The great 200 billion Euro Plan
A sketch for the transformation of Italy’s cities
By Sean Lockie and Angelica Monaco, with contributions from Indy Johar, Joost Beunderman and Juhee Hahm. For Italian translation, see here
Italy, like many nations, is facing a major strategic transition. Many Italian cities are seeing a cocktail of intensifying challenges and future risks, including the brain drain of young skilled people to bigger cities and other parts of Europe; economic stagnation and aging infrastructure; poor air quality, growing heat island impacts, and increasing incidence of flooding. All this has been exacerbated by COVID, which has deeply affected Italy’s communities and economy; it has both revealed and deepened inequalities. Already, we are seeing signs of a growth in exploitative labour patterns and the deprivation of minimum rights; in terms of social and psychological distress we are seeing growing incidences in violence both in the street and domestic sphere, and a worrying increase in self-harm. Italy’s society is hurting, and it needs a deeply strategic approach to investing in the infrastructures of tomorrow.
Beyond incrementalism
The transition required is systemic — this is not an incremental or additive transition, but a fundamental one. We know, for example, climate change not an isolated crisis: it is fundamentally a symptom of a structural problem in how we govern and how our relationships in the world are governed — in terms of our relationship with the future, our relationship with the natural and material world and our relationship with each other. As the evidence of growing social divisions and the perspective of 3+ degrees Celsius climate change becomes more and more unmissable, we must allow ourselves to re-think a series of fundamental social, economic, human and planetary relationships to forge a thriving future for Italian cities. And with a once-in-a-generation level of capital being made available through Italy’s National Recovery and Resilience Plan (PNRR), this is perhaps the best opportunity we have — which implies a huge responsibility on all of us as professionals and citizens.
The pandemic has seen levels of fiscal and policy coordination within the EU not seen before. For example, the capital to be raised to finance the Covid-19 recovery fund for fiscal stimulus packages across the EU was a collective response. The fund will be distributed over the next five years, in a mixture of grants and loans to EU countries, and direct EU spending; approximately 1/3 (€250bn) is to be spent on funding the green economy. The Commission plans to start borrowing in the markets in June of this year, and this now creates a precedent for other fundraising activities in Europe. The plan requires agreement on a new tax on goods imported into the EU from countries adhering to less aggressive CO2 emissions goals, new levies or surcharges on emissions in the transport sector, and a digital tax. The €250bn to be allocated to the green economy should provide the basis for the fiscal innovation to occur in the climate change space, e.g. to look at the feasibility of a climate change impact bond that could enable Europe to lead the way and invest in a clean, healthy and just future. All this comes on top of a very ambitious Italy-wide energy efficiency major retrofit programme called the ‘Superbonus’ scheme addressing fabric, renewable and heat source upgrades. Administered through Italy’s Revenue Agency there will be a subsidy of 110% of the installation costs paid back over only five years through tax savings. An impressive amount of organisations have been executed around this scheme involving banks, the tax department, consultancies, technical supply chains (insulation, plumbing, architecture, engineering) municipalities and citizens.
The pandemic also showed that places have to be able to transform fast, and that we need to develop this sort of institutional resilience and agility to deal with unpredictable events — so that we are not just responding reactively to crisis, but ensure our recovery measures are transformative and reduce future vulnerabilities. Milan, for example, was of the first large cities in Europe to lock down, and the city has responded with a broad set of initiatives, which included fast-track active mobility strategies, use of the home as a means of production, and schools deploying online learning at scale to address a digital divide and create more opportunity for self learning.
A multi-dimensional recovery programme
As the transformation is multidimensional, it has become very clear now that the processes to make it happen are of utmost importance. All recovery measures to be deployed in the near future need to go beyond one-dimensional quick-fixes, and instead target multiple co-benefits and synergies. For example, this includes the opportunity to leverage further the ‘superbonus’ subsidies to create an inclusive retrofit programme that addresses sustainability at street by street level. Such a retrofit programme should tackle not just the energy performance of the housing stock but the potential for greater social cohesion and long term benefits through residents generating and distributing their own energy, the enhancement of the public realm that connects the buildings, and repurposing space dedicated to the car to urban parks that allow residents to enjoy to exercise, birdlife, urban meadows and eventually community gathering (farmers markets etc).
