Megacities: the real story

We finally watched Andrew Marr’s Megacities last night. It’s a great piece of spectacular urbanism – endless cityscapes, vast crowds, skyscrapers, huge numbers, expansive metaphors. But it’s also quite badly wrong about what our urban future is going to look like. Let me explain.

The series has two basic premises. One, the world’s population is now majority urban. Two, we’ll be living in megacities – places with 10m people or more.

The first of these is very likely true. For urbanists it’s not an especially new fact, first appearing in this 2003 UN-Habitat report.

The second is part true at best. Megacities are telegenic, but most of the world’s population won’t be living in them. 

Sure, the number of megacities is rising – from two in 1950, three in 1975 to 19 in 2007. By 2025, the UN predicts  there’ll be 27. But the number of ‘large cities’ – five to 10m people – is already bigger, and growing faster. In 2007 there were 30: the UN suggests there’ll be at least 48 by 2025. More importantly, half the world’s urban population live in much smaller cities, of around 500,000 people. These may be the most common of all.

In fifteen years’ time, then, we’ll see far more Liverpools (around 400,000 people) and Londons (8m people) than Tokyos (26m people).

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Paradoxically, the biggest urban settlements are now hard to recognise as cities at all. Across the world cities are merging into mega-regions: notably China’s Pearl River Delta, the US Eastern seaboard, even the Greater South East.

Some of the numbers here are difficult to take in. An estimated 120m people live in the Pearl River Delta, the largest urban zone on the planet – China is now planning to merge nine cities in the Delta to create a single sprawl of 42m people. The Tokyo-Nagoya-Osaka-Kyoto-Kobe region may comprise 60m people by 2015, almost the entire population of the UK.

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All this may suggest that urbanisation is accelerating. In fact the opposite is true. Globally, cities grew fastest in the 1950s and early 60s: growth rates have been slowing ever since, from 4.1 percent to 2.5 percent today, and a predicted 1.8 percent by 2030. Developing countries are also on the same downward trend.  

Urbanisation runs in parallel with economic development, and so as developing countries industrialise, their urban systems tend towards steady state. Of course there is a lot of city by city variation. For example, the UN predicts Dhaka will keep growing – from 15.9m in 2007 to 22.8m in 2025. But Lagos, which has grown from less than half a million people in 1950 to over 13m in 2007, is predicted to reach just 16m in the next fifteen years.    

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Megacities makes much of the growth of urban slums. Again, the picture is complex. Over the past decade the share of urban slum dwellers has fallen from 39 to 32 percent, due to economic growth and policy interventions. But as people are flowing into cities faster than infrastructure can keep up, the absolute number of people in informal settlements is growing, and will keep growing.  

Marr stays the night in a Dhaka slum, discovering it’s quite like any other suburban neighbourhood – dirt streets and tin shacks aside. Marr echoes Stewart Brand, celebrating slum dwellers’ entrepreneurialism and inventiveness. Ed Glaeser describes slum neighbourhoods as ‘private energy, public failure’: the development challenges of poor public health, chaotic infrastructure and urbanised poverty remain considerable.

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Finally, we need to factor in the geography of climate change. Many megacities are coastal, and will be threatened by rising sea levels. Many will also be increasingly water-stressed in the years to come.

In his excellent book The New North, Laurence Smith explores the economic rise of the NORCS – cooler, resource-rich regions stretching across Canada, Scandinavia and parts of the US, Russia and China. He predicts new ‘hydrocarbon cities’ appearing across Canada and Russia, and new mega-regions like Cascadia – spanning Portland, Seattle, Vancouver and parts of NorCal.

Megacities are a great symbol of the global urban shift. But our urban future is going to be much richer and more complex than this.

