Ecological Economics 24 (1998) 103 – 118 ANALYSIS Towards sustainable city policy: an economy-environment technology nexus Roberto Camagni a, *, Roberta Capello a , Peter Nijkamp b a Department of Economics, Politecnico di Milano, Piazza Leonardo da Vinci 32, 20133 Milano, Italy b Spatial Economics Department, Free Uniersity, De Boelelaan 1105, 1081 HV Amsterdam, The Netherlands Received 12 July 1996; accepted 27 February 1997 Abstract Environmental problems have become a worldwide concern for economists, as is witnessed by the development of many theories and policies aimed at driving the economy towards a ‘sustainable economy’. The problem becomes even greater if we discuss cities. As recognised in many studies, a high percentage of the world population lives in cities, where quality of life and environmental concerns undermine all advantages associated with agglomeration economies. The vast experience in terms of theoretical and empirical substance which has been built up around the theme of ‘sustainable economy’ has only partially helped to generate a framework for an ‘urban sustainable development’. The city is in fact by definition an ‘artifact environment’, where well-established concepts of ‘environmental economics’ (such as natural capital stock, natural environment) can hardly be transferred and applied, in the way they are theoretically formulated. The first scope of the paper is to offer an analytical framework for ‘urban sustainable development’ to present the main economic concepts that are hidden under this label. In particular, different ‘environments’ co-exist in a city: the natural, the artifact and the social environment. Each of them generates positive and negative externalities for the city, since each of them represents ‘use advantages’ and ‘use costs’ for a city. If this is true, then it is a plausible assumption that the integration of these three ‘environments’ has to be supported with specific intervention policies. The main aim of this paper is to highlight the possible intervention policies which may be developed to achieve a balanced ‘sustainable development’ in terms of new policy principles that should govern the ‘sustainable city’. © 1998 Elsevier Science B.V. Keywords: Urban sustainability; Public policies; Market interventions; Technology-oriented strategies * Corresponding author. 0921-8009/98/$19.00 © 1998 Elsevier Science B.V. All rights reserved. PII S0921-8009(97)00032-3