Sustainable Cities and Infrastructure –––––––––––––––––––––––––––––––––––––––––––– Low Carbon Manufacturing, Technology Innovation and the Quality Standard of Industry André Schneider Vice President, GIB Foundation Chairman, World Climate Vice President, EPFL Sustainable Cities and Infrastructure –––––––––––––––––––––––––––––––––––––––––––– Low Carbon Manufacturing, Technology Innovation and the Quality Standard of Industry André Schneider Vice President, GIB Foundation Chairman, World Climate Vice President, EPFL

Global Infrastructure Basel Global Infrastructure Basel Foundation(©) 2 Global Infrastructure Basel Foundation is the globally leading organization dedicated to scale up the financing of sustainable infrastructure development. The independent, not‐for‐profit organisation is funded by diverse sources, among them the Swiss Government and the City of Basel in the framework of their promotion policy for market based sustainable development around the world. Based in Basel, Switzerland, GIB Foundation aspires to make accessible the added value of (environmental, societal and economic) sustainability of selected, high value infrastructure projects to contractors, clients and investors. For that purpose it develops and applies specific methods of project design, finance and rating as well as capacity development.

Introduction Global Infrastructure Basel Foundation(©) 3 What is the relationship between sustainable infrastructure, low carbon manufacturing, technology innovation and quality standards of industry ? It is all about sustainable lifestyles !

Sustainable Lifestyles Global Infrastructure Basel Foundation(©) 4 Is it possible to improve human health and life quality while at the same time reducing current levels of energy, transport and resource use? Social innovation and significant changes in consumption patterns and lifestyles will be vital to achieve long-term economic prosperity for all within the bio-capacity of our planet. Knowledge on sustainable lifestyles is scattered as are sustainability projects and initiatives. There is an immense need for advancement through bringing together current knowledge, experience and relevant stakeholders in a dialogue process to articulate and clarify the challenges that society faces in achieving the goal of sustainable lifestyles.

How do we support sustainable lifestyles ? Global Infrastructure Basel Foundation(©) Sustainable consumption (integrating the hidden cost into our consumption) 2.Sustainable infrastructure (energy, mobility, water, and other utilities) 3.Sustainable housing (a new approach to housing development)

Sustainable Consumption –––––––––––––––––––––––––––––– Sustainable Consumption ––––––––––––––––––––––––––––––

Sustainable Consumption Global Infrastructure Basel Foundation(©) 7

Sustainable Consumption Global Infrastructure Basel Foundation(©) 8

Planned Obsolence Global Infrastructure Basel Foundation(©) 9

Food Waste Global Infrastructure Basel Foundation(©) 10

Sustainable Infrastructure –––––––––––––––––––––––––––––– Sustainable Infrastructure ––––––––––––––––––––––––––––––

Why is Sustainable Infrastructure so Important? 12 Global Infrastructure Basel Foundation(©) Confronting the challenges of climate change mitigation and adaptation, resource scarcity and energy security will require massive investment in the fundamental reconfiguration of the infrastructure that supports modern society. By 2050, nothing will function as it does today. This challenge presents huge opportunities both for investors, general contractors and for projects owner.

Why is Sustainable Infrastructure so Important? Global Infrastructure Basel Foundation(©) 13

Why is Sustainable Infrastructure so Important? 14 Global Infrastructure Basel Foundation(©)

10 Themes for Sustainable Infrastructure 15 Global Infrastructure Basel Foundation(©) The following ten themes clearly affect the performance of sustainable infrastructure projects and their governance:  Accountability  Transparency  Customer Focus  Results Orientation  Poverty Responsiveness  Power-Balanced Partnerships  Shared Incentives  Sound Financing Mechanisms  Proactive Risk Management  Resource Protection

Sustainable Housing –––––––––––––––––––––––––––––– Sustainable Housing ––––––––––––––––––––––––––––––

17 Global Infrastructure Basel Foundation(©) Situation Around 40% of the CO2 emissions are coming from housing. Energy efficient buildings and measures to improve energy efficiency for buildings are technically and financially feasible and can be based on existing and available technology as well as proven design concepts. In many cases the necessary capital, to fund such measures to extend energy efficiency, is missing and not easily available. In order to move beyond demonstration and scale up to mainstream implementation, we need to create new policy frameworks to find new sources of financing (like grid reductions or peak reductions); public private partnerships that allow the financing of such measures based on the cost reduction and performance contracts.