More new stuff

I’ve put out a bunch of new academic and policy stuff in the past few weeks. Fresh from the ideas workshop, here it all is …

LSE’s Spatial Economics Research Centre has just published three of my phd papers in their working paper series. They are:

1) The Economics of Superdiversity [link]

2) The Long Term Impacts of Migration in UK Cities: Diversity, wages, employment and prices [link]

3) Does Cultural Diversity Help Innovation in Firms? Evidence from London (with Neil Lee) [link]

I’ll be presenting paper no.2 next month at the big NORFACE/UCL migration conference in London and at the RSA’s 2011 conference in Newcastle.

I’ll also be talking through all three papers (and discussing Richard Floria) at the AAG 2011 conference in Seattle in mid-April. If you’re there come and say hello!

More importantly, the UN Environment Programme launched a huge piece of work on the green economy a couple of weeks back, with a globally-streamed event in Nairobi and much other fanfare. This includes a report on Cities in the Green Economy [pdf], published by an LSE Cities team (including yours truly). LSE also did a sister report on Green Buildings [pdf].

You can read the whole lot, and some summary papers, on the Green Economy microsite.

So, farewell then …

… eco-towns, by the look of it. This is a good thing. Eco-towns are largely unloved, often in the middle of nowhere, and would have little impact on overall CO2 emissions.

Dermot (and Adam Marshall) have rightly criticised eco-towns for distracting from the much bigger task of greening Britain’s cities. As I’ve explored elsewhere, that’s a job which should have both a significant impact on the UK’s carbon footprint, but also much greater economic development potential.

Eco-towns have also failed dismally at being the kind of demonstration project the Government originally envisaged. There are much better examples abroad, both self-standing cities like Masdar in Abu Dhabi, and (more realistically) urban extensions like those in Vauban, Freiburg, or Hammarby Sjostan, Stockholm.

The latter also have the benefit of localist in design and delivery. In the coming months, let’s hope the Coalition can give British cities the financial flexibilities to try something similar.

City in a box, unboxed

Excitement online and in the twittersphere about the Cisco ‘city in a box’ being built in Songdo, South Korea. There seems to be a bit of a utopian city meme at the moment – instant cities,  floating cities and Paul Romer’s Charter Cities (which I discussed a while back). Last week’s Economist even showcased a whole series of prototype ‘cities for 2030′.

As the Economist piece points out, there’s something slightly odd about these kind of exercises. Cities tend to emerge and evolve organically, even chaotically, rather than being built from scratch: and their residents and users tend to be resistant to masterplanning.

A closer look at Cisco’s instant city actually confirms all this quite neatly. First, it’s not a city, it’s a business district – albeit one that could house up to 1m people. Second, it’s neither new or self-contained. Instead, it’s a bolt-on to an existing city, Incheon, the 3rd biggest in S Korea.

This kind of CBD megaproject has been done before – in Canary Wharf, for example, which works pretty well as a financial service cluster, if not as a functioning community. (With a working population of around 90,000 people, it’s over ten times smaller than Songdo.)

I can see the potential for this kind of plug-in planning in China in particular, given the pace of urbanisation there. The developer at Songdo reckons there’s a market for at least 20 more in China and across South East Asia. That’s plausible if the demographics and national economies hold up. But ‘build it and they will come’ is an inherently risky strategy – just look at Dubai.

I’d also love to see Cisco try this in a small, highly urbanised Global North country like the UK. Our biggest urban planning challenges in years to come is going to be greening the cities and buildings we’ve got. The eco-towns initiative doesn’t tackle this, and the programme is basically marginal.

But in growing places, there’s potentially an important role for high-tech, resource-efficient urban extensions – around Greater London, Manchester, York, Cambridge or Brighton, say. The problem will be the total lack of public funds to help actual building. Perhaps Cisco can step up to the Big Society plate and donate one?

ps. I’m now finally on Twitter – find me here.

pps. We’re now on holiday for a bit. Blogging returns in July.

