What is water's dollar value to the Canadian economy?

Image credit: http://blue-economy.ca/

The question above was partially answered by a research project called the Blue Economy Initiative involving a team of authors from the Walter and Duncan Gordon Foundation, Canadian Water Network and RBC Blue Water Project.

Among the impressive list of authors is Professor Steven Renzetti, an environmental economist and one of Canada's biggest thinkers on the economics of water. You can read a summary here, which features an interview between Water Canada and Professor Renzetti. The report finds that water is responsible for a contribution to Canada's economy of between $7.8 and $22.9 billion.

Here is an excerpt from the interview:

"We just don’t know what the value of water is in Canada today. That’s the biggest concern. We’re making decisions on public capital and infrastructure and improving water quality, but we don’t have enough information to determine whether these decisions are sound. As usual, it’s a typical academic result in that we don’t know enough and we should.

To promote dialogue about how water contributes to the economy, people need to understand the wide range of ways from which we derive benefits from it. We need to have more experience and knowledge on measuring these values so we can incorporate them into decision making and protect the resource. Another worry is that we’re falling behind. When you look at places such as the European Union and China, they have large research programs aimed at informing decision makers about biodiversity and ecosystems. Here, we have lots of scientists worrying about the chemical and physical natures of water, but we don’t know about its economical nature. It means we’re not going to make good decisions".

Read the full interview here.

Traffic congestion in the GTHA

We all know that traffic congestion is a mounting problem for the Greater Toronto Area. Alas, the traffic woes are not confined to the GTA but extend to the Hamilton Area as well. This region is known as the Greater Toronto Hamilton Area (GTHA).

While we are generally aware that traffic congestion is getting worse -- exacerbated by population growth  and a poor response in transit supply to demand -- do we really know the true costs of congestion in our urban areas? A recent article citing U of T Professor Eric Miller, offers a number of statistics and facts about the traffic congestion problem that any resident of the GTHA should know about:

"The average commute time in the Greater Toronto and Hamilton Area will jump by a third in 20 years without a major injection into transit, according to expert calculations."

This amounts to: "an extra 27 minutes a day, 2.25 hours more a week, 4.6 full days a year, that local commuters will spend in their cars battling congestion as the region adds an expected 2.6 million people".

"Studies have shown that GTHA congestion costs an estimated $6 billion in unrealized GDP each year. Gridlock also results in 26,000 fewer jobs created in the region".

I blogged about this topic a number of months ago discussing the importance of transit alternatives like high-speed rail to help alleviate traffic congestion on highway 401.

The article offers much more. A natural alternative is to expand transit services. Fortunately, Metrolinx, has a $50-billion, 25-year "Big Move" plan which will involve a conglomeration of 100 projects ranging from bike lanes to 1,150 kilometres of new transit lines. Eric Miller, who continues to caution that traffic congestion is a huge impediment to economic growth, thinks the Big Move is an “excellent start” but it won’t be the entire answer. The GTHA is competing with the world’s biggest metro areas — places like New York, London, Shanghai — which have very sophisticated transit systems.

To read the full story, see here.

The Gated City by Ryan Avent

For you urbanites out there, check out this podcast with Ryan Avent, author of The Gated City.

Avent's central thesis is that cities in the United States such as Boston, NYC, San Francisco and Washington D.C. are all very desirable places to live but are very expensive to live in. There are many reasons for this including limited and restrictive housing construction which drives up housing costs. Thus, they have not seen the same levels of population growth and housing stock construction as places like Houston, Las Vegas and Phoenix, for example.

Is this a bad thing? Depends on which question you are asking. Avent suggests that the coastal cities that have not seen a growing housing stock and are pricing out a lot of people (including middle class families and skilled labour). These are the people we need to keep our cities productive. As cities become more and more attractive places, demand for housing will inevitably increase.

But if housing supply does not respond to this demand, then how are they suppose to grow? And if one of our goals is to foster vibrant and productive cities by providing skilled jobs for people who cannot even afford to live there (hint hint,Vancouver) then we fail at achieving our main goal.

Avent talks about how self-interested people living in high dense and highly desirably places (like San Francisco) can fight against housing development in their neighbourhoods (classic NIMBYism) which pushes that development away to other places that are more open to housing development such as Houston. Sound familiar? It should be. Ed Glaeser discusses the environmental implications of this at length.

Some statistics and facts from the podcast:

"The median owner-occupied home in Houston in 2009 was just about $130,000 in value. And in San Jose it was over $600,000. And that just dwarfs the difference in wages. And it's not associated with the difference in construction costs. There is a difference in construction costs but it's very small relative to the premium due to the difficulty in building in those areas in the country".

"From 2001-2009, the housing stock in Boston, NY, and the Silicon Valley area, each of those, it grew by a little over 5%. And then you look at a city like Las Vegas, the housing stock grew by almost 40%. And in places like Phoenix and Charlotte it grew by 25%. So it's just a huge difference in growth in the housing stock, which really has nothing to do with demand but has entirely to do with the ease of building in those places".

There is a fascinating discussion in this podcast about city politics, urban planning, how zoning can be problematic, the consequences of distorting public policy and much more.

If you want a more condensed version of this, check out this 10 minute video via The Economist.

Here is a short review of the book.

The Business Case for Public Transit

Chris and I have blogged a fair bit about transportation issues through Enviro Boys. However, rarely have we discussed the business case for public transit and the multiplier effect it creates such as benefits for individual businesses, attracting creative and talented people to a city, moving millions of people everyday and really being the lifeblood of a vibrant and economically productive city.

