Deathly air pollution and slums are two of many challenges cities struggle with globally. Danish sustainable research company Sustainia has compiled a list of nine cities with the biggest risks, and shows that beneath these risks lie a number of market opportunities.
Indonesia’s capital Jakarta is sinking. Lagos, Africa’s most populous city, urgently lacks 17 million housing units. Seven million people die every year globally from the direct or indirect effects of air pollution – most of them living in bigger cities. Cities around the world struggle with seemingly insurmountable challenges. Sustainia took a look at nine of the cities living with the toughest challenges.
There are a number of underlying causes to these challenges. Although they receive increasing attention from NGO’s, journalists and world leaders, businesses can do their part too. In fact, these risks can be turned into lucrative business opportunities.
Risks open doors to new innovation, especially when you consider the resources mobilized in cities and their strength as drivers of change. For instance, no country has ever raised itself from low-income to middle-income status without significant population shift into cities.
Companies and businesses can take advantage of the tremendous opportunities posed by these global risks, but they need to correctly identify the challenges to pursue these market opportunities.
Cities marred by air pollution
Smog that impedes you from seeing just a few meters ahead, constant coughing and permanent risk of fatal diseases. Air pollution is costing the equivalent of between two to ten percent of GDP across the G20 countries. With 85% of the world’s population living in areas where thresholds for safe air pollution levels have been surpassed, the market for air quality improvement is staggering. It is estimated that the global market opportunities for air pollution control equipment will reach $21 billion by 2021.
1. Tangshan and 2. Xian, China
Take Tangshan – one of China’s most polluted cities. It’s a hub of heavy industry and coal-burning, producing massive amounts of cement, chemicals and steel. The Chinese Government has undertaken a range of political initiatives – from pressing residents to give up coal stoves at home, to the decommissioning or preventing new construction of several hundred coal power plants. $6.4 billion was granted towards cutting carbon, sulfur dioxide and nitrogen oxide emission in 2018. In China, the market opportunities for fighting air pollution will reach an estimated of $3.2 trillion in 2030.
At the Communist Party’s annual congress in 2014, Premier Li Keqiang declared war on air pollution in China. The main reason is that air pollution kills between 1.6-3 million Chinese people annually – giving China the unfortunate ranking of first place for global deaths from air pollution.
Picking up this deadly fight, air pollution programs that monitor air quality in every major Chinese city have been launched, and massive investments in high-tech industries working with solar panels and electric cars have been made.
The private sector is already pursuing market opportunities. The car-sharing provider GoFun offers luxury hybrid vehicles equipped with air purifiers to combat smog. In the Shaanxi province, a novel solution to air pollution is showing early promise – a 100m high air purification tower in the Xi’an home of the Terracotta Army. The tower is funded by the Chinese Government and works by sucking polluted air into large greenhouses around the base, heating the air so it rises up through multiple layers of cleaning filters.
Still, much more has to be done. Even though the Chinese government is taking the lead, there is still a long way to go according to Greenpeace, because policies still favor heavy industry and coal. This opens immense market opportunities for energy companies like Iso Paint Nordic, who produces roof coatings that transforms harmful exhaust gases into harmless salts and generate energy savings by reflecting more rays from the sun.
3. Varanasi, India
The historical city of Varanasi in India, home to one million people, is choking on air pollution that is up to 20 times above safe levels, making it one of the most polluted cities in the world. Pollution is primarily caused by vehicular and industrial emissions, where rates of asthma and patients reporting breathlessness in the city have increased by up to 25% between 2010-16.
Outdoor air pollution caused 620,000 deaths in India in 2012, and the World Bank estimates that it costs the country nearly 8% of its GDP each year. Action is desperately needed if the health risks are to be reduced.
The overall market opportunity in India for electric and hybrid vehicles is expected to reach $29 billion by 2030.
Given that 14 out of 15 of the most polluted cities in the world are Indian, and that the global air quality monitoring market is growing ($3.9 billion revenue in 2017), the market opportunities are stunning.
