Rode et al.
2010). These ‘agglomeration economies’ translate into
productivity gains for firms, and higher wages and
employment rates for workers. For many firms and
workers, particularly those in service sectors, there is
still a premium on face-to-face contact – to maintain
trust, build relationships, and manage interactions that
can not yet (and may never) be digitised (Charlot and
Duranton 2004, Sassen 2006, Storper and Venables
2004). Knowledge spillovers between firms and
economic agents tend to be highly localised and die
away within a few miles of the urban core (Rosenthal
and Strange 2003).
Agglomeration economies exist in both developed and
developing countries. Empirical studies in developed
countries find that doubling the employment density
of an urban area typically raises its labour productivity
by around 6 per cent (for a summary of the literature
see Melo et al. 2009). The same basic patterns are found
in developing countries, with strong evidence that
urbanisation boosts productive efficiency by lowering
transport costs and widening trade networks (Duranton
2008, Han 2009). Agglomeration economies can also be
achieved by connecting several cities as in China’s Pearl
River Delta region (Rigg et al. 2009), with the additional
benefit of addressing inequality between leading and
lagging regions within countries (Ghani 2010).
Expenditure on fuel (US$ per capita/year)
800
600
400
200
0
10
100
Europe
USA
R Square = 0.081
R Square = 0.027
1,000
Density
(persons per hectare)
Figure 4: Fuel expenditure and urban density, 2008 fuel prices (left-hand graph) and EU fuel prices
throughout (right-hand graph)
Source: LSE Cities based on multiple sources, see Appendix 1