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Policy Shapers of the Water-Energy-Food Landscape AN INTERIM REPORT

GLTE Royal Dutch Shell plc

Xyntéo is an international advisory

The Global Leadership and

is a global group of energy and petrochemicals companies with around 90,000 employees in more than 80 countries and territories. Shell’s Upstream businesses explore for and extract crude oil and natural gas, often in joint ventures with international and national oil and gas companies. Shell’s Downstream businesses manufacture, supply and market oil products and chemicals worldwide. Shell has been reporting on its environmental and social performance since 1997, and its sustainability performance is ranked in some leading indices.

firm that equips business leaders to unlock low-carbon growth. Working strategically and practically with some of the world’s leading companies from across a range of industries, Xyntéo delivers tailored analysis, inspiring arenas and collaborative projects. It founded and runs the Global Leadership and Technology Exchange.

Technology Exchange (GLTE)

is a partnership created to help companies navigate the risks and opportunities of a resourceconstrained economy. Through GLTE business leaders build their knowledge of the changing economic landscape, forge strategic networks and pursue practical collaborative projects. GLTE partners span a multitude of key industries and operate in nearly 200 countries.

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Foreword History teaches us that in any period of change, from the Renaissance to the Industrial Revolution to the Information Revolution, a small cadre of individuals can wield disproportionate influence. Today, as we move towards yet another new economic paradigm, a vanguard of actors across business, government and academia is shaping global approaches to the defining challenge of our era – how to grow in a resource-constrained world. The ideas and actions of these individuals – these “shapers” – will profoundly change the landscape in which companies, policymakers and individuals operate.

Harry Brekelmans EVP Russia and the Caspian Region, Royal Dutch Shell

Osvald Bjelland Chairman and CEO, Xyntéo

The challenge we are up against is dizzying in its complexity. Our water, food and energy systems are so interconnected that it can be inefficient or even ineffective to target problems in one sphere without action in the others, and the same holds especially true for climate change, both a product and a cause of stresses in the “water-energy-food nexus”. Meanwhile, the global economy is metamorphosing, geopolitical power shifting to the East, and the relationships between businesses, government and the public coming under increasing strain. Holistic, far-sighted policy will be essential to successfully navigating the uncertain territory of the water-energy-food nexus. Unfortunately, instead of such policy, fragmented, knee-jerk policymaking is currently prevailing – an obstacle that must be overcome if we are to meet the challenges of the 21st century effectively. Although individual behavioural change and industry leadership can and must contribute significantly to the solution, only an over-arching policy framework can provide the signals and incentives necessary to unleash massive investment in technologies, manage environmental risks, and restore trust between politicians, regulators, business and the public. This paper, and the Shapers Programme from which it stems, aims to contribute to better, wiser policy by highlighting the work and words of policy shapers from around the world. The effort is grounded in the Global Leadership and Technology Exchange (GLTE) partnership. We anticipate that it will be the first in a series of Shapers projects undertaken by GLTE under the aegis of different partners. The next step might be to explore new business models, disruptive technologies or cutting-edge science with a view to finding the catalysts of the innovation that will begin to transform our society. The series will provide a toolbox containing the best ideas and most successful approaches around the world. It will also be a call to arms. With their global reach and scale, GLTE partners are ideally positioned to identify innovative ideas and translate them from one sector or geography to another. We hope that business leaders and policymakers alike will find this report to be both useful and inspirational as they search for solutions to our resource challenges.

Introduction Increasing global prosperity means the long-recognised stresses associated with energy demand and supply and their environmental impacts are now being seen across other systems such as water and food. These stresses cross boundaries between nations, levels of government, sectors and industries. Too often, the interconnected nature of these resources has revealed limitations in traditional policymaking processes. Water is needed for almost all forms of energy production; energy is needed to transport and treat water; producing food requires both energy and water. Overcoming the crisis of governance surrounding water, energy and food will require new forms of collaboration between companies from different sectors, policymakers at inter-governmental, state and municipal levels, and NGOs. It will require a holistic yet pragmatic approach to policy development. Commissioned by Shell, this interim report shines a light on “policy shapers” – those pioneering policymakers and their influencers who are leading the response to the growing challenge of the water-energy-food nexus. It examines their policies and analyses the basis for their success, including the processes behind good policy formation and implementation. The report is the product of approximately 40 interviews with policy shapers, conducted over a period of three months in Australia, Europe, India, Singapore and the US. This report is not intended to be comprehensive; rather, we have focused on pockets of progressive policy from which lessons can be learned and shared with a broader audience. Our ambition is to deepen and extend this policy work to other developed economies such as Japan and Germany; emerging economies including Brazil, China, Colombia, Russia and South Africa; and other countries of interest – for example, Rwanda, which is looking to pursue a radically different, low-carbon development path. The report is divided into two sections. In “The Spark” we look at where innovative policy ideas originate. We examine the role of independent research organisations; the way in which cities and regional governments can act as policy laboratories for testing and refining new policy ideas; and finally the benefits of collegiate action across policy silos. In “The Fire” we examine how policies take hold and spread. We consider the dependence of policy implementation on public support and the corresponding importance of public education and outreach; what policymakers can learn from business, especially in how to move from development to scaling and deployment; and the role for new types of

