rise of “smart meters” and real-time information about electricity consumption and pricing allows cities to be “smart” about how they encourage consumers to change their behavior.

When urban households and firms know that the price of water and electricity can fluctuate, they have strong incentives to invest in durables and to economize on scarce resources. If such cities are experiencing population growth, water and electricity prices should rise to reflect the growing scarcity. By contrast, when governments protect urban households and firms by setting price ceilings for water and electricity, self-interested decision makers have little incentive to conserve. If cities can solve the political problem of allowing utility prices to fluctuate with underlying demand conditions, they will be much less likely to suffer from water and electricity shortages, especially during extreme weather shocks.

Such variable pricing can inflict real costs on the poor. An increasing block tariff rate with a low bottom rate for households that consume a low level of electricity or water would allow them to afford basic necessities.

Can a low-carbon city be resilient, or does increasing its adaptability to climate change always increase carbon production? The answer hinges on how power is created. Increasing electricity consumption while reducing carbon emissions requires cities to reduce their emissions per unit of power generated. One way to do this is to transition from coal to natural gas or to renewables. China and India have sharply increased their exports of renewable power equipment (wind turbines, solar panels).<sup>53</sup> If these countries reduce their cost of renewable power generation, domestic consumers could benefit from purchasing such products.

# **_Anticipating the rise of the fat tail_**

Extreme weather events are increasing in frequency and intensity. Some areas are suffering from extreme rainfall, others from persistent drought. Relative to historical probabilities, some very unlikely events are taking place. Consider the July 2012 mass flooding in Beijing. The city had not invested in a costly drainage system to handle such heavy rain. Had the rain fallen in Dalian or Tsingdao, which have higher design standards, the consequences would have been manageable. But because Beijing’s government and residents have little experience in handling flood conditions, the consequences were catastrophic. This heavy rain is a “fat tail” event. And as climate change unfolds, the likelihood of these low-probability but potentially catastrophic events increases.

In poorer cities, climate events exacerbate pre-existing public health challenges. One example is Freetown, Sierra Leone, where a cholera epidemic has broken out due in part to an exceptionally rainy season that flooded shantytowns. _The New York Times_ reports: “Cholera, transmitted through contact with contaminated feces, was made worse this year by an exceptionally rainy season that flooded the sprawling shantytowns in Freetown and Conakry, the capitals of Sierra Leone and neighboring Guinea. In both countries, some two-thirds of the population lack toilets, a potentially lethal threat in the rainy season because of the contamination of the water supply.