Place-based policies play a key role in providing local public goods and in safeguarding global environmental commons. They therefore help address important challenges, including demographic change and climate change. This requires a forward-looking approach. Needed climate action differs across regions. Addressing local environmental problems, such as congested roads, often puts regions in a better position to deal with climate change, with local benefits. Place-based policies help adapt public service provision in regions experiencing population decline, promoting local economic sustainability. Place-based policies are also important to ensure social cohesion in the face of demographic and environmental challenges.
Place‑Based Policies for the Future
Abstract
Place-based policies can facilitate public goods provision in the face of rising environmental and demographic challenges.1 Public goods provision is a key aspect of public policy generally. Regional and local governments provide local public goods of many types, such as for transport, security, and culture. Where such local public goods provision is also important for policy priorities at larger geographic scale, such as the national or the international level, they can become important for place-based policies. Environmental and demographic challenges have a national or even global reach and are set to become increasingly important for OECD countries. The provision of local public goods, such as in transport, education, health, water and sanitation, or even energy related infrastructure are often key responsibilities of local governments, including in the regulation of land use. These challenges have a significant spatial dimension and necessitate integrated solutions, coordinating policies across sectors, places and geographic scales. To avoid falling into a development trap, local governments must adapt the provision of these local public goods to meet these challenges. Adopting a place-based approach that integrates local public good provision, serving local needs, with policies to address these challenges can help prevent the build-up of unsatisfaction and opposition to the transformations needed to address environmental and demographic challenges.
Ensuring more inclusive and equitable processes is key. Transformations affect territories and populations in different ways. Regions facing the biggest challenges may have the least resources to deal with them. At the individual level, the impact of climate change or demographic change depends on factors like educational background, employment status, or the economic situation. Place-based policies therefore need to address these spatially different socio-economic impacts, including by adjusting the provision of public goods accordingly. This is reinforced with the emergence of extreme climate events. They make access to good local public services, including health facilities, transport services, water and sanitation critical for adaptation, notably for vulnerable households.
Demographic change and environmental challenges require addressing a multitude of interrelated, spatially distinct market failures. Place-based policies are particularly useful to address these challenges, harnessing the relationships between people, firms and public administrations. These market failures include the scale economies from shared local land and infrastructure use, including local public goods, such as transport infrastructure, as well as local and global environmental impacts, such as the loss of natural space and its impact on biodiversity.
A proactive approach is important
Place-based policies to address environmental and demographic challenges need to anticipate challenges irrespective of their current development status. Investment in long-lived infrastructure and land-use that is inconsistent with environmental or demographic challenges results in lock-in, the stranding of assets and ultimately higher costs, as well as development failures and loss of competitiveness. It is key to consider future spatial dynamics in the light of these challenges and evaluate the region's comparative advantages in addressing them.
Policy makers need to respond to long-term challenges before they materialise, rather than only respond to crises after they set in. Climate change and demographic change are gradual processes but require immediate forward-looking action. Otherwise, long-lived land use and infrastructure will be deployed in a way that is inconsistent with solving these challenges. Politicians are often elected for short terms (e.g. three or four years) whereas population decline and climate change manifest themselves over decades (Syssner, 2023[1]) Anticipating the actions needed today to reach environmental targets in the long-term is therefore important.
Spatial data is key for anticipating these challenges and shaping policies. Geospatial data already provide insights on environmental “hotspots” with high carbon storage or biodiversity potentials, or with high future exposure to climate hazards. Some metrics still need to be developed, for example to measure local GHG emissions and other environmental footprints. Wellbeing data beyond GDP help assess the benefits of local action to protect the global commons, for example, to incorporate the health, safety, space and time benefits of reduced car use. When assessing the policy response to demographic change, geospatial data on settlement structures, buildings and granular population projections can offer insights for spatial planning, service provision, housing rehabilitation and demolition decisions. Digital technologies serve data visualisation, for example in maps, and enhance communication and analysis.
A proactive place-based approach offers opportunities for citizen participation and involvement. Empowering citizens to contribute to shaping their communities can help place-based policies tailor service provision to their specific needs. This can prevent discontent and foster regional identity, along with a sense of purpose. Stronger citizen involvement and reinforcement of partnership mechanisms offer the potential, not only for more effective economic outcomes but also greater democratic participation . Local initiatives to revitalise public spaces through local art and culture, can encourage community cohesion in regions losing economic activity that has built their identity (Box 4.1). Information and communication play vital roles, as local experiences and media coverage significantly influence how people perceive environmental concerns and population decline.