My friend, Lewis Kelly, wrote a brilliant article for Alberta Venture on making the business case for public transit. His article is mostly focused on the new Light Rail Transit lines in Calgary and Edmonton. Here is an excerpt from his article:

"Regardless of their fiscal efficiency, rail lines tend to get built because of their political expediency – and the reasons for that are the same reasons that make building new train lines do wonders for business. People like riding trains and living in cities with extended rail networks. There’s an expectation among prospective employees that any world-class city will offer a certain level of cultural sophistication, diversity and a well-run rail network. “It really comes down to incubating and becoming a draw for talent,” says Brunnen at the Calgary chamber. “When we invest in these major public-transit infrastructure projects, we become more desirable for new investment – because we become more desirable as an international destination of talent.”

He also quotes two professors I think highly of, Professor Eric Miller at U of T and Professor Murtaza Haider at Ryerson U.

I think planners, environmentalists and other transit advocates should spend more time discussing the economic and business benefits of transit. After all, when glancing at the numbers, it is clear that investments in public transit can yield benefits far superior to simply investing in roads and highways. Ultimately, transit systems improve mobility and accessibility for our cities which in turn, create environmental and social benefits. And when transit is clearly linked to economic productivity (and being good for individual businesses) it is hard to argue against it. The more advocacy from different sectors and groups in society, the better!

The Economic Impacts of Climate Change for Canada

From the National Round Table on the Environment and the Economy (NRT):

"Climate change could be expensive for Canada. Unless global greenhouse gas (GHG) emissions are brought down and Canada invests in adaptation, the economic impacts of climate change on Canada could climb to billions of dollars per year.

Those are the conclusions of a new report of the National Round Table on the Environment and the Economy called Paying the Price: The Economic Impacts of Climate Change for Canada. This is the first national-level study assessing the economic impacts of climate change on Canada.

We found that the costs of impacts could range from $5 billion per year in 2020 to between $21 billion and $43 billion per year in 2050, depending on global greenhouse gas emissions and domestic economic and population growth. There are also risks that costs could be much higher – for example, there is a 5% chance of costs exceeding $91B per year in the 2050s with high climate change and rapid socioeconomic development".

More about the report here.

A great article on financially sustainable mass transit systems

David Levinson is Professor of Transportation Engineering at the University of Minnesota. He blogs at The Transportationist. Check out his post on some ideas on how to achieve financially sustainable mass transit systems. Many cities around the world recognize that transit is an indispensable component of greening their cities. Transit brings a number of benefits with the obvious environmental gains being shown through decreased carbon emissions per capita in the transportation sector.

The real challenge being faced by transit agencies around the world is financing their systems. They have to overcome a lot of inefficiencies that are embedded in the system (often created by local governments). Levinson has some good ideas. Here is the start of his post:

"Mass transit systems in the United States are collectively losing money hand over fist. Yet many individual routes (including bus routes) earn enough to pay their own operating (and even capital costs). But like bad mortgages contaminating the good, money-losing transit routes are bogging down the system."

More here.

Tim Jackson on prosperity without growth

Jackson says "prosperity consists in our ability to flourish as human beings within the ecological limits of a finite planet".

More here.

Two links to check out

Edward Glaeser on the "The death of distance and the rise of cities". In this audio lecture, Glaeser discusses regional policy and declining cities, urban sprawl, urban environment and gas emissions, density, affordable housing and other intriguing topics. The lecture is from 2008 and is on topics he is an expert on, not on urban farming which he evidently gets wrong.

The Heart of U.S. Economic Decline: Our Inability to Raise the Gas Tax. A link from the Infrastructurist on how raising the gas tax, among its many benefits such as helping re-build transportation infrastructure in the U.S., can actually help the country's financial troubles.

Water Markets and Trading

I recently delivered a presentation on water markets and trading in my class "planning for water resource management". Students in my class presented on a number of different topics from wastewater treatment in Vancouver and Singapore to water challenges in the Yucatan Peninsula.

My topic focused on the proposal of water markets as an economic efficiency tool in British Columbia's soon to be revised water act. I discussed how water markets work and how they might function in certain places in the province such as the Okanagan. You can view my presentation slide show here, and my summary here.

Below is a word cloud I created using this really neat and free tool called "wordle". The cloud below is an illustration of the words that represent my presentation on water markets and trading.

Applying a water market system to restore an ecosystem

My friend DM, shared this video with me. It's an inspiring story about how farmers, industry and citizens have an incentive to conserve the amount of water they use and return it to degraded ecosystems (e.g. streams and creeks) that have seen water levels drop over the years. For years, senior water rights in places like Montana have allowed right holders to use copious amounts of water. Why wouldn't they use lots of water? If they don't use the water, they risk losing their water right. Talk about incentive to conserve!

Rob Harmon is now working with farmers to measure water and divide it into one thousand increments, each increment gets a serial number and a certificate. The brewers in the area are worried about their "water footprints" and branding images. They use a lot of water and need some mechanism to return it back to the ecosystem. So they buy those certificates to restore water to the ecosystem.

The market-based system developed by Rob Harmon is based on the utilization of incentives and providing the right information to water users about how they can save money and restore ecosystem integrity.

Climatopolis - A Review

I recently finished Matthew Kahn's newest book titled "Climatopolis". I was looking forward to reading this book from the summer but did not find the time this past semester to indulge in Kahn's thought-provoking piece.

To begin, I highly recommend this book to anyone and especially those who love cities. According to the UN, 60% of the world's population will be living in cities by 2030. Climate change is bound to and already has affected urban areas. There are many opportunities for urbanites and Kahn is optimistic about how we will adapt.

