Goals for cities and citizens in the development of a new type of economy. Case studies: water consumption, electricity, and urban mobility sectors

Abstract

The first section of the paper considers cities as subjects interested in the development of a circular and degrowth economy. It provides an overview of the advantages of cities in setting goals for the transition towards a new type of economy. The following sections focus on the case studies of three sectors of urban development: household water consumption, electricity consumption, and the urban mobility sectors. The paper analyses individual consumption and demand trends in each sector.

One of the goals is to understand what propensities for changes in economic volume these sectors have (whether these sectors tend to grow or decrease), what problems for society and the surrounding environment these sectors cause, what economic approaches need to be applied to solve these problems. The principles of the degrowth approach have been described in each sector. Some advice on how to stimulate the transition to a circular economy has been offered as well.

Cities as the main actors in the formation of a new type of economy

Today, humanity faces such consequences of its activities as climate change, environmental pollution, social inequality, and limited material resources. One of the ideas for overcoming these contradictions is to convert the economy to a circular economy model. In contrast to the «take-make-waste» linear model, the circular economy model is regenerative by design and aims to gradually decouple growth from the consumption of finite resources. In comparison to the circular economy, the degrowth economic approach emphasizes the need to reduce global consumption and production in general.

Two factors have ensured the growth of the capitalist economic system. The first is stimulating the consumption of goods and services. The second is emphasizing the idea of ​​enrichment as the main stimulus for commercial companies.

However, entrepreneurship itself is now undergoing rethinking. Many companies are looking for new, additional motivational goals for their activities beyond commercial benefits. These can include fair trade, improving the ecological or social state of the region, solving the problems of mankind, or even a flight to Mars, which provides no commercial return in the near future. At the same time, commercial success remains an important goal for an enterprise, but sometimes it becomes not an end in itself, but a blood circulation system for the company, ensuring its efficiency and achievement of these additional goals of existence. Of course, we should not forget that business declarations are often just greenwashing.

Cities with strong local governments could become drivers in setting new goals and implementing alternative economic models. The advantages of cities over commercial companies as economic entities in the formation of new internal goals for shifting to a circular or degrowth economy are as follows:

• the main goal of elected local authorities is to improve the citizens’ quality of life and not to increase profits;
• in many cities, the system of citizen representation in governing bodies works effectively, that is, citizens, in general, are closer to the decision-making system, and municipal structures are more accountable to them compared to the relationship between employees and companies;
• citizens are less distanced from the outcomes of municipal activities and more interested in the success of their activities;
• cities are closely connected to the surrounding region: many of the problems arising from the maintenance of the vital functions of cities return to the cities with quick feedback;
• there are many actors and decision-making centers in cities: the different interests of parties, the need to find a compromise, and the existence of diverse perspectives on problems allow cities to find an approach to solutions in a more balanced way.

Today, there are many examples of cities setting new goals and already reaching them. For instance, cities entirely switch to renewable energy, completely eliminating the use of internal combustion vehicles. The tasks for municipalities that set the framework for the activities of different actors are:

• stimulate the development of a circular and degrowth economy;
• optimize urban provision processes in terms of minimizing resources;
• stimulate the development of a resource-free, virtual economy that is «cheaper» for the city;
• attract actors (citizens, organizations, and even specialists in municipal matters) capable of developing the city, bringing technological innovations, implementing a circular economy or the degrowth approach.

Thus, to the author’s mind, cities have an interest in developing a circular economy, but they also sometimes have limitations on their path towards transitioning to a degrowth economy. The following sections of this paper provide an overview of the possible transformations in water and electricity consumption, as well as the urban mobility sector. These sections aim to understand whether these sectors tend to grow or decrease, what problems the consumption of resources in these sectors causes for society and the surrounding environment, what economic approaches need to be applied to solve those problems.

Water for households

The National Development Strategy of Belarus, adopted in 1997, is a classic example of incorrectly set goals in the water consumption sector. It set the goal to provide residents with a per capita amount of water, the target value of which increased over time (from 260 liters per capita per day in 1997 to 350-355 liters in 2010 as the goal). It was believed that the higher water consumption per capita is, the better. The ministry responsible for the supply of water was interested in this model of consumption. In those years, residents of Belarus, who were not accustomed to saving, consumed twice as much water on average (260 liters per day in 2001) than residents of, for example, the Netherlands (about 128 liters per day).

The campaign to introduce such a simple solution as individual water meters in apartments led to a situation where the amount of water consumed—and, consequently, the need for sewage treatment—fell by exactly half over 18 years (to 136 liters per capita per day).