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alliances and partnerships in influencing, developing and implementing policy. While the policy challenges are daunting, our analysis has revealed much that is encouraging and positive. From academia, NGOs and think tanks an abundance of good initiatives is emerging: fact-based policy ideas which recognise interdependencies between different sectors, as well as policy ideas which are being experimented with at city and state level, inverting the traditional top-down model of policy development and implementation. There is also evidence that actors in the policy development process are growing in maturity, gaining understanding of the need to speak the same language, to break down barriers between government, business, finance and civil society. Above all, there is a growing realisation of the leading role that business, particularly in new alliances or collaborations, can play as agents of change in the policy arena. The document makes it easy to hear the views of our policy shapers firsthand – simply click the video icons to view short video clips. The names of all those who were interviewed and shared their insights are listed at the end of the report. The document makes it easy to see the views of our policy shapers firsthand – simply click the buttons to view short video clips. The names of all those who were interviewed and shared their insights are listed at the end of the report.

The spark Where do policy ideas come from?

Gathering Ideas from External Experts The policy shapers interviewed for this project identified many globally innovative policies to address challenges in the water-energy-food nexus, and almost all have one thing in common: with a few exceptions, the ideas behind them did not originate from government bureaucracies or policymakers. Shapers pointed to several explanations: the short-term thinking imposed on elected politicians and their administrations by election cycles, the cumbersome processes by which large bureaucracies test and refine ideas, and the tendency for civil servants to work in silos and appear to be “defenders of the status quo”. Moreover, civil servants and policymakers tend to have limited interaction with industry and civil society, as a result of time constraints or because anti-corruption rules deter them from collaborating more closely. This lack of interaction potentially strips policymakers of a good source of ideas and inspiration. According to Amory Lovins, a “disproportionate” amount of policy innovations originate in academia or in NGOs and think tanks. For example, Lovins’ own “think-and-do” tank, Rocky Mountain Institute (RMI), first proposed electric utility revenue decoupling (now adopted by 14 states) and co-invented feebates (adopted by five European countries). By building up a body of work over time, organisations develop trust and credibility with policymakers and other stakeholders, while accumulating expertise in policy formation that is not lost from election to election. Traditionally, academia and NGOs have transmitted policy ideas directly to policymakers, leaving industries to support or oppose them. But in recent years, owing to the level of government gridlock on policy in the water-energy-food-climate nexus, research organisations are increasingly collaborating with businesses to do “end-runs around policy”, as Lovins puts it. This kind of collaboration can resonate across the political spectrum more effectively than many policies because it focuses on shared outcomes, such as wealth creation or improved security, rather than becoming bogged down by the motives of individual players. Research organisations that establish themselves as credible, honest brokers to both sides can play an important bridging role between industry and government (see “France’s Alternative Energies and Atomic Energy Commission”). Sunita Narain, Director General of India’s Centre for Science and Environment (CSE), notes that her organisation has fewer resources than the government but also has a much lighter bureaucratic burden. CSE has successfully gathered large datasets, for example on water consumption across Indian cities, which governments need in order to make policy but have not been able to collect.

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Anna Skarbek, Executive Director of ClimateWorks Australia, notes that her organisation has been effective in shaping policy because it is trusted, perceived as evidence-based and neutral, and able to focus on opportunities rather than costs. Sonia Yeh, a researcher at the Institute for Transportation Studies at the University of California, Davis, elaborates that academic groups like hers are able to work more closely with industry and advocacy groups to collect and analyse data than government regulators would be permitted to, and can get informal input on potential policies more quickly than government agencies.

“It’s very important to have public knowledge … to have very good information and data.” Sunita Narain, Centre for Science and Environment (CSE), India

France’s Alternative Energies and Atomic Energy Commission (CEA) In 1945, at the dawn of the nuclear age, the French government founded an independent public agency to develop and maintain technical expertise and advise the government on energy and national security. The CEA has now become the government’s main independent policy advisor for nuclear and alternative energies, and was the driving force behind the nuclearisation of France’s energy production. Its funding, some €4.3 billion per annum, comes primarily from the French government, the EU and partner companies. According to Bernard Bigot, the agency’s Chairman since 2003, the CEA provides a long-term vision to the French government, whose own strategic attention span is kept short by election cycles. In Bigot’s view, this function is critical because when it comes to energy, “there are no short-term solutions – they all have to be long-term”. The CEA has direct, institutionalised access to the government: since its foundation, it has run between four and six two-hour briefing sessions each year on technical topics such as lessons from the accident at Fukushima. These meetings are attended by the Prime Minister and other senior ministers, and Bigot also has the right to request a meeting at any time with the President. Bigot says one of the key factors in the CEA’s role is that its advisory sessions take place out of the media glare. Thus, politicians can express ignorance, and seek genuine enlightenment about the scientific and technological evidence behind the policies they design. The CEA also engages with business partners, collecting their insights and concerns about policy ideas and incorporating them into policy proposals it submits to the government.

