Creative Financing

After reading about some of the challenges and issues addressed in Emily Badger’s Atlantic City piece, I thought about the Denver non-profit, Living City Block.  The folks at Living City Block are also trying to navigate the tangled finance, legal, and governance structure, with the specific goal of enticing mid-size commercial businesses to be more energy efficient.  The idea is based on the premise that for most small buildings rarely have the resources to do a serious retrofit and the idea is “cost-prohibitive.”  Also, 5 percent of commercial building owners in the U.S. own small to mid-size properties, take up 45 percent of all the commercial square footage in the country, and consume an equally large share of America’s annual commercial energy use.  But they have developed a system in which small business/buildings could combine with similar buildings/business with the idea that if all of those building owners got together to order pay for efficiency measures in bulk (buy high-efficiency water heaters in bulk or to collectively replace one-thousand windows) they could achieve the kind of economies of larger buildings.  Basically, it’s a building association of neighbors, with a common goal.  Living City Block acquires the financing, and also pay for and coordinate all the retrofit work and the owners won’t pay for any of the retrofits. They’ll instead turn over their utilities to Living City Block.  So, for example, if a business was paying $100 a month to the electric company, they would instead be paying $90 to Living City Block.  Once the utility bill falls, both amounts would drop.  In return for the deal however, the building owner is loosing some control over their building.  The real challenge is in coordinating the building owners, utility providers, and interactions between the buildings, Living City Block, banks, and the City government.  Obviously there are still many questions with this model, Exactly how long will the contracts last? What happens if a property owner sells? What about buying out? Can individual improvements still be made apart from the Living City Block improvements? And how can Living City Block accommodate these concerns while still meeting the requirement of the banks that are supposed to be doing most of the financing? 

But it does offer an interesting model for grass-roots financing and for local business owners to instigate changes that may otherwise be out of their reach.  Especially if the model could be expanded to other localized improvements, and some of the uncertainties were answered.  


Gold is the New Green


So what does it mean that now, after all these years that it makes financial sense to consider things other than the bottom line? It is after all safe to say that big business is taking big steps to make even bigger profits by improving its environmental fitness.

To pick an easy target, let’s take a look at Wal-Mart. The once ignominious retailer, great smasher of small town character (or great vulture of struggling local economy, depending on your viewpoint) has been auditing its energy and waste streams for the past 6 or 7 years. As described by Lovins and Cohen in “The Way Out: Kick Starting Capitalism to Save Our Economic Ass,” they have also, and possibly more importantly, been holding their suppliers and vendors accountable for their own environmental responsibilities (p.29). And while these moves have positioned Wal-Mart into a new era of “sustainability,” it is still largely a response to market demand. Yes there is an expanding global awareness of our impacts on our environment, but is likely consumers’ seeking savings of their own that is driving the shift towards lower energy consumption. But big corporations and retailers like Wal-Mart continue to undermine small community values, creating only an illusion of success. Populations continue to grow and spread and what is left is still a society based on the model born of the automobile and raised on saving a buck.

So gold is the new green. That is to say large amounts of money can be made or saved by making environmentally responsible decisions. In fact, big time CEO’s are chomping at the bit to save the world. According to Peter Lacy and Rob Hayward of, in their article “Green is the New Gold” (confusing, I realize), big business is hungry for environmental stewardship. “The failure to establish a link between their sustainability initiatives and business value is the fastest-rising headache for CEOs—37 percent of those surveyed, to be precise, compared with 30 percent in 2010 and just 18 percent in 2007, the year of the first study.” If there is any sense of cynicism here it is because I am cynical. Green is not necessarily the new gold, but I surmise vice-versa. Either way, I am happy that the greater industry tide is shifting. It is in fact what has led us into many of the innumerable environmental wrongs of the past we are faced with righting today.

Addressing Climate Change – Change or Die?

I recently saw a bumper sticker claiming “Change or Die,” a statement popularized in a 2005 Fast Company feature article on organizational and behavioral change.