Improving waste management to avoid burning of garbage and enhancing infrastructure to lessen trucks from entering Varanasi is one of the solutions needed to improve the city’s air quality. The Kolkata Solid Waste Management Project encourages segregation of waste with the ambition of eliminating open incineration of waste. Since their launch in 2006, a gradual decrease in diseases such as skin and liver ailments, malaria and poliomyelitis has been observed.
Pollution from transportation is one of the biggest issues and as demand for personal mobility is expected to increase in Varanasi and triple globally by 2030, market opportunities are huge. Plans to replace all public buses with new hybrid ones in 2020 have been put in place by the government, and a scheme has been launched to provide a $100,000 subsidy for electric and hybrid buses. There is clearly a burgeoning demand for electric vehicles in this city.
Cities in desperate need for affordable housing
Globally, 1.6 billion people will need affordable housing by 2025. At the same time the estimated market for affordable housing is expected to exceed a staggering $1,080 billion by, 2030.
4. Lagos, Nigeria
Africa’s most populous city is experiencing a housing deficit of more than 17 million units, causing slums to sprawl and creating insecure and poor living conditions for millions. An estimate of 2.6 million homes need to be built each year to meet this massive demand – opening up multiple market opportunities.
Creating affordable housing could create over 13 million of jobs in Africa by 2030. In Nigeria, up to 90% of urban housing is produced by private developers, which is a strong indicator of the massive market opportunity for companies to bring the housing deficit down.
In Lagos, the low-income urban dwellers upgrade informal housing to alleviate the housing deficits. At a national level, an innovative urban planning project called Eko Atlantic City, initiated by government departments and foreign and local companies, is projected to house 250,000 residents in an area equivalent to the size of Manhattan’s skyscraper district.
It’s questionable whether the property prices in Eko Atlantic City will meet the housing demands of low-income groups with an average annual income per capita of $7,000. Instead, building affordable houses from shipping containers is trending. Tempohousing Nigeria makes homes out of cargo containers that are 25% cheaper than traditional housing. One-bed houses sell for as little as $1,650.
5. Santiago, Chile
With more than 80% of its population living in cities, Latin America is now the world’s most urbanised region. Sadly, up to 25% of Latin Americans lives in slums or informal housing. These homes are exposed to health risks and are vulnerable to increasingly heavy weather conditions caused by climate change.
With few financing options available to low-income groups in Santiago, residents build their own houses with little or no mortgage. In the favelas of Santiago, slum dwellers use their savings and government subsidies to get help from architects to build half-houses with the other half completed over time. One approach, designed by the architecture company Elemental, has the potential to build housing units that cost as little as $7,500 per unit.
Patrimonio Hoy has come up with a solution to unlock housing opportunities with micro-financing. In collaboration with architects, they provide comprehensive advice on housing plans and issues weekly payback options. Patriomonio Hoy has benefited over 2.3 million people living in informal housing.
Sinking cities in a changing climate
Mega cities are threatened due to rising sea levels, pressure from heavy buildings, illegal pumping of groundwater, lack of proper sewer systems and heavy flooding. The challenge is highly complex as it combines health, environmental, economic and social risks at the same time. Therefore, assessing the market opportunities of sinking cities is difficult, but just ensuring affordable housing, safe drinking water and reliable energy have an aggregated potential value of up to $3.7 trillion.
6. Jakarta, Indonesia
Rivers flowing upstream and buildings slowly disappearing underground are everyday phenomena in the megacity of Jakarta – the fastest sinking city on earth. North Jakarta has sunk 2.5m in 10 years and the Greater Jakarta area, home to almost 30 million people, has sunk by 4m in the last 30 years. Abandoning North Jakarta, which will cost at least $220 billion, has been mentioned as the probable result if private companies and policy-makers don’t take action now. This risks stranding North Jakarta’s two million residents.
Overcoming this grueling challenge requires two actions: regulations need to be properly enforced, and private companies must take the lead in reconstruction and the provision of technological and infrastructural solutions. The Great Garuda, a 32km outer sea wall, is the only major infrastructure project proposed by the government. The plan has as many critics as proponents. It’s being built across Jakarta Bay to create an artificial lagoon along with 17 artificial islands by the Indonesian, Dutch and South Korean governments at a cost of $40 billion.