“The problems in energy policy are so hard that we need to bring science in.” Bernard Bigot, Alternative Energies and Atomic Energy Commission (CEA), France

Experimenting in Policy Laboratories Virtually all the policy shapers we spoke to said that dealing with the water-energy-food nexus will require policy experimentation and innovation at an unprecedented rate. Most also agreed, however, that such experimentation is difficult to conduct at the national level in large, decentralised countries for reasons such as short electoral timescales, political inertia, opposition by wellorganised and well-funded vested interests, divided public attention and the politicisation of issues. Yet innovative policies are emerging in states and cities, whose smaller size and more concentrated will to act enable them to operate as “policy laboratories”, which can adapt solutions to local circumstances and learn from other states before passing lessons on to the national level. For example, California – the US’s most innovative policy laboratory in the water-energy-food-climate nexus – has developed vehicle efficiency standards, a low carbon fuel standard and a greenhouse gas cap-and-trade system that have served as models for policies in other US states and the federal government as well as Germany and Australia (see “California’s Low Carbon Fuel Standard”).

“The solution could come from a private sector company or it could come from within the government … You have to be pretty innovative and open to ideas and not be afraid to try.” Cheong Koon Hean, Housing Development Board, Singapore

According to shapers from the United States, factors enabling California to act as a policy laboratory include: a popular perception of resource scarcity and support for environmental regulations; weak or absent lobbies that might otherwise oppose change to the status quo; and a degree of separation (provided by the Air Resources Board) between politics and policy design and implementation. The state’s strong universities and NGOs also provide innovative ideas that the policy laboratory can test. Some of these factors are shared by other policy laboratories in a range of geographies and scales. Owing to its population’s culture of environmental sensitivity and recognition of water scarcity, the Australian state of Victoria passed wide-ranging water conservation policies during the country’s drought between 2000 and 2010 while many other states and the national government could not. The famously progressive city of Berkeley, California piloted Property-Assessed Clean Energy (PACE), whereby homeowners can finance residential clean-energy improvements by adding the cost to their property tax bill. As of 2011, 29 states had adopted PACE-enabling legislation. The bottom-up approach to policy innovation has also delivered results where deadlocked international climate negotiations have not. Many shapers expressed the view that the top-down approach to international climate negotiations has failed. Nevertheless, greenhouse gas emissions trading systems (ETS) have emerged at the national, state and even municipal levels over the past decade. For example, the state of New South Wales in Australia has operated its own ETS since 2003, which laid

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the groundwork for the carbon-pricing scheme that Australia passed in 2011. Similarly, the UK ran a voluntary ETS from 2002 to 2006 that provided important lessons for the development of the European Union’s ETS, into which it was later subsumed. Such individual actions add up to a greater whole. Daniel Kammen notes that if China launches a nation-wide emissions trading programme in 2015, as has been reported by some media outlets, around two-sevenths of the global population would then be living under some kind of carbon price.

California’s Low Carbon Fuel Standard California’s Low Carbon Fuel Standard, approved by the state’s Air Resources Board (ARB) on 23 April 2009, mandates that blenders, refiners and importers reduce the carbon intensity of transportation fuels sold in the state by at least 10% by 2020. To develop the policy, then Governor Schwarzenegger asked California’s Environmental Protection Agency to work with the University of California, the California Energy Commission and the Public Utilities Commission. Daniel Sperling, Director of the Institute of Transportation Studies at the University of California, Davis and one of the leads on the feasibility study, notes that this division of labour enabled study authors to work closely and quickly with stakeholders in industry and NGOs; their recommendations to ARB had thus already been vetted by groups with greatly differing cultures and incentives. Sperling’s colleague Sonia Yeh also emphasises the importance of that process for building stakeholder trust in the policy process as well as the policy itself. These values have been the source of intense controversy and in December 2011 a federal judge ruled that they violated the interstate commerce clause in the US Constitution. (ARB has appealed.) Nevertheless, the LCFS has already inspired similar proposals in 16 US states, the EU and the Canadian province of British Columbia, as well as at the US federal level – an important development because in isolation the policy risks incentivising fuel suppliers to sell their carbon-intensive fuels outside California.

