The theme for this year’s World Habitat Day is “Accelerating urban action for a carbon-free world.” A well-known fact -- since 2007 more than half of the world's population lives in cities. According to forecasts, this percentage will increase to 60 percent by 2030. Cities and megalopolises are centres of economic growth that attract people, businesses, create jobs, and provide about 60 percent of global GDP. At the same time, rapid urbanization leads to the inexorable growth and expansion of urban infrastructure and services: the urban heat supply network, water supply, and sewerage systems, the collection of household waste, construction of buildings, roads, among others.

All this together causes a significant increase of harmful emissions, or various pollutants, into the environment, as well as greenhouse gases. Cities currently account for about 70 percent of global carbon emissions and over 60 percent of resource use. This dire situation leads one to ask two questions:

What plagues our infrastructure? What improvements can be made?

To answer these questions, an inventory of greenhouse gases was undertaken throughout the urban sector (excluding industrial production) and SWOT analysis of municipal opportunities for low-carbon development. The latter was prepared in 15 pilot cities of Kazakhstan with the support of UNDP and the Global Environment Facility. The main urban sectors that generate indirect greenhouse gas emissions in the cities of Kazakhstan were found to be: heat and power supply of residential buildings -- about 60 percent; urban transport -- 18 percent; and the municipal infrastructure - street lights, pumping stations, heating and lighting of budget/urban buildings -- 8-10 percent. These data highlight the fact that more than half of greenhouse gas emissions in cities emanate from buildings that need to be modernized.

Most of the buildings in Kazakhstan were built in the 50-80s of the last century and are characterized as being energy inefficient. According to expert data, heat energy consumption in buildings in Kazakhstan is about 240 kWh per 1 sq. meter per year (for comparison, this figure in Sweden is 82 kWh/sq. m, in Germany it is 120 kWh/sq. m, in France - 126 kWh/sq. m, in England - 130 kWh/sq. m). In 2010-2013 a large-scale energy audit of residential buildings was performed in Kazakhstan. The audit showed a large consumption of heat energy in apartment residential buildings: for example, on average in Almaty - 136 kWh/sq. m per year, in Atyrau - 181 kWh/sq. m per year, in Kokshetau - 257 kWh/sq. m per year. Certainly, the reason for the high heat consumption in buildings is partly objective - it is associated with the cold climate of Kazakhstan, but still, the potential for energy savings in these buildings is about 30-50 percent.

Most of the housing stock in large cities consists of apartment buildings with a centralized heat and power supply. This housing stock becomes obsolete from year to year and requires renovation that incorporates elements of thermal modernization. The infrastructure of cities that is connected with buildings also needs to be updated: namely, boiler houses, heating, electricity, and water supply networks.

Useful examples to be followed

Over the past decade with the support of UNDP more than 90 pilot projects in Kazakhstan showing the benefits of complex thermal modernization of buildings, urban infrastructure and testing of various technical and organizational solutions leading to energy saving have been implemented. The vast majority of such pilot projects in the regions have been positive from the economic and environmental point of view: with energy savings during the implementation of various activities in the range of 6 percent to 45 percent during the heating season.

The wide range of savings obtained is explained by the varying state of buildings that were built in different years, the diverse types of technologies and solutions used in the construction, and, consequently, the differing degrees of heat losses and various technical solutions used in the thermal modernization of buildings in the framework of pilot projects.

At the same time, the reduction in indirect greenhouse gas emissions is on average from 50 to 100 tons, and with a comprehensive modernization of buildings, it reaches values of 190 tons of CO2 eq. per heating season from one building being modernized. Different activities at the facilities have different effects (Diagram 1), but it’s still significant enough to do.

How to find funds for modernizing the municipal infrastructure?

Thermal modernization requires significant investments to implement energy-saving projects. Based on the results of the pilots implemented, the cost of the repair and insulation of the roof, basement of the building, interpanel seams on the facade, replacement of windows, installation of "smart heating" for a typical residential apartment building has been assessed at approximately US$162,000.

