The Transition to a Sustainable Economy by 2030

Entry for blog contest asking for ideas about how government and businesses can cooperate to build sustainable economy by 2030:


Government and business have a common interest in keeping the planet from overheating. How can they combine to foster this mutual concern?

Governments can even the playing field. In many countries there are tax benefits and subsidies for energy production. More than 40 countries currently subsidize fossil-fuel production or consumption to the tune of half a trillion US dollars. Governments in the Middle East subsidize 75 percent of the costs of fossil fuels. In the USA, oil drillers receive close to US$5 billion in tax subsidies while the solar energy sector gets US$2 billion. We need a global commitment to reduce all energy subsidies. Subsidies undermine the operation of free, efficient markets and send the wrong message to business.  Unleash market forces on a level playing field of unsubsidized energy costs. Cut subsidies for all energy industries but tax CO2 emissions to motivate business. Imagine a gradual reduction of subsidies and a steadily ratcheting pollution tax that allows business a chance to adapt. Maintaining steady fiscal pressure will result in the private sector finding ways to reduce their carbon footprint and so reduce global warming.

We need to cover the social costs of CO2, the main gas responsible for climate change. Estimates of the total social cost vary, but one commonly used figure is US$60 per metric ton of CO2. We could impose a tax, with annual increases up to US$120 by 2030 that is paid into a Global Carbon Fund (GCF). At the outset, we make each nation’s government responsible for collecting this tax. Different governments may use different methods of assessment and this variety will allow us to test different forms of tax implementation and collection. By 2030 we will be in a better position to decide what works best.

Governments are good at collecting money, much less successful in allocating funds efficiently. The GCF could then be used as an interest-free bank available to the private sector. Business can apply to the GCF, in cooperation with local impacted communities, for innovative programs of adaption and mitigation. Again, by 2030 we will have better ideas of what works and what does not, what is efficient and fair and what is a waste of money. 

The allocation of funds can be decided in a series of five year tranches to allow the benchmarking of successful loans in the short-term before a major reassessment in 2030. A formula could be devised to lighten the load of countries that have a limited CO2 footprint but have very high adaption and mitigation costs. The predicament of low-lying Pacific islands comes to mind: they have tiny carbon footprints, but face huge challenges of sea-level rise.

Businesses require long-term stability in order to make equally long-term investments and to undertake ambitious changes in their trajectory. When governments provide a stable and clearly understandable global set of incentives, they harness the enormous power of the private sector to reduce global warming. A commitment by each country’s government to abolish energy subsidies, to tax carbon in order to fund the GCF will give business around the world a stable and transparent environment in which to make long-term plans and play a vital part in moving towards a low-carbon economy.

With a steadily increasing carbon tax, the private sector will look for ways to reduce their carbon footprint while the GCF will provide them with fiscal incentives to work on climate change adaption and mitigation.

Pumping oil in Los Angeles (Photo ©John Rennie Short)

Wind turbines in Baltic Sea (Photo ©John Rennie Short)

World Travels 5: Cape Town, South Africa

The city sits at the southern tip of the continent. It is bathed in a salty clear air.  From the base of Table Mountain, the city spreads out along the coasts. There is a rich variety of residential areas from the upmarket suburbs along the coast to the townships on the edge of the city.

Looking up at Table Mountain from affluent suburbs

Expensive real estate beside the coast

Cape Town from the top of Table Mountain: Robben Island is in the distance.

Bo-Kaap, formerly know as Malay Quarter was a township for Muslims, originally from Indonesia. Close to the city center,  it is now undergoing gentrification

Travels 4: Mauritius

Mauritius is a former British colony off the coast of South Africa. It was the home of the dodo bird, now extinct, and the setting for imperial rivalries between Britain and France. Hundreds of thousands of laborers were imported from India to work on the sugar plantation. Sugar still plays an important role but since independence, in 1968, the economy has broadened to include manufacturing, financial services and high-end tourism.  

High end tourism is now a vital  part of the national economy

Small scale agriculture is still important

(All Photos ©John Rennie Short)

Travels 3: Dubai

Dubai is in a race against time. The oil reserves are running out, and running out fast. The oil will be gone, most likely, by 2035. And so the emirate is trying to position itself for a post-oil economy by transforming the city into a global transport hub, financial center, property market investment opportunity and tourist destination. That is the economic rationale behind the frantic building boom. But the buildings do not simply house tenants, they are designed to make a statement about the city's emerging position as a global player. Hence the big name architects and the signature buildings; they are the projections of global aspirations, exercises in place promotion and the embodiment of city marketing.

Burj Khalifa: one of the tallest buildings in the world

Burj Al Arab: luxury hotel and iconic symbol

High rise buildings at Dubai Creek

Laborers from South Asia build these structures


(All photos ©John Rennie Short)

World travels 2: Hawaii to Bali

Flew from Hawaii to Fiji, then to Sydney and onto Bali.