This concept is timely in light of the rhetoric, lingering controversy, and expanding research about climate change.

The Obama 2013 administration’s Climate Change Action Plan, is smoke in mirrors. It dodges the critical changes needed to modify our energy consumption patterns by championing energy efficiency and clean energy initiatives as major efforts combating climate change.



Yet these activities fall so far short of the significant economic and political changes needed to redress climate change as to be tragically inadequate. While these efforts are important, they are only a part – and arguably a relatively insignificant but politically feasible part – of necessary carbon emission reduction strategies.

While investment and support of expanded energy efficiency and renewable energy has its merits, more fundamental and harmonized changes are needed to achieve notable reductions in greenhouse gases. The Center for Strategic and International Studies’ (CSIS) Roadmap for a Secure, Low-carbon Economy (2009) argues for the need to reform incentive structures that influence carbon consumption – specifically to price carbon while concurrently investing in infrastructure improvements, energy efficiency, the clean-energy sector.

The administration’s Climate Change Action Plan reflects the political unattractiveness of more influential approaches to climate change, such as a carbon tax. Proponents of carbon tax, such as the Brookings Institute and the MIT Joint Program on the Science and Policy of Global Change, assert carbon taxes are the most efficient tool for stimulating the large-scale change needed to address climate change in a timely and substantive manner: a carbon tax would directly catalyze behavioral change at the individual, organizational, and institutional levels. Taxing carbon would also translate well across borders – something energy economy standards and regulations do not – and would have greater impact.

A tax on carbon might also reduce the need for costly and imperfect regulatory and assessment activities. The US EPA, for example, uses the Social Cost of Carbon (SCC) to evaluate the economic costs of the agency’s rulemakings from increases in carbon dioxide emissions. The SCC seeks to provide a comprehensive framework to estimate the negative impacts of climate change, but it suffers from complexity, controversy, and expense. An evaluation of the detrimental effects of carbon dioxide emissions seems misguided given the need to reduce carbon emissions is already well established (see the IPCC 2013 Climate Change Report and the UN Climate Change recommendations). The SCC has value as a tool to assess the impact of carbon emissions on socio-economic systems, but it is an inefficient and ineffective approach to stimulating reduction in carbon consumption.

 Why not use market forces to incentivize carbon reduction? The current carbon tax enacted in British Columbia has demonstrated net-positive economic and environmental – a reduction in carbon consumption and economic growth. The OECD’s Effective Carbon Prices report (2013) assesses the cost-effectiveness of policies to reduce GHG emissions and notes trading systems and carbon taxes as the most efficient policies to achieving this goal. The Brookings Institute supports the viability of a carbon tax, but claims the greatest impact on GHG reduction depends on targeted investment of carbon tax revenue in clean technologies. Effective climate change policies require appropriate carbon tax pricing combined with subsidies and direct investments in alternative fuel source research and development to “disrupt path dependencies and accelerate learning.” While a Change or Die slogan is sensational, the urgency of affecting real change in carbon consumption patterns should not be ignored. A tax on carbon is a step in the right direction. 

Grow, Drink, or Waste…

What will you do with your water?


This week my reading aligns on the topic of water so it’s a great time to explore it.  Usage, scarcity, and true cost are the components I’m going to address today. The importance of valuing fresh, drinkable water cannot be overstated.  About 70% earth is covered in water however, only .07% of that is fresh water.  Of that .07% of fresh water 70% of today’s water withdrawals are used in agriculture.

Access to fresh water isn’t distributed evenly on a global or national scale. Those that have access to fresh clean water on a daily basis don’t even have a true grasp on what our water is worth, let alone a willingness to pay that amount. Even in industrialized areas up to 50% of the water in domestic infrastructure systems can be lost in transmission. There has been discussion and stress over increasing water costs even as consumption decreases as well as reasoned opinions are voiced to sway the masses.

