By Parul Tewari, IIASA Science Communication Fellow 2017
Mexico City has been experiencing a major water crisis in the last few decades and it is only getting worse. To keep the water flowing, the city imports large amounts of water from as far as 150 kilometers.
Not only is this energy-intensive and expensive, it creates conflict with the indigenous communities in the donor basins. Over the last decade, a growing number of these communities have been protesting to reclaim their rights to water resources.
The ancient city of Tenochtitlan as depicted in a mural by Diego Rivera
(cc) Wikimedia Commons
As part of the 2017 Young Scientists Summer Program at IIASA, Francine van den Brandeler studied the struggle that Mexico City is facing as it tries to provide water to its growing population and expanding economy. Local aquifers have been over-exploited, so water needs to be imported from distant sources, with high economic, social, and environmental impacts. Van den Brandeler’s study assesses the effectiveness of water use rights in promoting sustainable water use and reducing groundwater exploitation in the city.
“A few centuries back, Tenochtitlan, the place where Mexico City stands today, was known as the lake city,” says Van den Brandeler. The Aztecs had developed a sophisticated system of dikes and canals to manage water and mitigate floods. However, that changed quickly with the arrival of the Spaniards, who transformed the natural hydrology of the valley. As the population continued to grow over the next centuries, providing drinking water became an increasing challenge, along with controlling floods. As the lake dried up, people pumped water from the ground and built increasingly large infrastructure to bring water from other areas.
Communities from lower-income groups, living in informal settlements on the outskirts of the metropolitan region are more vulnerable to this scarcity. Many live on just few liters of water every day, and do not have access to the main water supply network, instead relying on water trucks which charge several times the price of water from the public utility.
“In wealthier areas people consume much more than the average European does every day. It is a question of power and politics,” says van den Brandeler. “The voices of marginalized communities go unheard.”
Many people rely on delivery service for drinking water.
© Angela Ostafichuk | Shutterstock
The more one learns about the situation, the more complicated it becomes. The import of water started in the 1940’s. But with a massive increase in population in the last couple of decades, the deficits have become much worse.
The government’s approach has been to find more water rather than rehabilitating or reusing local surface and groundwater sources, or increasing water use efficiency, says van den Brandeler. Therefore wells are being drilled deeper and deeper—as much as 2000 meters into the ground—as the water runs out.
Some people have started initiatives to harvest rainwater, but it is not considered a viable solution by those in charge. “A lot of it has to do with their worldview and general paradigm. The people working at the National Water Commission and the Water Utility of Mexico City have been trained as engineers to make large dams and put pipes in the ground. They don’t believe in small-scale solutions. In their opinion when millions of people are concerned, such solutions cannot work,” says van den Brandeler.
Although the city gets plenty of rain during the rainy season, it goes directly into the drainage system which is linked to the sewage system. This contaminates the water, making it unusable. At the same time, almost 40% of the water in Mexico City’s piped networks is lost due to leakages.
Policy procedures and institutional functioning also remain top-down and opaque, van den Brandeler has found. One of the policy tools for curbing excess water use are water permits for bulk use, for agriculture, industry, or public utilities supplying water. Introduced in the 1940s, lack of proper enforcement has created misuse and conflicts.
For example, while farmers also require a permit that specifies the volume of water they may use each year, they do not pay for their water usage. However, it is difficult to monitor if farmers are extracting water according to the conditions in the permit. Since they do not pay a usage fee, there is also less incentive for the National Water Commission to monitor them. As a result, a huge black market has cropped up in the city where property owners and commercial developers pay exorbitant prices to buy water permits from those who have a license. Since the government allows the exchange of permits between two willing parties, they make it appear above-board. However, it has contributed to the inequalities in water distribution in the city.
With the water crisis worsening every year, Mexico City needs to find a solution before it runs out of water completely. Van den Brandeler is hopeful for a better future as she studies the contributing factors to the problem. She hopes that the water use permits are better enforced and users are given stronger incentives to respect their allocated water quotas. Further, if greater efforts are made within the metropolis to repair decaying infrastructure and scale up alternatives such as rainwater harvesting and wastewater reuse, the city won’t have to look at expensive solutions if adopted in a decentralized manner.