Shrink to fit

My last post talked about the principles of dealing with shrinking cities. This one concentrates on the practice. In DC a few weeks back, I had an informal chat on shrinkage with some of the Brookings Metro team (helpfully organised by Dermot, whose writeup is here).

For me, there were four big points from the discussion:

First, US cities are mainly ‘shrunk’, not ‘shrinking’. With a more mobile population, and severe contraction in the 1980s and 2000s, people voted with their feet. In the UK the picture’s mixed: historical data suggests that Liverpool’s population has fallen by over 300,000 since the 1960s, while Stoke’s has only dropped by 25,000.

That means the challenges are different. In the US, the big issues are repairing the physical fabric for remaining residents, and pooling jurisdictions so local tax bases can cover cash for public services. In the UK, tasks include promoting individual mobility, raising human capital and doing physical repair.

Second, the US approach is bottom up, not top down. This is partly historical: people have bad memories of government Urban Renewal programmes in the 1960s, which had a disproportionate impact on African-American communities. It’s largely institutional – the US system gives cities strong local leaders, typically Mayors, who in cities like Youngstown (est pop 73,000) and Flint (113,000) have led the public conversation and put forward new strategies.

The Obama administration has dipped a toe in the water, talking about ‘auto regions’ like Detroit, and ‘cities in transition’, but none of this has yet translated into action. By contrast, UK efforts like HMR have been Whitehall-led initiatives, essentially aimed at ‘doing something about those inner cities’.

Third, US programmes are less radical, and more micro, than you might imagine. In practice, policymakers focus on struggling neighbourhoods, more than whole cities. Empty houses and land are bought up, and there is selective demolition and rebuilding. Often areas are simply returned to meadows, or turned into parks and bikeways. Rather than actually ‘shrinking the city’, the aim is to improve the city that’s left – making it nicer and greener.

In the UK, however, many  HMR pilots have tried to use housing market remodelling to stimulate area population and economic growth. Adding net housing when populations are shrinking does not feel wise.

Finally, finance differs. In the UK, Whitehall provides upfront funding to HMR, which leverages private sector borrowing – a funding model that’s now collapsed.  By contrast, US improvements are often funded via county-wide property taxes or fixes like TIF – as I’ve pointed out, tools that UK city leaders don’t yet have at their disposal.

Closer to home, Leipzig’s story is instructive too. The second-largest city in Eastern Germany, it lost 100,000 people after re-unification (20% of its current population). In 2000 an expert commission on the city was established, led by Leipzig’s Mayor. The resulting strategy involved some demolition and remodelling of inner urban housing, plus a range of quality of life measures (e.g. allowing artists to take over derelict properties).

Leipzig’s population is about the same size as Greater Manchester, so the city also developed its market potential, with a modernised train station and airport. Overall, it has stopped shrinkage: the population has stablised, and there has been slight employment growth (largely driven by high-tech manufacturing investment, such as a new BMW plant).

Lessons

So what are the lessons for the UK? First, cities – not Whitehall – need to be in control of policy and process, proposing ideas and getting local buy-in. Often, the pitch will need to be about a better, greener place to live – not ‘renewal’ or ‘shrinkage’.

Second, the policy mix should combine place elements (remodelling neighbourhoods) with people elements (improving skills, helping residential mobility). My post last year suggested ‘removing overcapacity in local housing; improving the local environment (which could include some US-style ‘greening’); levelling VAT rates on refurb and new build; developing local skills, access to employment and transport links to stronger labour markets; new funding tools; and some honest repositioning’.

That still feels about right. Although compared with Flint and Youngstown, big cities like Liverpool have far larger domestic markets, and thus potential for further jobs growth. Leipzig’s story suggests there’s a role for demand-side measures in bigger places: Liverpool’s recent economic and population growth confirms this.