Table 1. Comparison of water consumption (liters per capita per day) (Ryabova, Novikova, 2007, p. 19; NSSD of Belarus, 1997, Appendix 1; EU Water Statistics, 2020; Netherlands Water Statistics).

Data from the European Union indicate that the consumption of water varies between countries (from 65 to 280 liters per person per day) (EU Water statistics, 2020). This can be attributed to both the cost of water and cultural tradition. This data also indicates that water consumption across all countries has been more or less stable over the course of 10 years. Therefore, we can assume that in those countries where the cost of water is not a significant factor, people understand how much water they usually need. So we can surmise that cities may have their own stable levels of water consumption.

Moreover, the total urban water consumption should not exceed the resource capacity of the ecosystem. Such resource boundaries are specific for each city. For example, Minsk takes most of the water for the needs of the domestic sector from several hundred municipal wells. Even today, the city uses more artesian water than can be supplied by groundwater without reducing its reserves. This leads to a decreasing level of groundwater near Minsk and in the Minsk region, which, in turn, leads to increased vertical infiltration of water through the soil from the surface to the wells. Poorly treated water from the city surface, containing various chemical pollutants, starts to flow into the wells. Additionally, in the bowels of the earth under the city, there is a water depression funnel, whose cone is constantly expanding away from Minsk.

Consequently, water from agricultural fields also starts getting actively sucked into the wells. It contains nitrates which are not filtered out when passing through the ground. As a result of this process, the water supplied to the city by artesian wells sometimes does not meet the quality requirements. Special filtering systems are not provided for such cases. In the future, this may lead to the need to install expensive filters. Moreover, not all residents of Minsk have access even to this artesian water, and they use purified water from the river which is far from the best quality.

Therefore, Minsk needs to further reduce its water consumption. Of course, this task should be assigned not only to the city residents, who consume about 51% of all water (Minsk water statistics, 2020) but also to industrial enterprises. The analysis of their water consumption goes beyond the scope of research in this paper. Therefore, having established that Minsk should reduce the amount of water it consumes, we will go on to consider how this may be done in the household water sector.

Transformation idea

The city depletes environmental water sources without compensating for the harmful effect on nature—that is, without paying the full external cost. A common solution would be to further reduce water consumption through the use of modern household appliances and water saving methods. In addition, various technical measures are also known:

• development of water recycling technologies, including improved wastewater treatment, ensuring the quality of clean water, organization of water intake for urban technical needs below the treated water discharge points;
• use of treated rainwater;
• dividing the supply of water into technical and drinking water with varying degrees and costs of treatment;
• cleaning and reuse of greywater (for example, water after a shower is used to flush the toilet).

All these and other technologies are technically feasible, although, no doubt, their implementation will take years and is expensive. It is more important to set a reasonable goal in the water sector, which can include two subgoals. First, provide the city with water without harming the environment, while the rest of the required amount can be obtained by water recycling. Second, after completing this technical transition, reduce the cost of the new technical system.

From the circular economy perspective, city water consumption should be at the optimal sustainable level (the black solid line on Figure 1). The blue dashed line shows the water level limit that can be taken from ecosystemic water sources (rivers, lakes, wells) without losing the balance of irreplaceability or other negative effects. Today, the amount of water consumed by the city (the black solid line) exceeds this water limit.

Figure 1. City water consumption and water sector economics (random scale). [Ed. Note: author's original spelling].

The water rate (the black dotted line), including taxes, is a mechanism to encourage users to reduce their water consumption. Water is a natural resource for which, as it often happens with natural resources, people do not pay the full additional external cost. The cost of the harmful effect in this example is difficult to determine. Nevertheless, the water rate can be significantly increased while remaining acceptable for users. Today, the cost of water supply and water treatment (without heating) in Minsk does not exceed $3 per person per month with a consumption of 150 liters per day, which is acceptable for most families.

With the introduction of an increased tax (the dotted line in Figure 1) on water, there is an additional incentive for the user to save water and look for other ways of economizing. The collected taxes can be invested in water recycling technologies.

The black dash-dot line in Figure 1 shows the growth of the economic volume of the water sector (CAPEX + OPEX). The implementation can be conducted in three stages.

The first stage: the water rate rises by including additional taxes. In Minsk’s case, it will constitute a significant part of the water rate. This causes a slight decrease in the total volume of water consumption and, therefore, a slight decrease in the economic volume of the sector. The first stage should be short, it should arouse the interest of investors and entrepreneurs in the development of the market and the introduction of technologies.