About the Researcher
Francine van den Brandeler is a third year PhD student at the University of Amsterdam in Netherlands. Her research is on the spatial mismatches between integrated river basin management and metropolitan water governance – the incompatibility of institutions and biophysical systems-, which can lead to fragmented water policy outcomes. Fragmented decision-making cannot adequately address the issues of sustainability and social inclusion faced by megacities in the Global South. She aims to assess the effectiveness of policy instruments to overcome this mismatch and suggest recommendations for policy (re)design. At IIASA she was part of the Water Program and worked under the supervision of Sylvia Tramberend and Water Program Director Simon Langan.
This article gives the views of the author, and not the position of the Nexus blog, nor of the International Institute for Applied Systems Analysis.
Shalini Randeria, a sociologist and social anthropologist focused on legal pluralism and global inequalities, is the Rector of the Institute for Human Sciences (IWM) in Vienna and an IIASA Distinguished Visiting Fellow. On 9 March, she gave a keynote lecture in Vienna entitled, “Precarious livelihoods, disposable lives, and struggles for citizenship rights,” as part of the IIASA-Austrian Academy of Sciences public event, Human Capital, Geopolitical Complexities, and our Sustainable Future.
Q. Why do you say that globalization is full of contradictions?
A. We are living in paradoxical times. The global spread of democracy has gone hand in hand with the erosion of its substance. Decisions once made by national parliaments are now made by supranational institutions, reducing the say of citizens in public decision-making. As people feel disenfranchised, trust in our governments fades. Sometimes going to court seems to be the only way to make governments accountable to citizens. This development not only expands the power of the judiciary but also politicizes it.
What role does globalization play in the inequality between Global North and Global South?
Neo-liberal economic restructuring has increased inequalities between countries but also within each society. We are witness today to an unprecedented concentration of income and wealth, which is not an unforeseen consequence of economic globalization but the result of deliberate public policies. The global South, however, is no longer a geographical category. Greece is an example of European country dependent on international finance institutions in much the same way that once so-called developing countries were.
Shalini Randeria © IWM / Dejan Petrovic.
You say that economic and political processes render some lives disposable – what do you mean by that?
Take India for instance: since the country’s independence in 1947, every year some 500,000 people—mostly small farmers, agricultural workers, fishing and forest-dwelling communities —have been forcibly displaced to make room for gigantic infrastructure projects. They have become development refugees in their own country. These people are regarded as ‘dispensable’ by the state in the sense that their livelihoods are destroyed, their lives disrupted, and they are denied access to common property resources. These populations are the human waste that is sacrificed at the altar of an unsustainable model of incessant economic growth.
The Sustainable Development Goals (SDGs), adopted last year, include aims to end poverty, ensure access to employment, energy, water, and reduce inequality, at the same time as preserving the environment. What challenges do you see for achieving these goals?
The SDGs will prove to be an important milestone, if they are implemented the world over. Some of these goals are in conflict with one another. Take the protection of biodiversity, for example, which is often constructed as an antagonistic relationship between society and nature In the new global regime of biodiversity consveration, nature is portrayed as self-regulating, as a pristine, uninhabited wilderness that is threatened due to the wasteful resource use by local populations. Thus access and traditional usufruct rights are curtailed, and indigenous knowledge is devalued and marginalized. The (post)colonial transformation of landscapes into “environment,” “natural resources,” and “biodiversity” has enclosed the commons in most regions of the global South and often commercialized them.
The idea of the Global Commons as spaces and resources that all have access to and also have the responsibility to protect is a useful one in this context. The oceans are but one example of the global commons that include water, forests, or air, which are all being increasingly privatized. The Global Commons also include common resources developed by humans such as virtual data, knowledge, computer software, and medication..
What needs to be done by international institutions to make significant progress in achieving the SDGs?
Eliminating poverty will need an understanding of it that goes beyond a merely economic one. One will need to take into account possibilities of democratic participation, access to public goods and infrastructure, as well as civil rights and a restoration of a plurality of livelihoods. But these institutions also need to be reformed as they have a serious democracy deficit, be it the EU or the Bretton Woods institutions. Unaccountability of international institutions and powerful corporations along with stark asymmetries of power between these and the nation-states characterizes the new architecture of global governance, which need to be remedied urgently if we are to realize global justice.