“It is much better to go down the tiers of government to effect change…That’s where we now can see real opportunity for catalysing substantial change that doesn’t have the political pushback that exists at the international and national stage.” Chris Ryan, Victorian Eco-Innovation Lab, Australia

“By acting early, California has launched a policy experiment that could produce valuable lessons for the United States and other countries.” Mary D. Nichols, California Air Resources Board (ARB), United States

Bridging Silos to Harness Synergies Some of the best ideas in policymaking – particularly considering the cross-cutting nature of climate change and the interrelated resource stresses of the water-energy-food nexus – come from agencies and policymakers that bridge traditional silos. California’s Air Resources Board (ARB), the agency responsible for protecting the state’s air quality, bridges silos in part through its structure and composition. All board members, with the exception of Chairman Mary Nichols, are part time, spending the remainder of their time in professions from medicine to law.

“Whereas greenhouse gas control is extremely important, if we concentrate on that to the exclusion of everything else – for example water systems – we’re going to lose the game.” Lord Oxburgh of Liverpool, House of Lords, United Kingdom

In addition to bringing together diverse perspectives under its own roof, ARB also works effectively with a range of other agencies and stakeholders. According to Nichols, the state’s Global Warming Solutions Act of 2006 is the best example of this collaborative approach. The Act mandated interaction with the California Energy Commission and Public Utilities Commission and required the Board to seek input from advisory committees on economics, technology and environmental justice as it developed rules to implement the bill. Terry Tamminen, Secretary of the California Environmental Protection Agency during Governor Arnold Schwarzenegger’s administration, reports that California’s climate change regulation led to more interaction among agencies rather than the other way around. The same appears to be true in India, where Arunabha Ghosh observes that India’s National Action Plan on Climate Change (NAPCC) forces different ministries to consider how individual mandates affect the overall goal. In a country where multiple shapers bemoan the lack of a single ministry of energy, this exercise is critical. Although it is too early to evaluate the success or failure of the NAPCC, Ghosh believes that its integrative approach is an important innovation in government. Ng Lang, CEO of Singapore’s Urban Redevelopment Authority, explains that interagency collaboration is built into Singapore’s long-term strategic planning for the country’s development. Each decade, all major government agencies assemble to consider a 50-year concept plan for land use. If there are differences of opinion among agencies, the Singaporean Cabinet will itself weigh in.

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Electricity Tariffs in Gujarat India’s agricultural sector demonstrates the close interrelationship between water, energy and food – and the consequences of managing these systems without regard to their impacts on one another. In most states, agriculture is the biggest consumer of electricity, which is used to pump groundwater for irrigation. Until recently, farmers in the state of Gujarat were charged electricity tariffs based on the ratings of their water pumps rather than on their actual energy usage. This incentivised them to pump as much water as possible, depleting groundwater in an already drought-prone state. Moreover, since the Gujarat Electricity Board (GEB) was losing money, it began curtailing power to farms. Farmers responded by installing their own capacitors to tap into electricity intended for residential and industrial use. To external advisors such as the World Bank, the solution seemed obvious: install meters on farmers’ wells and force them to pay for the electricity they consume. But Indian farm lobbies are powerful and several chief ministers who had tried this approach in other states had promptly lost their seats. In 2003, the Gujarati government launched a scheme called the Jyotigram Yojana. GEB effectively constructed a parallel transmission system for agricultural customers so the electricity board could monitor, price and ration power consumption separately from the residential and industrial sectors. Power theft dropped, electricity revenues increased (allowing the agency to recover the initiative’s significant upfront costs within two and a half years), and although electricity costs rose for farmers, they benefited from predictable access to eight hours a day of guaranteed, high-quality electricity supplies. Meanwhile, rural residents and industry also gained access to uninterrupted electricity, and since farmers now had a cost incentive to be more water-efficient, the water table began to recover. The scheme’s innovative approach required policymakers to switch from a siloed mind-set to one that co-optimised energy, water and food production, and earned it the Innovation for India Award in 2010. Gujarat now has the fastest growing agricultural sector in the country, and is selling surplus electricity to neighbouring states. Rajasthan, Maharashtra and Andhra Pradesh have all now adopted elements of the programme. In a draft of the 12th five-year plan, India’s Planning Commission indicates that the principles behind Jyotigram Yojana should be extended to all states.

The message that a coordinated government creates better policy than the sum of its parts echoes Amory Lovins’ assessment that “better solutions often emerge when you expand the boundaries of the problem rather than shrinking them to try to make complexity more tractable” (see “Electricity Tariffs in Gujarat”). For the most part, however, shapers report that policy processes remain too compartmentalised to address the interconnections among food, energy, water and climate systems effectively. And although policy silos are being bridged with success in policy laboratories such as Singapore and California, breaking down these walls is harder in larger, more inertiaprone bureaucracies. Most of our shapers agree that transcending silos on a larger scale will be essential for effective policymaking in this area over the next decade.

“Right now we develop policies in silos … An integrated policy framework … would create the space for long-term investment strategies and allow many different types of products and process and business innovations to emerge.” Arunabha Ghosh, Council on Energy, Environment and Water (CEEW), India

“Quite often the solution will lie outside the sphere that you’re looking in. You find the solution by expanding the boundaries of the problem.” Amory Lovins, Rocky Mountain Institute, United States

The fire How do policy ideas catch hold?

