Post on 28-Mar-2015
transcript
Natural Infrastructure:
Optional subhead would go here
What’s the Bottom Line?
Elena IrwinProfessor, Department of Agricultural, Environmental and
Development Economics
Water for the Americas TourFebruary 11, 2014
Columbus, OH
Incentives for Getting Businesses to Work for Water Sustainability
Department of Agricultural, Environmental, and Development Economics
The business case for sustainability: The world is changing
Department of Agricultural, Environmental, and Development Economics
The business case for sustainability:
Declining Natural Resources
Renewables and nuclear power account for more than half of all new capacity predicted to be added worldwide through 2035
Department of Agricultural, Environmental, and Development Economics
The business case for sustainability:
Climate change
Source: IPCC http://kiln.it/embeds/ipcc/sensitivity/
Department of Agricultural, Environmental, and Development Economics
The business case for sustainability:
Increased water scarcity
Department of Agricultural, Environmental, and Development Economics
The business case for sustainability: Growing ecological degradation
Department of Agricultural, Environmental, and Development Economics
The business case for sustainability:
Increasing extreme weather events
Department of Agricultural, Environmental, and Development Economics
The business case for sustainability:
Increasing environmental regulation
Source: US EPA http://www.epa.gov/oppt/greenengineering/pubs/whats_ge.html
Department of Agricultural, Environmental, and Development Economics
Businesses are responding
Department of Agricultural, Environmental, and Development Economics
Business acting alone won’t save the planet
• Increased sustainability actions by businesses often generates “co-benefits”
for society
• But the business case for sustainability does not consider all social costs
PRIVATE
PUBLIC
Revenues
BENEFITSCOSTS
Construction + O&M costs
Revenues
Financing
Net private benefits
Construction, O&M costs
Regulatory costs
Stormwater runoff
Urban heat island
Net public costs
CONVENTIONAL CHOICE(GRAY DEVELOPMENT)
A Problem of Incentives
NET PRIVATE BENEFITS ARE POSITIVE, BUT NET SOCIAL
BENEFITS ARE NEGATIVE
Financing
Construction, O&M costs
Regulatory costs
PRIVATE
PUBLIC
Stormwater runoff
Urban heat island
PRIVATE
PUBLIC
Revenues
Reduced runoff and warming
BENEFITSCOSTS BENEFITSCOSTSVS.
CO2 absorption
Habitat
Amenities
Avoided public costs
Net public
benefits of green vs. gray
Opportunity cost of forgoing gray
Added cost of greenNet cost of green vs.
gray
Construction + O&M costs
Revenues
Financing
Net private benefits
Construction, O&M costs
Regulatory costs
Stormwater runoff
Urban heat island
Net public costs
CONVENTIONAL CHOICE(GRAY DEVELOPMENT)
SUSTAINBLE ALTERNATIVE (GREEN DEVELOPMENT)
Revenues
PRIVATE
PUBLIC
CO2 absorption
Habitat
Amenities
Reduced runoff & heat island
Net public
benefits of green vs. gray
Net private costs of green
vs. gray
Stormwater runoffStormwater runoff
Urban heat island
BENEFITSCOSTS
NET SOCIAL BENEFITS ARE POSITIVE, BUT NET PRIVATE BENEFITS ARE
NEGATIVE
GREEN VS. GRAY
Costs
BENEFITSCOSTS
GRAY DEVELOPMENT
BENEFITSCOSTS
GREEN DEVELOPMENT
Construction + O&M costs
Revenues
PRIVATE
Costs
PRIVATE
Costs Revenues
Net private costs of green vs. gray
Private market does not internalize public costs
Net private benefits of green are negativeNo private
incentive for green
development
Construction + O&M costs
Stormwater runoff
Urban heat island
Revenues
PRIVATE
PUBLIC
PRIVATE
PUBLIC
CO2 absorption
Habitat
Amenities
Increased private costs of gray
Revenues
BENEFITSCOSTS BENEFITSCOSTS
IMPACT FEE IMPACT FEE = STICK
Stormwater runoff
Urban heat island
Net private costs of gray
OPTION #1: POLLUTER PAYS Increase private costs of gray
development
GRAY DEVELOPMENT GREEN DEVELOPMENT
CostsCosts
Construction + O&M costs
Revenues
PRIVATE
PUBLIC
PRIVATE
PUBLIC
CO2 absorption
Habitat
Amenities
Revenues
BENEFITSCOSTS BENEFITSCOSTS
PAYMENT
Increased private benefits of green
Stormwater runoff
Urban heat island
PAYMENT = CARROT
Stormwater runoff
Urban heat island
Net private benefits of green
OPTION #2: PAYMENT FOR ECOSYSTEM SERVICES
Increase private benefits of green development
GRAY DEVELOPMENT GREEN DEVELOPMENT
CostsCosts
Public Cost of
Payment
Revenues
PRIVATE
PUBLIC
Costs
PRIVATE
PUBLIC
CO2 absorption
Habitat
Amenities
Revenues
BENEFITSCOSTS BENEFITSCOSTS
PAYMENT
IMPACT FEE
Stormwater runoff
Urban heat island
Public Revenues from Fee
Public Cost of
Payment
Stormwater runoff
Urban heat island
Net private costs of gray
Net private benefits of green
OPTIONS #1 & 2: Stick and carrot together
GRAY DEVELOPMENT GREEN DEVELOPMENT
Costs
Source: EPA New England, “Funding Stormwater Programs,” EPA 90-F-09-004 April 2009.