Second stage: the introduction of new technologies. The capitalization and operating costs of the sector are increasing significantly, and the cost of supplying and treating water is also increasing. As the cost of water rises, city taxes are reduced to prevent rate increases. At the end of the second stage, the water rate fully covers the cost of water and ensures the interest of entrepreneurs. Taxes are reduced to a minimum.

Third stage: market mechanisms and innovative technologies reduce the cost of water, so the rate, CAPEX, and OPEX are reduced.

To summarize, citizens’ water consumption has decreased by half in 20 years. This indicates that the degrowth approach is starting to be implemented. The development of the city and the growth of prosperity do not lead to an increase in water consumption. The economic part of the water sector has a certain optimal level. In this sector, the citizens’ task for the purpose of achieving a circular economy is to reduce water consumption, and businesses’ task is to implement renewable technologies. The municipality’s task, meanwhile, is to set the shared city goals and stimulate both categories of actors to perform these tasks.

Electricity for households

In Belarus, the household sector consumes about 20% of all electricity consumed in the country. It is more difficult to forecast consumption trends in the electricity sector compared to the water sector. Unlike water, whose functions are more or less clearly defined, many new services, especially energy-intensive ones, use electricity.

Electricity consumption varies greatly from household to household depending on whether it is used for heating, cooking, etc. It is also difficult for people themselves to determine the amount of electricity they need for consumption.

On the one hand, the price of electricity creates an incentive to save it, as well as to increase the energy efficiency of devices. Some devices have reduced energy consumption tenfold. On the other hand, new services and devices are emerging. Devices which provide people with new facets of comfort and which have begun to spread throughout Belarus are dishwashers, robotic vacuum cleaners, specialized kitchen appliances, IoT sensors, and actuators for smart houses. In general, these are energy-efficient devices; moreover, some of them are designed to save electricity (or water and heat).

Electric cars are a new device that consumes a lot of power in relation to home consumption. However, we will analyze electric vehicles for our purposes in the urban mobility sector. Another new service is the replacement of central heating with electric heating and gas stoves with electric stoves. This replacement will lead to a decrease in the consumption of fuel resources in other sectors as well.

In general, over the past 10 years, electricity consumption has remained unchanged.

Table 2. Total electricity consumption by all households in Belarus (National Statistical Committee of the Republic of Belarus, 2019).

In the foreseeable future, the only service for households in Belarus that will significantly increase the use of electricity is air filtering systems, air recuperators, as well as the increasingly popular air conditioning systems. Air conditioners in the summertime can become an additional major item of power consumption in Belarus. It seems plausible that with the growth of prosperity, more and more residents will choose to install an AC unit.

Today, the average household electricity consumption in Belarus is 608 kWh per year per capita for the operation of household appliances and 790 kWh for cooking (National Statistical Committee of the Republic of Belarus, 2019). In Minsk, electricity is hardly ever used for heating homes or water, so electricity consumption is limited to the values above. Mass use of air conditioning systems can double the total electricity consumption.

The goal to provide the city with renewable energy sources (RES) produced entirely within its territory is technically unfeasible today and does not make sense. Thus, it is preferable for solar power stations to be located outside the city, where land is less valuable. Wind turbines produce unnecessary noise and also require a free area around them.

Many cities have set a different goal: to completely provide the city with renewable energy produced within the city, in its vicinity, purchased from renewable energy sources located in the country or abroad. This goal is technically possible. As in the case of water supply, it is clearly defined and formulated. It is this goal that must be further analyzed from the perspective of a circular economy.

Figure 2. Electricity consumption in the household sector.
[Ed. Note: author's original spelling].

The operating costs (OPEX) of conventional energy for electricity generation are usually higher than its capital costs (CAPEX) since they have a rather high fuel component and personnel costs. Renewable energy is characterized, on the contrary, by low operating costs (OPEX) (no fuel component, a number of technologies require virtually no maintenance) and high capital costs.

In the transition phase to a circular economy, the main energy capacities powered by fossil fuels are replaced by renewable ones. Initially, there is an increase in power capacities and the volume of funding, then there is a shrinkage of the sector by reducing the cost of purchasing energy resources and closing traditional power plants.

Due to the inconsistency of electricity generation from renewable energy sources, a larger number of installed renewable energy capacities and additional energy storage systems will ultimately be required to provide consumers with electricity in the same volume.

After the end of the transition, the energy sector becomes entirely renewable. The economic model of such an energy sector no longer contains external costs that are not paid by society, as is the case with traditional energy. They are also taken into account in the production and utilization of RES power plants. Renewable energy must and can be flexible to the growing demand for electricity. Timely installation of additional capacities will provide the necessary flexibility.

