Division and belligerence are now par for the course in a deeply divided American Congress, but while the political fault lines appear to be ever widening, there are still some significant shows of bipartisanship that provide us with some hope for the future.

Take a recent piece of bipartisan legislation that ensures federal funding to combat harmful algal blooms—just signed into law by the President. With political theatrics dominating most column inches, many of these critical environmental stories born from congressional collaboration receive scant coverage. You will be forgiven for having missed it.

Nevertheless, this legislation matters greatly and should provide inspiration for future Canadian environmental policy.

The new law reauthorizes the Harmful Algal Bloom and Hypoxia Research and Control Amendments Act of 2013, allowing federal funds to be released to combat algal blooms deemed of “national significance.” Further, it provides funding for scientific research into the causes and impacts of algal blooms, with a complete national assessment required at least every five years.

This is a clear signal America is taking its algal blooms problem seriously.

From Lake Erie in the north, to the Floridian coasts in the south, Americans have experienced the economic, environmental and health impacts of harmful algal blooms on their doorstep, and have decided to take action.

Often mistakenly underestimated as mere eyesores, algal blooms can significantly affect the health of the flora and fauna of water bodies, and can prove harmful to those who drink it or even inhale its toxins from the air—including humans.

Such is the expanse of the United States that a federal response is necessary, given algal blooms are the product of complex, wide-ranging networks of inflows and watersheds, most of which span multiple American states and cannot be neatly localized into one jurisdiction.

Sound familiar?

In Canada, we suffer from similar ills. Half of perennially algae-infested Lake Erie is situated in Canada, while Lake Winnipeg has long been the poster child for Canada’s algal bloom problem. Similarly, Canadian tourism suffers due to closed beaches and health warnings, and billions of provincial dollars are zapped up trying to combat the issue locally.

Much like the United States, our algae-infested waters are products of many activities from multiple jurisdictions. Consider, for example, the Lake Winnipeg watershed, which spans no fewer than four Canadian provinces and three American states.

A federal mechanism in Canada, allowing local jurisdictions to flag significant flourishes of algal blooms to the federal government, which could then release funds from its coffers to tackle it, would be the only logical way to address this transboundary issue.

Further, the new law’s provision for new research and regular assessment of the state of algal blooms in the country is equally necessary in Canada. While there is some exciting Canadian research being conducted into what causes algal blooms, an allocated federal pot for that type of science would yield even more significant and useful findings.

As the impact of climate change only continues to intensify, algal blooms will prove to be more of an environmental hazard in North America. Canada should proactively safeguard its abundant freshwater supplies by taking algal blooms seriously and treating them as a national issue.

It seems as though a recent bipartisan success story in Congress could prove to be just the blueprint.

This article first appeared in The Hill Times on March 11, 2019.

India, the world’s third-largest energy consumer is undergoing a clean energy transition.

This transition must not only advance climate commitments but also development needs and economic priorities. This is a delicate balancing act. As we tread this tightrope, introduction of new macroeconomic policies could add further complexities.The goods and services tax (GST), introduced in July 2017, is one such example. The GST removed tax exemptions offered previously to solar photovoltaic (PV) and added much uncertainty during the first year of its introduction. How has the GST implementation impacted the cost of solar PV power?

According to a recent study published by the Council on Energy, Environment and Water (CEEW) and the International Institute for Sustainable Development (IISD), the introduction of GST has led to an increase in cost of generation of solar power by almost 6 per cent, while simultaneously reducing the cost of coal-based thermal power by nearly 2 per cent for existing plants.

Overall, it appears that the GST has implicitly widened the gap between coal-based power and solar PV, which has otherwise narrowed in the past few years, and could delay the onset of much needed ‘parity’ between the two sources. Combined with the imposition of safeguards duty (making majority of the PV panels used expensive) and the cap on solar power tariffs, the GST impact may have a bearing on profitability of companies in the sector.

Renewables deserve preferential treatment

The utility-scale solar power projects have become increasingly cost competitive against conventional energy sources. The scaling back of tax exemptions for solar PV under the GST regime and plans to further reduce subsidy support to renewables, suggests that the sector has already achieved critical mass to compete on its own merit.

Yet, it is also important to recognise that segments such as rooftop solar, microgrids, offshore wind, and floating solar continue to remain expensive or are too nascent to be deployed without adequate support in the short- and mid-term. The National Clean Energy and Environment Fund (NCEF), fed by the Clean Environment Cess applied on coal, was earmarked for supporting clean energy technology research and projects. With the GST, the Clean Environment Cess has been replaced with the GST Compensation Cess, which is no longer directed into the NCEF. This void must be plugged by the government through an alternative source. Policymakers should distinguish between emerging and mature renewable energy technologies and extend continued support to nascent but critical alternatives.

Another distinction that the GST regime must make is between the variety of contracting structures that exist for solar PV. According to a recent notification by the GST Council, 70 per cent of the gross value of the contract will attract 5 per cent GST, while the remaining 30 per cent will be treated as services and attract 18 per cent GST. This approach seems arbitrary since, for instance, the share of services in solar parks projects is close to 17 per cent. Ideally, services associated with installation of solar PV must be part of a composite supply and attract 5 per cent GST just as the solar power generating system.

It is also worth noting that the above clarification from the GST Council came after more than a year of implementation of GST. Until then, there was confusion on the GST rates applicable for solar power projects, with states differing from each other in their interpretation. The introduction of the safeguards duty on solar panels has only compounded the uncertainty, resulting in delays in deployment of solar projects.

