Sustainability in Government Agencies
Create a level playing field
Too often, the playing field is tilted toward the unsustainable players. Why else should virgin-fibre paper cost less than recycled? How can mining virgin aluminium be viable as long as there are cans to be recovered? In most cases, the answer is that the full cost to society is not factored into the prices. Businesses count some costs (eg harvesting trees, making pulp and drying paper) but can ignore others (eg loss of habitat, stream degradation, landslides and the destruction of fisheries).
Align regulations with your goals
Too often, regulations present a barrier to sustainability. They tend to lag behind technology and are resistant to change. But if you make it harder for people to innovate, most will take the path of least resistance and stick with the status quo. You need to take a proactive approach. The City of Vancouver, Washington, in partnership with the US Green Building Council–Cascadia region, decided to take six hypothetical building applications that meet the Living Building Challenge through their code review process to identify where their building codes and land use codes might prevent this type of construction. This review will inform their priorities as they work to improve their building codes. Their expected outcome is to change the codes where barriers exist and create incentives for these types of projects to be streamlined through the review process.
Privatize the resource within the right boundaries
People who support privatization often point out that you never wash or change the oil in a rental car. Why bother? Ownership, if the boundaries are right, can produce better long-term protection of a resource. However, for this to work owners, to the extent that this is possible, must be made to internalize their externalities. For example, imagine a timber company. Their land produces more than trees – it provides a habitat for plants and animals; it may protect streams and downstream fisheries and it anchors topsoil. However, traditionally timber companies have only been able to generate revenue from cutting and selling trees, so there are strong financial incentives to clear-cut as much as the laws allow. The traditional governmental approach has been to regulate what they could, for example forbidding harvesting inside riparian zone buffers.
But timber owners, both large corporations and small woodland owners, tend to bristle at these restrictions. Many clamour to be paid for these ‘losses’. Geoffrey Heal, in Nature and the Marketplace, presents a different approach. While it might not be possible to develop markets for all the services timberland might provide, you can redraw the boundaries of an owner’s responsibilities. Why not combine a timber company and a water company? Let the hybrid organization get income not only from trees but also from water quality. Then the proper financial incentives would be in place for them to protect the ecosystem services of their land.
Get the numbers right
Government (ie society) picks up the cost for many impacts caused by business. These ‘externalities’ are not included in the price of products or services. Without the right prices, markets will make the wrong decisions. Some have suggested that we assign ‘green taxes’ to correct the market signals, to internalize the cost to society in the product price. And in some situations these have been effective. For example, Ireland assigned a PlasTax to plastic bags. In short order, this move reduced demand for plastic bags by 90 per cent and earned 3.5 million Euros for other environmental projects.
However, Herman Daly, the former World Bank economist, is not a fan of green taxes. He worries we’d spend all our time trying to get the numbers just right. Instead, he advocates taxing resources more than income. He feels that getting most of our government revenues from natural resources would create the same result with a lot less effort.
Governments also use broad societal measures to monitor the health of their societies. Here again Daly highlights major problems with the methods they use: gross domestic product (GDP) is the benchmark generally used, but GDP only measures money moving around. It doesn’t distinguish between what most would consider good things (education, food, housing, etc.) and costs associated with bad things (eg prisons, environmental cleanup, domestic abuse and antidepressants) which, to some extent, are unintended negative side effects of our society. It’s like a calculator with only a plus sign. He states, ‘empirical evidence that GNP growth has increased economic welfare in the United States since about 1970 is nonexistent’.
Most measures of economic growth such as GDP (which has replaced GNP as the measure of choice) and traditional economics are blind to nature’s inputs. They may count the costs of cutting trees, transporting them and milling them but give no value to the tree itself (the input). Yet without this natural capital, the other steps would be valueless. Likewise, they do not count the impacts of the outputs and waste on climate change, water quality, soil erosion and the like.
RESOURCES
Heal, Geoffrey (2000) Nature and the Marketplace: Capturing the Value of Ecosystem Services. Washington, DC: Island Press.
Daly acknowledges that markets (which GDP does measure) do provide efficient allocation of resources. However, they don’t deal at all well with justice (redistribution of wealth) or issues of scale (which deals with sustainability). He says we must begin to view the economy as a subset of the environment, not separate from it, and as such the issue then becomes the optimal size of the economy (at least in terms of its use of natural resources for inputs or outputs/waste). The economy cannot grow forever, especially in terms of material throughput. And the service/information economy is no saviour because it too relies on natural resources. As Frederick Soddy put it, ‘No phosphorus, no thought.’