Climate change has been a topical subject since 2006 when Al Gore and Nicholas Stern frightened the world about the future risks humanity would face if we did not take action. Gore, Stern (to a lesser extent) and a number of climate change researchers including climate scientists, economists, geographers etc, often focus our attention to climate change mitigation. This means looking at tools or systems (such as a carbon tax, cap-and-trade emissions standards, energy conservation) that will help lessen the impacts of climate change by emitting fewew greenhouse gas emissions. Few, however, talk about the importance of adaptation, or simply adapting to climate change in our uncertain future.

Matt Kahn's book takes us on economic journey (he's an environmental economist) exploring how residents of global cities such as Los Angeles and New York City can adapt to climate change if they receive proper signals about the importance of doing so. In a time when people have better access to information (thank you Google) there is more knowledge being created about the risks of more frequent natural disasters - flooding, hurricanes, earthquakes, heat waves and droughts are all severe and highly damaging to any city in the world. Whether it is a developed or developing city, some residents are far more impacted than others (take hurricane Katrina in 2005 as a good example).

Throughout the book, Kahn talks about two vastly different groups and how they will respond or adapt to climate change. The first group is the Homer Simpsons of the world; those who are lazy, myopic and unwilling to sacrifice for their long-term good. They might be more skeptical of climate change and do nothing to protect themselves from it. Or, there is the traditional economic person who is cold, calculating and self-interested who Kahn calls the Mr. Spocks (Star Trek) of the world. The Mr. Spocks will take advantage of all of the information available on climate change and take pro-active steps to cope with the uncertainty surrounding climate change.

Take this example from the book: Kahn explains a situation where Al Gore (Mr. Spock) and Homer Simpson are both offered an opportunity to buy a home at a low price in an area that climate change scientists believe is at a high risk for serious flooding. The Al Gores would say either no thanks or if they accepted this offer, would take steps such as elevating the home and other costly flood-proofing actions to protect it. Homer (the ignorant one) would not be aware and take the offer right away. The Homers might take advantage of the low cost and migrate (or as Kahn says, "vote with their feet" by moving) away from a safe city such as Salt Lake City* to more risky and desirable cities like NYC, if they could trust their government and engineers to invent a credible protection strategy. The local government could construct seawalls for example, to help protect households living on the coast. That would be costly though and the money would come from all taxpayers including those who decided to live in less risky areas. As more and more households start to live in these risky areas, the federal government would provide more funds for protection because their political clout increases. So, if there is no flood, Homer will live on to be a happy person. If there is one, Al Gore will not suffer and Homer will.

Kahn provides examples like this to illustrate how both information and incentives can drastically change the way people think and adapt to climate change. Forward-looking entrepreneurs can innovate (earning huge profits) and be ready with a variety of products to help the Homers cope with their new reality. Thomas Mayne, an architect at UCLA, is discussed in Kahn's book because he is designing a "floating house" for New Orleans' residents. Such innovation can earn him big bucks for those wishing to live in riskier flood-prone areas.

There are countless examples in the book of such risky areas (like fire zones with wealthy landowners) where a market or insurance system can be created to price land based on climate change risk. An example comes from the state of Missouri where some local governments encourage developers to develop on high risk flood plains. This so-called "land assembly problem" allows developers to build on really cheap land in flood prone areas and make huge profits. The local government is excited about the new tax revenue and the job creation that accompany these projects. Alas, when floods happen in that state the federal government comes in a bails out the developer with tax payers' money because they were foolish enough in the first place to build in risky areas! Kahn suggests that insurance companies and markets need to appropriately price this land so that any risk takers who suffer from such disasters are solely affected by it, and not the taxpayers who probably disagreed with the development in the first place.

The bottom line is that there are a number of opportunities in cities across the world to embrace a more market and insurance oriented approach based on climate change risk. When insurance companies start to price land based on future risk, people will respond in different ways - some will migrate and some will stay and take advantage of the new demand for products such as floatable houses, more energy efficient air conditioners, rain water harvesting systems and many more. They will, in effect, adapt and create a greater market for such products allowing for better innovation and design from the business world thereby creating a safer city in our uncertain future. Keep in mind that while these adaptation technologies sound very promising, they will probably be very expensive and hence out of reach for the poorest and most marginalized - the group most affected by climate change.

These are just some highlights from the book. I do not agree with all of Kahn's points but I commend him for his forward-looking approach on a significant global issue of our time. He talks about Los Angeles and NYC extensively in his book because they are good case studies of climate change risk and adaptation potential. There is also a good amount of writing on China in the book and Kahn's predictions about how they will (or will not) green their cities in the face of climate change.

I have a copy of the book and would be happy to lend it to anyone interested.

I will write a post in January about some of the lessons urban planners could learn from Kahn's book.

*Kahn comes up with a list of the United States' top five most resilient cities that will cope best with climate change. These include 1) Salt Lake City 2) Milwaukee 3) Buffalo 4) Minneapolis 5) Detroit

Guest Entry: Greater Utility for Green vehicles must go beyond Green marketing

By: Caitlin Yan

Green marketing and green products - once just buzzwords in the corporate world are now, finally realizing exponential growth in the consumer marketplace. There exists, however, a lag in the adoption rates for some of these green products. Is the marketing all wrong? Are the creative agencies missing their mark? Not necessarily. While most Canadians support environmental sustainability in theory, the kind of behavioural change that some green products call for is often more than consumers are ready to accept.