Where fresh water is located, how much it is used, and it what ways is the next step. Data and maps provided by the Sasi Group at the University of Sheffield and Mark Newman at the University of Michigan helps to illustrate this. The maps and data set can be found at World Mapper.


This map illustrates the undistorted shape of each county.


This first distorted map shows the proportion of worldwide water use in each country or area.


This second map shows the proportion of all water used that is more than 10% of the renewable internal freshwater resources of that territory.


Our third map shows the proportion of all water used for domestic purposes that was used within the region.


The fourth map represents the proportion of all water used for industrial purposes between 1987 to 2003.


The final map shows us the proportion of all water used for agricultural purposes from 1987 to 2003 in each region.

Looking at the trends shown in the SHI & UNESCO graph, from the Vital Water Graphics Report,  below we can see the increase in water use across all sectors and the dominance of agricultural use.


TruCost studied the Top 100 Externalities of Business and found an estimated US$1.9 trillion in cost caused by the global natural capital cost of water consumption.

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92% of these costs derive from the top 100 region-sectors concentrated in agriculture and water supply located in Asia and North America.  Part of the problem in quantifying these losses lies in the issue that water taken directly from the surface or groundwater supply is rarely paid for.

“The extent to which agricultural sectors globally do not generate enough revenue to cover their environmental damage is particularly striking from a risk perspective.”

The valuation for water ranges from $0.1 per m3 where water is relatively plentiful, to over $14 per m3 in areas of scarcity.  13 of the top 20 region sectors in water use all center around agricultural uses.

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The report shows the relationship between pricing and scarcity below.

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As we move forward in considering sustainable regional development an understanding of our where our food comes from and what that means in costs to the natural environment should be a piece of the puzzle.  So what do you want to do with the water we have… Grow, Drink, or Waste?

Rain Tax? New Frameworks to Protect Our Waterways


Hydrograph by J. David Rogers

Impervious surfaces have gained a lot of attention over the last decade. They are everywhere in our urban environment; from roads, to roofs, to parking lots. The high concentration of impervious surfaces in our cities accelerates the volume and speed of the rainwater causing flooding, erosion, pollution, and combined sewer overflows (CSOs). This hydrograph illustrates the difference in stormwater flows between pre-settlement and urbanized conditions, with a high speed and high volume peak.

Portland and Seattle are ahead of the curve in promoting low-impact development (LID) practices that slow, disperse and absorb rainwater where it falls to the ground.  Seattle now refers to these practices as green stormwater infrastructure (GSI). Portland uses the term “green streets” to describe many of the alternative measures that address stormwater in the right-of-way beyond traditional gray infrastructure (pipes and sewers). Many of these strategies are now being marketed to developers (see National Resource Defense Council graphic below).


National Resources Defense Council graphic from their report, “How Commercial Property Investment in Green Infrastructure Creates Value”



The Seattle Green Factor is a framework that has helped Seattle address stormwater runoff, since its introduction in 2006 by the Department of Planning and Development. This municipal code was the first of its kind in the U.S. and was based on Berlin’s Biotope Area Factor. It includes strategies such as green roofs, green walls, permeable paving, cisterns, bioretention cells and native plantings.

The Green Factor uses a scoresheet to calculate a score for new construction and each project must meet a minimum score based on zoning. It is a critical strategy for addressing urban stormwater that creates flexibility for developers to meet the code while contributing value and delight to urban built environment.

In 2009 both the Department of Planning and Seattle Public Utilities issued a “Director’s Rule” that clarifies requirements for implementing green stormwater infrastructure (GSI) to the maximum extent feasible (MEF) at the same time expanding the scope and updating the Green Factor code.

More recently, Portland continues to expand its commitment to reducing runoff from impervious surfaces, as steep Environmental Protection Agency (EPA) fines for every CSO (as much as $16,000 per daily violation) loom. In the fall 2013 the city established a progressive “stormwater fee.” It is designed to be more equitable because the fee is based on runoff quantity instead of being based on water usage. A similar fee is also being implemented in Maryland.