The GST must increase relative competence of solar power with due consideration to second-order effects. One could argue that taxation on coal must reflect the health and environmental costs it imposes on the society but a higher tax on coal would make energy unaffordable for economically vulnerable groups. Hence, policymakers must focus on targeted subsidies, just as those being provided for LPG consumption under the Ujjwala scheme, to ensure that benefits accrue to the deserving, while also pursuing decarbonisation of India’s energy sector. Further, it is also important to evaluate the net impact of fiscal measures and budgetary support on promoting sustainable energy choices.

The GST was introduced with the intention of simplifying indirect taxes and reining in inefficiencies in the tax system. It is not surprising for a major shift in fiscal policy to have unintended consequences, which will be resolved over time. However, it is important to continuously monitor and examine if such fiscal measures are being effectively wielded, to support India’s larger national objectives with implications for sustainable development.

This article first appeared on Energyworld from The Economic Times on March 8, 2019.

Millions of dollars worth of fossil fuel subsidies could be better targeted by governments to benefit poor women.

That’s according to recent research from the Global Subsidies Initiative of IISD, with ENERGIA and partners Spaces for Change, IRADe and Bangladesh Institute for Development Studies.

The research involved surveys with 2,400 households as well as focus group discussions in Bangladesh, India and Nigeria. An initial scoping phase included a review of 28 episodes of fossil-fuel subsidy reform, and research of secondary data in Indonesia.

Currently, governments globally spend the equivalent of USD 400 billion on fossil fuel subsidies. That’s around 10 times more than is needed to plug the universal education gap (USD 39 billion), around seven times more than the global energy access gap (USD 56 billion) and more than enough to finance SDG health targets (USD 134–371 billion).

Overall, the research found fuel subsidies do not work well for poor women. A large share of subsidies accrues to wealthier segments of the population because they consume more energy and have better access to it. This effect is particularly strong for liquified petroleum gas (LPG), as the researchers found in India, but also for a “poor people’s fuel” like kerosene, as observed in Bangladesh and Nigeria.

Subsidies do not guarantee lower fuel prices—and may even create price premiums by increasing fuel scarcity. Even in countries with fixed fuel prices, households were found to pay significantly more. In Nigeria, low-income women reported paying between two to six times more than the official price for kerosene, and in Bangladesh 14 per cent more for the same fuel. Indeed, households in these countries were often not even aware of the existence of a subsidy. These findings imply that any benefits from subsidies are even lower than previously estimated.

The burden of queuing for scarce cooking or lighting fuels frequently falls on women. In Nigeria, women reported queuing for hours and sometimes all day to get kerosene. In Lagos, Nigeria, 57 per cent of survey respondents preferred informal dealers for convenience and availability, despite higher prices and safety risks of adulterated fuel.

Not all subsidy schemes resulted in fuel scarcity, however. In India, Pratyaksh Hanstantrit Labh (PAHAL, formerly known as the Direct Benefits Transfer scheme for LPG, or DBTL) appears to have been successful in preventing large-scale illegal diversion of fuel, with very low rates of shortages or price premiums. However, the subsidy has still not reached everyone. In the states of Chhattisgarh and Jharkhand, almost half of the households surveyed did not use LPG and therefore did not benefit from the subsidy at all. Biomass remained a cheaper option for the poorest people in all three countries where the research focused, and many households continue to use biomass alongside LPG, so problems with indoor air pollution are not immediately resolved just by subsidizing LPG.

Connection subsidies directed at women could help

Better targeting of support for energy access is needed and could counteract some of the problems identified in the research. For example, connection subsidies can encourage gender empowerment around decisions to purchase new cooking equipment for LPG and overcome upfront connection costs. In India, the new LPG Pradhan Mantri Ujwala Yojana (PMUY) scheme aims to help women in low-income households switch to LPG. Such connection subsidies, however, also require good targeting. Only 48 per cent of PMUY beneficiaries were among the poorest 40 per cent of households. And PMUY relies on a poverty card identification system that is well known for having major errors of exclusion.

While these schemes are not perfect, some poor women are accessing subsidy benefits. Therefore, any attempt to remove or better target subsidies must be done with care, and mitigation measures are needed to protect poor women. Increasing the price of subsidized fuels without any support measures could cause additional hardship for poor women who are accessing subsidized fuels.

Poor women can be impacted by fuel price increases in several ways. In Bangladesh and India, around half of higher-income households report being able to absorb price increases (implying that there is still scope for better targeting). However, two-thirds of households in Bangladesh said they would reduce expenditure on both kerosene and other goods (such as food) if faced with a doubling of prices. With a 40–50 per cent price increase in India and Nigeria, the majority said they would reduce subsidized fuel consumption and/or revert to biomass.

Switching back to biomass has time and health implications for women, given they were found to be the primary cooks in all three countries surveyed. Women more frequently collect the wood or dung and are exposed to its smoke. Some households also reported secondary impacts such as a reduced ability for members to undertake activities that require lighting, such as studying and leisure time (e.g., in Bangladesh linked to use of kerosene).