Building Constituencies and Leveraging the Media A dedicated constituency of champions is key to turning a policy spark into a fire. Policies limiting emissions or promoting efficiency tend to take hold in places where the effects of energy use, climate change, water scarcity and food insecurity are most apparent to voters – as, for example, air pollution in Chinese and Californian cities, and water scarcity in Singapore and Australia. The ongoing bitter debate about Australia’s greenhouse gas cap-and-trade bill, which finally passed in November 2011, reflects policymakers’ failure to build an adequate constituency of support for the legislation. Tristan Edis, Editor of the Climate Spectator, says the Australian carbon price is “a bit like an orphan – no one really loves it”. Other policy shapers also highlighted the importance of effective communication to build a groundswell of public support. Although the most innovative policies tend to come from researchers at universities and think tanks, these groups are not necessarily good at communicating to a broad audience. Consequently, research organisations such as the Institute for Transportation Studies at the University of California, Davis and the Rocky Mountain Institute are beginning to harness the communications skills of media consultants and advocacy-oriented groups such as the National Resources Defense Council. Policies addressing the water-energy-food-climate nexus face particular challenges in attracting constituents. This is because their long-term benefits often imply short-term costs, and they may be too abstract for their beneficiaries to understand – or even to see that they are beneficiaries. The media can also exacerbate these communications challenges. Ross Garnaut, a professor at the University of Melbourne and the Australian National University who played a key role in creating Australia’s cap-and-trade bill, explains that Australia’s tendentious media culture has created a major barrier to economic reform in the public interest. According to Garnaut, Australia’s climate policy discussion “has been damaged by these tendencies, although the policy outcome demonstrates that policy reform in the public interest is still possible”. Sir David King, on the other hand, argues that the media can create momentum behind policy if it is used to embarrass politicians into action. Media pressure can also be drawn on by governments to spur efforts by industry, as was seen when the Victorian government introduced legislation in 2006 to publish the names of the state’s 200 largest water consumers. According to John Thwaites, who served as Victoria’s Minister for Water during that period, although water prices are generally too low to incentivise water conservation by industry, perceived risk to reputation and

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brand clearly motivated companies to change their practices. The campaign both reflected and heightened public awareness of water scarcity and disapproval of water wasters (see “Victoria’s ‘Target 155’ Programme”). Public pressure can be a powerful lever even in more command-driven political systems, particularly for policies that require behavioural changes. Ng Lang observes that Singapore’s population has evolved over the last 40 years from one that tended to leave policy decisions to the government to one of citizens that want to be part of the policy process. According to Ng, managing this shift well is critical to the next phase of Singapore’s development.

Victoria’s “Target 155” Programme In response to the drought that hit south-eastern Australia between 2000 and 2010, the government of the state of Victoria enlisted the media to raise public awareness of water scarcity and encourage water conservation. One of the most prominent of these initiatives, Target 155, asked Victorians to reduce their water consumption to 155 litres per day. Target 155, which operated between December 2008 and February 2011, encouraged Victorians to take four-minute showers, install water efficient showerheads and keep buckets in their showers to capture water while the shower was warming up for later use in the garden. A joint report by Victoria’s three main water retailers credited the policy with saving more than 53 billion litres of drinking water over the programme’s lifetime. The drought finally abated in 2011, and daily water use has crept above 180 litres per capita. But Target 155, one of the most inexpensive measures Victoria implemented during the drought, created widespread social awareness of water scarcity and changed Victorians’ behaviour. Indeed, Thwaites calls this type of behaviour change “fundamental to what we’re going to have to achieve in climate change and managing water and resources”.

“It’s not enough to write a good policy document. You have to use whatever other levers you can, for example the media, to reach out to the public – because the public provide the voters who the minister needs to keep on board.” Sir David King, Smith School of Enterprise and the Environment, Oxford University, United Kingdom

“Good ideas are only as good as the number of people that you can get together to support them. So the most important thing is to reach out to people, bring them to the table and engage them.” Tarun Das, Confederation of Indian Industry (CII) © Government of Victoria

Bringing Business Insights into Policymaking

“Policy needs to be well-informed by technoeconomic realities, and too often those policy discussions are not connected with the practicalities of actually getting them implemented.” Steven E. Koonin, formerly of Department of Energy, United States

