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Introduction
Kath Wellman and Marcus Spiller
Introduction
The motivation to write this book comes from a fascination with the Âcomplex, dynamic, interactive nature of cities and recognition of the Âcritical role that urban infrastructure plays in this. Why is infrastructure so Âimportant in cities? Cities, simply defined, are concentrations of Âpeople, resources, information, and activities. Clever and skilled people in close proximity with each other generate many benefits due to the diversity of interactions of people and ideas and the potential for economies of scale and scope from agglomeration. Where interaction is fluid, dense, and diverse, there emerges potential for innovation and creativity. Although we realize that people and ideas are fundamental to successful cities, these people and the processes they put in motion need support from urban infrastructure to ensure that cities remain healthy, safe, and accessible and to support Âcultural, economic, and social systems. Efficient, effective urban infrastructure does not lead in itself to competitive, innovative cities, but the lack of it would strongly impede their development or sustainability. Through Âinfrastructureâs enabling function, complex, dynamic cities come alive.
Understanding the economic nature of urban infrastructure is critically important to any analyses of the contributions infrastructure may make to the efficiency of human interaction in the urban economy. In contrast to the fluid, dynamic nature of human transactions in healthy cities, urban Âinfrastructure is characterized by high capital investment costs in assets which are inflexible, often location and function specific, exhibit network characteristics, and typically require low but steady maintenance and Âreinvestment. Once committed, the capital is essentially sunk, difficult, or impossible to retrieve. Additionally each city has a legacy of infrastructure from past investment which can either support or inhibit the efficiency of future infrastructure investment. The longevity and essentially path-Âdetermining nature of urban infrastructure investment influences urban development patterns and cost structures for decades, as urban Âinfrastructure services are usually inputs to further production or to end consumers. These are important reasons why such inputs have to be efficientâÂpositive or negative efficiency effects are cumulative. Thus a Âflexible but conservative approach needs to be taken to major investment decisions due to the locational, sunk nature of costs and the long-term impacts of such investment.
The economic benefits generated by urban infrastructure investment Âfollow a well-known pattern over time. Direct returns from infrastructure investment are highest at the early stages of a cityâs development when the stock of infrastructure is small and basic networks are incomplete, with returns on infrastructure investment falling as a cityâs legacy of Âinfrastructure grows. Arguably the highest efficiency gains both in terms of resources (such as energy) and finance are thus likely to be made in small to medium sized rapidly developing cities over the next two decades. Having said that, there is the potential to accrue further large productivity gains in Âestablished major metropolitan areas from agglomeration (see Chapter 9), intelligent merging of existing grids and networks (see Chapters 6 through 8), Âdevelopment of new facilities management techniques, and efficiency enhancing technologies.
Urban economic infrastructure needs to be robust and flexible enough to deal with changing conditions and demands, which is why a long-term approach to investing in infrastructure is necessary. Flexibility is not inherent in the infrastructure itself, but greatly depends on intelligent planning and incremental enhancement of existing networks. Selective, strategic investment in infrastructure that supports this flexibility may generate high positive developmental impacts and long-run returns. It is likely that urban futures will depend to an even greater extent on wise infrastructure Âinvestment policies, given fiscal constraints, climate uncertainty, and an increasing awareness of the necessity to consider sustainability in all humanânow mostly urbanâactivities.
Of course, urban economic infrastructure is hardware and merely Ârepresents the most recent physical manifestation of humanityâs culture and economy. But cities are about software, about people. Thus, additional to economic infrastructure (sewerage, water supply, transport, electricity, gas, communications, etc.) is social infrastructure. Social infrastructure comprises the institutions and built structures that Âsupport such services as health, education, law, and justice. For Âefficiency at a city level, both Âeconomic infrastructure and social infrastructure need to be coordinated. How investment decisions are coordinated and made on urban infrastructure and how this infrastructure is managed is therefore critical to cities, and increasingly to nations dependent on these cities.
Global Challenges of Urban Growth, Climate Change, and Finance
The growing international interest in cities, and the urban infrastructure that supports them, arises from a realization that globally there is rapid urban growth (UNFPA, 2007, 2011) and that cities contribute significantly to human well-being and to national economies (World Bank, 2009; Glaeser, 2011). Currently the world population is estimated to be over 7 billion of which approximately half, about 3.5 billion, now live in urban areas. If we look at how this urban population is distributed, about 0.93 billion (27%) now live in cities in the more developed regions of the world, 1.9 billion (54.5%) live in less developed regions excluding China, and about 0.64 Âbillion (18.5%) live in cities in China. The growth rates for cities (2005â2010) varies from an overall growth rate of 1.92% for world urban populations, to a growth rate of 0.68% for more developed regions and 2.33% for less developed regions excluding China. China has an urban growth rate of 2.62% (UN, 2010). We can see from this that over half of the worldâs urban population is living in developing regions and these Âpopulations are growing at a much faster pace than populations in developed regions. These developing regions have the lowest stocks of existing infrastructure and have potentially high efficiency and productivity benefits from effective and efficient investment in infrastructure and management.
