Policy recommendations

As developing countries rapidly urbanise, and the transition to a net zero economy takes hold, developing countries need to proactively plan how they will leverage this to their benefit. New markets and associated value chains will be created to serve the growing demand for low-carbon goods and services. Others, such as fossil fuel production and associated products, will shrink. This will have many implications for modern growth and employment opportunities. Cities need to leverage and build green comparative advantages. Making use of the abundant natural resources needed to build greener, higher value-added industries, as well as leveraging the supply of low-skilled workers to build the sustainable city of tomorrow, are two ways that countries can meet sustainable growth objectives, while also contributing to adaptation and mitigation goals.

  1. Place urbanisation at the centre of national efforts to promote sustainable growth.

 Climate change is not simply an issue of adaptation and mitigation, but also one of economic opportunities in which cities have a large role to play. Investing in adapting to climate change and mitigating increased emissions are important. But, in addition to this, developing countries should look to harness the new economic opportunities that climate change and the global transition to net zero will bring. As centres of innovation, trade, and work, cities are well placed to champion this change. Well-managed, sustainable urbanisation should therefore be a national priority.

  1. Map current GVC positions to understand existing specialisms and potential future green products and services.

To understand which GVCs to develop—whether building new ones or reshaping existing ones—the process of GVC mapping is crucial. This is because the approach each city should take in order to deliver upon this economic development will be different depending on its unique set of natural, human, and physical capital. Mapping current and future comparative advantages shows whether cities should compete on existing strengths or invest in developing new ones.

  1. Engage with new or adapting industries and invest in the skills and infrastructure needed to increase the local value-add in production.

Currently, much of the higher value-added activities are done in developed cities, but as new green demands emerge there will be new opportunities for developing cities to get ahead. Cities who can provide new, greener firms with certainty that they have the skills, infrastructure, and connectivity to create the value locally—or are willing to put this in place—stand to gain from this opportunity.

  1. Adapt to declining demand for fossil fuels, and instead leverage the abundant natural endowments needed for low-carbon technologies.

The global transition to net zero emissions will cause a relative decline in fossil fuel use. It will also increase demand for renewable energy sources and the minerals necessary to service the green transition. Countries need to adjust proactively to these changing opportunities. Policymakers in developing countries can benefit by pivoting investment and policy towards these alternative mineral reserves and renewable energy endowments. Urban leaders can then grow new industries through value-added manufacturing and service tasks, supporting both innovation and dispersion of new technologies.

  1. Absorb low-skilled workers in green urban jobs through building the sustainable, productive, and liveable city of tomorrow.

The low-skilled workforce will continue to drive a large proportion of the economic activity that takes place in developing country cities. There is merit in working to facilitate more and better jobs for this large pool of low-skilled, mostly informal workers. Small policy changes and investments may help them do ‘current things more sustainably’—for example, in building and construction, and waste management provision. This focus on non-tradable services can contribute to building the sustainable, productive and liveable city of 2050 and beyond, which in the long-term can attract greener firms and provide further job opportunities.