Note: This article gives the views of the interviewee, and not the position of the Nexus blog, nor of the International Institute for Applied Systems Analysis.
By Wolfgang Lutz, IIASA World Population Program Director and Founding Director of the Wittgenstein Centre for Demography and Global Human Capital (Originally published on the World Economic Forum Agenda Blog.)
Few people would dispute the importance of education in our lives and those of our children. For good reasons, in virtually all industrialized countries, education is compulsory for everybody for at least 10 years.
In developing countries, however, 780 million women and men remain illiterate. Moreover, about 60 million children of school age are not at school.
Yet instead of making a concerted global effort to bring all children to school, less than 4% of official development assistance funds basic education. Over the past seven years, UNESCO and UNICEF report a decline in basic education.
Many think education is an aspect of social development that comes as a by-product of economic growth. This is wrong. Education is an absolutely necessary precondition of economic development.
Bill Clinton’s famous mantra, “It’s the economy, stupid!”, may be a useful slogan for an election campaign, but it is misleading in setting the priorities for sustainable development. It’s not primarily the economy, nor money, that makes the world go round and determines progress in human well-being. Much more important than the content of people’s wallets is the content in their heads. And what is in our heads is formed and enhanced by education which, in turn, helps fill the wallets, improves health, improves society and the quality of institutions, strengthens resilience at all levels and even makes people happier.
I could discuss the ample scientific statistical analysis to prove the transformative role of education in development. But more convincing may be historical success stories.
Finland was one of the poorest corners of Europe in the late 19th century. In 1868-1869 it suffered the last great famine in Europe not induced by political events. Almost half of the children died in this hopelessly underdeveloped and poorly educated economy based on subsistence agriculture.
After that tragedy, the Lutheran Church, supported by the government, launched a radical education campaign: young people could marry only after they passed a literacy test. The number of elementary school teachers increased by a factor of 10 over just three decades and by the beginning of the 20th century all young men and women in Finland had basic education. In 1906 Finland was the first country in Europe to grant women the right to vote and the subsequent economic development, based primarily on human capital, made Finland one of the world’s leaders in technology, innovation and, as a result, competitiveness.
In the early 1960s, Mauritius was a textbook case of a country stuck in the vicious circle of high-population growth, poverty and environmental destruction. Following the advice of scientists such as James Meade, the government launched a (strictly voluntary) family planning programme together with a huge push on female education. This led to rapid fertility decline plus economic growth, first through the textile industry based on semi-skilled female workers, then in upmarket tourism and more recently in banking and high-tech information technology. Mauritius is the only such success story in sub-Saharan Africa. The country managed to escape the vicious circle of poverty and underdevelopment through investment in human capital.
University students in Malaysia. © Nafise Motlaq / World Bank
Japan, Singapore, South Korea and finally China have similar stories but the timing is different. The Chinese experience shows that such success is not confined to remote and tiny island or city states. The highly elitist appreciation of education in Confucian tradition became transformative for the country once it was combined with the (originally) protestant approach of a broad-based education. Again, these countries built their stunning success stories primarily on improvements in human capital and without significant raw materials or international assistance. Economic growth followed the education expansion.
There is little doubt about the cause and effect between education and human well-being. Neurological research shows that every learning experience builds new synapses making our brains physiologically different for the rest of our lives. Education expands the personal planning horizon and leads to more rational decisions and less fatalism. It clearly empowers people to access more information, contextualize it and make conclusions that are more conducive to personal and societal well-being.
Well educated people are better at adopting good habits such as physical exercise, safe sex or quitting smoking. Education has many other effects on health from lowering child mortality to postponing disability and cognitive decline in old age, besides the commonly cited effects on income and employment. There is even the surprising finding that education makes people happier despite the fact of making them more aware of potential problems. Unsurprisingly, universal education reduces vulnerability to natural disasters and helps people adapt to climate change.