We need natural resources to build cells and proteins so that we can think. Daly also emphasizes that we must stop counting natural capital as income. At present, when a timber company harvests trees, it generates revenues, making its financial statements look healthier. But in fact it has depleted its holdings. Depleting natural and non-renewable resources should be treated as depreciation. Daly recommends using a portion of the income from non-renewable resources to finance renewable substitutes. Part of getting the numbers right is to measure the right things. Austin Energy is one utility that has been developing tools to measure carbon return on investment. If you are making decisions regarding future energy production, it’s helpful to know which options result in the biggest reduction of greenhouse gases for the least cost.
RESOURCES
Happy Planet Index measures the degree to which a nation is able to provide a high quality of life while protecting the environment. It’s not a measure of happiness but rather the efficiency with which a nation converts natural resources into happy and long lives, www.happyplanetindex.org/.
The Index of Sustainable Economic Welfare is similar to the Genuine Progress Indicator (GPI) and has been calculated for nine countries to date, comparing it to GDP. The following site has the results for the nine countries (including Chile, Australia, several European countries and the US GPI): http://community.foe.co.uk/tools/isew/.
In the US, Vassar’s Institute for Innovation in Social Policy publish the Index of Social Health. They show data in five-year increments and the most recent year for which they post data is 2005. They also produced a report, The Social Health of the States 2008, which provides state by-state comparisons. Their indicators are a good shortlist for measuring community health, http://iisp.vassar.edu/ish.html
RESOURCES
Cobb, C. et al (1995) ‘If the GDP is Up, Why is America Down?’, The Atlantic Monthly, October. Daly, Herman, E. (1996) Beyond Growth: The Economics of Sustainable Development. Boston: Beacon Press.
Eliminate perverse subsidies
Subsidies are, in the words of Norman Myers and Jennifer Kent, ‘a form of government support extended to an economic sector, generally with the aim of promoting an activity that the government considers beneficial to the economy overall and to society at large’. These can be direct (eg federal or state tax deductions or credits for energy-efficient appliances) or indirect (eg free parking and roads subsidize the auto industry). In Perverse Subsidies, Myers and Kent define a perverse subsidy as one that not only hurts the environment but also comes back to bite the economy. There are a shockingly large number of these, as cited earlier.
The table below represents Myers and Kent’s best estimates of global subsidies by type and sector. Note that perverse subsidies are a subset of the total, so you can get a sense of the percentage of each subsidy type that is having perverse effects.26 These perverse subsidies lead us to make investments that are counter-productive. One interesting battleground today is electronic waste. Until recently, companies were not held responsible for the costs associated with managing the disposal of their products. However, electronics are filled with heavy metals, which can leach into groundwater in a typical landfill. European countries were some of the first to refuse to take on the responsibility for managing this waste, banning TVs, computers and other electronics from their landfills. Initially, the manufacturers baulked. Until it becomes their responsibility, manufacturers have few incentives to improve the environmental impacts of their products. Wayne Rifer, a member of the National Electronics Product Stewardship Initiative, points out that traditionally, ‘During the whole lifecycle of the product, manufacturers take responsibility only until the point of sale. And after use when the value of the product becomes negative, traditionally it then becomes the responsibility of government.’ Making manufacturers responsible for the product through to end of life prevents them from externalizing disposal costs on to governments and citizens. Instead, product stewardship legislation creates an incentive to redesign products to maximize the value of the materials for reuse and recycling. What is the solution? Product stewardship has the potential to solve the particular problem Rifer mentions above. (See more in the Manufacturing chapter.) Beyond that, Myers and Kent advocate making subsidies transparent. Since subsidies are often unpopular, this helps to balance out those who have a vested interest in maintaining subsidies. It also helps to build collaboration across constituencies. For example, environmentalists, deficit hawks and neo-conservatives can agree we shouldn’t borrow from our children’s future. The Sierra Club, Friends of the Earth and the Wilderness Society banded with Citizens for Tax Justice, Taxpayers for the Common Cause and the US Public Interest Research Group to expose perverse subsidies. Myers and Kent also recommend using regulations, user charges, tradable permits and green taxes where appropriate. Sunset clauses should be included in new subsidies to ensure that they come up for review periodically, so they can be removed when they are no longer needed or have become perverse.
Since public utilities are usually more heavily regulated than other businesses, and because they are a primary source of greenhouse gases, governments need to ensure that the incentives work properly there as well. If power companies can only grow if they sell more electricity and if they are required to invest only in the lowest-cost generation, they will probably make decisions that undermine sustainability goals. Decoupling rates and production is key. In California, for example, the utilities are rewarded for investing in energy conservation, and when they meet certain goals, the state allows them to charge higher rates.