One of the most obvious obstacles to incorporating green products into your daily routine is the higher price tag. Furthermore, the goods and actions that have the greatest positive impact on the health of the environment often require the consumer to make changes to habitual routines, patterned schedules and all in all, buy more complementary “stuff”. A good example is the array of green vehicles making their way into your neighbourhood dealerships.

At this point, we’ve heard our fair share of how these vehicles can significantly lessen our reliance on oil and in turn, reduce the amount of harmful pollutants released into the air. So why then, has the demand for these vehicles been disappointing? There are a few factors that have to be considered before this question can be answered.

The existing price differential between traditional gasoline-powered vehicles and alternative energy vehicles (such as hybrids and electric powered vehicles) is a major roadblock for many consumers. Also, the fuel economy offered by some green vehicles is less than stellar which only appeals to a small segment of consumers more concerned with making a social statement than saving some coin. On top of that, the year-end blowout sales apply almost exclusively to traditional fuel vehicles thereby widening the gap between the costs of the two types of vehicles.

The slow sales can be attributed to hesitation on the supplier side as well. It’s not only the consumers who are reluctant to adopt this technology. It should come as no surprise that electric vehicles are more expensive to manufacture than traditional vehicles, but did you know that car makers actually lose money on each unit they sell because of the current retail price? Electric vehicles currently account for less than 2% of all vehicles sales and there are few signs indicating an increase in consumer demand. It looks like both manufacturer and consumer are waiting for the other to make the first move.

Finally, another indication of the current stalemate is the lack of electric car chargers and charging stations on the market. An electric car is by no means a stand-alone purchase as it requires the aforementioned accessory components to function properly. Battery charger suppliers appear to be waiting for car manufacturers to introduce more electric vehicles and car manufacturers are holding off until consumers show a greater interest in these non-traditional vehicles. The fact remains that there are not enough charging stations and chargers to reduce “range anxiety” – the fear of being stuck on the road without any power. Unfortunately, the solution is not as trivial as simply making more of the vehicles or the chargers.

Hopefully after taking a look at some of the contributing factors, the true nature of the situation is a bit clearer. The slow adoption of green vehicles is not only a marketing problem. Sure, the marketing departments of Nissan and Ford should be ramping up their efforts to better address their consumers’ perceptions of green vehicles. The economics and social views of green vehicles have shifted away from where they started when the talk of green vehicles first began. The progress made in regards to the complementary technology and systems for green vehicles needs an in-depth, critical evaluation (calling all R&D professionals).

There are many consumers who want to do their part for the environment by owning a greener vehicle but won’t do so until there is greater utility and when the infrastructure is a reality. Even with the tricks and illusions (critics words, not mine) available to marketers today, you would be hard pressed to find someone to successfully market a product or service that doesn’t exist.

Caitlin Yan is a recent graduate of the Business Administration program at Wilfrid Laurier University. She has a specialization in Brand Communication and Management. Caitlin has a keen interest in products and behaviours that are less harmful to the health of humans and the environment.

Zetland's keynote address...

in Washington DC at a conference called "Bridging Knowledge Gaps in Water Management" at the Center for Strategic and International Studies. David Zetland wrote a guest post for us back in June about the importance of good local water management. He continues this discussion --building on points in his new book "The End of Abundance" -- and what policymakers need to pay attention to. Water is not priced correctly in the U.S. Zetland says, and information on water is lacking. Zetland's keynote starts at the 10 minute mark in the clip below.



People don't always know the cost of tap water in their household. Sure, if you are paying based on how much you consume (volumetric pricing) than you probably have an idea. But flat rates (all you can eat) don't tell the person the information they should know about how much their water costs per unit of consumption. Zetland thinks the U.S. Federal government should take action in assembling this information to make water management and water pricing more transparent.

People in the U.S. are attuned to markets and not community. Australia and Singapore have brought about stringent measures on water conservation. Yes, they don't have a lot of water, but residents of these countries have collectively decided to change their lifestyles based on water limits. They have adapted. In the U.S., price is what changes peoples' behaviour says Zetland. If water was priced based on scarcity, then prices would soar especially in places like Nevada, California and Arizona for example. The fact that the U.S. population is hovering around 308 million people, and in a time when water scarcity is becoming more rampant, the need for good water management, education and information is more critical than ever.

His bottom line is that we need to first understand our water systems, seek information about it, understand its fragility and start to price our water equitably and effectively. This also means that if farmers (or the agricultural sector) are allotted more water than residents living in cities and if they don't use up their allotted amount, then a market should be created for the farmers to sell that excess water at a price that reflects its value to other water users.

When I leave graduate school, my ideal first job would be to work as a water educator/planner disseminating information about water systems and water management and engaging citizens in this salient topic. Ultimately, the more information we produce on this matter, the more we can pressure our policymakers to get it right. Canada, like the U.S., has a long way to go in terms of water education and pricing of water.

Guest Entry: A short story on Brazil's colonial forests

By: Diogo Cabral

Are there any positive aspects of deforestation? Well, since humanity spent most of its time on Earth devastating forests, there must be! Historians tends to be very careful when judging past human actions. Indeed, for pre-modern humans, the forest had to be used. We can imagine the astonishment with which those men and women would react to the idea of preserving the forest. With the exception of a tiny intellectual elite – in fact, only a small portion within that elite – the conversion of forest was not seen as something bad.