About a decade ago, I discussed some of this evidence with the Nobel laureate Gary Becker. He said: “Well, when I think about it, I cannot think of anything for which I rather would be less educated than more educated.”
Now we need to educate the economists and policy-makers to make it a much higher priority in the development agenda.
Note: This article gives the views of the author, and not the position of the Nexus blog, nor of the International Institute for Applied Systems Analysis.
By Armon Rezai, Vienna University of Economics and Business Administration and IIASA,
and Rick van der Ploeg, University of Oxford, U.K., University Amsterdam and CEPR
The biggest externality on the planet is the failure of markets to price carbon emissions appropriately (Stern, 2007). This leads to excessive fossil fuel use which induces global warming and all the economic costs that go with it. Governments should cease the moment of plummeting oil prices and set a price of carbon equal to the optimal social cost of carbon (SCC), where the SCC is the present discounted value of all future production losses from the global warming induced by emitting one extra ton of carbon (e.g., Foley et al., 2013; Nordhaus, 2014). Our calculations suggest a price of $15 per ton of emitted CO2 or 13 cents per gallon gasoline. This price can be either implemented with a global tax on carbon emissions or with competitive markets for tradable emission rights and, in the absence of second-best issues, must be the same throughout the globe.
The most prominent integrated assessment model of climate and the economy is DICE (Nordhaus, 2008; 2014). Such models can be used to calculate the optimal level and time path for the price of carbon. Alas, most people including policy makers and economists view these integrated assessment models as a “black box” and consequently the resulting prescriptions for the carbon price are hard to understand and communicate to policymakers.
© Cta88 | Dreamstime.com
New rule for the global carbon price
This is why we propose a simple rule for the global carbon price, which can be calculated on the back of the envelope and approximates the correct optimal carbon price very accurately. Furthermore, this rule is robust, transparent, and easy to understand and implement. The rule depends on geophysical factors, such as dissipation rates of atmospheric carbon into oceanic sinks, and economic parameters, such as the long-run growth rate of productivity and the societal rates of time impatience and intergenerational inequality aversion. Our rule is based on the following premises.
- First, the carbon cycle dynamics are much more sluggish than the process of growth convergence. This allows us to base our calculations on trend growth rates.
- Second, a fifth of carbon emission stays permanently in the atmosphere and of the remainder 60 percent is absorbed by the oceans and the earth’s surface within a year and the rest has a half-time of three hundred years. After 3 decades half of carbon has left the atmosphere. Emitting one ton of carbon thus implies that is left in the atmosphere after t years.
- Third, marginal climate damages are roughly 2.38 percent of world GDP per trillion tons of extra carbon in the atmosphere. These figures come from Golosov et al. (2014) and are based on DICE. It assumes that doubling the stock of atmospheric carbon yields a rise in global mean temperature of 3 degrees Celsius. Hence, the within-period damage of one ton of carbon after t years is
- Fourth, the SCC is the discounted sum of all future within-period damages. The interest rate to discount these damages r follows from the Keyes-Ramsey rule as the rate of time impatience r plus the coefficient of relative intergenerational inequality aversion (IIA) times the per-capita growth rate in living standards g. Growth in living standards thus leads to wealthier future generations that require a higher interest rate, especially if IIA is large, because current generations are then less prepared to sacrifice current consumption.
- Fifth, it takes a long time to warm up the earth. We suppose that the average lag between global mean temperature and the stock of atmospheric carbon is 40 years.
We thus get the following back-of-the-envelope rule for the optimal SCC and price of carbon:
where r = ρ+ (IIA-1)x g. Here the term in the first set of round brackets is the present discounted value of all future within-period damages resulting from emitting one ton of carbon and the term in the second set of round brackets is the attenuation in the SCC due to the lag between the change in temperature and the change in the stock of atmospheric carbon.
Policy insights from the new rule
This rule gives the following policy insights:
- The global price of carbon is high if welfare of future generations is not discounted much.
- Higher growth in living standards g boosts the interest rate and thus depresses the optimal global carbon price if IIA > 1. As future generations are better off, current generations are less prepared to make sacrifices to combat global warming. However, with IIA < 1, growth in living standards boosts the price of carbon.