The proposed Decentralisation Bill therefore looks quite promising. Big city Mayors and Local Economic Partnerships, more open local planning, and proposals to build local social action are all useful; uniform local incentives for housebuilding less so. More seriously, local leaders will still lack the financial tools to deliver the kind of programmes carried out in the US and in Europe. The forthcoming review of local government finance should look to broaden councils’ toolkit, and widen their tax-raising base.

One final point. CLG and bodies like the HCA have critical system designer and enabler functions, supporting and advising local leaders and communities – if not dictating to them. Whitehall will need to lead on promoting any ‘right to move’ in the social housing system; and will still be providing direct funds for skills and education. Despite the Secretary of State‘s emphasis on ‘localism, localism, localism’ ‘localisation, localisation and  localisation’ (thanks Grant!), I suspect central government will still end up with useful roles to play.

Geography and social justice

This is the first of two posts on ‘shrinking cities’, or as civil servants might put it, ‘places with a long history of economic underperformance’. In the UK, this means cities like Hull or Stoke-on-Trent with low average incomes and higher-than-average deprivation rates; abroad, places like Leipzig, Cleveland or Detroit.

The politics of improving life for people in under-performing places is extremely sensitive, as Policy Exchange discovered when they appeared to suggest moving people out of ‘failing’ Northern cities. Recently there’s been more interest, via LSE’s ‘Phoenix Cities’ book, Julien Temple’s ‘Requiem for Detroit?’ and from the Centre for Cities (see Dermot’s helpful summary, and my thoughts from last summer).

Why now? First, during the 2000s a lot of economic development funding went into cities. But this has not always improved residents’ overall welfare. As the business cycle turns, city leaders are looking for new ways forward. Second, there’s now less regeneration money around. Between 2011 and 2015, central government departments like CLG may face 20-25% spending cuts. So Whitehall policymakers are looking hard at if, where and how to spend.

At the recent AAG Conference in Washington DC, Michael Storper offered some helpful thoughts on all of this.

Spatial disparities exist, Storper argues, because there are benefits of clustering economic activity, and these persist over time. Agglomeration economies help explain why cities exist, and why they still matter. Theory and real world experience also suggest that long term convergence is unlikely.

So agglomeration leads to disparities between places. At the same time, increasing returns to skills lead to disparities between people. And because higher-skilled people tend to sort into more successful cities, we often get poorer people concentrated in poorer places.

The question for policymakers is what, if anything, we should do about this? Storper outlines three responses.

We could aim for ‘spatial equity’, compensating people and places who lose out. This feels appealing – but what does it really mean? Is holding successful places back fair to their residents? And how do we actually equalise outcomes? Even the UK’s very centralised public services haven’t got rid of postcode lotteries.

Another view is that we invest in poorer places. This is the traditional regeneration perspective. Structural economic change has long term impacts that markets won’t deal with – physical decay, poverty, crime. And there are efficiency costs to this – not least higher spending on benefits. Area-based policies tackle these externalities, get markets working again and places back on their feet.

This has been pretty much the UK approach for the past two decades. It’s given many cities a public makeover – and has made them nicer places to live. But most evidence suggests that improving places doesn’t easily translate into improving outcomes for people. Trickle-down regeneration works about as well as trickle-down economics.

People can move, and it’s hard to assess area-based initiatives if some recipients leave the area. ‘Regeneration thinking’ also doesn’t say how to balance limited resources between helping poor places recover, and helping growing places do better. CLG’s Regeneration Framework has a go, but isn’t completely convincing.

A third view comes from urban economics, especially Ed Glaeser (and now, Richard Florida). In its simplest form, this says we should focus on people, not places. People are mobile; investing in their mobility and human capital improves their economic prospects. Investing in immobile places does not, especially as convergence is unlikely.

To me, this feels like the right starting point for policy. This view is also increasingly fashionable in UK policy circles, and partly explains the bad press traditional regeneration has been getting. But as Storper points out, it’s more complicated than it looks to implement. There are three big policy points.  

