This is my presentation held at the International Forum on Urban Policy for the Sustainable Development Goals, Seoul, 8-10 June 2016. See further: http://urbansdgplatform.org/seoulforum/overview.jsp
Mayors, distinguished guests, ladies and gentlemen,
It is an honour to present for such a diverse and knowledgeable audience.
My name is Jeroen van der Heijden. I am an associate professor at the Australian National University.
One of the topics I have studied extensively over the last years is the collaboration of government, citizens and businesses. The idea of collaboration, citizen participation, and business involvement in the transition to sustainable urban environments is at the core of many of the presentations and debates held at this Forum.
But how well does collaboration, citizen participation, and business involvement work in practice? And how can we make it work better? Those are the key questions that drove an international research project that I led between 2012 and 2015.
In this project I have studied more than 60 examples of governance innovations in India, Malaysia, Singapore, Korea, Australia, the Netherlands, and the United States.
Over the next 10 minutes, or so, I will briefly inform you about the key lessons of this project.
You will understand that I can only touch on the key insights in my presentation. But I am more than happy to discuss details during the Q and A, or after the session.
Brief outline of the presentation
The outline of this presentation is as follows. I will begin with setting the scene. Why do we see so many governance innovations for increased urban sustainability and resilience around the globe?
I will then present three examples from my international study. These are the better performing examples I have come across.
One of the take home lessons of my research project is that whilst the 60 or so examples that I have studied have resulted in many best practices, the majority of them face the problem of scale and speed. They have not yet been able to speed up the transition to sustainable and resilient urban environments on a large scale. I will spend some time explaining why this is.
From here on I draw conclusions about how to move forward with these governance innovations.
Why the move to governance innovations?
To be able to understand the solution chosen, we must understand the problem. So why the turn to governance innovations? Well, there are many reasons. But three of them recur in most countries that I have studied.
First is that traditional top-down government-led legislation, such as planning legislation and building regulation require much institutional capital. Governments require well trained staff to develop and enforce these. Often they do not have sufficient institutional capital.
Second is the problem of today’s buildings, infrastructure and cities. When governments introduce new top-down interventions they often exempt the buildings, infrastructure and city districts that have already been built. This means that the environmental problems caused by today’s cities will not be solved with the regulatory interventions of tomorrow.
Third is that governments, when it comes to cities, tend to regulate objects and not behaviour. Yet, changing people’s behaviour is equally important as using the latest technology if we want to achieve truly sustainable cities.
So how to move forward?
Towards governance innovations
Acknowledging these problems, governments around the globe have begun to work together with citizens and businesses to develop innovative governance instruments. The set of 60 examples that I have studied can roughly be clustered in three types.
First are alternative regulatory instruments. A typical example is Green Mark in Singapore. Like traditional building regulation, Green Mark states requirements that a building has to meet. But, contrary to traditional building regulation it does not set a single bottom line requirement. It has in place different performance levels.
Property developers and property owners are incentivised to meet the higher performance levels within Green Mark. This is done through certification and classification of their buildings. The higher the level of performance, the higher the class of certification. The certification can be used by property developers and property owners to market the performance of their buildings to their clients.
In short, instead of mandating bottom line performance through traditional building regulation, Green Mark seeks to incentivise high levels of performance through positive incentives. Positive incentives are key in these alternative regulatory instruments.
A second example is the Better Buildings Partnership in Sydney. This is an action network led by the City of Sydney Government. It brings together the City Government with the city’s fourteen major property owners. Together they own more than 50 percent of commercial property in the central business district of Sydney.
The City Government understood that if these fourteen property owners would reduce the carbon emissions of their buildings the city as a whole would achieve considerable reductions at city level. However, the individual property owners had little incentive to make changes.
The City of Sydney therefore brought them together in an elite network and works with them to develop knowledge on how to improve the resource sustainability of their buildings. Through peer pressure, sharing of knowledge, and, very importantly, acknowledging their performance the City of Sydney has helped these property owners to reduce the emissions of their buildings with 70 per cent by 2030 as of 2006 emissions. This is truly outstanding performance, and shows what can be done if governments and private sector organisations begin to work together.