Many policy shapers say that private sector experience, or at least a good understanding of the private sector, is essential for ensuring that sparks of policy innovation catch fire. Steven Koonin, former Under Secretary for Science at the US Department of Energy, identifies the business-related disciplines of making money and working at scale as two attributes that are critical to sound policy but not generally shared by academia and think tanks. Tarun Das, former Chief Mentor of the Confederation of Indian Industry (CII), notes that a majority of the most influential drivers of new policy ideas have backgrounds in the private sector. Intellectual cross-fertilisation with the private sector can be instructive for policymakers not just because it helps them better understand the industries they foster and regulate, but because it allows them to tap into the private sector’s ability to find creative solutions. Singapore, whose government is cited frequently by policy shapers as a source of some of the world’s most innovative policies in the water-energy-food nexus, “has a knack for pulling in the private sector to solve problems”, according to Cheong Koon Hean, CEO of the country’s Housing Development Board. For example, Chew Men Leong, CEO of the Public Utilities Board, Singapore’s national water agency, says that Singapore’s policy to deal with water scarcity is simply to create space for the water industry to develop technologies for increasing supply. The government effectively allows industry to use the country as a laboratory in which to develop technologies and then scale and deploy them (see “Singapore’s Water Policy”). Peter Newton reports that Australia has developed a different model for harnessing the innovative potential of industry and ensuring that policy helps translate it to scale. Founded in 1991, its Cooperative Research Centres (CRC) Programme funds collaborative research partnerships that bring together researchers from an Australian university or affiliated institute with end-users in business and government agencies, to focus on, in the words of the CRC Programme website, “clearly articulated, major challenges that require medium- to long-term collaborative efforts”. The minister responsible for the CRC programme is also advised by a 14-member committee that includes representatives from business. Under the programme, CRC partners conduct research and develop technologies to address government-identified priorities, decrease commercial risk by building demonstration projects, identify and pursue opportunities for commercialisation, and train a new generation of graduates with expertise in critical technological issues for careers in industry and

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government. Tony Wong, Chief Executive of a new CRC on “Water Sensitive Cities”, explains that CRCs are effective because “industry, researchers and government are brought together under one roof and one agenda”. In addition to contributing innovative problem-solving, there is the potential for large multinational companies to facilitate policy transfer from one place they operate to another, in the same way that they have traditionally facilitated technology transfer.

“There is an important role for leadership and resilience from business and political leaders – a role to look into the future and see what’s in the best interest, and not just listen to the noise of the present.” John Thwaites, Monash Sustainability Institute, Australia

Singapore’s Water Policy Singapore’s small land area, high population density and scarce freshwater supplies have forced it to develop one of the most innovative water management plans in the world. Through a combination of an extensive urban rainwater catchment system, wastewater reclamation and desalination on the supply side and water pricing and efficiency measures on the demand side, Singapore plans to eliminate its dependence on water imports by 2060. Singaporean policymakers have long understood that realising this vision will require new technology on a large scale, especially for desalination and water recycling. So the Public Utilities Board (PUB) has been working with the Economic Development Board (EDB) to encourage companies to do their research and development in Singapore. PUB can then explore opportunities in which the businesses can scale up their technologies, supporting them as a customer and perhaps even as an investor. In particular, PUB allows companies to test their nascent technologies on Singapore’s waste and saline water. By doing so, Siemens has developed a game-changing system for electrochemical desalination – and Singapore now has a pilot plant using the technology. Through accelerating pioneering research and development in water treatment, Singapore’s national water policy has made the citystate into a global leader in the water industry. For example, Hyflux, the Singaporean company whose membranes are used in Singapore’s desalination and water plants, has now built a number of water recycling plants in China. But most importantly, by bringing boardroom insights into its water policy, Singapore’s government has ensured itself access to the necessary technologies for implementing its 2060 water vision.

“Solutions can never come from one sector. We should look at how different sectors can collaborate, and come up with solutions that are context-specific, but grounded on rigorous science.” Tony H F Wong, Centre for Water Sensitive Cities, Australia

Assuming Leadership – the Role for Business Most of our shapers agreed that global policymakers are struggling to turn good ideas into effective and widespread tools for change. Throughout the regions we investigated, government bureaucracies tend to be characterised by their inertia, not their innovation, and are often, says Steven Koonin, “designed to move slowly”. Given this reality, businesses can play a significant role in accelerating the spread of good policies. Many individual companies are already acting alone to show leadership, realising that this can give a competitive advantage by anticipating policies, reducing costs or building brand. Yet despite attempts by individual companies to differentiate themselves, industries are often seen as monolithic both by the public and by policymakers, especially if their associations have high-profile advertising and lobbying campaigns. As a result, leadership may go unrecognised, while bad actors reflect poorly on the entire industry. Many of our shapers highlighted the structural or cultural tendency of industry lobbies to resist change to the status quo. Based on his experience in Australia, Ross Garnaut says he no longer expects industry associations to embrace climate policies because “business lobbies have to look after the squeaky wheels”, and even though many individual business leaders privately express support for pricing carbon, they say they couldn’t afford to go public because of how others in their industry might react.