Ensuring affordable and climate-proof apartment units can improve sanitary conditions and prevent the outbreak of disease and unmanaged waste disposal. This currently costs the city $80 million every year and contributes heavily to the pollution of city rivers.
Investing in green infrastructure such as parks to reduce flood duration and enhance quality of life is crucial to reduce carbon emissions and create jobs for local Jakartans, who will see many more opportunities for work, as the city plans to construct 3,000 parks by 2022.
7. Mexico City, Mexico
Some parts of Mexico City – with its 21 million residents – are sinking at a rate of one meter per year. This poses multiple risks linked to water management and health, preservation of historical sites, traffic disruptions from flooding and housing vulnerability. It has cost the city billions in repairs and flood control since the 1900s. In the poorer neighborhoods, residents can go without tap water for two to three months during the dry season, forcing the government to dispatch water trucks.
No central agency is taking short or long-term responsibility for water resource management as Mexico City spreads across multiple state boundaries. But political decision-makers are aware of the problems related to water crisis. In 2018, mayor-elect Claudia Sheinbaum Pardo pledged a $370 million investment in the city’s water department to deal with the sinking and water crises, thereby opening up opportunities for stakeholders to take action. But long-term solutions are capital intensive and require centralized planning on a regional level to be effective.
The local government has launched a rainwater harvesting system “Aqua a tu Casa” to meet drinking water demands. Each harvesting unit guarantees the supply of up to 40,000 liters of drinking water per year, which means annual savings of around $200 per family. The construction of parks can mitigate water shortage by ensuring that the rain water reaches the water distribution systems to be used as potable water, diversifying the city’s water sources. Parque Lineal La Viga is an excellent example of how investing in public infrastructure can improve climate vulnerabilities through inclusive and green urban planning
Urgent need for access to sustainable energy
In 2015, 193 UN Member States agreed on an ambitious goal to “ensure access to affordable, reliable and modern energy for all by 2030.” In order to reach this goal by 2030, cities have to be onboard. Globally, cities consume more than two thirds of global energy and produce about 70% of greenhouse gas emissions. A market opportunity of between $555-770 billion is expected for companies providing clean and green energy in cities.
8. Buenos Aires, Latin America
In Latin America, demand for energy is expected to increase by more than 50% in the next decade, and greenhouse gas emissions from the building sector alone are expected to double between 2010 and 2030. This opens immense opportunities for energy companies with scalable, sustainable solutions.
Across Latin America, an estimated 25 million streetlights could be replaced, offering $2 billion in potential annual savings. Temperature control and electricity consumption are hot topics. In 2013, the capital of Argentina launched an energy plan to switch more than 90,000 streetlight bulbs to more energy-efficient LED bulbs as a part of a public-private partnership with Philips Lighting. LED lights provide long-lasting performance, with an expected lifespan of more than 20 years, while using 80% less energy and producing the same amount of light as traditional lights.
When the project was completed in 2015, the city had replaced 75% of its lighting stock, saving 50% in operational costs and cutting energy usage by 40-50%.
9. Sub-Saharan Cities
Africa is starved of electricity. More than two-thirds of sub-Saharan countries are without proper access to electricity grids and are therefore struggling to support hospitals, schools, and sanitation systems, and sustain GDP growth. These risks can be turned into massive market opportunities and some companies are already on the move.
The largest business opportunities have a potential value of more than $296 billion by 2030 and could create nearly 16 million jobs. This could spark a long-lasting social and economic development for the region.
Based on a pay-as-you-go model for solar power, M-KOPA provides clean energy to a wide range of sub-Saharan countries. The company came in 34th on MIT’s list of the ‘50 Smartest Companies in 2017.’ Current customers are projected to save $300 million over the next four years and enjoy 50 million hours of kerosene-free lighting per month.
Lack of proper monitoring systems in sub-Saharan cities is another risk as most scalable solutions requires data monitoring of some sort. The American company Oopower, part of Oracle Utilities, provides smart data solutions for utilities with an opportunity to engage customers in improving their energy efficiency. In 2015, the company provided $1 billion in energy savings for customers and saved over 5.8 million tonnes of CO2.