Most people conceived of clearing and burning the forest as the inevitable progress of the great human "home". Snakes, scorpions, spiders, mosquitoes, fleas, ticks, ants and other forest dwellers can be just minor annoyances when one has nylon tents, rubber boots, mosquito repellent, and antidotes to poisons; but not when one’s only weapons are scythes, firebrands and the faith in the Creator. Clearing the forest was not necessarily "destruction", but a natural transition from a dark, messy and dangerous space to a lighted, orderly and reliable place.

In fact, when one speaks of forest destruction or degradation, one misses much of the bigger picture. The “declensionist narrative” – as it is known in the historiographical community – flows in an one-way street: this kind of account tells the story of the decaying forest or that the forest environment was devastated but misses the wider implications. More fruitful is to view deforestation as a two-way street or, to use more philosophical terms, as a dialectical process.

Deforestation is not only an effect suffered by the forest because the deforesters themselves change along the way; conceptions about nature and abundance were transformed; techniques were modified and capital was created; cultural identities and boundaries were recreated; social inequalities were softened or hardened; the world, after all, is hardly the same after deforestation. This is not to say that nothing bad stemmed from past deforestation or that “this is the way things had to happen”. The environmental-dialectical vantage point only stresses that historical events do not occur in isolation but in networks or totalities. It's a more comprehensive approach to write history.

This conception can help us understand more completely the implications of different uses of the forest in the past. Of special importance is the study of the fortunes of the forests of less developed countries like Brazil. “Deforestation is a tragedy”, wrote the American historian Shawn Miller, “deforestation is an unmitigated disaster if little or no benefit is taken in the process”. He was referring to the process of economic appropriation of Brazil’s coastal forests. Unlike the United States or Canada, Brazil did not develop a vibrant timber industry in the colonial period. Most of the tropical rain forest was burned and not timbered. Colonists burned the woods to obtain biomass ashes, a powerful fertilizer for the soil. In fact they obtained huge profits raising sugarcane using this method.

At the end of eighteenth century, the Portuguese America, with half the settled area of British America, exported roughly the same value in commodities. The problem – although not a problem to the colonists themselves at the time – is that sugar plantations generated less economic linkages (or development) than timber exploitation. Because of the gigantic land lots, only the later sugar plantations were driven to market to obtain firewood. So small demand did not encourage competition and entrepreneurship in the timber sector. So capital investment and technological advancement in the milling industry were not present. So the production of iron – an indispensable raw material to the building of sawmills – was not encouraged inside the colony. And so on.

It must be said, however, that the small commercial harnessing of the Brazilian timber was not only due to the workings of sugar plantations. The forest itself posed serious difficulties to the establishment of a staple timber economy. The main problem was that, unlike temperate hardwoods and conifers, tropical hardwood species are pretty much scattered across the landscape. It is very difficult to find a cluster of, let’s say, rosewood. An all extractive economy, by definition, is built on a homogeneous basis of natural resources. In fact, all early modern extractive economies were organized upon large spatial concentrations of resources: animal skins, fish, wood and all kinds of "spice".

Standard products are especially important in international timber markets where demand in most cases is for very specific uses. Ironically, because of their greater wealth, the forests of the tropics provided very little incentive to commercial exploitation on a large scale.

Diogo Cabral is a visiting PhD student in Environmental History at UBC. He is visiting from the Universidade Federal do Rio de Janeiro in Brazil.

SuperFreakonomics: A quick review

I just finished reading SuperFreakonomics: Global Cooling, Patriotic Prostitutes, and Why Suicide Bombers Should Buy Life Insurance. The authors are Steven Levitt and Stephen Dubner. The book is a follow-up to their first book titled Freaknomics which was a NY Times best-seller and led to the creation of blog to continue the dialogue.

There are a number of really fascinating and very insightful stories found in SuperFreakonomics- stories that really make you think about how human beings can respond or alter behaviour based on reasonable economic incentives. At first, their insights and comparisons seem to be completed unrelated, but Dubner and Levitt are very creative and pull together correlations that leave you amazed. Overall, I would recommend this book to anyone. It is not about recessions, financial markets or inflation, instead the authors use compelling statistics to illustrate how selfish and irrational we can be and how incentives, pricing and public policy can lead to a more harmonious and healthy society.

Instead of touching on how drunk walking is more dangerous than drunk driving, or why doctors are so bad at washing their hands or if people are innately altruistic or selfish or how monkeys respond to economic incentives, or what Al Gore and Mount Pinatubo have in common, I will share an example with you which covers a controversial topic known as geo-engineering.

In short, geo-engineering is large scale engineering of our environment in order to combat or counteract the effects of changes in atmospheric chemistry.

While I don't have a particular stance on geo-engineering, it is worth some discussion. Let me share one SuperFreakonomics example with you where a geo-physicist has figured out a way to counteract a natural disaster provided by Mother Nature, hurricanes.

Hurricanes are deadly, since 1900, more than 1.3 million people worldwide have been killed by them. Between 2004 and 2005, there were six hurricanes in the U.S. with combined damages of $153 billion dollars. Without going into all of the technical details, hurricanes become more potent (accumulate more thermal energy) when they hover over warm waters. A geo-physicist has proposed a solution that can help prevent the water from getting too warm and thus too destructive.

The trick is as follows: hydraulic head is a force, created by the energy put into the waves by wind. This force would push the warm surface water down into the long plastic cylinder, flushing it out at the bottom far beneath the surface. As long as the waves keep coming in, the hydraulic head's force would keep pushing warm surface water into the cooler depths, which will lower the ocean's surface temperature. A molecule of warm surface water would take about three hours to be flushed out the bottom of the plastic cylinder.