“The standards are going up. You can either be a laggard or a leader – and the rewards and going to go to the leader.” Daniel Kammen, Renewable and Appropriate Energy Laboratory (RAEL), University of California, Berkeley, United States

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On the other hand, action by groups of businesses that transcend individual sectors can be very powerful. Daniel Sperling notes that the resignation in 2009 of Apple, Nike and electric utilities PG&E, Exelon and the Public Service Company of New Mexico from the US Chamber of Commerce over its stance on climate change added significant momentum to the calls for climate legislation. Mary Nichols, Amory Lovins and Dan Kammen also identified the US Climate Action Partnership (US-CAP) as an innovative model for a hybrid industry-NGO association that played a constructive role in advancing US climate legislation during 2009 – though in the end neither of these approaches was enough to break the Congressional deadlock.

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The Chicago Climate Exchange The Chicago Climate Exchange (CCX) was a voluntary exchange platform for greenhouse gas emission trading in the US. Richard Sandor, a former economics professor, adapted the idea for the exchange from the US Environmental Protection Agency’s successful sulphur dioxide emissions trading programme. At the launch of its first commitment period in 2003, CCX’s 13 charter members each paid an entry fee and received a yearly emissions allowance, which was calculated from their baseline emissions and CCX’s emissions reduction schedule. Participants, which included large and small corporations from almost every industry as well as utilities, universities, NGOs and municipal governments, joined the exchange because they were thought leaders who believed a national climate bill was coming. When it did, CCX would be positioned to become the US’s main platform for carbon trading. But a national climate bill never materialised, and allowance prices collapsed in 2010. The exchange was not renewed for a third commitment period. The lessons of this experiment show that industry can get only so far ahead of policy, and CCX could not survive indefinitely without US climate legislation. Nevertheless, many member companies and CCX itself still describe the seven-year experiment as a success: it helped members build experience in managing climate risks and its 450 members mitigated an estimated 700 million tonnes of greenhouse gas emissions. CCX, Sandor observes, got further than the US Congress was ever able to, “proving the concept without the policymakers”. CCX also inspired sister exchanges in Tianjin, Montreal and the European Union – the European Climate Exchange is the largest platform for the EU’s emissions trading scheme, in which 72% of the world’s greenhouse gas trade takes place.

Tarun Das points out that the Confederation of Indian Industry (CII) has also taken an active role in advancing Indian policy, by publishing one of the country’s first blueprints for a low-carbon development pathway and calling for India to address climate change on its own rather than waiting for developing countries to lead. Das explains that CII’s aim has been to position itself to compete in both the present and the future: “There are enough people in business who will drive the shift to clean energy, but there are also people who will resist it. The ones who drive it will win.” The same philosophy inspired a group of corporations to join the Chicago Climate Exchange in 2003 and engage in a voluntary cap-and-trade programme over seven years (see “The Chicago Climate Exchange”). Growing challenges in the water-energy-food-climate nexus are creating opportunities for businesses to form collaborations that span sectors and geographies. Such collaborations can play a key role in driving forward innovative policies. In so doing, leading businesses can act as inspiration not just for policymakers, but also for other companies in their industries and regions.

“A key question is how to engender leadership for the sort of cross-sectoral decision-making we need and then how to translate that leadership into practical action.” Jamie Pittock, ANU Water Initiative, Australian National University

“There are enough people in business who will drive the shift to clean energy, but there are also people who will resist it. The ones who drive it will win.” Tarun Das, Confederation of Indian Industry (CII)

Conclusions The global economy is on an unsustainable trajectory. Population growth, industrialisation and climate change are placing increasing stress on water, energy and food systems – systems that transcend borders and economic sectors and interconnect in ways that are only beginning to become clear. Innovative approaches to addressing challenges in the water-energy-food nexus are emerging in science, technology and business models, but policy has not kept up. On the contrary, governments have become notorious for their inertia, just when clear policy is most needed to catalyse major investment in new technologies and move economies forward on the basis of restored trust and shared goals among corporations, policymakers and citizens. Yet pockets of progress do exist around the world, and insights from policy shapers in Australia, Europe, India, Singapore and the US offer lessons for catalysing change in 20th century policy models – change that is essential if the global economy is to adapt to 21st century challenges. Sparks of policy innovation arise through experimentation and the breaking down of traditional barriers between stakeholders and disciplines. • The lion’s share of policy innovation originates in academia, NGOs and think tanks in countries such as the US, Australia and France. In recent years, these groups have begun to engage more directly with business to circumvent the deadlock of political environments. • Independent, credible research organisations can bring the necessary scientific rigour to policy proposals; provide long-term thinking to political systems held hostage to short-term election cycles; and incite inclusive policy innovation by bridging industry, civil society and government. • Innovative policy concepts can be tested and proved quickly in state and city “policy laboratories”, where political barriers are relatively low, before spreading to other cities or states or being scaled up to the national or international level. • Shrinking a policy’s scale while expanding its scope can inspire new solutions to old problems. • At the same time, collaboration across silos can produce policies that leverage interconnections among water, energy and food systems.