First, it’s not clear everyone is truly ‘mobile’. People are free to move; but less skilled people have less information or resources to migrate between cities. Policy interventions might improve mobility, although we don’t have strong evidence here – increasing choice in the social housing system could help, also expanding housing supply in more successful places. Research and experiments should look to fill this gap.

Second, it implies we maximise economic welfare. But we know people think beyond money. Some local responses to Policy Exchange’s report reveal people happy to live in ‘failing’ Newcastle and Liverpool – because they like being there. At an LSE screening, critics of Julien Temple’s film similarly pointed out that nearly a million people still live in ‘failed’ Detroit.

Urban economists explain this in terms of spatial equilibrium. People sort by economic prospects, and prefer different kinds of communities. Low wages get traded off against low cost of living and/or better amenities. In spatial equilibrium local labour, housing and ‘quality of life’ markets all clear, so that real wages equalise across all places. Ongoing SERC research finds some UK evidence for this.

The spatial equilibrium approach implies we don’t need to worry so much about disparities in nominal income. But in some poorer places, especially given mobility barriers, we may want to adopt measures (better quality housing, tackling crime) which will improve residents’ wider wellbeing – and thus raise real incomes.

Finally, national politics and local delivery are both critical. The UK is generally less tolerant of inequality than the US. Our politics is steeped in notions of fair play and universal standards: we’re a long way from accepting apparently large income disparities on the basis of hard-to-explain equilibrium concepts.

British over-centralisation also makes it politically difficult to do anything about managing decline: London policy apparatchiks seem to be telling other cities what to do (which they are). This is one reason why the Housing Market Renewal programme has often been so painful, why Policy Exchange got in trouble, and why the Coalition’s emphasis on localism is important. In future, devolution and actually doing managed decline need to go hand in hand. I’ll explore these ideas further in the next post, and take a look at some international experiences along the way.

High Speed Two: what’s in it for cities?

It won’t be here for another 15 years, but HS2 has triggered a mass outbreak of trainspottery enthusiasm. The Guardian even live-blogged Andrew Adonis and Sadiq Khan’s announcements, for goodness’ sake.   The big issues last week were route, timing and cost – so I want to focus on impacts, particularly for cities. I’m not sure these will be all they’re cracked to be.

Dermot has helpfully summarised HS2 and the Conservatives’ plans, and R&R round up the reaction here. It’s all fairly positive (although the headline numbers don’t add up – £30bn over 20 years is £1.5bn per year, not the £2bn quoted by DfT). All the positivity explains why the Conservatives feel they need separate proposals – more on those later.

Let’s take environmental impacts first. HS2 is being pushed as green infrastructure. But as Henry points out, the CO2 impact of the line isn’t at all clear: it could take reduce emissions by -0.41m tonnes, or raise them by about the same amount. This is a pretty small fraction of total UK emissions, and doesn’t seem to significantly change the overall cost-benefit ratio. However, the lack of certainty is a worry – and dents the line’s green image.

There’s more detail on the economic impacts (summarised above). The bulk of the benefits accrue to individual travellers and firms via time savings, which feed into productivity gains at the national level. Time savings also help increase competition between firms.  Labour market impacts are much smaller – it’s unlikely HS2 will dramatically change commuting patterns, for example.

In theory transport improvements boost urban agglomeration – and thus productivity – by improving linkages between firms, and between firms and workers. By bringing agents closer together, we improve cities’ ‘effective density’. HS2 modelling suggests that for North-South high speed rail, these impacts are pretty small – £3.6bn over 60 years, just over 10% of the overall benefits of the line.

This is partly because HS2 doesn’t connect anywhere that’s not already on the rail network. By contrast, SERC’s research suggests that plugging new cities into high-speed infrastructure delivers a bigger charge to output.

So what does HS2 mean for cities? Urban firms and travellers are the big winners, which is good news for cities if more productive businesses raise wages or employment. Some cities get the kudos of being on the line, and may get a regeneration boost from new stations – although that could turn into a windfall gain for developers. But fairly few firms will relocate, and agglomeration impacts will be pretty small.