A complete transition of the entire Belarus electricity sector to renewables was proposed in The Energy [R]evolution scenario (Simon et al., 2018). According to these scenarios, the cost of choosing the path of the Energy [R]evolution is $61 billion, which is comparable to the current Belarus GDP. Despite the high cost, it is estimated that this route is more cost-effective than the route of conservation of traditional energy. Its choice means a transition to a circular economy, which allows for solving environmental problems. After the implementation, Belarus will save more than $5 billion on fuel purchases annually.

Transformation idea

The goal of transferring its electricity consumption to RES can be set not only by the city but also by its residents independently. Unlike the water sector, where the existing technical system and prospective technical solutions are centralized (the system of water recycling in a single house seems fantastic), electricity supply can be decentralized, at least partially, and therefore performed by many actors.

In Minsk, solar panels installed on roofs and walls of multi-story buildings can be well applied as renewable electricity sources located directly in the city. The advantages of placing solar panels directly on buildings include minimal costs for the transmission of electricity, savings on connecting the power plant since it can be connected to the electricity grid already existing in the house, as well as involving residents to independently invest in their electricity consumption.

The average area of ​​an apartment in Minsk is 51 square meters. Modern solar power plants (SPP) located in this area are capable of generating 6,650 kWh of electricity per year (Harbunou, 2020). At the same time, the average annual electricity consumption by one family in Minsk can be assumed to be equal to 1,520–3,650 kWh (the average size of a household is 2.7 people, the larger value corresponds to the consumption of households with electric stoves). That is, panels installed on the roof can provide enough electricity for 2-4 households.

Micro-investments from consumers make it possible to attract investment to the rapid growth of renewable energy. People can either invest in a personal power plant installed on the roof of their own house, or they can unite in specialized energy cooperatives or energy trusts. These associations can invest in the installation of renewable energy facilities outside Minsk, and homeowners’ associations in their installation on the shared roofs of multi-story buildings.

Direct investment in RES without banks as intermediaries has several advantages:

• transparency for the investor: people are sure that their money will be used specifically for the development of renewable energy;
• customers can calculate their private energy balance to determine how much electricity they consume and produce by renewable energy sources;
• self-funding gives people the opportunity to identify not only as consumers, but also as producers: they become a prosumer, and «energetically respectable» if they produce no less electricity than they consume;
• anyone will be able to correlate the growth of energy consumption and compensate for it by installing additional renewable energy sources;
• investing in electricity has more than just personal economic interest, it creates an additional incentive for people to spend their money on production of other renewable resources;
• cooperation within the same building and district will also help strengthen local communities.

To launch such a mechanism, Belarus needs to develop new legislation and tax incentives. For example, a person or an organization can be partially exempt from VAT on electricity bills and invest that money in their own power plant. The cost of electricity from many decentralized sources of renewable energy today could be competitive with traditional energy.

Figure 3. A possible scheme of production at a solar power plant and its consumption by one household in Belarus. [Ed. Note: author's original spelling].

Household electricity consumption is assumed to be the same around the year and equal to 194 kWh for our example (Figure 3). The power of the SPP in this example is 2.5 kW. It requires 18m2 to accommodate it. Electricity production is different in different months. During the summer months, the household sells more electricity; during the winter months, it buys more. The annual balance of production and consumption for this example is the same at 2328 kWh.

The main investment (CAPEX) in the SPP in this economic example occurs at the beginning of the period. Annual operating expenses (OPEX) take a few percent of the initial investment for this type of renewable energy. The return on investment occurs by reducing the cost of purchasing electricity. For this example, the return on investment occurs in the 15th year of operation under the condition of the current rates in Belarus. Households can invest the funds that are saved annually in the growth of energy capacity.

Urban mobility

If earlier experts analyzed transport primarily as a system consisting of the transport fleet, road network, and fuel resources, now they are shifting focus and analyzing, first of all, not the city transport system, but urban mobility as a holistic approach. In its most general definition, mobility is the ability of a person to move independently or with the help of vehicles. Mobility is also a service to move people. This service can be provided by public transport, car sharing, taxi, private cars. If a city is organized conveniently enough, so that many needs are within walking distance, mobility can even be performed on foot. If it is convenient, safe, and accessible to move within the city, especially for vulnerable groups of people, such as people with disabilities, then urban mobility is organized efficiently.