Education and awareness are key

The research found other factors that could be significant for fuel switching and better access to cleaner fuels for women:

• Better-educated women are more likely to choose LPG (as in Nigeria).
• Existing patterns of decision making and purchasing power over energy choices within the household also need to be considered (educating men as well as women around energy choices).
• In Bangladesh, for example, women have the dominant role in household chores, but men make the decisions on energy sources for lighting (46 per cent) and cooking (39 per cent). Furthermore, men also had the role of purchasing kerosene (94 per cent).
• Other likely important factors include improving distribution or the electricity system, especially to rural areas and to the poor, in order to provide alternatives. In India, large drives to expand LPG distribution have played an important role in enabling greater access. Culture (tastes and preferences) may still matter more (e.g., in Nigeria).

Finally, investing in subsidy alternatives could empower women more directly. In Nigeria, surveyed households did not prioritize energy subsidies over other kinds of support. When asked what kind of government support they preferred, households indicated jobs, health, financial support and education to access to modern energy. While households might undervalue the benefits of modern energy, this nevertheless raises the question whether the billions spent on an inefficient subsidy system might not be better spent on social protection programs.

More diverse and technology-neutral subsidies, conditional on outcomes, may be more effective in achieving access, avoiding technology lock-in and fostering affordable solutions adapted to context. Energy policies should ensure that the right market incentives and structures are in place to cultivate new and renewable lighting and cooking technologies such as solar or grid electrification (to replace kerosene subsidies). Social policies may deliver better outcomes for women including social safety nets, health care, education or business loans for women.

In terms of broad policy recommendations to governments, the research suggests that governments should:

• Continue to phase out fossil fuel subsidies that do not support energy access or the target population. In particular, there is a need to phase out subsidies for kerosene, which is prone to large-scale diversion, is more costly than other lighting alternatives and is not clean-burning, while also ensuring there is a clean alternative to switch to.
• Better target subsidies for fuels currently deemed necessary for sustainable energy access, and ensure more resources are available to help achieve SDG7 on energy access and fund programs supporting women and promoting gender empowerment.
• Consider technology-neutral subsidy mechanisms that focus on outcomes not fuels and avoid technology lock-in.
• Recognize that subsidy reform needs to be undertaken carefully, based on an impact analysis of effects on women alongside a robust package of measures to mitigate negative impacts of price increases.
• Use comprehensive strategies for energy access that recognize the importance of gender and incorporate it into policy design.

The full report can be downloaded from the HIVOS, ENERGIA website here.

The much-anticipated follow-up to 2009’s Stiglitz Commission report was released recently.

The original report was a beacon for those concerned about GDP’s inadequacies as a measure of social and economic progress, helping to launch the global movement to go “beyond GDP”. The second report continues to shine that light, showing how over-reliance on GDP as the yardstick of economic performance can mislead decision-makers. It kept them, for example, from seeing the 2008 financial crisis until it hit.

A major contribution to the beyond-GDP movement in the time since has been the series of “inclusive wealth” reports released by the UN Environment Programme (UNEP). Their latest report is cause for both optimism and worry if you’re a Canadian.

Inclusive (or comprehensive) wealth is the value of a nation’s assets: its produced, natural, human, social and financial capital. Comprehensive wealth is important because these assets – factories, forests, skills, relationships, savings and the like – are the basis for most well-being. They provide the foundation on which all goods and services – both market and non-market – are produced. We use them to create products as diverse as food, healthcare, public transit, clean air, wilderness tours, soccer balls and movies, not to mention the thousands of others that are part of a “good life”.

As the foundation for all market and non-market production, comprehensive wealth is clearly important for current well-being. More important is its link with well-being in the future.

In simple terms, if Canadians (or citizens anywhere) want well-being to continue for their children and grandchildren, the country’s comprehensive wealth must be sustained. If not, declines in future well-being are unavoidable.

Here is where the yin and yang for Canadians comes in UNEP’s report.

On the positive side, UNEP ranked Canada top among G7 nations in 2014 in terms of comprehensive wealth per capita. In other words, the average Canadian had more assets at his/her disposal in 2014 than any other G7 citizen, largely due to Canada’s massive endowment of forests, minerals, water and other natural capital. Canada had nearly four times as much natural capital per capita as its closest G7 peer, the United States.

The bad news is that Canada ranked last in terms of growth in comprehensive wealth. By the UN’s estimates, Canadian comprehensive wealth actually fell by 0.25 per cent on average each year from 1990 to 2014. In contrast, every other G7 nation succeeded in growing its comprehensive wealth substantially over this period (Table 1).

Clearly, other countries are outperforming Canada. In 1990, the average comprehensive wealth in other G7 countries was 53 per cent of Canada’s; by 2014, that share had climbed to 74 per cent. At current rates of growth, Canada will lose its first-place position to Japan in 2024 and will fall to fifth place in less than a generation (by 2039).

This is a recipe for declining well-being in Canada. From failing infrastructure to more pollution, lower wages and cities that are less safe, Canadians stand to lose a lot.

UNEP is not the only organization to find that Canada is managing its comprehensive wealth poorly. In the most detailed study of comprehensive wealth completed for a single country, colleagues at the International Institute for Sustainable Development (IISD) and I came to essentially the same conclusion. Though our findings aren’t quite as dramatic as UNEP’s (we find Canadian comprehensive wealth grew weakly in recent decades rather than declining), they nonetheless point to real concerns about the sustainability of Canadians’ well-being. Canada’s robust GDP growth, on the other hand, tells a much more upbeat – but potentially misleading – story about the country’s progress.

Perhaps most troubling is the fact that the Canadian government, like governments everywhere, does not have a handle on measuring comprehensive wealth. GDP, in contrast, is well measured and, consequently, very influential. As we note in our study, this tips the decision-making scales in favour of short-term GDP growth over long-term sustainability. We think it is time the scales were balanced.