Jiu Valley, located in Romania, is historically recognised as the largest coal mining region of the country. However, since the 1990s, the valley has experienced a significant decline in its coal industry, with the workforce diminishing from 90 000 employees to 2 724.
The Valea Jiului Implicata is a coalition composed of 25 local NGOs committed to the region's rehabilitation. They actively engage civil society and citizens in co-designing and co-implementing various initiatives aimed at revitalising the valley. This revitalisation is taking due consideration of the historical context to give the Valley a new identity and a sense of purpose without coal. These initiatives include various projects, such as the transformation of the Petrila Coal Mine into a multifunctional centre for administrative, economic and cultural activities, or promotion of the Valley as an attractive investment destination. They have also established the Robotics Valley Digital Skills and Competences project to create training centres focused on robotics and new technologies. These centres will select top-performing students from Jiu Valley high schools to participate in both national and international competitions.
As human activity approaches planetary resource boundaries, policy makers need to be aware of the full range of spatial implications of actions to avoid crossing these boundaries. Nine planetary limits must not be crossed to maintain the planet's ecosystem services and hence the foundations of human wellbeing, each with spatial impacts that place-based policies need to address (Rockström et al., 2009[2]). These limits encompass climate change, biodiversity loss, land-system change, freshwater use, biogeochemical flows, ocean acidification, stratospheric ozone depletion, atmospheric aerosol loading, and the introduction of new substances (e.g. synthetic chemicals such as nanoplastics, or radioactive materials). Of those nine processes, climate change, biodiversity loss and the degradation of land may be particularly important due to their global impact (Table 4.1).
Strategies must integrate the unique characteristics of each place, reinforcing the role of subnational governments. The causes of land degradation and pollution are often localised, resulting from land use, energy transformation, transport, or industrial activities. Likewise, many impacts of resource degradation are also localised (e.g. heat waves, floods, or ecosystem loss). For instance, heat waves had a global cost of 0.6% of GDP in 2023, but the cost ranged from 0.1% for least-affected regions in France to 1.3% for most-affected regions in China (Subran, Gröschl and Zimmer, 2023[3]). Well‑designed, forward-looking place-based policies can prevent negative impacts by focusing on localities’ specific challenges (Box 4.2).
Note: Planetary boundaries serve as a framework for defining the boundaries within which human activities can impact the Earth's system without risking the environment's self-regulatory capacity beyond these limits.
Source: Creutzig, F. (2023[4]), “Global Environmental Goods, Local Public Bads? Place-Based Transitions as a Key Contribution to Global Stewardship”.
Paris has set ambitious targets for the year 2050, aiming to achieve an 80% reduction in its carbon footprint, transition into a zone with no local greenhouse gas emissions, shift to 100% renewable energy sources, and cut energy consumption by half. It also involves preparing the city and its residents for an increasing number of extreme heat days. Achieving these objectives involves modifying the local urban plan to prioritise bioclimatic strategies.
This approach entails the creation of 300 hectares of new green spaces, including pedestrian zones, and the preservation of 100 000 protected trees to establish cooling areas and fight the effects of heat islands. It also involves the construction of more social and public housing units, each incorporating ecological innovations and resident-focused services. Additionally, efforts will be made to expedite the thermal renovation and greening of collective housing buildings. Lastly, all flat roofs will be optimised for renewable energy generation, vegetation, and/or sport activities.
Place-based policies are key to resolve supra-local tragedies of commons. Climate change is composed of interrelated local issues and addressing it is best done solving these nested local challenges. Addressing the global issue of CO2 emissions necessitates tackling local challenges such as congestion and dependence on cars. A place-based approach offers unique opportunities to address threats to the global environment commons in a way that they generate benefits for the local population (OECD, 2021[5]). These benefits can in turn help strengthen action to preserve global environmental commons. They can improve the political economy of such policies, as benefits often exceed costs and local benefits arise more quickly than long-term climate benefits.
Place-based policies can contribute to “positive tipping points” in protecting global environmental commons. Place-based climate action can generate positive system feedbacks – where the initial action generates reinforcing climate action from other actors and in other places. Key mechanisms of such positive system feedback are economies of scale and social contagion (University of Exeter Global Systems Institute, 2023[6]). For example, place-based policies can harness local scale economies of climate neutral infrastructure. Regional examples of successful systemic transformations towards climate neutrality can trigger contagion through imitation, harnessing the co-benefits of local action.