In setting out such a multi-dimensional recovery programme, a first challenge relates to how we understand the interconnected and cascading risks that we face (e.g., air pollution, fuel poverty, health impacts, job losses and precariousness, lack of appropriate education and community cohesion as well as climate change). Secondly, we need to re-think how we build portfolios of mutually reinforcing interventions against such future liabilities, enabling us to set a clear directionality of the transition but be open to uncertainty and emergence of new opportunities as well as possible new crises. This also means building distributed capacity to build, iterate and learn from early interventions, to create dynamic transition portfolios that have proximity and agility to evolve with ongoing new issues, opportunities and problems and insights as they emerge. After all, we live in an age of both chronic emergency and emergence — meaning centralised, slow moving institutions are by definition not up to the task.
Next gen institutional capacities
In practice this means building the institutional capacity in both the public sector (municipalities), private sector (developers, energy companies etc) and civic sector to understand and act on emergence in a collaborative way. This is about fundamental institutional properties: the distributed capacity to make sense of complex data and weak signals, distributed capacity to innovate, and distributed capacity to forge new coalitions. We aren’t able to 1:1 predict what the problems are, where our greatest liabilities lie, and what the solutions might be.
One dimension where such institutional capacity needs are particularly urgent is innovation in maintenance. We have to radically reduce the bureaucratic and the management costs of maintaining, adapting and upgrading our existing cities as a whole if we are going to unlock the current infrastructure upkeep backlogs and unlock new value in the existing built environment. This is particularly relevant in Italy where there are many layers or control and bureaucracy which hold cities back in the procurement and government of such works. A ‘boring revolution’ in local empowerment, accountability and simplification of procedures is essential for the country to spread its wings and take flight to new levels. Italy needs to change its mindset from “we have always done it this way” to one of “these are extraordinary times, let’s give this a go and learn from it”.
To get there, we need to take a value chain approach to investing. This looks at investing across value chains, such as enabling the real estate development and construction sectors to move into bio based and circular materials. Critically, such value chain transitions and deep and structural shifts need to be approached from a ‘just transition’ perspective. If we limit ourselves to point based innovations, we are going to see the consolidation of capital and wealth in the hands of the few. So recognising the SME and family-based nature of the economy in Italy, how do we invest in an inclusive, economy-wide revolution of the whole value chain, driving digitised production and whole-life-cycle performance capacity, emphasising the new skills and ways of working essential to new machine-human automation capacities?
We know that in the 21st Century, if we are going to talk about prospecting for the future, we are fundamentally operating in the domain of new machine-human capabilities. This requires the setting up of new institutional and financial infrastructures, both to crystallise what our future risks are and to integrate a more sophisticated understanding of those liabilities into how we invest in a range of human, technological and physical transition infrastructures. Our infrastructure investments have to move well beyond the familiar ‘cranes on the horizon’ — financing also the long-term capacity for companies, whole sectors and communities to be part of imagining and innovating within the transition.
For example, cities are increasingly taking seriously the need for massive investment in green infrastructure, with Milan, Turin and Bologna being among many European cities with plans to plant millions of trees. But it is impossible to build truly integrated approaches unless we have integrated e.g. flooding, heat island, health and biodiversity liabilities into the models of the utility companies that own the flood risk and the energy companies that own the capex requirements for heat island effects - integrating them with the impacts on health, and involving insurance companies across these risks or rewards, and building a collective outcome buying capacity which integrates those risks and liabilities across the public and private sector. Multiple-benefit infrastructure solutions like (peri-) urban forests can manage these risks simultaneously and produce co-beneficiary results. So the pooling of those liabilities and being able to build frameworks for companies, communities and other long-term focussed organisations to set up community driven outcome buying contracts to allow the investing towards collaboratively defined priorities become fundamental tools. This sort of innovation in procurement lets the public sector and communities describe the outcome they want and then leave space for new innovation to occur. We are on the cusp of seeing this innovation in some places where health authorities for example are investing in changes to the built environment because they result in say less obesity or respiratory disease or a community with reduced mental health stresses. We are seeing cities like Vienna and London starting to grapple with these systemic challenges.
The social contract for transition
What becomes apparent in all this is that Italy must invest in the citizen-level capability for innovation. We have to build citizen understanding of the transition and appetite for innovation, almost at an everyday level — it is an essential part of the social contract required for a legitimate transition. The street level capability, the mass democratic capability to innovate is a fundamental component in this thesis. Bologna is a great example where this already starting to happen, through the Fondazione Innovazione Urbana and its “I Laboratori di Quartiere”, patient and democratic spaces for discussion at neighbourhood level. The goal is to activate on-going processes of listening, dialogue and collaboration in each neighbourhood, to bring out priorities, needs, indications and proposals, imagining shared solutions on how to regenerate and enhance spaces in the various areas of the city through public assemblies in the neighborhoods, thematic sessions and physical or on-line meetings.