Sugar plantations are still an important part of Fiji's economy

Sydney with entrance to harbor in distance

Portrait of Jack Mundey, one of my heroes that I have written about, in The Rocks area of Sydney

Flying over Australia: Uluru

Balinese dancer

Hindu temple in Bali

World Travels: 1 DC to Hawaii

Just returned from almost three months of sabbatical travel. Went round the world twice- the first time east to west; then west to east. So first order of business is to show some photos of travel. Will punctuate this updating travel blog with more up to date events.

Traveling through Phoenix

Flying into Kona

Solidified lava flows

Wildfire article takes off

I published an article in The Conversation on the social context of wildfires in the west. You can access it here. I argued that the federal government underwrote the fire costs of people moving into the ever expanding wildlands-urban interface, a region that is getting more development but also becoming more vulnerable to forest fires as it dries and warms with climate change. The piece has attracted some attention, being posted by the Federal Reserve, Newsweek as well as in science and trade journals and local newspapers out west. I have also received lots of interesting email from people on the frontline of firefighting.

I wanted to write this piece for the past three years and gratified that when it did come out, it reached a wider audience that the more restricted coverage of my articles in academic journals. 

Poster for POLIS in Cali, Colombia

Cool poster made by folks at POLIS Icesi University for my visit to Cali Colombia.

Cities and climate change refugees: the Efe interview

While in Cali Colombia I was interviewed by the Spanish news service Efe, the Spanish language version of AP. The article was widely circulated in newspapers in Argentina, Colombia, Costa Rica, Cuba, Ecudaor, Paraguay, Peru and Spain.

Here is a rough translation:

Migration resulting from climate change may have already started, warned American expert John Short in Colombia today, who also confirmed that the world is not prepared for the effects of global warming.

"Migration due to climate change has already begun. In Bangladesh, for example, there are climate change refugees who have fled their rural homes because they can no longer survive in such an aggressive climate," said the expert in an interview with EFE.

Short, who received his doctorate from the UK’s University of Bristol and is an expert on urban issues, geography, environmental issues and globalization, said the environmental changes "will become the new normal for everyone on the planet".

The exodus to major cities:

The researcher provided his climate change theory as part of a lecture presented to ICESI University in Cali, Columbia, further noting that this "new normal" will bring about a significant exodus to urban areas, which those who live in the most remote areas will see as an option for survival.

"No city is prepared for the unexpected migration that may be caused by climate change," said the expert, who noted that these new migrants "comprise groups with economic constraints", which complicates their adaptation to the urban environment.

Adaptation and mitigation:

The American professor points to “adaptation” and “mitigation” as ways of confronting climate change.

The first term refers to "how humans can ensure that the built environment accommodates the new normal," explained Short, who described mitigation as "actions to lessen climate change."

In order to exemplify mitigation, the expert mentioned alternative sources of energy like wind, which is used by countries such as Spain and Denmark.

Nevertheless, he said that "these options are being overshadowed by the current decline in oil prices."

He also referred to “green roofs”, referring to vegetation that is planted on facilities in order to reduce ozone emissions.

Regarding adaptation, Short explained that it is a more complicated process, given that the "new normal" is different in every part of the world and demands more resources.

"The problem is that we don’t know exactly what the change will be in different parts of the world," he said. EFE

Cali Colombia

Cali, Colombia. The city moves to the beat and sound of salsa and has a liquid sensuality, an everyday eroticism. I was in the city for a week working with colleagues at  POLIS at Icesi University. We are studying street vendors in the city.

Here are some photos from fieldwork:

 All photos: © John Rennie Short

The rich as well as the poor are on the move

The other immigrants: how the super-rich skirt quotas and closed borders

John Rennie Short, University of Maryland, Baltimore County

The mass media are filled with images of desperate refugees struggling to escape civil unrest. But it is not only the poor and the displaced who are on the move. The rich, especially from countries such as Russia and China, are also leaving their home countries, but they are not faced with fences and rejection but welcomes and encouragement.

A review of these policies highlights the dramatic differences between rich and poor when it comes to immigration. It also reveals the dubious economic benefits of catering to the super-rich.

Cheapening citizenship?

Canada was the first rich country to go after the wealthy. Under its Immigrant Investor Program, first introduced in 1989, foreign nationals could gain residency in Canada by loaning (Canadian) $800,000 interest-free to any of the provinces for five years. The program was very attractive first to wealthy people from Hong Kong and then mainland China, as it was a relatively cheap method to gain residence in a secure, safe country with generous social benefits. More than 130,000 individuals entered Canada through this program. Vancouver became such a popular destination that locals refer to it as Hongcouver.