This type of framework could address existing properties impervious surface and work in concert with the Green Factor that addresses new construction projects. Together these types of measures create incentives for property owners to address runoff in whatever way that they see fit.

With the private and public sector working together on this issue, Seattle might have a chance a reaching the ambitious goal that former mayor Mike McGinn set in the spring of 2013. He issued an Executive Order setting the goal for Seattle to manage 700 million gallons of stormwater by 2025 using green stormwater infrastructure (GSI). By expanding the use of strategic frameworks, Seattle and Portland will continue to be leaders in protecting their waterways.

Environmental Stewardship & Economic Growth in Aberdeen

I was driving through Aberdeen this weekend for a work conference and got to thinking about the interesting relationship between environmental stewardship and economic growth.  Aberdeen and the surrounding communities were once part of a thriving economy, with most of that success attributed to timber companies like Weyerhaeuser.


It has been a couple of decades since the spotted owl controversy began.  Once the owl was named an endangered species, the timber industry in Grays Harbor largely came to an abrupt halt.  Suddenly, several plants around the area were closing down.  Workers were losing their jobs, and families were left destitute.  The economy in Aberdeen has never recovered and the spotted owl is still dying off.

This brings up a few questions: what could we have done differently to promote both the economy and the protection of the spotted owl in Aberdeen—since now, we are protecting neither?  Instead of an outright ban, maybe giving incentives for protecting certain areas would have been ideal.  Since the spotted owl is becoming more and more endangered, maybe the timber industry was not to blame.  I spoke with families who had lost their livelihood from this situation, and they never recovered.

It brings up the ideal of ethics and the environment.  It is a difficult relationship between the two, because both the environment and the economy are so critically important.  I was thinking of the nudges article in relation to this.  Maybe if Grays Harbor had taken part in an advertising campaign saying that spotted owl protection and economic growth through the timber industry were not mutually exclusive.  Or maybe if there were a wildlife refuge for these owls and timber could still be sustainably harvested in other areas.  I do not have a solution for this problem, but I find the relationship between environmental stewardship and economic growth and interesting one.

Oil, Water and James Bond

Oil and water don’t mix. But they are of such importance that both are featured in a James Bond film, as the next major international threat. In Quantum of Solace, Bond is seeking revenge for the death of his lover and stumbles upon Dominic Greene, a wealthy businessman and agent for the Quantum organization. In a dramatic opera-infused scene, Bond learns that Greene has been buying thousands of kilometers of oil pipeline in a quest to control the “world’s most precious resource.” In a previous scene, the CIA, having learned of Greene’s purchasing of oil pipeline, agrees to look the other way while he stages a coup d’état in Bolivia, in exchange for US buying rights for any oil discovered in Bolivia. The British government is also reluctantly in bed with Quantum, they are desperate for oil as the US and China gobble up the reserves in the Middle East.

After crashing landing an old plane in the Bolivian desert and taking cover in an elaborate cave, Bond stumbles upon a dammed river and an enormous underground reservoir and realizes that Quantum is actually after water; that water is the “world’s most previous resource.” By allowing the Americans and British to assume that they had found oil, Quantum quietly gained control of Bolivia’s water supply and created an artificial drought and exorbitantly high water prices for Bolivians.

Although obviously fictional, this environmental terrorism depicted in this film is relevant to thinking about the price of oil and water and their value as limited resources. That both the British and American governments were willing to makes deals with Greene for access to oil speaks to our dependence on oil. This and their inability to think outside of the typical energy-focused framework allowed Greene to secretly seize control of Bolivia’s water supply without drawing any suspicion. While an evil corporation does not threaten our water supply, water is a limited resource and the created drought depicted in Quantum of Solace could become very real. Finally, that the main twist in the film is that water, not oil is the “world’s most precious resource” speaks to the importance of creating legal and responsible methods for managing water’s usage.