Municipal stormwater management: Fees and green infrastructure credits
Example: City of Philadelphia implemented impervious-based stormwater billing in 2010
City of Philadelphia Stormwater Fees
• Gross Area charge: $0.526/mo per 500 sq ft
• Impervious Area charge: $4.145/mo per 500 sq ft
• Credits offered for management of first inch of stormwater runoff using green infrastructure (porous pavement, green roof, downspout disconnect, trees) avoided public costs of $170 million
What is a stormwater utility?
A stormwater utility, operating much like an electric or water utility, may collect fees related to the control and treatment of stormwater that can be used to fund a municipal stormwater management program.
Construction + O&M costs
Stormwater runoff
Urban heat island
Revenues
PRIVATE
PUBLIC
PRIVATE
PUBLIC
CO2 absorption
Habitat
Amenities
Revenues
BENEFITSCOSTS BENEFITSCOSTS
Lower cost financing, public and non-profit partnerships
Stormwater runoff
Urban heat island
GRAY DEVELOPMENT GREEN DEVELOPMENT
CostsCosts
Net private benefits of gray
OPTION #3: MANAGING BEYOND THE FENCE LINE
Reduce private costs of green development
Net private benefits of
green
Department of Agricultural, Environmental, and Development Economics
Water Synergy Project in Louisiana (US Business Council on Sustainable Development)
• Bringing watershed users from industry and public sector together to develop sustainable water management practices
• Water reuse and transfer strategies
• Constructed and restored wetlands
• Federal funding for regional stormwater management
• Innovative financing through PACE
Department of Agricultural, Environmental, and Development Economics
Water quality trading programs• Trading
programs allow facilities to
purchase pollution
reductions from another lower-
cost source• Requires
extensive public-private
partnerships
Example: The Great Miami River Watershed Water Quality Credit Trading program facilitates wastewater treatment facilities to purchase
credits from farmers who reduce pollutant runoff into rivers and streams.
Department of Agricultural, Environmental, and Development Economics
Greif: PackH2O water backpack• Funding to develop pack from non-profit foundations;
worked with Battelle on design
• Partnerships with many organizations to manufacture and distribute pack, including
•Operation Blessing International
•Habitat for Humanity International
•Partners for Care
•CxCatalysts & CEMACO
•Partners In Health• 2013 People's Design Award at the National Design
Awards
• To date more than 100,000 H20packs have been distributed in 21 countries across five continents
Department of Agricultural, Environmental, and Development Economics
Managing beyond the fence line is especially important for water• Water and watersheds are
common pool resources: everyone uses their services, but many
services are unpriced or underpriced
• Many competing demands determined by local uses, including
business, agriculture, municipal, residential, transport, recreation• Businesses acting alone do not
have the right incentives• Government’s multiple roles: stick,
carrot and partner
Department of Agricultural, Environmental, and Development Economics
Elena IrwinProfessor, Department of Agricultural,
Environmental and Development Economics
Faculty leader,Environment, Economy, Development and
Sustainability (EEDS) major at OSU
irwin.78@osu.edu