- Higher IIA implies that current generations are less prepared to temper future climate damages if there is growth in living standards and thus the optimal global price of carbon is lower.
- The lag between temperature and atmospheric carbon and decay of atmospheric carbon depresses the price of carbon (the term in the second pair of brackets).
- The optimal price of carbon rises in proportion with world GDP which in 2014 totalled 76 trillion USD.
The rule is easy to extend to allow for marginal damages reacting less than proportionally to world GDP (Rezai and van der Ploeg, 2014). For example, additive instead of multiplicative damages resulting from global warming gives a lower initial price of carbon, especially if economic growth is high, and a completely flat time path for the price of carbon. In general, the lower elasticity of climate damages with respect to GDP, the flatter the time path of the carbon price.
Calculating the optimal price of carbon following the new rule
Our benchmark set of parameters for our rule is to suppose trend growth in living standards of 2 percent per annum and a degree of intergenerational aversion of 2, and to not discount the welfare of future generations at all (g = 2%, IIA = 2, r = 0). This gives an optimal price of carbon of $55 per ton of emitted carbon, $15 per ton of emitted CO2, or 13 cents per gallon gasoline, which subsequently rises in line with world GDP at a rate of 2 percent per annum.
Leaving ethical issues aside, our rule shows that discounting the welfare of future generations at 2 percent per annum (keeping g = 2% and IIA = 2) implies that the optimal global carbon price falls to $20 per ton of emitted carbon, $5.5 per ton of emitted CO2, or 5 cents per gallon gasoline.
If society were to be more concerned with intergenerational inequality aversion and uses a higher IIA of 4 (keeping g = 2%, r = 0), current generations should sacrifice less current consumption to improve climate decades and centuries ahead. This is why our rule then indicates that the initial optimal carbon price falls to $10 per ton of carbon. Taking a lower IIA of one and a discount rate of 1.5% per annum as in Golosov et al. (2014) pushes up the initial price of carbon to $81 per ton emitted carbon.
A more pessimistic forecast of growth in living standards of 1 instead of 2 percent per annum (keeping IIA = 2, r = 0) boosts the initial price of carbon to $132 per ton of carbon, which subsequently grows at the rate of 1 percent per annum. To illustrate how accurate our back-of-the-envelope rule is, we road-test it in a sophisticated integrated assessment model of growth, savings, investment and climate change with endogenous transitions between fossil fuel and renewable energy and forward-looking dynamics associated with scarce fossil fuel (for details see Rezai and van der Ploeg, 2014). The figure below shows that our rule approximates optimal policy very well.
The table below also confirms that our rule also predicts the optimal timing of energy transitions and the optimal amount of fossil fuel to be left unexploited in the earth very accurately. Business as usual leads to unacceptable degrees of global warming (4 degrees Celsius), since much more carbon is burnt (1640 Giga tons of carbon) than in the first best (955 GtC) or under our simple rule (960 GtC). Our rule also accurately predicts by how much the transition to the carbon-free era is brought forward (by about 18 years). No wonder our rule yields almost the same welfare gain as the first best while business as usual leads to significant welfare losses (3% of world GDP).
Transition times and carbon budget
||Fossil fuel Only
|Business as usual
Recent findings in the IPCC’s fifth assessment report support our findings. While it is not possible to translate their estimates of the social cost of carbon into our model in a straight-forward manner, scenarios with similar levels of global warming yield similar time profiles for the price of carbon.
Our rule for the global price of carbon is easy to extend for growth damages of global warming (Dell et al., 2012). This pushes up the carbon tax and brings forward the carbon-free era to 2044, curbs the total carbon budget (to 452 GtC) and the maximum temperature (to 2.3 degrees Celsius). Allowing for prudence in face of growth uncertainty also induces a marginally more ambitious climate policy, but rather less so. On the other hand, additive damages leads to a laxer climate policy with a much bigger carbon budget (1600 GtC) and abandoning fossil fuel much later (2077).
In sum, our back-of-the-envelope rule for the optimal global price of carbon and gives an accurate prediction of the optimal carbon tax. It highlights the importance of economic primitives, such as the trend growth rate of GDP, for climate policy. We hope that as the rule is easy to understand and communicate, it might also be easier to implement.