Policy Shapers of the Water-Energy-Food Landscape  19

Good ideas alone are not enough to drive change, and innovative approaches are also required to ensure that sparks of innovative policy catch fire. • Regions where the effects of water scarcity, energy and food insecurity, air pollution and climate change are already evident have ready-made constituencies or champions for policies to address them. In many regions, however, these effects have not yet become obvious, and policy advocates must create these constituencies through effective public communication and use of the media. • In contrast to government, the private sector has a large capacity for innovation, and business can instigate the development and spread of innovative policies in a number of ways. Private sector mind-sets and insights can help policymakers move policies from demonstration to scale. Given the right incentives, business can work with other stakeholders to develop the enabling technologies for policies in the water-energy-food nexus. • Business is aware of the many factors contributing to political inaction on climate change and the water-energy-food nexus, and the dangers this poses to all sectors of society. In a number of ways, individual companies are already trying to fill the leadership vacuum, but more effective approaches are needed. Influential companies can overcome the private sector’s own inertia by forming new cross-sectoral collaborations – that transcend industry associations and channel companies’ full potential to break away from the status quo and become leaders of change.

© Getty Images

Appendix of Interviews Australia Caroline BAYLISS, Director Australia, The Climate Group Tristan EDIS, Editor, Climate Spectator Ross GARNAUT, Vice-Chancellor’s Fellow and Professor of Economics at The University of Melbourne; Distinguished Professor of Economics at The Australian National University Daniel KHONG, Senior Development Manager, Places Victoria Peter NEWTON, Research Professor in Sustainable Urbanism, Swinburne Institute for Social Research Jamie PITTOCK, Programme Leader, Australia and United States - Climate, Energy and Water U.S. Studies Centre, and ANU Water Initiative, Australian National University Chris RYAN, Director, Victorian EcoInnovation Lab (VEIL) Anna SKARBEK, Executive Director, ClimateWorks Australia John THWAITES, Chair, Monash Sustainability Institute; former Deputy Premier and Minister for Climate Change and Water, Victoria Tony H F WONG, Director & Chief Executive, Centre for Water Sensitive Cities and Professor, Monash University

Europe Bernard BIGOT, Chairman, French Alternative Energies and Atomic Energy Commission Harald DOVLAND, former Deputy Director General, Ministry of Environment, Norway Jaime GORNSZTEJN, Head of Brazilian Development Bank (BNDES) Limited, subsidiary of BNDES in London

Gunnar GJERDE, former Director General, Ministry of Petroleum and Energy, Norway Sir David KING, Director, Smith School of Enterprise and the Environment, Oxford University; former Chief Scientific Advisor to H.M. Government, United Kingdom Geraldine KUTAS, Head of Brazilian Sugarcane Industry Association (UNICA)’s Brussels Office Ben MOXHAM, Senior Policy Advisor on Energy and Environment, Office of Prime Minister, United Kingdom Lord OXBURGH of Liverpool, Former Chairman, Shell; former Chair of the House of Lords Science & Technology Select Committee, United Kingdom Alexandre STRAPASSON, former Head of Sugarcane and Agroenergy Department, Ministry of Agriculture, Brazil

India Tarun DAS, former Chief Mentor, Confederation of Indian Industry (CII) Pramod DEO, Chairman, Central Energy Regulatory Commission Arunabha GHOSH, CEO, Council on Energy, Environment and Water (CEEW) MK NARAYANAN, Governor, West Bengal Sunita NARAIN, Director General, Centre for Science and Environment (CSE); Director, Society for Environmental Communications Aromar REVI, Director, Indian Institute for Human Settlements Shyam SARAN, former Foreign Secretary and former Advisor to Prime Minister on Climate Change

20  Policy Shapers of the Water-Energy-Food Landscape

Singapore CHEONG Koon Hean, CEO, Housing Development Board CHEW Men Leong, CEO, Public Utilities Board Richard HOO, Group Director, Strategic Planning, Urban Redevelopment Authority (URA) KHOO Teng Chye, Executive Director, Centre for Liveable Cities NG Lang, CEO, Urban Redevelopment Authority (URA)

United States Daniel KAMMEN, Distinguished Professor of Energy and Director, Renewable and Appropriate Energy Laboratory (RAEL), University of California, Berkeley Steven E. KOONIN, former Under Secretary of Energy for Science, Department of Energy Amory LOVINS, Chairman and Chief Scientist, Rocky Mountain Institute Mary D. NICHOLS, Chairman, California Air Resources Board (CARB) Richard SANDOR, Chairman and CEO, Environmental Financial Products Daniel SPERLING, Director, Institute of Transportation Studies (ITS-Davis), University of California, Davis Terry TAMMINEN, President, Seventh Generation Advisors; former Secretary of the California Environmental Protection Agency for Governor Arnold Schwarzenegger Sonia YEH, Researcher, Institute of Transportation Studies (ITS-Davis), University of California, Davis


Policy shapers project  

Interim report