There are some methods and trends in the urban mobility sector that bring direct economic benefits to cities and fit well with the circular economy and degrowth approach. The development of technologies and the increasing number of people working remotely can lead to a reduction in the need for mobility within the city. Shifting the start of work or study time for some organizations is well known as a means to reduce the demand for movement during rush hour. There are also other trends in urban mobility, as implemented by some European cities:

• reduction of operating costs due to the introduction of electric transport (electric transport is more expensive but pays off in long-term operation);
• increased use of electric public and private transport;
• the refusal of vehicle ownership: transport sharing (car-sharing, bicycle and electric scooter sharing, taxi) reduces the capitalization of the public transport sector, leads to faster vehicle upgrades and quick introduction of innovation;
• the transport sphere, «inflated» during the era of private car domination, can start shrinking both economically and literally physically (the width of the carriageway); a decrease in the width of streets and, consequently, the cost of their maintenance due to a decrease in demand for private car transportation has already become noticeable in some cities;
• the refusal of vehicle ownership reduces the area and cost of parking infrastructure; the future of autonomous transport is not yet one of the introduced trends, and its viability is still unclear. Driverless transport can reduce costs not only by eliminating the cost of driver labor, but also by reducing parking spaces in the city (theoretically, it can constantly be at work). It has less downtime. The complete transition of transport in the city to autonomous control is theoretically capable of decreasing public damage by reducing the number of road accidents, as well as decreasing the amount of regulatory road infrastructure (traffic lights, road signs, and road markings).

The ideal model for urban mobility which we should strive for, unlike the water or electricity sector, is very difficult to imagine, formulate, and quantify.

Reducing the cost of private transportation may lead to traffic congestion, less walking, and degradation of public transport. Vilnius transport split statistics may be one of the typical examples (Jakimavičius & Burinskienė, 2013, 4). The consumption of gasoline by residents of Minsk has doubled, and diesel consumption increased by 5% over 18 years (National Statistical Committee of the Republic of Belarus, 2019, 96-102). Increasing speed limits and building the infrastructure for high-speed movement within the city limits is not safe. Moreover, it deprives people of the feeling of a city as an extended space. However, each city, depending on its size, economy, topography, and climate, may have its own «transport cocktail» (the ratio of preferred transportation modes).

Thus, long-term general goal-setting with regard to mobility is difficult. So cities try to set detailed targets in various sectors of mobility: average speed of journey, congestion, object availability, number of accidents, amount of energy consumed, etc.

How to improve urban mobility

Сities must create conditions for convenient and affordable mobility for all residents. However, improved service can lead to a higher number of rides, which can result in negative consequences. In the sphere of urban mobility, city officials have learned to be very active in managing people’s transport behaviour and regulate businesses providing mobility services.

Today, many mechanisms are used in EU cities to manage transport preferences: additional taxes and payments, restrictions on the number of lanes for movement by car, and physical parking spaces. At the same time, the attractiveness and quality of alternative transport are improved. For example, there are more comfortable public vehicles, more convenient routes, and schedules, a higher speed of communication, etc.

There is a large field for cooperation in solving the problem of creating better mobility. Public transport, taxis, bicycle, and car sharing are examples of using shared resources. Carpooling—getting passengers to fill vacant seats in the car when moving from one district of the city to another—is unpopular in Belarus, but it also makes economic sense.

Transformation idea

An expanded public transport management system can improve urban mobility and reduce the cost of service.

The public transport system may include not only the usual route of public transport but also non-route vehicles of various capacities. Adaptable centralized control will be able to provide the user with a vehicle both for a trip planned in advance in the calendar and for a spontaneous decision. The user sets the criteria for a trip, for example, with or without switching transport, going alone by taxi, or allowing the use of multi-seat transport, whether they need to go fast or not. The system selects route or non-route transport for them based on the optimality criteria or adapts the public transport route scheme for the future. Transport fleet co-ownership and the constant selection of optimal transport by the system can reduce overall costs.

Transport fleet co-ownership is not obligatory. In the case of private ownership, the owners, individuals, and legal entities, can lease their vehicles to the transport management system. At the same time, private ownership of the means of providing services and competitiveness remain. Vehicle autonomy is a desirable feature for such a transport system.

Conclusions

The economic aspects of these areas have different characteristics and can be summarized in a table.

Table 3. Sectors comparison.

The sectors have different tendencies. In any of the considered areas, attempts to make the transition to a circular economy or to follow the degrowth economy approach by purely technical means without changing people’s behavior and regulation of business behavior may be ineffective. The role of municipalities is key in setting goals and objectives for cities, citizens, and businesses.

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The paper is part of the «Eastern European Cities: Degrowth vs Right to Develop» project, supported by FES Regional Office «Dialogue Eastern Europe». The views expressed in the paper belong to the author and do not necessarily coincide with those of the Cedos think tank or Friedrich Ebert Stiftung.

Any use of the materials from this publication is allowed provided the mention of the primary source is made no further than the second paragraph of the text.