Or take Ferrara, where the Climb Project has boosted active and sustainable home-to-school mobility through a mix of behavioural change, internet of things and gamification; it aims to change the attitude of children, their families and their community to embrace environmentally sustainable travel solutions by creating eco-friendly mobility habits as a fun and social experience. Local communities can use the lessons learned from the project to create a civic movement with other co-benefits too. These projects all start at a grass roots level and are seeing important levels of citizen participation.
Or take the Silk Project in Rovereto aimed at creating a cultural and economic district of silk-based activities following an integrated development approach: regeneration and reclamation of the uncultivated land; promotion of a social and sustainable agriculture project for the production of mulberry trees and silkworms, with job placements for people in difficult situations. Finally, in the circularity space there are numerous examples of innovation that are at the point of scaling in Italy. Bioplastics from grape residue in the Valdobbiadene area for example, or the numerous examples of new business models we are seeing in places like Milan around circular housing concepts, where there are developer models being refined that bring residents together to not only manage their building but to help with child care, asset sharing (mobility) and food production. These are the projects we need to find and learn from, whether to grow in scope and / or replicate, or in order to enable lessons learnt to drive systemic impact, using the recovery funds to catalyse this change and bring these new climate resilient value chains and business models to the market.
Building lead markets in Italian cities
Ultimately we need a culture change in how we view such transition initiatives. If for example we invest in digitally enabled street ‘de-pavings’ creating space for micro-meadows and urban trees all across a city, and if we create new models of Civic AI to get communities to engage with their public assets like urban meadows, allotments and other Nature-based Solutions — then we are not just making cities better and communities more resilient. By making such machine learning models open source and looking at the social network capital that builds the capacity to then retrofit whole streets and districts in an integrated way, that allows you to generate demand for the value chain innovation and regulatory innovation which builds a high value economy for the 21st Century. So it’s not just de-paving: it’s an intentional pathway to inclusive transition and new ‘lead markets’ that create sustainable jobs, livelihoods and positive place identity.
Clearly, this type of fundamental transition demands a deep reflection on and investment in institutional capacity fit for the 21st Century. We have discussed investing in value chains, civic collaboration capacity and financial instruments like outcome buying. Another dimension is the educational investment for human development in the machine age. What are the new 21st century schools and development agenda that Italy wants to prepare for? Do we need radical new schools or universities which are transformed? Do we need a whole new area of human development infrastructure? Currently there are still several areas of the country suffering the digital divide and this is having significant consequences on the ability to attend schooling online, affecting the level of competences of future generations. There are world leading examples of AI occurring in Italy in the regions in Piemonte in Turin, Bologna, Modena, Reggio Emilia where research centres and companies are partnering. The challenge here is to learn from the insights created for system-wide benefit, so that such innovation is shared nationally in a more evenly distributed way.
The other aspect is government acting as a lead market. Government procurement should not just be focused on efficiency but actually on purposeful creation of new lead markets through investing in and ‘buying’ innovation in key sectors. How do governments actively support the emergence of new behaviours through what they procure? Governments and cities have great potential here but there are many obstacles in practice. Civil servants get worried about the risk of failure so go with the middle ground and we miss the chance for the big innovation to occur. Alongside regulatory innovation, acting strategically in this domain is going to be vital.
The final dimension is building the infrastructures for regulation to be less about control oriented to one of enabling. A control orientated governance and regulatory system works in a world of predictability. But that is not the world we live in — now less than ever. So if this is the case we need not just a series of immediate regulatory adjustments enabling a green recovery, but also to create agile new ways to evolve our regulatory frameworks on an on-going basis for a complex emergent world focused on innovation and transition. This is particularly true in Italy, where a deep change in public administration is needed whether in procurement, recruitment, authorization procedures and or know-how on public-private-civic collaboration.
The PNRR offers great opportunities. But it cannot be a sticking plaster. Driving an innovative, resilient, and thriving society in the 21st Century cannot be achieved with the tools and practices of the 20th century. We must create tangible pathways towards a next generation governance system at urban level and beyond — through collaboratively building portfolios of new instruments and tools right across the domains we mention in this piece: a ‘boring revolution’ of institutional infrastructures to enable the more visible aspects of recovery and resilience in our cities.
If you want to find out more about this initiative contact Sean Lockie, Angelica Monaco or Joost Beunderman.