The actions to protect planetary boundaries vary along the rural-urban continuum (Table 4.2). For example, in cities place-based solutions to reduce emissions and energy use in car transport would also reduce harmful traffic congestion, improve health, connectivity, and road safety and free scarce urban public space. In thinly populated areas the strategic planning of charging infrastructure for electric vehicles is important (OECD, 2021[5]). Some regions need to identify local assets that need to be repurposed to make production sustainable.
The environmental crisis also questions the current use of land-based resources. Policies to address the use of land inevitably require place-based approaches. The successful transformation of existing infrastructure relies on local-level spatial planning and decision-making (OECD, 2024[7]). Urban regions need to avoid sprawl. In rural regions, concerns related to crop yields and renewable energy generation may be important. In such regions, combating soil degradation, caused by factors like agricultural or industrial activities, can move regions towards sustainability. For example, the restoration of a wetland may not only absorb carbon but may also protect scarce freshwater resources.
Appropriate policies will depend on regions’ natural assets, their sectoral specialisation of economic activity and their infrastructure endowments. For example, geographic factors will determine a region’s potential in terms of wind, solar and other renewable energy opportunities. The human capital to design, build and maintain new key industries is not present in all locations and can be a missing ingredient which place-based policies need to provide. Investment will determine the ability of regions to move towards green jobs and skills, while reshaping their productive and industrial systems (Rodríguez-Pose and Bartalucci[8]). Moreover, regions differ in the options citizens and firms have to substitute away from emission-intensive consumption and production in response to carbon pricing, for example to replace car use with public transport or to adopt agricultural practices to reduce synthetic fertilizer use. Place‑based policies need to provide such substitutes. These are often linked to regional infrastructure and development.
Addressing environmental challenges locally requires collective action. The systemic nature of these challenges makes individual decisions insufficient. A place-based approach can facilitate collective decisions. This needs to include businesses. For example, in the port city of Hamburg, collective action by government, the port authority, road transport companies, and the electricity utility are needed to quickly ramp up investment for the electrification of freight transport from and to the port and make the most of rail infrastructure. This harnesses the competitive advantage of the port for the regional economy as well as low-cost emission-free transport services for many central European regions (OECD, 2024[9]).
Note: Planetary boundaries serve as a framework for defining the boundaries within which human activities can impact the Earth's system without risking the environment's self-regulatory capacity beyond these limits.
Source: Creutzig, F. (2023[4]), “Global Environmental Goods, Local Public Bads? Place-Based Transitions as a Key Contribution to Global Stewardship”.
Decarbonising the transport sector can illustrate advantages of place-based approaches. For instance, in cities, individual choice may favour private car use, which then risks orienting land use and infrastructure decisions towards building more roads and further urban sprawl. This will result in high costs for all, in terms of congestion, pollution, emissions and inefficient use of urban space (Box 4.3). This problem can be described as a “prisoner’s dilemma” (Creutzig, 2023[4]).
Passenger travel choices are a global problem, leading to high CO2 emissions from car use. It nests a multitude of local coordination problems which can be described as a prisoner’s dilemma.
Consider two commuters who live in the same area and work in the same place. Options include using your own vehicle or a more environmental mode such as public transport or cycling. Each cell shows payoffs for two travellers: the first number is for the left traveller, the second is for the top traveller (rated 0 to 20, higher is better). The second number represents time cost (minutes) and air pollution (NOx kg/year). These payoffs reflect traveller preferences considering both time and air quality. When everyone opts for the environmental mode of transportation, collective wellbeing is maximised. However, there are incentives to revert to private cars because quicker travel times but if everyone relies on private cars, it results in congestion and increased emissions. On the other side, the impact of car use on road safety may also discourage the use on environmentally friendly travel modes.
Collective decisions at the local level are necessary to encourage all commuters to shift to environmentally friendly travel modes. They include charges or restrictions on private vehicles in city centres, subsidies for public transport and shared mobility solutions. These local decisions will also help adopt transport solutions that are resilient in the transition to climate neutrality.
Source: Creutzig, F. (2023[4]), “Global Environmental Goods, Local Public Bads? Place-Based Transitions as a Key Contribution to Global Stewardship”.