Fertility rates impact on infrastructure investment and management. Countries with high fertility rates will generally sustain higher population growth rates requiring more services and facilities. A relatively large proportion of the population being young will put demands on education and employment. Low fertility rates also have impacts. The proportion of young people will decline relative to the proportion of old people due both to low fertility and the greater life expectancy of old people. This will impact on urban services, increasing the demand for health, aged care, and income Âsupport, perhaps on a smaller tax base. It will particularly impact on urban infrastructure where finance is dependent on government budget appropriations (such as in the transport sector in Australia, see Chapter 8). Fertility rates vary across developed and developing regions, with many countries within developing regions, particularly in Africa, having high Âfertility rates. All countries in Europe (with the exception of Ireland and Iceland) and countries such as Thailand, Iran, Australia, and China have low fertility rates. Intermediate fertility rates are found in countries such as India, United States, Indonesia, Mexico, and Bangladesh. Low fertility rates and an aging population are already of substantial concern in Europe and Australia (Productivity Commission, 2005) where a very high proportion of the nationâs population live in the cities. Strong rural urban migration flows in nations, such as China, add further complexity.
How the urban population is distributed is also of concern. Much has been written about mega cities with populations of over ten million people, such as Tokyo, Delhi, New York, Mumbai, Sao Paulo, Mexico City, and Shanghai and on national and regional cities of 5 million and above. These cities already have a large legacy of infrastructure and are important drivers of their Âcountries or regionsâ economies. Cities of 5 million inhabitants and above account for about 15.5% of the total world urban population (aprox. 37% of the population of cities greater than 750 000 inhabitants). Much of the impact of urban growth is going to be felt in smaller and intermediate cities of below five million inhabitants which now support 84.5% of the world urban population. Currently cities of 750 000 up to 5 million inhabitants support 26% of the world urban population (aprox. 63% of the population of cities 750 000 or greater). The remaining 58.5% of the world urban population live in Âcities of less than 750 000 people.
The large number of small- to intermediate-sized cities involved becomes evident if we plot the number of cities that have greater than one million population within each of three size categories based on population; those between one and five million inhabitants, those between five and ten million inhabitants and metropolitan areas with over ten million inhabitants (see Figure 1.1). With globalization and the scale of urbanization, there is intense competition for resources between these cities. Thus getting efficient, effective infrastructure where investment occurs is important, particularly where the existing infrastructure stock is small and networks are incomplete, for here investment is likely to have substantial returns. Getting it wrong will leave a legacy that may well impede not only the present efficiency of urban infrastructure but also future investment in infrastructure. The scale of the challenge is daunting and much will be gained from developing cities benefiting from the lessons learned in developed cities rather than playing catch up on outmoded systems.
This urban growth and the increasingly competitive environment for Âcities are occurring at a time when the limits of the biosphere to produce resources and absorb waste are evident. The supply of water and climate change are of particular concern and both are interlinked (for a description of climate change see Box 1.1). To mitigate climate change, governments internationally are negotiating amelioration strategies, with two frequently advocated strategies being a âcarbon taxâ or a âcap and tradeâ system for emissions (see Chapter 7 on Energy Systems). Both strategies would have a marked impact on the energy and transport sectors (Chapters 7 and 8) and a flow through effect on other urban infrastructure and services that have a heavy reliance on energy, such as manufactured potable water (particularly desalinization).
Limitations of natural systems have increased pressure on governments to develop urban infrastructure that is not only efficient in an economic sense and equitable, in that the outcomes are distributed transparently and fairly, but also environmentally sustainable, protecting long-term environmental assets and mitigating climate change.
The complexity of financing and managing urban infrastructure is further heightened by the financial environment in which investment decisions are made. Historically, the financial environment has been intermittently volatile and will seemingly continue to be so into the foreseeable future. An increasingly globalized and interconnected financial world has triggered a series of recent financial crises (the Asian Financial Crisis of 1997, Dot-Com Crash of 2000 and Global Financial Crisis (GFC) of 2008, European Debt Crisis of 2011). Although there is strong interest globally for heavier Âregulation of the financial institutions that have played a role in these Âcrises, it is probable that the interconnectivity of global financial systems will facilitate further financial âepidemicsâ in the future, impacting upon investment decisions and the structured provision of infrastructure.
Box 1.1 Climate change, adaptation, and mitigation.
The Intergovernmental Panel on Climate Change (IPCC) has issued four major reports (IPCC, 1990, 1996, 2001, 2007a) which review findings on atmospheric change and its likely causes. The latest report states that warming of the climate system is unequivocal, evident in the observations of increases in global average air temperatures, widespread melting of snow and ice, and rises in global average sea level. There is growing evidence to support the thesis that climate change is induced by recent changes in the atmosphere caused through carbon Âemissions from human-centered activity. This has a direct impact on the Âfinancing and management of urban infrastructure, both in terms of its effects on infrastructure, the need to adapt infrastructure to withstand the impacts of change, and the need to mitigate infrastructure contribution to carbon emissions.
Climate change is predicted to have impacts on rainfall and runoff in urban water catchments as well as an increased frequency of storm events, with associated cyclones and flooding (see Chapter 6). There is a predicted rise in sea level of between 18 and 59 cm by 2100, with a possible additional contribution from ice sheets of 10â20 cm (IPCC, 2007b). This rise, coupled with an expected increase in storm surges, will have a direct effect on low-lying infrastructure in coastal areas and estuaries, including major infrastructure facilities, such as Âairports. Particularly at risk are low-lying natural resources such as land and coastal ecosystems as well as freshwater aquifers. The coastal nature of many Asian and Oceania cities makes them vulnerable. Managing urban Âinfrastructure for climate change requires strategic planning and governance at a Âmetropolitan level (see Chapter 9) to ensure the effective coordination of infrastructure (both social and economic), adapting cities to changing environments such as rising sea levels, and retrofitting cities to improve energy outcomes and reduce carbon emissions.
Technological Change
These are indeed large global chall...
