Editing IPCC:AR6/WGIII/Chapter-4 (section)

==== 4.4.1.9 Example: Combining Housing Policies With Carbon Taxation Can Deliver Both Housing and Mitigation in the Transport Sector ====

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The spatial distribution of households and firms across urban and rural areas is a central characteristic of development pathways. Patterns of urbanisation, territorial development, and regional integration have wide-ranging implications for economic, social and environmental objectives ( [[#World%20Bank--2009|World Bank 2009]] ). Notably, choices regarding spatial forms of development have large-scale implications for demand for transportation and associated GHG emissions.

Exclusionary mechanisms such as decreasing accessibility and affordability of inner-urban neighbourhoods is a major cause of suburbanisation of low- to middle-income households (e.g., [[#Hochstenbach--2018|Hochstenbach and Musterd 2018]] ). Suburbanisation, in turn, is associated with higher transportation demand (Bento et al. 2005) and higher carbon footprints for households ( [[#Jones--2014|Jones and Kammen 2014]] ). Similarly, other studies find a significant positive link between housing prices and energy demand ( [[#Lampin--2013|Lampin et al. 2013]] ).

Reducing emissions from transport in cities through traditional climate policy instruments (e.g., through a carbon tax) is more difficult when inner-urban neighbourhoods are less accessible and less affordable, because exclusionary mechanisms act as a countervailing force to the rising transportation costs induced by the climate policy, pushing households outwards rather than inwards. Said differently, the costs of mitigating intra-city transportation emissions are higher when inner-urban housing prices are higher ( [[#Lampin--2013|Lampin et al. 2013]] ).

This suggests that policies making inner-urban neighbourhoods more accessible and more affordable can open up broader opportunities for suburban households to relocate in the face of increasing transportation costs. This is particularly important for low- and middle-income households, who spend a greater portion of their income on housing and transportation, and are more likely to be locked into locations that are distant from their jobs. Making inner-urban neighbourhoods more accessible and more affordable has the potential to reduce both the social costs (e.g., households feeling helpless in front of rising fuel prices) and the economic costs of mitigation policies – as a lower price of carbon is likely to achieve the same amount of emission reductions since households have more capacities to adjust.

Making inner-cities neighbourhoods more accessible and more affordable is a complex endeavour ( [[#Benner,%C2%A0C.%20and%C2%A0A.%20Karner--2016|Benner and Karner 2016]] ). At the same time, it is already a policy objective in its own right in many countries, independent of the climate mitigation motivation, for a range of social, health and economic reasons. Revenues derived from climate policies could provide additional resources to support such programs, as some climate policy already have provisions to use their revenues towards low-income groups ( [[#Karner--2018|Karner and Marcantonio 2018]] ). The mitigation benefits of keeping inner-cities more accessible and affordable for low- and middle-income households often remains out of, or is only emerging in the debates surrounding the planning of fast-developing cities in many developing countries ( [[#IADB--2012|IADB 2012]] ; [[#Grant--2015|Grant 2015]] ; [[#Khosla--2019|Khosla and Bhardwaj 2019]] ). Finally, from a political economy perspective, it is also interesting to note that (Bergquist et al. 2020) find higher support for climate policy packages in the USA when affordable housing programs are included.

In addition, investment in infrastructure is critical to the development of decarbonised economic structures that generate growth, employment, and universal access to a wide range of services that are central to the SDG agenda: transportation, water, sanitation, electricity, flood protection, and irrigation. For low- and middle-income countries, annual costs of reaching these goals by 2030 and putting their economies on a path toward decarbonisation may range between 2% and 8% of GDP, with the level depending on spending efficiency. Notably, these costs need not exceed those of more polluting alternatives ( [[#Rozenberg--2019|Rozenberg and Fay 2019]] ). For transportation, this involves a shift toward more public transportation (rail and bus), and decarbonised electricity for vehicles, combined with land-use policies that densify cities and reduce distances between homes and jobs. By influencing the spatial distribution of households and firms and the organisation of transportation, infrastructure has a strong bearing on GHG emissions and the costs of providing services to different populations. Depending on country context, the private sector may play a particularly important role in the financing of infrastructure ( [[#World%20Bank--2009|World Bank 2009]] ; [[#Klein--2015|Klein 2015]] ).

Many investments in infrastructure and sectoral capital stocks have long lifetimes. Given this, it may be important to make sure that today’s investments be fully decarbonised at the start or that they later can be converted to zero carbon. Today’s investments in electric vehicles in settings where electricity is produced with fossil fuels is an example of convertible investments – they will be decarbonised once electricity production has switched to renewable energies. For capital stocks that cannot be decarbonised, countries may face costs of decommissioning well before the end of their useful lifetimes, especially when it is needed to respect country commitments to future full decarbonisation.

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