The devices would take the form of rings made from old truck tires filled with foamed concrete and lashed together with steel cable. The cylinder extending six hundred feet deep into the ocean, would push the warm surface water under. The trick is to modify the surface temperature of the water. Bottomline: in large numbers, these devices could possibly make warm water cooler and thus less likely to build a destructive hurricane.

So, would this hurricane killer actually work? These devices would range in price (depending on size) but could be as little as $100,000 - allocating 10,000 of them around the world would cost $1 billion or one tenth the amount of hurricane property damage incurred in a single year in the U.S. alone.

This is just example proposed by imaginative scientists who think that such tricks could help decrease the impact of destructive hurricanes. Levitt and Dubner discuss specific geo-engineering examples here. They are controversial and may never be adopted by governments, but their point is this: changing the behaviour of individuals (to drive less or pollute less for example) is never an easy task, using geo-engineering solutions can cool the temperature of the earth at a cost considerably cheaper than public awareness campaigns or large scale government spending on carbon reducing technology. The ideas may seem far-fetched, but would be worth carrying out in smaller projects.

Take their thoughts and findings with a grain of salt, but understand that such solutions could be cost-effective if they were funded and embraced by governments.

Would you support a driveway tax?

News from the Kansas City Star reports that the City Council of Mission, Kansas, has approved a driveway tax.

A driveway tax is simply a fee that charges you based on how much traffic your property produces. Currently in Mission, Kansas, sales and property taxes raise revenue to finance roads. Alas, such revenue has not been sufficient enough to maintain the roads. With the tax, households and businesses are going to share a larger financial burden - the fee is expected to raise $1.2 million a year to help finance $38 million in road improvements during the next 10 years.

"The City Council on Wednesday night approved a new fee charging every homeowner $72 a year and small businesses $3,558 a year beginning in December".

Engineers have calculated that a single-family home generates about 9 1/2 vehicle trips a day. Target Store (virtually ubiquitous across America) generates about 8,500 trips a day. McDonald’s is predicted to produce 2,700 trips.

A driveway tax is not common in the U.S. In fact, the only state that has been progressive with such a tax is Oregon. 18 cities in Oregon have adopted it. This comes at no surprise considering Oregon is more green and progressive in its thinking.

As you could imagine, the newly passed tax has witnessed negative reactions from the business community. Unsurprisingly, they are concerned that in a time when the economy is recovering, the tax would simply hurt small businesses.

Like London's Congestion Charge Zone, these sort of eco-taxes are always jurisdiction dependent; what works in one city might not work in another. A driveway tax may be appropriate for Mission considering that roads there are deteriorating and someone has to pay for them. I agree with Felix Salmon's assessment of this, it is similar to my argument of the BC carbon tax being too low. In short, if a driveway tax is introduced in your city, it should be set at a rate that can actually change behaviour. The formulas predict that the tax will cost 2 cents per trip; that is way too low to bring about any meaningful reduction in driving.

The driveway tax for homeowners in Mission will be $72. This is irrespective of how many trips you do in a day. Thus it is a uniform rate which is problematic because it discriminates against those who drive less, those who bike, take public transit or walk to their final destination. It is understood that the city needs revenue to ameliorate their streets, but those who drive more (produce more traffic from their property) should pay more. It is unfair to discriminate against those who take greener methods of transport.

Those who do take greener methods should be guaranteed some sort of incentive to encourage the continuation of sustainable transport and change behaviour of current motorists. This way, revenue is still being collected while simultaneously changing behaviour and getting people to think about the environment.

Key message: The next decade will see even more green taxes. It's 2010, times are changing and we are going to have to adapt. Creating a win-win for the environment and the economy will require full participation of citizens; this can eventually lead to sustainable urban solutions.

Energy Intensity in China

Image Credit: South China Morning Post

Energy intensity is a macroeconomic measure of the energy required per unit of economic output. It is commonly expressed as units of energy per unit of Gross Domestic Product (GDP). For China, it is the amount of energy needed to produce each yuan of economic output.

According to official figures from Beijing, last year China burnt the equivalent of almost 108 tonnes of coal to produce each million yuan of economic output.

From 2005 to 2009, energy intensity fell by 16 percent in China. Do not be totally deceived though. The output of the service industries - retail businesses, media, financial services and banking all use much less energy than manufacturing and industrial businesses. The service industries have started to rise of late and have formed a greater share of overall economic output. As a result, energy intensity tends to decrease as a natural consequence of economic growth.

Energy intensity remains relatively high because of China's large-scale infrastructure projects such as high speed rail construction and hydro-electric dams. When energy is priced at a lower amount, there is less of a need to conserve and use it more efficiently. The Germans have been efficient in almost every aspect of their economy.

In Germany, conservation of energy has not necessarily slowed down economic growth. Using energy efficiently has led to better allocation of it, which leads to better transmission and distribution of electricity across the nation. This keeps the economy going (it's amazing how much you can save with smart energy allocation) and does little harm to the environment.

Another example: Italy 's annual energy intensity of 122.8 tons of oil equivalent makes it the most energy efficient country in the G8 and one of the most energy efficient in the industrial world. This is mainly due to the traditionally high energy prices which have resulted in more efficient company and consumer behaviours. No one likes higher energy prices (whether you're an industry or household resident). But higher prices force you to innovate (and conserve) and design products that are less energy intensive. This drives competition and overtime, the entire economy benefits and people adjust accordingly.

China’s wasteful industrial and chemical plants are what keep energy intensity high. They help keep economic growth in check but have negative ramifications on the environment. Adopting environmental regulations would risk slowing down such growth. It seems that the Chinese Communist Party is content with how the economy is growing (now the world's second largest) but be critical and ask yourself if such growth is truly sustainable given the population size, political system, increasing numbers of university graduates and outstanding human rights cases.