On this basis, HS2 isn’t likely to fundamentally change the UK’s economic geography. Rather, it will speed up the economic geography we already have.

Two final points. First, for Northern cities, the big agglomeration gains will come from speeding up links into urban cores, or bntter connections between nearby cities like Manchester and Leeds. This is the message of the Eddington Report, and it’s important it doesn’t get lost.

Second, the final shape of HS2 may look quite different. Last week’s report also did some preliminary modelling of high speed lines to Scotland – much closer to the Conservative proposals. While there’s a ‘good case’ for a high speed link to Manchester, the early numbers suggest a ‘particularly strong’ case for lines to Leeds and the East Coast of Scotland. That implies a cash-strapped future government might want to choose between two halves of the Y – a very tough political choice indeed.

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Update, Jan 2012: the Coalition has now given HS2 the green light. It’s also published some updated cost-benefit modelling. Three things stand out from this.

First, my analysis holds. The overall shape of benefits and costs is the same, although the recession and higher building costs have changed some of the numbers slightly. See page 10 for the new figures.

Second, the modelling almost perfectly explains the politics. Those who gain from HS2 (business, core cities, those in ‘the North’) are strongly in favour; those who lose (communities and homeowners along the line) are vehemently against. Local opponents of HS2 are hardly irrational – quite the opposite. This also suggests that rather than handing a windfall gain to business by pegging HS2 fares to conventional fares, HS2 tickets should be pricier – at least in first class.  That provides another way for taxpayers to recoup some of the initial outlay.

Third, the agglomeration benefits for Phase 2 (Manchester and Leeds) seem much larger than Phase 1 (London to Birmingham). Why? Rather than connecting two relatively distant cities, Phase 2 links a lot of nearby places (e.g. ‘South Yorkshire’ to Leeds in 20 mins), and provides indirect access to big cities not on the line (e.g. from Manchester to Liverpool). The fact of HS2 thus strengthens the case for complementary investments like the Northern Hub, which will bring Liverpool, Manchester, Sheffield and Leeds closer together.

Green cities, green jobs

Green jobs are hot. All three political parties want to shift Britain onto a low-carbon growth path. It’s a powerful meme. Two questions, then: what are green jobs? And where will they be? My guess is: mostly quite boring. But they will be everywhere, and they will be a big deal for towns and cities.

So what are ‘green jobs’? ippr’s new report suggests that ‘all jobs should be green’ in future. I’m not sure. Let’s focus on activities with the biggest carbon footprint: energy, waste, transport and construction. Some jobs in other sectors can be greened too, say if manufacturers adopt more sustainable workflows.

Where will green jobs be? To answer that, we need to consider how the UK moves onto a greener growth trajectory. There are two basic approaches, impling different roles for government – and different levels of political engagement.

Let’s call the first the Green Industries approach. This is about increasing the UK’s global share of high-value green activity – like wind turbines and low-carbon vehicles. It also encompasses major infrastructure like high-speed rail. National Government holds the policy levers: public money, tax breaks, business support (and to an extent, picking winners).

The second approach we could call Green Places. This is about making towns, cities and households more sustainable. The focus is on non-traded activities: buildings, energy and waste systems, local public transport – and things like repairing windmills on roofs.

Local government has a critical role here, alongside Whitehall: via recycling, local planning standards (like the Merton Rule), procurement and PPPs (like the ESCOs in Woking and Birmingham). Whitehall matters behind the scenes – for example, through DECC’s new Feed-In Tariff rules.

Green Industries are the sexy, photogenic things politicians get excited about, and are the focus of Labour’s Low Carbon Industrial Strategy, the Conservatives’ ‘Marine Energy Parks’ idea, and the Lib Dems’ green growth plans. Interestingly, the Tories seem keener on Green Places than Labour – see proposals for a ‘green deal’ for households, and support for micro-generation.