Dell, Melissa, Jones, B. and B. Olken (2012). Temperature shocks and economic growth: Evidence from the last half century, American Economic Journal: Macroeconomics 4, 66-95.
Foley, Duncan, Rezai, A. and L. Taylor (2013). The social cost of carbon emissions. Economics Letters 121, 90-97.
Golosov, M., J. Hassler, P. Krusell and (2014). Optimal taxes on fossil fuel in general equilibrium, Econometrica, 82, 1, 41-88.
Nordhaus, William (2008). A Question of Balance: Economic Models of Climate Change, Yale University Press, New Haven, Connecticut.
Nordhaus, William (2014). Estimates of the social cost of carbon: concepts and results from the DICE-2013R model and alternative approaches, Journal of the Association of Environmental and Resource Economists, 1, 273-312.
Rezai, Armon and Frederick van der Ploeg (2014). Intergenerational Inequality Aversion, Growth and the Role of Damages: Occam’s Rule for the Global Carbon Tax, Discussion Paper 10292, CEPR, London.
Stern, Nicholas (2007). The Economics of Climate Change: The Stern Review, Cambridge University Press, Cambridge.
Note: This article gives the views of the authors, and not the position of the Nexus blog, nor of the International Institute for Applied Systems Analysis.
Tarja Halonen was the 11th President of the Republic of Finland and Finland’s first female head of state from 2000 to 2012. She currently serves as the Co-Chair of the UN High-level Panel on Global Sustainability, and the Chair of the Council of Women World Leaders. She is also a member of the high-level reflection group, the Alpbach-Laxenburg Group.
“Being poor does not mean that you are stupid; it sometimes demands a lot of intelligence to survive if you are poor. It is very important to take these issues seriously and our primary focus should be the empowerment of people.” – Tarja Halonen at the 2014 Alpbach Forum
IIASA: How have you been involved in the formation of the Sustainable Development Goals? Why is this process important?
TH: I have been involved in this process since the development of the Millennium Development Goals, and I consider that it is very important that we continue to work for these principles after the implementation of the millennium goals has ended in 2015.
In spite of all of their weaknesses the Millennium Development Goals were important goals, informing the knowledge and expectations that we have regarding sustainable development and a global climate agreement or commitment. To me, the post-2015 Agenda and the Sustainable Development Goals, are perhaps the most important guarantee for the future of the world.
What is different about the approach of the Alpbach-Laxenburg Group?
We have said many times—and many world leaders agreed at Rio+20—that it is time to stop working in silos. We need a multidimensional approach, where academia, politicians, business, civil society, and also NGOs are involved. This is where the Alpbach-Laxenburg Group is so important. I think that this group is an effort to address that need, and I hope that by bringing together the various areas of society we can address the great social injustices in the world. It is not only the business of scientists what happens in the world. It is not just someone else’s problem: everyone needs to be involved in the process.
How do you hope to see the issues of gender inequality reflected in the group?
In 2012 I was co-chair of a report entitled “Resilient People, Resilient Planet: A Future Worth Choosing” for the UN Secretary General, as part of my role on the High-level Panel on Global Sustainability. While compiling this report we noticed that there are a lot of resources that are overused and which cause problems. However, what is underused is human capital.
There are three categories we should focus on: the poor, youth and women. Of course all of these groups are very important to include. But for women, inequality is a lifelong story that you cannot get rid of.
It is very important to take these issues seriously and implement measures to change the status quo. I have already tried in many ways, and of course the Council of Women World Leaders has already done a lot of work which I am very thankful for. I am also very proud of Michelle Bachelet, current President of Chile, and the first Under-Secretary General and Executive Director of UN Women, who has led work on the empowerment of women at all levels. We need to make an effort to strengthen gender and women’s rights as part of the post-2015 goals. There are many similar attempts to raise this issue but I hope this group can make it a stronger voice.
-Interview by Philippa Brooks, IIASA Communications Manager, during the 2014 European Forum Alpbach
Note: This article gives the views of the interviewee, and not the position of the Nexus blog, nor of the International Institute for Applied Systems Analysis.