Cities within the European Union face a growing legal and financial obligation to become ‘climate neutral’ by 2050. A global remission of this magnitude would keep humanity from experiencing the bad scenarios of climate variability that occur when the planet durably becomes two degrees warmer or more. Such scenarios have a price tag:  future citizens will pay for chronic strains and increasing episodes of extreme weather conditions. In all studies, whether in scientific journals like Science and Nature or published by international organizations like the IMF or the World Bank, the costs of climate change in terms of economic decline strongly outweigh the investments needed, even if the exact amounts vary. Yet, despite this knowledge of future risk to the budget, few cities today know how to finance the necessary transitions to contribute to climate neutrality and become fully adapted to unavoidable change.

In an urbanizing world, where city systems and their logistical supply chains contribute the bulk of emissions and present most value-at-risk, there is thus a strong need to answer this question. In this workshop, we will explore what financial techniques can be involved in municipal finance and what practical steps can be taken. Hence, we do not talk about where to find money for mitigation and adaptation efforts – that is, we will not ask who will finance the transitions. Those questions reflect well-worn paths, are currently negotiated in practice, and have a certain cognitive intractability that will be worked out in the muddling through of the deliberative multilevel governance of European institutions.

Front and center in this exploration stands the well-known decision-theoretic problem of how to weigh the short-term against the long-term in a rational manner. Like all governments, urgent problems and path-dependent policies can bias decision-making in towards choices that are sub-optimal for the (very) long term from a financial perspective. On the other hand, the urgent problems cannot be wished away, cities often have tightening budgets from which they have to service an increasing amount of tasks. Quays, roads and bridges need renovating, and new areas must be developed to meet the spiraling demand for housing, to name but a few examples. Cities have many current expenses, including the servicing of past debts from investments in previous years. Also, path dependent policies bring much of the value currently enjoyed, so that piecemeal engineering, instead of radical change, is the only acceptable mode. And so, coarse graining away any ethical considerations into a naked and unapologetic technocratic rationality, the question becomes: what division of the burden is optimal, how can we come to know that division, and how do we effectuate it?

We can work from the metaphor of Finance as an infrastructure of techniques through which money flows.  Like roads or energy grids, financial infrastructures shape how resources move across time. Is there any way we can redesign this financial infrastructure so that a better outcome is secured across the generations? What mechanisms— e.g. amortization structures, shadow pricing, loans or climate-adjusted accounting—can reshape these flows to find an optimal point between present and future?

Programme 

This is an invitation-only event.