Key message: Through innovation and smarter design, energy efficiency will get better in China, but it is going to be an extremely difficult task given the current economic growth.

Tolling Cross-Harbour Tunnels in Hong Kong

has become a hot issue lately. Specifically, the Western Harbour Crossing –one of Hong Kong’s three Victoria Harbour crossing tunnels-- is increasing its toll rate.

“Fees for private cars, taxis, and light buses using the Western Harbor Tunnel (WHT) will increase HK$5 to HK$50, HK$45, and HK$60 respectively, and single-decked buses and double-decked buses will each see HK$10 and HK$13 toll rises”

“The company faces increasing operating costs and need to raise sufficient cash flow to repay debts and earn a reasonable return. To ensure continuous viability, the company needs to adjust the level of its tolls”.

The Western Harbour Crossing is private, unlike the Cross Habour Tunnel which has been operated by the government since it was built in 1972. What’s the issue? The issue is that all three cross habour tunnels have different toll rates. Instead of discussing the price differences between types of transport modes, I will use “private cars” to illustrate the rate difference:

Eastern Harbour Crossing (private): $25 per car
Cross Harbour Tunnel (CHT): $20 per car
Western Harbour Crossing (private): $50 per car

For more info see here.

Which one do you think has the highest usage? You probably guessed correctly, the CHT. I live fairly close to the tunnel and have witnessed the egregious traffic congestion. Indeed, its capacity is 78,500 and it has over 120,000 cars passing through it everyday. The Western Harbour Crossing has about 50,000 cars go through it everyday and a capacity of 118, 000.

From reading the newspaper it is quite evident that the public is not content with the toll increase. They argue that it is already too high and hence why the western tunnel is severely underused. Given that the CHT is used the most –because it is the most central, convenient and cheapest—the City needs to figure out a way to redistribute traffic to increase efficiency and alleviate the pollution problem associated with idling cars around the CHT. The government could also choose not to intervene and let the market take care of itself. Overtime, it’s possible that people will adjust and start using the western tunnel because of their frustration with congestion and long-waiting times at the CHT.

But, a toll increase could risk even fewer cars using the tunnel. Usually, if you want to increase demand and usage of a road/tunnel, you lower the price, not increase it. There have been many solutions put forward by HK citizens. The one that makes the most sense is a peak hour tolling system for the CHT. In short, the busiest hours in the morning and evening would have a higher toll rate simply for the purpose of decreasing traffic congestion. Despite Hong Kong's impressive public transit system, there are still a lot of cars on the road. While peak hour pricing may seem like a progressive idea, it certainly has merit and could complement Hong Kong’s sustainable development goals.

We need to keep three things in mind (or more) when we talk about tolls. 1) Prices must be adjusted to maintain an optimum speed for reducing pollution. Intense traffic congestion at the CHT means long line-ups of cars and a greater concentration of pollution. 2) Drivers using the shortest and most convenient route should pay for the privilege. As mentioned, the CHT is the most convenient because it is centralized; thus it should definitely be priced accordingly. 3) Extra revenue from the increased tolls could be used for the replacement of new buses with cleaner fuel or to subsidize private tunnels like the western tunnel to help with traffic redistribution.

Last, toll increases also risk fare increases for taxis and mini-buses. These methods of public transport also use the cross harbour tunnels. Thus, toll increases produce ripple effects that could be mitigated with some sense of progressive imagination.

Key message: Hong Kong has three cross harbour tunnels that have different toll rates. They also have drastically different rates of usage. Introduce peak hour pricing for the most congested cross harbour tunnel as an experiment to see what happens.

Rapid Conflict Prevention Support

Earlier this summer, I read a book called Economic Gangsters: Corruption, Violence, and the Poverty of Nations by Raymond Fisman and Edward Miguel. The book draws on number of correlations between seemingly random things that have important policy implications in economic development.

While Enviro Boys does not directly write about international/economic development, the book reveals important ideas that pertain to climate change which we know is a global issue that requires expertise from several disciplines. I wanted to share one concept from the book that has the highest degree of relevance to this blog. The concept is called Rapid Conflict Prevention Support (RCPS) which is a form of aid that targets countries suffering temporary income drops due to poor weather or commodity price declines. It would provide immediate financial aid to such countries to help stabilize sectors of the economy before conflict erupts.

One of the rationales of this idea stems from Chapter Five titled “No Water, No Peace” where the authors discuss the country of Chad and its complete dependence on rain-fed subsistence agriculture. When the country goes through intense droughts, farmers suffer as their crops die and this affects the entire country's economy. Research from Miguel and his NYU colleagues found that a 5% drop in per capita income due to drought, increases the likelihood of a civil conflict in the following year by nearly one half. Thus when water does not fall from the sky, not only does the economy suffer but there is a risk of greater instability.

To partially remedy this problem, the authors discuss the merits of RCPS as it could provide temporary public work jobs for unemployed young men; the group most likely to participate in armed violence. The authors suggest how donors of RCPS would be able to track rainfall and famine conditions through publicly available websites. As the authors write "Rwanda relies heavily on coffee export earnings to provide for its people, so when the world price of coffee plummets, so do most Rwandans' income. In this way, a sudden drop in key commodity prices acts a lot like a drought, leading to an unexpected decline in income that leaves the population desperate and violence-prone". Miguel explains how potential donors of an RCPS program could track coffee prices on the Chicago Board of Trade and respond to falling prices accordingly.