While the program was a boon to wealthy Chinese, it was seen increasingly in Canada as a too-cheap selling of their citizenship with negative effects on property markets by raising prices. When the program was cancelled in February 2014, it had 59,000 pending applicants, 45,000 from mainland China. At its peak in 2005, the program was responsible for almost 11% of the roughly 250,000 immigrants allowed into the country each year.

       
       

          Countries are now effectively competing to attract wealthy immigrants.
          dierken/flickr, CC BY
       
     

The UK has a Tier 1 investor visa for those from outside the European Economic Area (EEA) and Switzerland willing to invest one million British pounds in UK government bonds and UK-registered companies. It is a fast-track system that provides a visa decision within three weeks and allows you to bring immediate family members, still spend up to six months outside the UK and and gain an easy path to full citizenship: a sweet deal. Applications run, on average, about 600 a year. A recent review concluded that the entry “fee” was too low, most of the money was invested in government bonds for which there is no lack of demand, and the greatest impact was on the London property market, raising prices beyond the reach of the locals.

Since 1990, the US has an employment-based program tailored for the wealthy entitled EB5. Under this program, 10,000 visas each year are reserved for investors to receive permanent residence status if they invest at least US$1 million (only $500,000 in high unemployment and rural areas) in a commercial enterprise that employs at least 10 full-time US workers.

Studies by trade groups estimate that the program contributed $3.39 billion to US GDP and resulted in 42,000 jobs in fiscal year 2012, while a more critical review of the EB5 program came to the conclusion that the visas are too cheap, the program is badly run and the bulk of the money goes to already overheated real estate markets.

An investigation by The New York Times documented the case of a 34-story glass tower in the middle of affluent Manhattan that was classified, through selective and creative use of census statistics, as a an area of high unemployment.

The total cost of the building was $750 million, with one-fifth coming from foreign investors seeking green cards through the EB5 program. More than four out of every five applicants of the 8,500 foreign investors now come from mainland China.

Competition for the super-rich

Other countries with favored immigration policies for the wealthy include Australia, with its Significant Investor Visa introduced in 2012, popularly known as the “golden ticket,” and Singapore’s Global Investor Program. Malaysia has a “Malaysia’s My Second Home” program tailored to rich retirees.

Much of Europe now counts as a single territorial unit in terms of freedom of movement and capital mobility. Some countries use their privileged position as entry points to sell access and citizenship.

In Latvia, for example, anyone who buys property worth at least 50,000 Lats (US$96,000) in provincial cities, and 100,000 Lats (US$192,000) in Riga, receives a five-year residency permit that allows them access to other countries in Europe. Since 2012, Portugal has a “golden visa” guaranteeing two-year residence in return for a 500,000 euro investment in real estate investment or a one million euro investment that creates 30 jobs. By March 2014, 542 visas were issued, with 433 going to Chinese applicants. In 2013, Spain and Greece adopted similar programs for real estate investments of 500,000 euros and 250,000 euros, respectively. The same year Hungary gave a residence permit in return for an investment of 250,000 euros and a payment to “partners” of the government for at least 40,000 euros. This is the same Hungary that has sought at times to block the flow of refugees from Syria and Iraq in recent weeks.

Malta proposed an Individual Investor Program that offered citizenship for a straight fee of 650,000 euros. After heavy criticism
both domestically and from European partners that the program was effectively selling European citizenship, the program was placed on hold, and then in November 2013 a revised program offered citizenship in return for 1,150,000 euros.

Indeed, the competition for the rich is creating a downward pressure on the price of entry. In 2012, Portugal offered 500,000 euros for residency; the next year, Greece asked for only 250,000 euros.

Trickle-down effect?

Even as rich countries review their policies, there is one thing that’s quite clear: the rich are on the move, and more states want to attract them. But does it make economic sense to offer financial incentives to attract them?

One of the claims for those who promote and support a “cash for citizenship” approach is that it provides benefits to the country, such as increased investment and new jobs. However, the countries courting the rich already have lots of willing investors, and few jobs can be directly related to the programs. There is no shortage of foreign investors for Manhattan office blocks, even without the extra allure of a green card. Most official reviews now come to the conclusion that the programs, hastily conceived in the rush to attract the newly wealthy citizens of Russia, China and other countries, are too cheap with few benefits for the host countries.

In the US, authorization of the the EB5 program, aimed at luring wealthy immigrants, runs out on September 30. The reauthorization tries to address the existing shortcomings with a wide-ranging reform of the initial program.

But despite the proposed changes and Congress' transparent attempt to wrap it up as a job creation and investment promotion, as the data clearly show, it a selling of citizenship for a program with very limited benefits to the nation. It is a program that deserves to die.



John Rennie Short, Professor, School of Public Policy, University of Maryland, Baltimore County

This article was originally published on The Conversation. Read the original article.