18 Global Infrastructure Basel Foundation(©) A Case Housing Complex, Larger City in Northern Germany CAPEX: € ( € in average per unit for 220 building units) OPEX for Energy: € / year (1.683€ per unit for 220 building units) Increase in CAPEX from applying EE measures: € Decrease in OPEX from applying EE measures (energy efficiency and energy selling to the grid) : € / year Financing of increase in CAPEX for applying EE measures: 4% interest on long-term loan Payback Period based on the full use of the decrease of OPEX for interest and payback: 30 years In conclusion: The future users of these houses will spend the reduced energy costs of € per year for a period of time (30 years) on paying back the investment for the EE measures (or a total of €), before they profit fully of the cost reduction of € per year. The owner will have a much more energy efficient building with no further investment but pay the full energy costs as without EE measures for 30 years. The financier will get the required return on their investment of 4%.

19 Global Infrastructure Basel Foundation(©) Barriers LOW ENERGY PRICES: Causing a very long payback period. CAPEX: Higher upfront capital cost while savings come in at a later time. MISALIGNMENT: Misaligned financial incentives between landlord/owner (investor of the energy saving and reduction measures) and tenants (receiver of cost savings). (not in the case of owner occupation) TECHNOLOGY RISK: Perceived risks of energy efficiency measures and positive energy buildings are high (new to the market). INSTABILITY: Instability of energy prices over the long investment horizon although prices in general have been increasing over time. PERFORMANCE RISK: Owners or tenants cannot be certain on energy performance in the long run.

20 Global Infrastructure Basel Foundation(©) Opportunities for Implementation LOW ENERGY PRICES: Realistic or not, tax on externalities, targeted subsidies, and/or laws stimulating energy efficiency measures. FINANCING: If low energy prices are addressed, financial tools that provide money to pay for such energy efficiency investments, where a shared energy cost reduction provide interest payment. CROSS FINANCING: Find ways to use such solutions to reduce grid extensions and peak performance and use this as new sources of financing. SOLUTIONS: Find the right solutions that addresses the type of buildings, economic context, capabilities of the project owner, the climatic context, and the opportunity for long term renewable energy systems. PERFORMANCE ASSURANCE: Solution providers need to guarantee the energy savings generated to allow for a steady cost savings flow. PROJECT DESIGN, SET-UP AND MANAGEMENT: Institutional set-up, where an agency or operator seek the best solutions, best providers of technology and of finance, develop economic model with definition of roles. BEST PRACTICE: Solutions Directory; Financing Directory; Solutions and Financing Community; Document successful projects.

Conclusions –––––––––––––––––––––––––––––– Conclusions ––––––––––––––––––––––––––––––

22 Global Infrastructure Basel Foundation(©) Conclusions We need to go from low carbon to sustainable development. Low carbon manufacturing and production has to integrate concepts of sustainability and cover the hidden sustainability costs and must address over consumption. Low carbon manufacturing and production has to provide solutions for sustainable infrastructure and housing. We need to approaches to financing of sustainable infrastructure and financing looking at Rethinking infrastructure and housing planning; Financing through institutional investors providing long term fixed income financing; Financing integrating all elements like cost of grids and cost of. peak energy need.

23 Global Infrastructure Basel Foundation(©) Conclusions We need technology innovation to reduce energy use, to create smart mini grids and to develop new consumption models. We need industry quality standards to define frame conditions for sustainable consumption; sustainable infrastructure; and sustainable housing; to assure quality, common levels and protection for investments. We need to develop sustainable life styles.

24 Global Infrastructure Basel Foundation(©) Thank you for your attention!

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