My guess is that Green Industries, though exciting, will only take the UK so far. First, only a few places will have them. The range of green technologies is vast. With no global standards, potential for international growth is capped. Most importantly, geographies of innovation, production and sales already differ. Silicon Valley leads the US in ‘cleantech’ R&D – but large-scale manufacturing is already shifting from the US to China and other cheap locations.

Second, the UK is already lagging. In wind turbines – where Britain should be a leader – the top firms are German and Scandinavian. (From this perspective, one of the saddest things about last year’s Vesta dispute is that Vesta is Danish).

Third, policy options are pretty limited. Green industries in the US are supported by Government stimulus money and a massive VC sector. Other European governments have funded producers for years. Britain has plenty of strategy, but limited cash to back these up. Low Carbon Economic Areas have no funding attached, and rely on existing RDA / LA budgets plus local ingenuity. The experience of Science Cities, a similar approach, doesn’t get my hopes up.

The Green Places approach is much more prosaic, but will have bigger impacts on more people. Cities’ carbon footprint is large: the C40 group estimates that worldwide, urban areas represent around 75% of the world’s energy use and CO2 emissions. Fiscally, Green Places largely involves redirecting existing budgets. (Some costs are passed on to firms and households – but councils should be allowed to use tools like TIF to ease financing constraints.)

Finally, British local government is already on the case. The Merton Rule is a classic example of how local policy innovation has shaped national thinking. Woking is a leader in decentralised energy. And Greater Manchester’s LCEA proposals look pretty good, with a five-year retrofit programme, small-scale renewables and smart meters for thousands of households across the city.

The UK needs both green industries and green places. But let’s not get over-excited about the first, while underplaying the second. Green jobs might be more dull than we thought. But they’re important as ever.

The economics of high-speed rail

Notebook and Thermos time again. Last week’s slightly weird dust-up between Andrew Adonis and Theresa Villiers highlights two things. First, how tortured the politics of high speed rail are becoming. Second, how murky the concrete costs and benefits remain.

Politically, a fast North-South line should be a done deal. Both main parties want it – but for different reasons, and probably going different places. HS2 is also getting entangled in highly sensitive planning questions, especially for the Conservatives. The Tories want a highly localised, ‘open source’ planning system – but also, room for nationally-driven infrastructure that goes straight through various safe seats.

As with the Channel Tunnel, a surprising number of people are desperate to get away from major investments designed to make their lives easier. (In California, by contrast, one of the main problems facing High Speed Rail proposals is that everyone wants to be on the line.)

We’re still not much clearer on what will actually deliver, economically and environmentally (something I complained about in a previous post). Happily, SERC has just published a new paper [pdf] which gives us some pointers.

The researchers look at the economic impacts of the Frankfurt-Cologne ICE line: 120 miles long, about the same distance as London to Birmingham. In theory, better links between cities bring people closer together, raising their productivity. The researchers isolate this effect by concentrating on new stations with no prior rail links. They find a 1% increase in market access raised GDP by 0.25% around towns on the line. These effects were highly localised, dropping off within about 30 minutes’ drive time.

Importantly, the research suggests these benefits are probably permanent – putting in a new rail line changes the underlying connectivity of the area, which then shifts firms’ and households’ location decisions.

Overall, the authors suggest that HSR both delivers significant additional economic benefit. And it’s good value for money – if gains are permanent, there should be big future fiscal payoffs from higher tax receipts.

That still leaves some big policy questions:

1) The SERC work only looks 4-5 years post-investment – so we don’t know what the really long term impacts of HSR will be (papers like this take a deeper view).

2) We also don’t know impacts for big, well-connected cities. If they are the major gainers from connectivity improvements, HS2′s impact on spatial disparities may be limited.

