# **1 Introduction**

Half of the world’s 7.1 billion people live in cities today. By 2050, 6.2 billion people, or two‐thirds of the world’s population, are expected to be urban dwellers. Cities hold the majority of the world’s economic wealth and infrastructure assets, are home to some of the most highly educated populations, and are hotbeds for innovation (World Bank, 2010a, 1). Cities and their ancillary service organizations in local government, such as utilities, are therefore uniquely situated to be catalysts for change (Corfee‐Morlot et al., 2009, 2).

Despite the benefits cities provide, they are also major contributors to climate change. An estimated 36 to 48 percent of global greenhouse gas emissions result from activities occurring within cities (Marcotullio et al., 2013). These emissions come from a variety of sources, such as energy supply, transportation, buildings, and industry (World Bank, 2013b, 1). Local governments and their complements, such as local utilities or other special purpose organizations, retain responsibility for planning, financing, and managing most infrastructure sectors in the modern urban economy. Government‐owned infrastructure, in the form of office buildings, municipal power plants, waste water treatment plants, buses, street lights, and so on, are major sources of emissions for urban areas.

Cities are small enough to engage strategies that address climate change in a manner that is location specific and relevant to their communities. At the same time, collectively they are big enough economically to have a voice on the global stage. The 50 largest cities in the world have a combined GDP of $9.6 trillion; an amount larger than every country’s GDP except the United States (World Bank, 2010a, 1). As cities utilize the majority of the world’s energy, decisions made on a local level will have global ramifications. Estimates suggest that if local governments were to select a low carbon path for the five sectors with highest levels of GHG emissions (i.e., residential and commercial buildings, passenger and freight transport and waste), greenhouse gas emissions on a global scale could be reduced by roughly 47 percent by 2050 (potential of avoided emissions of core sectors by 2050, figure 4 Bloomberg, et al., 2014).

Infrastructure decisions made by local governments have path dependent implications for local and regional development patterns. In other words, the economic system “reorganizes itself” around infrastructure (Hallegatte et al., 2012, 2). For example, the decision to build a road into an otherwise remote area can promote facility‐induced development. A few, or perhaps just one such investment can implicitly adjust market conditions to encourage development along an entire corridor, and may result in undesired externalities such as urban sprawl (Beimborn and Kennedy, 1995, 17). Studies of changes in urban form over centuries indicate that once established, a roadway or any other infrastructure is unlikely to be converted to another use. The implications for development patterns can be profound: areas where particular kinds of infrastructure investments are made, such as transportation arterials or water and sewer mains, are the places most likely to grow first (Kelly, 1993, 3).

Every year, hundreds of thousands of decisions on infrastructure investments in urban areas are made across the globe. Most local governments in developed countries – and a growing portion of local governments in developing countries – make these decisions as part of a formal capital investment planning process. Capital investment plans, sometimes referred to as capital improvement plans or Page | 2