To start with, Statistics Canada should be funded to regularly report on comprehensive wealth – as it has long done with GDP. Then the government should build comprehensive wealth metrics into its decision-making, ensuring that short-term growth objectives do not overshadow the well-being of our children and grand-children.

Every Canadian deserves a future that is as prosperous as the present.

This article first appeared on the Smart Prosperity Institute's blog on February 12, 2019.

Coming Up in Global Trade

The international trade community is returning to action in what promises to be a jam-packed year that could set the stage for an overhaul of the World Trade Organization (WTO) as we know it.

Early hints of what may lie ahead came from the World Economic Forum’s Annual Meeting in Davos last month, where trade ministers debated how to safeguard the WTO’s Appellate Body—now bordering on collapse—and how to help the organization adapt to an increasingly uncertain political and economic landscape.

The past year at the WTO was, by all accounts, an especially challenging one, as the organization’s members sparred over the increasing use of unilateral tariffs by the United States, as well as the growing strain on the organization’s dispute settlement mechanism. As 2019 begins, these subjects will remain contentious, even as the WTO works to advance and reinvigorate its negotiating agenda on multiple fronts.

Normally, this would be a “ministerial year,” with the organization’s members laying the groundwork for their highest-level meeting. In a relatively unusual development, there will be a 2.5-year gap between ministerials, rather than the statutory two years, with the next one set for June 2020 in Astana, Kazakhstan.

The deadlines set at the 2017 WTO ministerial, such as reaching a deal to discipline harmful fisheries subsidies by late 2019, remain intact. Should WTO members meet those deadlines, it leaves the Kazakhstan meeting agenda virtually wide open in a year that coincides with the next U.S. general election, where trade is expected to again play a headlining role.

WTO reform: “Like-minded” countries reconvene

It’s clear, though, 2019 will be anything but quiet.

For example, the WTO’s Appellate Body now has only three members—the bare minimum to sign off on any ruling. Several WTO members have submitted proposals, either individually or jointly, on Appellate Body reform—but whether any of these will serve to quell the United States' stated concerns about “persistent overreaching” remains to be seen.

There is growing momentum among many WTO members to “modernize” the organization, including the Appellate Body—though the details and feasibility of reform are unclear at this stage. In Davos, Canada led a meeting of “like-minded” countries to gauge what contribution this group could make on dispute settlement, the WTO’s negotiating function, monitoring and transparency, and development.

Their communiqué said they hoped to achieve “significant progress” by the upcoming G20 leaders’ summit in Japan this June—a short window for achieving a political commitment on what these reforms could look like, much less for the technical negotiations and consensus building that need to occur among the WTO’s much wider membership.

Also notable was the announcement that the group would convene “open-ended consultations with all interested Members,” aiming to craft proposals that would “improve the WTO’s deliberative and monitoring functions and ability to solve trade concerns without litigation.” The approach would entail strengthening existing WTO bodies to head off disputes before they escalate to formal cases, thus alleviating some of the pressures on the legal system.

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These proposals would be designed as “cross-cutting and committee-by-committee basis,” covering initially the relevant WTO bodies that work on rules of origin, sanitary and phytosanitary measures, technical barriers to trade, and services. Moving important issues to committees will require transparency to ensure important regulatory outcomes are not hatched behind closed doors. Also, the participation of developing countries (including those that do not have missions in Geneva) would be essential in order not to erode their say in the multilateral trading system.

The concluding remarks of Swiss Federal Councillor Guy Parmelin after the separate Davos “mini-ministerial” on trade indicated that while there is wider interest in WTO reform beyond the Canada-led group, there are also questions on the work’s “content and modalities.” Other WTO reform discussions are also underway in parallel groupings, such as the US-EU-Japan trilateral format.

E-commerce: questions remain about approach, objectives

Also on the horizon is the start of formal negotiations on electronic commerce rules among a group of WTO members. The countries endorsed a joint statement on the subject at Davos, with the notable addition of China to the list of participants, with its rapidly growing e-commerce market.

The group confirmed its “intention to commence WTO negotiations on trade-related aspects of electronic commerce,” pledging they would pursue “a high standard outcome that builds on existing WTO agreements and frameworks with the participation of as many WTO Members as possible.” The statement also referred to the situation of small and medium-sized enterprises and developing and least developed countries.

The statement is scant on substantive details or timeframes, and otherwise reads similarly to the joint statement most of these WTO members already endorsed over a year ago in Buenos Aires. The start of these new negotiations will likely fuel renewed questions over what such rules should entail and whether an international regime on e-commerce is even plausible—points Simon Lester has raised in his International Economic Law and Policy blog.

Trade watchers will also be considering whether the WTO is the right forum for such an effort and what new ideas may emerge from these discussions. Looking ahead, WTO members will still have to address long-standing disagreements over whether to start new negotiations on topics such as e-commerce or investment facilitation while old processes are still outstanding.

The world’s freshwater laboratory is a very busy field station these days—with ongoing studies examining algal blooms, climate change, selenium toxicity, environmental DNA, non-lethal ways to research fish, what happens to fresh water when oil spills occur and how best to clean them up.

With all that activity, why would IISD Experimental Lakes Area also be considering research on the potential impacts of Canada’s recent cannabis legalization on its freshwater resources?

Quite simply, it is because we have reason to be concerned.

