This is a longer, technical paper that presents the detailed academic argument for our view of sustainable development, and why a regional approach is needed.
E-Systems Funding Proposal
This is the full text of our funding proposal, designed primarily for donors and investors.
E-Systems San Diego Case Study
A practical example of E-Systems' approach using energy flows to create a local innovation fund in San Diego, CA.
* * *
Building a Lower Emissions World - Article (2019)
$100 Trillion, perhaps the largest concentrated spending in history, is needed for global urban infrastructure investment through 2030, based upon credible government and banking estimates. Cities are seen as the front line to solve serious social and environmental challenges. Beyond supplying roads, water, transit, telecoms and energy, etc., this investment needs also to reduce greenhouse gas (GHG) emissions, and to provide more equitable housing for all, including hundreds of millions of people migrating to cities. But progress remains far too slow. The role of cities in triggering this investment needs a fundamental rethinking.
While trillions are available at low interest rates, accelerating infrastructure spending is proving difficult. The $2.5 Trillion spent globally per year is half of what is needed. New funds promised with much fanfare by the Trump administration seem to be vapourware. A Financial Times 2015 survey of investment managers showed that “there are simply not enough viable infrastructure projects out there.” In fact, this gap has been noted for over 50 years.
Many government agencies, businesses, and investors think that all we need are more technocratic measures such as specialized “green funds”, “better risk assessment”, “a stronger enabling environment”, and “to do more infrastructure deals”. Or, a strong, wise mayor commits to “targets”, and this will make it so. New technologies and financing will be embraced by citizens, businesses, property developers, etc. Cities will align their departments and building and traffic codes. Different levels of government will cooperate, risks will be managed, and viable investment projects will emerge and be implemented. In 99% of the world’s cities, these assumptions are completely unrealistic.
Often treated like a black box, “cities” face daunting management problems. Most urban governments operate in “silos”, where departments compete over investments and policies. Salaries and working conditions are frequently uncompetitive with the private sector, leading to politicized staff-churning and even corruption. Complex tendering regulations severely constrain city governments’ ability to obtain least cost solutions. While better building and zoning regulations are needed, too often these are captured by local elites. Government is rarely seen as a competent, neutral party able to balance technical, financial, and social interests.
Most cities’ revenues barely match spending needed to just keep the city running. Financing is rarely strategic, but rather a mishmash of local property taxes, permit fees, and national or foundation grants. Most cities find it difficult to access capital markets, even as cities are forced to spend more due to central government cutbacks. Perverse incentives warp decisions; particularly in developing countries, city government revenue depends heavily upon electricity tariff surcharges, reducing support for energy efficiency.
While 70% of GHG emissions occur in cities, city governments have surprisingly limited direct influence over these emissions. The Stockholm Environment Institute modelled the effects of 600 cities implementing “best practice” in building codes, densifying transit hubs, energy efficiency retrofits in city-owned buildings, installing solar arrays, capturing waste dump methane, integrating water and waste recycling, etc. These reduce emissions by only an additional 15% of the amount needed to keep warming below 2° C by 2030. A more recent Yale University study suggests cities might lower global emissions 30% by 2030. More worrying, a 2015 review by the Arup engineering group showed 70% of existing measures known to reduce emissions are not being implemented in most cities. Often cities’ climate change plans are not properly costed, and barely mention finance and implementation issues.
Cities and businesses constantly talk about engaging to address climate change. But actually, they circle each other warily, worrying about excessive profits, dependency upon sole source technologies, incoherent policies, and conflicts of interest. Businesses and investors have no interest in funding soft, upfront development costs they may not recover. Citizens are caught in the middle of all this, with little say as their jobs, incomes, and housing options come under increased pressure. Urban governments, too often either paralyzed or polarized, are unlikely to self-correct quickly, fuelling yet more citizen frustration, more distrust and fear, and more populist or even violent responses. This will only be turbo-charged by stresses from accelerating climate change; on present trajectory, we will miss by a wide margin emissions targets needed to stay below 2° C.
All these constraints create what economists call a classic “Nash Equilibrium”, where none of the players has sufficient interest to move first to fix the problems. Transactions costs are massive, investments are concentrated while benefits are scattered, and complex decision-making and political squabbling are so endemic that numerous solutions that are profitable now are routinely ignored.
Conventional “top-down” or “back room” measures to increase spending to reduce emissions and inequality have no coherent theory of change that addresses these serious implementation problems. We need a way to create the consensus and trust that are critical to moving forward, and bring the players together.
We can start by building a new kind of organization, a “low emissions economy partnership” (LEEP): a group of businesses, local government, and citizens’ organizations that jointly develop and propose equitable, low-emissions solutions to private finance or government. A LEEP would have its own office, and a small, skilled management team that thinks strategically. It would hire staff and raise capital, governed by an independent, diverse board comprised of an urban metro-region’s key stakeholders, to ensure that emissions reductions support a larger, inclusive effort to strengthen the local economy.
The partnership would be a trusted, transparent, neutral forum to help governments, businesses, and citizen’s groups collaborate to reduce emissions, and rethink housing, land use, and finance issues in a low risk, “pre-competitive”, cooperative way. The partnership will clarify which measures require government action and which can be taken simply by private initiative.
A LEEP would incubate new project ideas rapidly and flexibly, supporting the most difficult to finance up-front legal and engineering work to e.g. design mixed-use, affordable housing in central “low-emissions” districts, or get building owners, utilities, and new supply and storage firms to cooperate and speed up energy and water retrofits. But integrated thinking will only happen if an organization drives and delivers it.
Pieces of this approach are seen at Boston’s Green Ribbon Commission; New York City Energy Efficiency Corporation; Cape Town’s GreenCape; the Institute for Spatial and Urban Planning (IPPUC), Curitiba, Brazil; “participatory budgeting” in several US, EU and Latin American cities; and the 40% of German solar PV capacity owned by local cooperatives.
Any city in the world could set up this innovation partnership. Annual spending managing energy, waste and water exceeds 5% of regional income ($5 Billion per year in a $100 billion urban economy). A conservative 10% increase in efficiency savings and local generation could return hundreds of millions to consumers, while providing the small funds needed to support a LEEP office. It is a matter of redirecting a fraction of money already being spent.
Governments will retain legal authority over many issues: a LEEP simply provides more options. While working closely with government, a LEEP is independent. It can ask difficult questions, design solutions, create bankable deals, and move rapidly in ways that government cannot. This ability to open up discussions, to involve citizens and businesses in early project design, to finance upfront costs, and to get things done, will reduce risk, help achieve political consensus, and thus accelerate investment.
In “Choruses from the Rock”, T.S. Eliot warned against “dreaming of systems so perfect no one needs to be good”. The LEEP idea is not foolproof. If members allow, it can be corrupted, or rendered simply ineffective. But with sufficient transparency, and leadership, we can accelerate needed investment and create a civic culture that delivers trusted, effective solutions. We can then shift from de-constructing political symbols (think trade wars, Brexit, Confederate war statues, “pure” Islam, etc.), to actually rolling up our sleeves and constructing a more just, lower emissions world.