3) It’s hard to say whether people will switch from planes to faster trains (a modal shift) or use more of both. The answer makes a big difference to the environmental footprint of high speed rail.

4) How to actually fund and deliver the thing.

I’m sure we’ll get answers to some of this when the Government eventually publishes the HS2 report and its own ideas – both of which will be appearing, according to the Transport Minister, ‘before the election’. At which point we can settle down to round 2 of Adonis vs Villiers …

How green is the Valley?

In 2007, Al Gore laid down a challenge to Silicon Valley: invent the technologies to conquer climate change. The Valley has spent the past few years trying to do just that. The green economy and ‘cleantech’ are big deals here: if you believe the hype, this is what Silicon Valley 3.0 will look like.

So can the world’s most innovative region really do it again?

It’s important to pin down what the green economy means. UC Berkeley’s Karen Chapple identifies four components: energy, building, transport and recycling. Each is very broad – e.g. energy covers tidal, wind and solar power, decentralised infrastructure (or ‘smart grids’), and installation and maintenance activity.

The South Bay has rapidly developed a presence in all of these, particularly in solar (which shares technologies with semiconductor manufacture). Joint Venture Silicon Valley recently put out a Greenprint for the Valley [pdf] setting out ‘climate prosperity’ – growing a new generation of innovative, world-beating firms and dealing with climate change on the side. For solar, the upper level jobs target is 20,000 positions by 2017.

The Valley has plenty of first-mover advantages – a big talent pool, strong industry networks, an entrepreneurial culture, lots of venture capital, eco-conscious consumers, and helpful regulation designed to boost local green industries (California recently passed AB32, a state-level cap and trade scheme, and has just passed AB920, a feed-in tariff system).

The area’s cultural diversity helps too. Kim Walesh, San Jose’s Chief Strategist points out that South Bay firms are already plugging into big markets in Chinese cities.

And yet … this may not turn out to be the world’s eco-region. As GBN analyst Olaf Groth told me, the sheer diversity of ‘the green economy’ presents challenges – much of has limited ICT crossover. Geographies of innovation, production and sales are diverse, and don’t really favour a single hot location. There are dozens of distinct cleantech clusters in the US and around the world; production is often outsourced; consumer markets are very localised. It will be hard for Valley firms to access all of these.

Government’s role is also critical. Green technologies need subsidy and regulation to be fully economic: traditional VC won’t invest on a 20 year payback schedule. But the big public contracts that helped kick start ICT 30 years ago will be harder to secure today.

So the Valley’s traditional advantages may be of limited help. And as Karen Chapple and Bill Lester argue in forthcoming research, green industry may not mean local green jobs. The South Bay already has a number of defunct semi-conductor factories, as production shifts to cheaper locations offshore.

What can we Brits learn from this? I think there’s a few key points here. First, ‘green growth’ is feasible. But UK policymakers need to get clearer on which bits can generate growth and jobs. In energy, that means wind and tidal power; and there will be significant waste, construction, transport and maintenance markets in urban areas.

Second, there is an important spatial dimension. The UK is small but highly urbanised; many of the key green markets (in waste and transport, for example) will be in and around cities. London’s Mayor already has powers to combat climate change, and is using these to leverage extra funds for business development; other big cities should get the same.

Third, national policy is hugely important – meaning regulation, planning and tax tools aimed at fostering behaviour change and stimulating green industries. As the Turner Climate Change committee argues, this requires a strong national planning system.
The Opposition stance here is unhelpful: a Cameron Government would probably abolish the Independent Planning Commission, which takes decisions on energy networks.

More broadly, the UK is still seen as a bit soft on cleantech: according to Deutsche Bank, the UK is not seen as a safe bet for international investors, who increasingly prefer China or Germany.

The Silicon Valley story tells us there is unlikely to be a single winner in the green economy. But it also suggests that the UK can do a lot more to push forward its own distinct eco-sectors, and develop greener cities (and valleys) while we’re doing it.