Place-based policies are essential to provide local public goods in a way that consistent with global environmental challenges, harnessing local co-benefits, such as clean air, access to clean water, and biodiversity. For example, establishing green spaces provides not only recreation but can significantly enhance local biodiversity or flood protection. To harness these potentials, policy makers need to work with local actors, such as farmers, tourism operators and citizens, to take account of how their livelihoods depend on the natural assets while optimising wellbeing co-benefits. Developing local transport, such as infrastructure that promotes active mobility, along with ride-sharing to replace individual car use, can reduce congestion and improve air quality, but this requires understanding local commuting behaviours. Effective water management depends on local land use, which may require working with local farmers. Such targeted interventions not only safeguard environmental resources but also enhance the overall well-being and resilience of local populations.
Place-based policies also play a key role in alleviating socioeconomic vulnerabilities from protecting the global commons. The manufacturing industries that are among the most difficult to make climate neutral tend to be concentrated in specific regions that are often socio-economically weaker. Jobs in these industries are relatively well-paid in these regions and employ unqualified workers (OECD, 2023[10]). Some regions face multiple vulnerabilities, such as weak educational attainment and low productivity of firms in the manufacturing sectors, reducing their ability to integrate new climate neutral technologies. Potential access to key infrastructure, such as hydrogen pipelines, can also be weaker. Without targeted support for the transformations in these regions disparities within OECD countries can rise, boosting the geography of discontent and resistance against the climate policy agenda.
Resistance to climate action is not always rational, demonstrating the need to gain public acceptance. Regional disparities in how much populations are concerned by environmental degradation often result from emotional responses to personal circumstances that also reflect regional impacts of climate change that have already materialised and socio-economic conditions. Experiences with drought or extreme heat tend to heighten individuals’ apprehension about the climate crisis (Hoffmann et al., 2022[11]). But when people struggle to meet their basic or daily needs, their focus on environmental issues tends to diminish. Effective place-based action to address local and global environmental problems should also incorporate communication strategies. This is also needed to counteract the impact of advertising on consumption practices, which often downplay environmental values. For example, cars are commonly linked with a sense of freedom; fashion is commonly coupled with new purchases.
Not-In-My-Backyard (NIMBY) attitudes may impede actions to protect the global environmental commons, as environmental policies may produce changes that can generate a feeling of loss. Harnessing the potential co-benefits from such actions through better local solutions and involving the population in taking local decisions can alleviate opposition. For instance, in the case of wind farms, offering people a share of the profit has proven effective. Another example could be the replacement of parking with green recreational space (Creutzig, 2023[4]). Experimentation, for example through the temporary introduction of measures, can help the public perceive the benefits while reducing opposition to their introduction.
Population decline and aging affect public service delivery, land use planning and their funding. Sustained, strong depopulation can make local infrastructure oversized, resulting in high per capita costs. At the same time, a smaller and aging population can heighten dependence on public services, particularly on healthcare, or on public transport, for example because vulnerable individuals cannot drive a car. The emigration of young, skilled workers may result in a rising share of older, vulnerable populations with lower income but stronger education and health service needs. Regions undergoing population decline often contend with shortages of skilled workers. While per capita costs and demand for some public services rise, tax bases to fund service provision are eroded.
Place-based policies can help adapt the provision of public goods to the specific characteristics in depopulating places. Due to spatial disparities, not all citizens may have equal access to the same standard of public goods in quantity and quality, and depopulation can aggravate such inequality, for example through the concentration of service provision in regional centres, improving access to them, or through the rehabilitation of town centres (Syssner, 2023[1]). While rural areas are often most affected, many small and medium-sized towns are now also facing steep depopulation and ageing. They encounter more difficulties than cities in adapting due to challenges in attracting investment (OECD, 2023[12]). Some shrinking municipalities are situated in growing regions. When addressing declining population, it is key to implement strategies to adapt to local circumstances, rather than relying solely on budget cuts (Box 4.4).
Acknowledging population decline and aging is crucial in shaping a vision for the future that prioritises well-being and sustainability. Many regions initially attempt to revert decline, which may aggravate lack of adaptation and increase long term costs. Place-based policies should not only focus on economic aspects like employment and economic growth but also on improving health, education, or reducing crime. The quality of the living environment, including housing, is important (Syssner, 2023[1]).
