Cutting costs and emissions: can smart cities deliver?

Camille Viros

Economist/Policy Analyst, Centre for Entrepreneurship, SMEs, Regions and Cities (CFE), OECD

Cities account for around two-thirds of global energy demand and generate 70% of energy-related global CO₂ emissions. These shares will only increase over the coming decades as urbanisation continues. 

In 2022, the need to act on energy has become urgent. It was a year in which the climate crisis deepened — with droughts in Europe, wildfires in North America and floods in Asia and Australia fresh in the minds of policymakers as they convened at COP27 in Sharm-El-Sheikh. It is also the year in which Russia’s war against Ukraine disrupted energy markets, sending prices rocketing and underscoring the need to reduce dependence on volatile and fragile trade in fossil fuels. 

Being smart with energy 

Cities have a pivotal role to play in meeting both energy and climate objectives. Digital ‘smart city’ solutions can present a win-win for policymakers seeking to cut costs and emissions. For example, smart sensors and controls for thermostats and lighting in buildings can help use energy more efficiently and reduce energy costs and emissions at the same time.  

In the University District of Umeå in Sweden, intelligent building control systems have been installed across the University Campus — with sensors that collect data on human presence, temperature, light and CO₂ levels and control airflow, climate and lighting. This has helped cut energy use by more than 20% during peak hours across the campus. 

Digital twins — real-time virtual models of a city’s physical assets and infrastructure — can also help reduce energy consumption in cities. The London Building Stock Model offers a snapshot of the energy demand and performance of all buildings in the city — both residential and commercial. It helps identify poorly performing buildings, which then helps target efforts to conserve energy and identify households most at risk of energy poverty. 

Digital ‘smart city’ solutions can present a win-win for policymakers seeking to cut costs and emissions.

Making the most of smart cities’ potential 

If properly executed to guide policymaking, the potential of smart city technologies to cut energy costs and carbon emissions is huge. According to the International Energy Agency, in the buildings sector alone, digital solutions and smart controls could reduce carbon emissions by as much as 350 Mt CO₂ by 2050 — equivalent to more than 10% of carbon emissions coming from the buildings sector in 2020.  

However, national governments must back cities’ efforts with the right financial and technical support if smart cities are to deliver on their climate objectives while cutting costs for their citizens.