The Building Retrofit Loans here in Seoul make for a third example. It is exemplary of a broader trend of innovative financing models that gains traction around the globe.
In short, property owners, whether they are major corporations or average households, often cannot find funds for sustainable building development or improvement of existing buildings. Banks are hesitant to provide funds as they still think the business case for green buildings and infrastructure has not been made convincingly.
In instruments such as the Building Retrofit Loans here in Seoul governments step in and provide funds for sustainable building development and retrofits. They do so by directly providing low interest loans, as under the Building Retrofit Loan. Or by acting as a middleman between banks and property owners. They then act to take away the risks that banks experience.
These are but three examples of what is possible if governments are brave and work together with citizens and businesses in governing the transition to sustainable and resilient cities.
But what is the overall performance of all these innovations?
The problem of scale and speed
I already flagged out that these three examples were the better performing ones in the set of over 60 examples that I have studied. Most of the ones I have studied face complications in market uptake. They often see a very slow uptake of only 1 to at best 15 percent of the market they address, but then hit a wall. They attract the leaders, but then do not spill over to the laggards.
What might explain this lack of transformative power of these innovative governance instruments, I wondered.
The answer to that question goes somewhat against our intuition. Ideally you want a market uptake as illustrated by the yellow line in this figure. First you attract the leaders. They then inspire the early adopters. They on their turn motivate the early majority to use the innovation. And so on.
Yet, this ideal market diffusion works in a market that is very homogenous. Now look at cities, and particularly the development and property sectors. They are all but homogenous. We have major development corporations, and one-man firms. We have multi-billion-dollar property managers, and we have families owning an apartment. They are all very, very different.
And that is indeed a part of the answer to the problem I identified. The innovative governance instruments seem of interest to the leaders in the development and property and development sectors, but not the rest. That partly explains the chasm in their uptake.
Interestingly, this is directly related to how governments tend to market these governance innovations. They market them with a single leadership narrative. With rewarding leadership. With talks about how important it is to be a leader in the sector.
But not everyone wants or can be a leader.
So, to increase the performance of these governance innovations I think we need different narratives. One is to attract leaders and set the example, the other is about a new social norm for the remaining 85 per cent of citizens and businesses. And most likely more than two narratives are necessary if we want to be responsive to the heterogeneity of cities.
So how to move forward with these governance innovations?
If we take a step back and reflect on my presentation we see that both traditional governance instruments such as planning legislation and building codes come with limitations, as do the governance innovations that I have just talked about.
I therefore think that one of the solutions is to begin thinking about hybrids. Instruments that bring together traditional mandatory requirements with voluntary performance. Green Mark in Singapore is a typical example of this approach.
A second solution is to move from the current system of opting-in to these governance innovations, to opting-out of them. Let me explain. Most of the governance innovations that I have studied invite citizens and firms to participate. To opt in. Yet, for many citizens and firms opting in might be too high a barrier in the first place. They do not have time. They have never heard of the innovation. And so on.
So what about voluntarily opting out? To give an example. How about we offer everyone who buys an apartment or other building an additional loan to improve the energy efficiency of their property. They may turn this down if they want to. “Opting out”, meaning that they have choice. But the default option is that they get it. From behavioural economics we have learned over the last decade that changing the default in this way often results in better outcomes.
A third novel way of using governance innovations is to use them in rolling rule regimes. In rolling rule regimes we would consider governance innovations as temporary experiments for the development of more formal mandatory requirements. Say, for a period of five years we experiment with an action network like the Better Buildings Partnership and after five years we make the best practices from the experiment mandatory in our planning legislation and building codes.
A new round of experimentation can be started after those five years, and so on. This would result in evidence based regulation that pushes the laggards to follow the leaders, whilst at the same time it rewards the leaders for their leadership.
Those are in a nutshell the key findings from my work. Yes, governance innovations based on collaboration and participation may result in increased sustainability and resilience at city level. But only if we use them in a smart way.
I am more than happy to discuss this more during the Q and A. Feel free to ask questions after this session also, or get in touch also via email.
Thank you for your attention.
Thanks to Dr. Kwon Young Sang, Seoul National University, for the photo.