Population decline can increase the per capita cost of local public goods, affecting both infrastructure and services. For instance, rural schools often face challenges of being undersized and overstaffed, yet municipalities may need to maintain small primary schools to ensure access to basic education. Maintaining the same level of accessibility to local public goods throughout the territory requires a good understanding of local population needs as well as the potential for repurposing existing buildings, requiring close cooperation with local actors. Place-based policies can promote densification and concentrate multi-service infrastructure, foster inter-regional and inter-municipal cooperation, and leverage digital technology for example with on-demand public transport, to adapt local public goods to depopulation. These approaches can improve service delivery and ensure the sustainability of local public goods provision.
Estonia's population has remained relatively steady since 2015 but is anticipated to undergo a significant decline in the near future. This demographic shift has unfolded unevenly across the country, with major urban centres like Tallinn and Tartu experiencing sprawling growth, while over half of Estonia's counties have witnessed population reductions exceeding 25%. This trend results in decreased population density, leading to higher per capita expenses for service and infrastructure provision. Additionally, it contributes to a rise in the proportion of elderly residents across all regions of Estonia. This challenge calls for the region to (OECD, 2022[13]):
Increase densification of central areas and implement demolition and renovation initiatives.
Develop governance across all sectors and governmental levels to develop more tailored service provision with flexible degrees of centrality.
Enhance municipal co-operation by initiating joint municipal projects aimed at elevating the quality of services (e.g. integrating and combining school services).
Adjust the fiscal framework to accommodate population decline (e.g. the use of land taxes and land-based financing instruments or fiscal incentives to address shortage of teachers).
Provide information system and administrative assistance to local governments.
Source: OECD (2022[13]). Shrinking Smartly in Estonia: Preparing Regions for Demographic Change, OECD Rural Studies, OECD Publishing, Paris, https://doi.org/10.1787/77cfe25e-en.
Place-based policies should have three main nested objectives to ensure the provision of public goods in shrinking areas: local adaptation, local economic sustainability, and territorial equity (Figure 4.). These three objectives are interdependent: strategies that are tailored to local circumstances not only support economic sustainability but can also help improve territorial equity (Syssner, 2023[1]). To achieve these objectives, central and local governments can employ four types of interventions (Table 4.3): structural interventions (e.g. inter-municipal cooperation), financial interventions (e.g. municipal tax), measures that facilitate place-based innovation (e.g. civil society cooperation), and initiatives tailored to address human capital requirements (e.g. networks for collaboration in post-compulsory education and lifelong learning). The four types of interventions must be coordinated across different levels of government and designed to be mutually reinforcing (Syssner, 2023[1]).
Source: Authors’ elaboration based on Syssner, J. (2023[1]). “Place-based policy objectives and the provision of public goods in depopulating areas: equality, adaptation, and economic sustainability”.
Local and central governments need to work together with a range of interventions. For example, local policies can be adjusted to adapt service delivery, and proactive central government involvement needs to provide financial and technical support for service provision and targeted infrastructure investment. The central government can invest in in infrastructure such as railways or broadband to facilitate services access and business opportunities. It can align the responsibilities, powers, and duties of local authorities with local conditions. It can provide financial incentives targeted at specific depopulating regions. For example, Sweden has waved student debt for qualified individuals willing to work in lagging depopulating regions to address skills shortages (Syssner, 2023[1]).
The development of effective place-based policies also requires the participation of private actors. It is important for local authorities to encourage private sector involvement in supporting public goods provision. Ideally, regions experiencing demographic challenges should aim to attract businesses that produce tradable goods or services for external markets, to support revenue generation as internal markets weaken in the face of depopulation (Whitaker, 2020[14]). Business communities should therefore play a role in promoting both economic sustainability and adaptation efforts.
Source: Syssner, J. (2023[1]). “Place-based policy objectives and the provision of public goods in depopulating areas: equality, adaptation, and economic sustainability”.
References
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← 1. This chapter was informed by the third workshop in the series on Place-Based Policies for the Future that was held on 9 June 2023 with invited experts. Papers for the seminar were prepared by Professor Josefina Syssner (Place-based policy objectives and the provision of public goods in depopulating areas: equality, adaptation, and economic sustainability) and Professor Felix Creutzig (Placed-Based Global Environmental Goods, Local Public Bads? Place-Based Transitions as a Key Contribution to Global Stewardship).