All of our planet’s water is connected

To understand how a human consumption issue can affect fresh water, we need to consider the connectivity of our planet’s water. Water is a finite resource, and when we use it for one purpose it can be altered, affecting how that water can be used afterward. IISD-ELA scientists have been studying this phenomenon for more than 50 years.

For example, in the late 1990s and early 2000s, Dr. Karen Kidd, now a professor at McMaster University, led a team of scientists at IISD-ELA to examine the impacts of the female reproductive hormone, estrogen, on freshwater lakes. The work was based on the understanding that estrogen, either naturally produced by humans or synthetically prescribed in birth control pills, is excreted in urine but is not completely removed by sewage treatment plants. Therefore, measurable concentrations of estrogen are discharged from sewage treatment plants and can be found in rivers downstream from these facilities.

Dr. Kidd and her team showed that, even at the minute concentrations released, fish populations could be dramatically and negatively affected. There are similar examples related to other chemicals routinely found in our fresh water, including other pharmaceuticals such as lipid-lowering drugs, antidepressants, pain medication—even caffeine!

The case for cannabis

Dr. Kidd’s estrogen study is important, because prescriptions for ethynlestradiol, the synthetic form of estrogen found in birth control pills, can be linked to increased concentrations of total estrogen measured in rivers downstream from major Canadian cities. Similarly, when a new prescription drug appears on the market, there is the potential for increased usage, excretion of the original chemical or active metabolites, and impacts to receiving waters.

Why would IISD-ELA be considering research on the potential impacts of Canada’s recent cannabis legalization on its freshwater resources?

Quite simply, it is because we have reason to be concerned.

People consuming cannabis metabolize tetrahydrocannabinol, or THC as you may know it, primarily to a metabolite known as THC carboxylic acid (THC-COOH). This non-psychoactive metabolite is eliminated in urine and feces, is directed to our wastewater treatment facilities and could ultimately appear in bodies of fresh water. But does this necessarily suggest cause for concern following the legalization of cannabis?

Will more Canadians be using marijuana now that it is legal?

First, there is conflicting evidence whether decriminalization will result in increased usage arising from increased availability, greater social acceptance and potentially lower prices.

A recent study in the United States found that, in Washington State, perceived harmfulness declined and usage increased among adolescents after legalization, while this association was less clear in Colorado. Another recent study from Oregon found that cannabis use by adolescents increased after legalization occurred, but only among active users and not among those who didn’t use cannabis before it was legalized.

In the Netherlands, some association of increased use after adopting a policy of “non-penalization” may have been tempered by the fact that prices remain higher than in other jurisdictions. Health Canada commissioned a study by the Denver-based Marijuana Policy Group, which predicted increased cannabis usage after legalization but with a significant degree of uncertainty included.

All of these findings should be taken with a pinch of salt, given that the researchers themselves acknowledge that usage patterns are difficult to nail down, because they are based on self-reporting surveys and there is a tendency for people to either underestimate their usage or simply deny that they use cannabis at all.

Are cannabis metabolites already reaching Canadian waters?

In 2018, Statistics Canada conducted a pilot research program to estimate cannabis usage patterns by analyzing concentrations of THC metabolites in waste water from major Canadian cities. Just the fact that such a study could be initiated emphasizes that cannabis metabolites are present in appreciable concentrations in wastewater and that these compounds could be reaching our freshwater. And we know that cannabis metabolites have also been found in other studies around the world. For the five Canadians cities studied by Statistics Canada, an average load for all sites combined was estimated at 540 micrograms/person/week.

Even though that’s a pretty abstract number, it allows us to make some basic calculations to estimate potential concentrations reaching downstream surface waters. For example, if we apply that loading rate to Winnipeg’s South End treatment plant, which serves 176,000 people, and combine it with the highly variable flow of the Red River, concentrations of THC-COOH could vary between 0.13 and 3.1 nanograms/litre (ng/L), depending largely on the season. That estimate is based on the incoming load to wastewater treatment facilities and does not necessarily account for the removal of THC-COOH by the treatment process.

Each of the existing studies has used short exposure durations, unrealistic concentrations or has been conducted using one species in the laboratory. IISD-ELA knows that results in realistic field settings can be quite different from those obtained in the lab.

Even so, there are currently no specific regulations regarding TCH-COOH discharges from wastewater releases, and the few studies that have examined removal rates indicate that as little as 20 per cent of the THC-COOH may be removed. In some cases, concentrations may actually be higher in the water discharged than in the original waste stream because the treatment processes itself can convert metabolites of THC-COOH back into the original compound. We do know that estimates of 0.1 to 3 ng/L would be in the lower ranges of what has been reported to date for receiving waters. For example, two studies conducted in Spain determined THC-COOH concentrations to range between 24 and 80 ng/L. Similar concentrations (42–105 ng/L) were reported in treated waste water in Slovakia, but the authors of this study noted that the THC-COOH loading rates they reported were relatively low compared with other European cities such as Paris and Amsterdam.

What happens when those cannabis metabolites hit our fresh water?

It is important to remember that there is a great distinction between how much of a chemical is in the environment versus the detrimental effects that it may have on aquatic ecosystems and resident wildlife.

There have been relatively few scientific studies that have examined potential effects of environmentally relevant concentrations of THC-COOH on aquatic organisms. Increasing oxidative stress and damage to DNA were detected when zebra mussels were exposed to THC-COOH. While the exposure concentrations were high in this study (70–700 ng/L), the amount of time they were exposed to the THC-COOH was short (only 14 days) leaving open the possibility that more chronic exposures could also have effects. It is important to recognize that THC-COOH is relatively stable (days to months) in water, so longer-term exposures are possible in continuously impacted environments.