Similar to large scale environmental issues, the need for prevention is far more critical and cheaper than dealing with the aftermath – floods, droughts, earthquakes or whatever else it may be. Forecasting precipitation, monitoring commodity prices or even an imminent earthquake are not always easy to predict. As such, there is a need for some precautionary mechanism to ensure that matters are not worsened when the event actually happens. Miguel’s RCPS idea would use economic indicators to identify nations most likely to suffer future strife, increasing aid before violence erupts. Such prevention is better than a more costly cure.

Sure, there might be some corruption that takes place through a program such as RCPS, but in a time when droughts are bound to get worse, RCPS can provide immediate funds to help prevent and or alleviate the economic hardship. It could supplement investments in education and infrastructure for long-term sustainability.

If you want to learn more about this topic (and other topics in violence, corruption and poverty) read their book; it's very insightful and a fun read in general. They identify a number of remarkable correlations and provide policy solutions such as RCPS.

Check out Edward Miguel's Bloomberg article here.

Gwynne Dyer on Russia's grain ban

I came across an article yesterday in the South China Morning Post written by Gwynne Dyer. The title “Russia’s grain ban is just the beginning” reminded me of Dyer’s pessimistic and gloomy outlook on climate change and how the world is going to cope with it. During my time at Trent, Gwynne Dyer visited the university and delivered two public lectures - lectures I found supremely entertaining, very informative and a little bit scary considering his predictions on what climate change is going to do to our world.

I thought I would post his article to give you a taste of his writing. Dyer thinks big (with pessimistic forecasts) but pulls you into considering climate change from a new perspective. He has written 9 books on topics ranging from military history, climate change and international relations.

**Gwynne Dyer has granted Enviro Boys permission to publish this post on the blog**

“Russia’s Grain Ban is just the beginning”
By Gwynne Dyer

It cannot be proved that the wildfires now devastating western Russia are evidence of global warming. Once-in-a-century extreme weather events happen, on average, once a century. But the Russian response is precisely what you would expect when global warming really starts to bite: Moscow has just banned all grain exports for the rest of this year.

At least 20 percent of Russia’s wheat crop has already been destroyed by the drought, the extreme heat—circa 40 º C for several weeks now—and the wildfires. The export ban is needed, explained Prime Minister Vladimir Putin, because “we shouldn’t allow domestic prices in Russia to rise, we need to preserve our cattle and build up supplies for next year”. If anybody starves, it won’t be Russians.

That’s a reasonable position for a Russian leader to take, but it does mean that some people will starve elsewhere. Russia is the world’s fourth-largest grain exporter, and anticipated shortages in the international grain market had already driven the price of wheat up by more than 80 percent since early June. When Putin announced the export ban, it immediately jumped by another eight percent.

This means that food prices will also rise, but that is a minor nuisance for most consumers in the developed countries, since they spend only about 10 percent of their income on food. In poor countries, where people spend up to half their income on food, the higher prices will mean that the poorest of the poor cannot afford to feed their children properly.

As a result, some will die—probably a hundred or a thousand times as many as the 30-odd Russians who have been killed by the flames and the smoke. But they will die quietly, one by one, in under-reported parts of the world, so nobody will notice. Not this time. But when food exports are severely reduced or banned by several major producers at once and the international grain market freezes up, everybody will notice.

Two problems are going to converge and merge in the next 10 or 15 years, with dramatic results. One is the fact that global grain production, which kept up with population growth from the 1950s to the 1990s, is no longer doing so. It may even have flatlined in the past decade, although large annual variations make that uncertain. Whereas the world’s population is still growing.

The world grain reserve, which was 150 days of eating for everybody on the planet 10 years ago, has fallen to little more than a third of that. (The “world grain reserve” is not a mountain of grain somewhere, but the sum of all the grain from previous harvests that is still stored in various places just before the next big Northern Hemisphere harvest comes in.)

We now have a smaller grain reserve globally than a prudent civilization in Mesopotamia or Egypt would have aimed for 3,000 years ago. Demand is growing not just because there are more people, but because there are more people rich enough to put more meat into their diet. So things are very tight even before climate change hits hard.

The second problem is, of course, global warming. The rule of thumb is that with every one-degree C rise in average global temperature, we lose 10 percent of global food production. In some places, the crops will be damaged by drought; in others by much hotter temperatures. Or, as in Russia’s case today, by both.

So food production will be heading down as demand continues to increase, and something has to give. What will probably happen is that the amount of internationally traded grain will dwindle as countries ban exports and keep their supplies for themselves. That will mean that a country can no longer buy its way out of trouble when it has a local crop failure: there will not be enough exported grain for sale.

This is the vision of the future that has the soldiers and security experts worried: a world where access to enough food becomes a big political and strategic issue even for developed countries that do not have big surpluses at home. It would be a very ugly world indeed, teeming with climate refugees and failed states and interstate conflicts over water (which is just food at one remove).

What is happening in Russia now, and its impacts elsewhere, give us an early glimpse of what that world will be like. And although nobody can say for certain that the current disaster there is due to climate change, it certainly could be.

Late last year, Britain’s Hadley Centre for Climate Change produced a world map showing how different countries will be affected by the rise in average global temperature over the next 50 years. The European countries that the Hadley map predicts will be among the hardest hit—Greece, Spain, and Russia—are precisely the ones have suffered most from extreme heat, runaway forest fires, and wildfires in the past few years.

The main impact of global warming on human beings will be on the food supply, and eating is a non-negotiable activity. Today Russia, tomorrow the world.