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2016 GGSD Forum - Session 2: Presentation by Mr. Jan Brueckner, Professor and Former Chair, Department of Economics, University of California, United States

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Urban Sprawl and the Greenness of Cities

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2016 GGSD Forum - Session 2: Presentation by Mr. Jan Brueckner, Professor and Former Chair, Department of Economics, University of California, United States

  1. 1. Urban Sprawl and the Greenness of Cities Jan K. Brueckner University of California, Irvine OECD Forum on Urban Green Growth, Spatial Planning and Land Use November 9–10, 2016
  2. 2. Market Failures and Sprawl Cities grow spatially for good reasons: larger populations, higher incomes, and better transportation to the suburbs. But market failures (which cause the economy to do the wrong thing) exist, and they cause too much spatial expansion. One market failure comes from road congestion, with each commuter failing to recognize that her presence slows down other drivers. Too much driving then occurs, so that commute trips are too long and the city is too spread out.
  3. 3. Market Failures and Sprawl Another market failure comes from a failure to account for the pollution caused by urban transportation and residential energy use. Commute trips are then too long, dwellings are too big, and buildings aren’t tall enough (height means greater energy efficiency). The result again is a city that’s too spread out.
  4. 4. Remedy for the Congestion-Related Market Failure Congestion tolls can remedy the congestion-related market failure, as in London, Stockholm and Singapore. Tolls make driving more expensive, making cities more compact in the long run. Research shows that optimal congestion tolls would reduce the urban land area by 12–20%.
  5. 5. Remedy for Pollution-Related Market Failure Congestion tolls would also reduce pollution, but different instruments would be better for specifically targeting it. A higher gasoline tax is needed along with extra taxes on housing and land (together, equivalent to a carbon tax). My research shows that, to address urban pollution, the US gas tax should be raised from $0.49 to $0.71. Residential taxes on both floor space and land should be levied, but at a rate much lower than existing US property taxes.
  6. 6. Remedy for Pollution-Related Market Failure The result is a 9% shrinkage in the city’s land area and a 4% reduction in emissions per capita. Findings are based on a typical carbon cost of $40 per ton, but they get more dramatic with an extreme $220/ton value. The optimal gas tax then rises to $3.90/gallon (a European level), and the real estate taxes quintuple. The urban land area shrinks by 36% and emissions per capita fall by 19%.
  7. 7. Loss of Open Space Another environmental market failure is the developer’s failure to consider the open-space benefits from land on the urban fringe (lost after conversion to urban use). This market failure is less clearcut than the others, since people may not care much about access to fringe open space. Local parks may matter more. Regardless, development tax is remedy.
  8. 8. Greenbelts or UGBs as Remedy Urban growth boundaries (UGBs), also called greenbelts, are a different potential remedy for these market failures. But they treat a symptom of market failures (sprawl) rather than underlying causes. Nevertheless, UGB does exactly the right thing under open-space market failure. But a UGB does not achieve enough densification in the city center under other market-failures, relative to ideal remedies. So UGB is not a good remedy for pollution-related urban sprawl.
  9. 9. Lessons Cities are too spread out because of several market failures. Addressing the pollution-related market failure through taxes can shrink a city’s area by as much as 36%. Shows that significant urban sprawl comes from ignoring the effects of pollution. Ignoring the congestion-related market failure also exacerbates urban sprawl. UGBs are not good remedies for either of these market failures.

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