Zebrafish treated with short durations of exposure to THC during early embryonic development had reduced heart rates, increased rates of deformities, reduced swimming performance and higher mortality, but the exposure concentrations used for these studies were two orders of magnitude higher than what might be observed in the environment. In an even more unrealistic scenario, an earlier study treated juvenile common carp with varying concentrations (2–30 mg/L) of crude leaf extracts of cannabis for 56 days and reported biochemical indicators of stress.

Where is IISD Experimental Lakes Area planning to take the research next?

Each of the existing studies has used short exposure durations, unrealistic concentrations or has been conducted using one species in the laboratory. IISD-ELA knows that results in realistic field settings can be quite different from those obtained in the lab.

And that’s why IISD-ELA is continuing to consider further investigations into the potential effects of cannabis on our fresh water.

Specifically, we are embarking on research using enclosures to examine the how long THC-COOH can be present once it is discharged to fresh water. We are also studying the effects on aquatic life at realistic concentrations and processes that determine how much of the metabolite is removed by current wastewater treatment processes.

This article first appeared on the IISD Experimental Lakes Area blog on January 28, 2019.

As IISD announced in November last year, today is Scott Vaughan’s final day as President and CEO.

The Board, staff and wider IISD community wish him tremendous success as he takes on the role of International Chief Advisor of the China Council for International Cooperation on Environment and Development (CCICED).

 
Under Scott’s leadership, not only has IISD’s governance and financial position strengthened, but the research and institutional strategy has evolved to meet clear needs in the world. Scott has always preferred to avoid attention, setting other people up for both the spotlight and success. Nonetheless, he does deserve real credit for the clear progress made under his leadership. We owe him a great debt of gratitude for the passionate and professional way he has served our organization.
 
Jane McDonald assumes the role of Interim President and CEO on February 1, 2019 with strategic support from the Executive Group. Her insights into IISD as Managing Director as well as her expertise connecting government, the private sector and the non-governmental organization community will ensure a smooth transition as the Board conducts our executive search.
 
It’s the mark of a great organization that a leadership change neither slows nor distracts from the core mission. The Board has already seen from the staff, key partners and the wider IISD community that this will be the case. IISD’s voice has never been more vital on the world stage and we look forward to finding the right person to help us raise it. 

Alan Young
Chair of the Board, IISD

Using Permits and Contracts to Reduce International Investment Agreement (IIA) Risks to Climate Change Regulations: The Washington Gas Purchase.

On April 4, 2018, the Maryland Public Service Commission (Maryland PSC) issued an Order approving the purchase of Washington Gas in the State of Maryland by AltaGas, a Canada-based natural gas company.

The Order of the Commission, which was subject to negotiation with AltaGas and involved public hearings and inputs from expert witnesses, acts as a regulatory approval by the responsible government for the purchase. In the United States, decisions permitting foreign investment are almost exclusively taken at the state level rather than the national level, due to the division of powers in the U.S. constitution. The negotiating process leading to the decision also makes it similar to a contract negotiation process.

Washington Gas is a subsidiary of WGL Holdings. AltaGas acquired WGL Holdings in full, completing the process in July 2018. Other WGL Holdings subsidiaries include New Hampshire Gas, though Washington Gas is the largest. The Maryland PSC Order is binding over this purchase. AltaGas, upon completing the acquisition, said that the value overall of WGL Holdings was USD 9 billion.

Eliminating risk from future climate change regulations

What made the Maryland PSC’s Order to approve the purchase unique was the inclusion of legally binding conditions, negotiated with AltaGas, designed specifically to address the potential of future regulatory decisions to reduce or prohibit carbon-based energy use in Maryland. (The author of this blog was an expert witness on behalf of the Office of Public Counsel of the State of Maryland and drafted the preliminary version of the conditions of the Order discussed here,  ultimately agreed to by the investor.)

These potential actions would be primarily, though not exclusively, for climate change purposes.

The need to tackle carbon-based pollution, including from energy, has been a recurring topic in Maryland. It has become widely recognized that ongoing climate change policy-making processes could lead to future regulatory limits and prohibitions. Hence, the issue was very much a live issue during the Maryland PSC approval process.

In investment treaty terms, the Maryland PSC’s decision—specifically the conditions involving future regulatory decisions to lower or ban carbon-based energy use in the state—acts as a means to eliminate the risk of actions against the government for breach of fair and equitable treatment (FET) and expropriation obligations. The conditions also act as the antithesis of a regulatory stabilization provision. Each of these issues is discussed briefly below.

The text of Conditions 20-21 of the Order is found at p.A-11:

NAFTA

20. Notwithstanding any other provisions of these conditions, AltaGas, Washington Gas, and WGL recognize that the State of Maryland and the Government of the United States retain the full right to enact bona fide laws and regulations in relation to the production and distribution of natural gas and other carbon-based energy sources. Nothing in these conditions or the Commission’s orders restrict or alter these rights, or creates or implies any limitation on the State of Maryland or its agencies, or on the Government of the United States and its agencies, with respect to future measures in this regard. This includes measures to address climate change and other public interest issues such as air quality.

21. AltaGas, Washington Gas, and WGL expressly acknowledge that the Commission, by approving the Merger, is not creating any special expectations to induce AltaGas, as an entity covered by North American Free Trade Agreement (“NAFTA”), to close the Merger.