Such housing facilities usually have 80 apartments and this proves to be a dilemma in terms of financing: the owner of each apartment must invest more than $2,000 in the renovation of the house. For many owners (mostly pensioners and low-income citizens who live in such older buildings), this amount is unaffordable and requires long-term savings or borrowing. At the same time, the economic effect of complex thermal modernization is only slightly more than KZT1.3 million per year. It is clear that even a simple payback period for these activities exceeds all reasonable limits (more than 50 years). In part, this situation is due to low energy tariffs in Kazakhstan. For example, the cost of 1 Gcal of heating energy in Nur-Sultan is currently KZT24,000 (about $55), which is almost 10 times less than in Western European countries.

To overcome this barrier associated with the long payback of energy-saving measures, UNDP in Kazakhstan is developing and testing various financial incentives and support measures to ensure distribution of the thermal modernization system, since, as noted above, these measures lead to a significant reduction in energy consumption and greenhouse gas emissions. Therefore they must be supported by the government, which has opted for a policy of decarbonization of the economy.

For example, a number of UNDP pilot projects tested the scheme of energy service contracts (ESCO contracts) when performing certain types of the total renovation of residential buildings. This scheme involves a specialized energy service company (ESCO) for renovation and for work in modernizing buildings to save energy (electricity, heat, gas, water). The savings achieved should be made compared to the pre-modernization “baseline” for the owner or tenant of the facility. Payment for the services of the energy service company is made from the funds of the savings achieved which were generated as a result of the technical measures performed in connection with the modernization of the building.

A preliminary analysis showed that the most rapid and tangible effect for obtaining savings is provided via measures to modernize the heating system and hot water supply (installation of "smart heating"). For such simple and relatively low-cost activities (investments in the range of $8,000-10,000 per building), payback periods go beyond the three-year period. Under these terms, UNDP is testing subsidy measures to provide ESCO companies with a 10 percent subsidy on the commercial loan rate. In the context of the global coronavirus pandemic and taking into account the difficult economic situation, support measures were also developed in 2020 in the form of a 40 percent capital cost subsidy for performing such activities. All these measures shorten loan repayment periods and make projects viable.

Other measures for the thermal modernization of residential buildings (facade, roof, among others) are more cost-intensive and in most cases are not interesting for private ESCO companies. The implementation of a comprehensive pilot project in Nur-Sultan has shown that the implementation of similar activities by attracting debt financing is possible only if there is initially accumulated capital in the amount of at least 76 percent of the cost of thermal modernization of the facility. The solution to this problem can be a subsidy as a tool to motivate the repair work. However, the subsidies must have a source of formation and such a sizeable amount will be a heavy burden on local authorities (operators of building renovation programs).

It is possible that, if modernization is viewed through the lens of sustainable infrastructure, climate care, reducing the risks associated with ensuring the safety of housing and the possible consequences of massive discontent among residents, this indicator can be justified and is comparable to the amount of costs that will be required to eliminate the consequences, if such repairs are not carried out and the energy consumption is not reduced

Significant financial resources will be required for this task. According to our very r estimates, the total is $10-12 billion. To cover these costs, borrowed funds will obviously be required, which can be attracted and used for their intended purpose using financial mechanisms to support consumers through subsidies and the provision of reasonable grant support. This strategy has been successfully demonstrated by the experience of implementing pilot projects.

Eco-cities – a bellwether in building a low-carbon footprint

At the same time, the establishment of eco-cities, or low-carbon cities, is already a reality. In world practice, cities with high energy efficiency and, as a result, a low specific indicator of greenhouse gas emissions, are known. For example, Reykjavik (heating and hot water needs are covered by hydrothermal energy), Vancouver (expanded use of hydropower, solar, and wind energy), Copenhagen (due to a huge floating wind farm and many cyclists), Oslo (using renewable energy, efficient lighting and successful programs sharing cars and bicycles).

Given that urbanization is one of the defining trends of the 21st century, the right urban policy can become a driver of solutions to overcome today’s development problems and lay the foundation for a more open, inclusive, and sustainable future for all.