Expropriation

Some interpretations of expropriation include a concept of “regulatory expropriation.” Under this theory, which itself is far from unanimously accepted as part of the meaning of expropriation, a change in regulations that impacts a business’s profitability can be an act tantamount to expropriation. This notion relies on the view that investors have some form of right to operate in perpetuity in the same manner as when the investment was made. Enacting a new regulation would thus be akin to removing such a right.  

The conditions quoted above make it clear that the investor, AltaGas, has no extended rights to operate as it did at the start of the investment, at least as it relates to laws and regulations to reduce carbon-based energy use. By expressly denying any such right, the conditions act to preclude any effective claim to regulatory expropriation under NAFTA’s Chapter 11, Article 1110.

FET

The provision above has the effect of preventing a claim that a new measure to reduce natural gas use would constitute a breach of FET obligations in Article 1105 of NAFTA or under FET language. These provisions have been found, under some readings, to create barriers to new legislation on the basis that the investor had a “legitimate expectation” to be free of future regulations that would negatively impact its investments.

A less stringent reading of the legitimate expectation concept has held that, where the investor had been given reason to expect a government will act or refrain from acting in a certain way and this specific expectation is then frustrated by the government, a claim under FET would hold.

The conditions above make it clear that the investor could have no expectation that the government will not act to reduce greenhouse gas emissions from carbon-based energy sources. The text acknowledges that the government has the right to do so and could act accordingly. Thus, at a substantive level of interpreting and applying an FET clause, both stricter and more flexible readings of legitimate expectations have been negated by the conditions.

Antithesis to a regulatory stabilization provision

At a functional level, these legally binding conditions act as the exact opposite of a regulatory stabilization provision that would either prohibit a government from enacting new laws or regulations that impact an investment or would require the government to compensate the investor for any negative economic effects resulting from the new measure. Such stabilization provisions are fraught with difficulties for governments but remain a demand of many companies, especially in the oil and gas sector, when making investments.

The conditions imposed by the Maryland PSC Order in this case produce precisely the opposite result: rather than the government assuming the risk of introducing new laws or regulations, and thus being disincentivized from doing so, the above provisions make it clear that the investor is the sole actor that bears this risk.

Special importance in the oil and gas sector

That this provision is by an investor in the oil and gas sector is especially important. Analysts from around the world have forecast literally trillions of dollars in “stranded assets” in the sector due to necessary and foreseeable restrictions to combat climate change. Stranded assets are production, transportation and transmission facilities that lose economic value after legal measures restrict or prohibit their ability to continue producing, transporting or delivering their products. 

Who covers the costs of these stranded assets is a key question. In many cases, analysts anticipate that the cost of these assets would be part of a claim under a regulatory expropriation or FET provision in an investment treaty. Thus, claims could stretch easily into the billions of dollars for climate change regulations. In the Washington Gas case, the above provision negates this risk, clearly allocating the risk of stranded assets to the investor.

Acting in the public interest

The fact that a top-tier oil and gas company agreed to this precedent-setting provision shows that the demand for a stabilization provision in this sector can be counter-acted by a provision recognizing governments’ right to take measures to protect the environment. 

Given this precedent, governments should thus feel more empowered to protect the public interest, including on environmental issues and including in relation to oil and gas investments.

If the findings of the 2018 special report on the impacts of global warming of 1.5° C from the Intergovernmental Panel on Climate Change have yet to convince decision makers of the urgency of climate action, the economic costs of climate impacts should.

The International Monetary Fund has long warned that climate change poses the biggest economic risks to the global economy. In its latest annual risk report, the World Economic Forum has again placed extreme weather events and the failure to deliver the Paris commitments as the two top risks facing decision makers. The Asian Development Bank recently estimated countries in Southeast Asia could see a loss of 11% in gross domestic product by the end of this century.

All the while, the two indicators that matter – annual emissions and average global temperature increases – are going in the wrong direction. Global greenhouse gas emissions have climbed each year since 2012. The years 2015-2017 were, according to the World Meteorological Organization, the hottest ever recorded.

This means more action engaging all economic levers is urgently needed to shift the current trajectories towards lower-carbon outcomes.

A noticeable laggard as part of the climate solution is trade policy. Certainly, actual trade in clean technologies is now substantial and markets are growing.

Yet, experts have argued that trade agreements can support and accelerate climate action, with special measures. Trade levers include getting rid of tariffs and non-tariff barriers that hinder trade in green goods and services, disciplining subsidies that support fossil fuels or other environmentally harmful products and services, and many other areas. The World Trade Organization has discussed these and other opportunities since its founding, but is incapable of acting.

All the more reason why this week’s meeting in Brussels – bringing business leaders and non-governmental organisations together to implement trade and climate action – is so welcome.

The Canada-European Union Comprehensive Economic and Trade Agreement was signed just over a year ago and carves out a number of important provisions to support climate action. All tariffs on all goods – including a growing cluster of low-carbon products and related specialised services – are now or soon will be at zero. CETA sets out new provisions to enable the exchange of professionals. It also opens new and substantial opportunities in public procurement.

Much of the conceptual work that has led to this week’s meeting has been in the works for years, driven by the Organisation for Economic Co-Operation and Development and others. The International Centre for Trade and Sustainable Development – a Geneva-based think tank that recently closed after more than 20 years of work – played an indispensable role in identifying the benefits of aligning trade and environmental protection in ways that deliver benefits measured both in higher environmental outcomes and in helping households see bottom-line benefits in terms of income and improved labour market conditions, especially in developing countries.

CETA provisions have zeroed out all tariffs while introducing innovative clauses, such as a new regulatory forum to provide a non-negotiating setting to identify opportunities for better regulatory alignment. CETA also includes novel provisions like corporate social responsibility, opening potential avenues to examine how voluntary standards championed by a long list of business in low-carbon pathways could be accelerated within a bilateral trade arrangement.

Effective climate action must involve an array of economic solutions. The world can’t wait for the crawling negotiations of the WTO to support climate action. We hope newer examples of trade agreements, including CETA, can show that they can be one part of the larger actions within markets to find low-carbon pathways. This week’s meeting is thus a welcome first step.

Bernice Lee is Research Director for Global Economy and Finance at Chatham House and Executive Director of the Hoffmann Centre for Sustainable Resource Economy.

Scott Vaughan is President and Chief Executive Officer of the International Institute for Sustainable  Development and chairman of the IISD Experimental Lakes Area Board.

This article first appeared on Borderlex on January 23, 2019.

“Wear hiking boots.”

That’s the number one piece of wisdom you are given by veterans of the World Economic Forum (WEF) when you mention you will head to Davos. This is not only good advice, it is essential for survival on the snow-packed roads as a normally quiet Swiss skiing village transforms into the largest global gathering of the economic and political elite each year.

This was my first experience in Davos. It came somewhat late and with a cost risk: many WEF attendees reserve hotels a year in advance to avoid the steep CHF 4,000–5,000 room rates per night that await last-minute guests. Luckily, I got a tip about a little mountain town 45 minutes outside Davos that still had warm beds, reasonable room rates and an early train to get me to a breakfast meeting on improving the contribution of private finance to achieving the United Nations' Sustainable Development Goals (SDGs). 

I didn’t know what to expect. On my way I heard of several controversies—notable world leaders cancelling participation because of challenges at home, the enormous carbon footprint of attendees’ private jets, the irony of the planet’s elite meeting to discuss issues of the middle class—but I kept an open mind. After all, I am a member of the Global Shaper community, and the WEF is an active member and collaborator with my main project, the Geneva 2030 Ecosystem. In all of my interactions with the WEF, it has been clear that they are 100 per cent committed to achieving sustainable development by leveraging the power of business—not working against it.

New Perspective

I attended WEF to host and moderate a panel at the Sustainable Impact Hub on Accelerating SDG Finance through Collaboration. The Sustainable Impact Hub is a joint initiative by several United Nations, development and humanitarian organizations. It’s dedicated to creating a space to dig deeply into sustainable development and humanitarian issues. The panel featured leading experts from finance:

• Lise Kingo, CEO & Executive Director, UN Global Compact
• Simon Smiles, Chief Investment Officer, Ultra High Net Worth Individuals, UBS
• Gabriela Ramos, Chief of Staff and Sherpa to G20, OECD
• Nadina Stodiek, Fund Manager PPP Mandates, Impact Manager, BlueOrchard Finance
• Francois Jung, Lead on Finance and Innovation, The Global Fund

At home in Geneva, I act as the lead facilitator on a collaboration that brings together development actors and private financial players to develop solutions to SDG finance, so this topic is well-trodden territory for me.

However, this panel of experts put a very different spin on the topic:

1. Innovation matters but so do the basics.

In the development arena, we are intensively examining novel financial instruments that can bring more financing to the SDGs (for example, blended finance and tokenization for infrastructure finance). The expert panel, however, highlighted the need to go back to basics to create consistency and clarity for market players to build upon. It was highlighted again and again that an “impactful” investment must be clearly defined so investors can more easily compare and make informed choices. There are a number of initiatives happening in this space, but consolidation is necessary—and the World Bank’s International Finance Corporation Principles for Impact Management were given as a good starting point.

2. Measure what you treasure, don’t treasure what you measure.

In other words, there is an influx of data in the world, but making sense of it all can be a challenge. As a global community, we need to be clear what goals matters to us—such as leaving no one behind while achieving sustainable development—and find the right measurements to quantify progress.

3. Everyone has a role to play.

Mobilizing USD 5 trillion to 7 trillion per year to achieve the SDGs will require every sector of society to play its part—awareness raising, policy frameworks, measurement and standardization, financial product builders and corporate alignment must all be there in order to make a material difference for sustainable development. This means that each of our individual roles will be most impactful if we do it in collaboration with others.

Youth: Loud and clear.

I certainly took new perspectives and ideas from Davos, but there was one lesson that was not new. Davos reinforced something I have always known and will always believe: youth represent our greatest hope for progress and change.

Youth took centre stage in several important ways at Davos and made their voices heard. The Global Shapers community launched the #VoiceForThePlanet campaign that has already garnered over 35,000 pledges. One young refugee defied all odds by making it to the WEF to tell his story despite not having a passport and having lived in a refugee camp for over 20 years.

And Greta Thunberg put the show in perspective, taking a 32-hour train ride to the forum to tell leaders to “act as if your house is on fire” when it comes to climate.

“Our house is on fire.”
A part of my speech at the World Economic Forum today. Thank you for inviting me! #wef pic.twitter.com/LvTWiwEiOu

— Greta Thunberg (@GretaThunberg) January 25, 2019

Davos may be cold, but the need to act now has never burned stronger.