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US & Canada Have To Overcome Patchwork Regulations In Low-Carbon Transformation – Part 2

This regulatory patchwork of federal, sub-national, and urban regulatory processes, incentives, and fines is dealt with today by local offices, and by hiring local engineers and architects for local efforts so that they can smooth the alignment.

Originally published on Medium.

This is the second in a series of articles detailing the challenges facing rapid transformation to substantial decarbonization by 2030. It was triggered by a scheduled conversation with a wandering marketing guru, Elisha Israel, who had just stepped off a high-speed train in Northern Africa.

He was seeking to understand the barriers facing sustainability entrepreneurs and transformation consultants, hence the reason he was talking with me. The conversation ranged over four major factors I saw as hindrances to rapid transformation.

The first article deals with the challenge that a majority of people, wealth generation, and climate solution requirements are within urban areas, yet urban areas were an afterthought in constitutions. They have limited ability to generate revenue themselves and are subject to interference from two to three levels of government and governance above them as they attempt to achieve carbon neutrality. Short and long term solutions such as declaring climate emergencies, unifying regional power and budgets for fixing problems, and the potential for urban cryptocurrencies were discussed.

This article deals with the specific headwinds of regulatory patchworks that exist across the United States and Canada. I’ll pull at two or three threads to draw this out.

The first thread is work I did with Simon O’Byrne, SVP and business leader of Stantec’s community development global practice. Stantec has 400 offices around the world, with a focus in North America. Simon and I connected on a North American trade panel in Vancouver, where I introduced some of the post-Westphalian urban alignment thoughts I wrote about in the first piece in this series. We spoke afterward, and then engaged frequently for several months around a specific challenge Simon had.

His challenge, one faced by every firm that’s larger than a breadbox, is that regulations change with every urban border, every sub-national border, and every national border. As an urban designer who leads architects, engineers, and urban planners, Simon’s challenge was the lack of ability he had to leverage global knowledge across hyper-local regulations. Further, that hyper-locality meant that the unique intellectual capital of designers and engineers was often specific to the urban area, not to Stantec. It was easy for them to leave Stantec, substantially underbid it on a wide variety of work and make just as much or more money for themselves due to the lack of the global overhead Stantec brought to the table.

Multilevel value proposition for global consulting company go-to-market approach

Image by author

My proposal was to create a global urban futures index based on major transformative trends, one that addressed leading practices, identified and promoted Stantec global SMEs, created unique Stantec intellectual capital, and shifted the go-to-market conversations with clients substantially. It would have both rewarded the SMEs and tied local resources more closely to Stantec. It would have created excellent marketing, sales, and delivery collateral.

The strategic focus of Stantec was more on global acquisitions and Toronto’s Sidewalk Lab initiative which they are heavily involved with, so this proposal hasn’t moved forward. But it’s the type of thinking that is required for firms to engage globally in the rapid transformation and to maximize their revenue and profits in this period of increasingly rapid change. Leading practices from around the world must be brought to local areas as efficiently as possible in order to speed change.

The future is already here. It’s just unevenly distributed.— William Gibson

The second thread pertains to a sustainability-focused conference I attended recently, again in Vancouver. There were multiple useful sessions which I’ve written about and related conversations over the month around it with various stakeholders, but overall the takeaway was that Vancouver is a bubble of the future, and lessons learned here will be applied over the next 20 years across Canada and the US.

Let’s take building heating and air conditioning, as an example. There are two major global treaties which impact this, the Paris Accord with its aspirational target of 1.5 degrees Celsius of warming and the Kigali Amendment to the Montreal protocol. The first, especially with the three-part UN IPCC 1.5 degree reports, makes it clear that substantial transformation is required to avoid very large economic, societal, environmental, and human impacts in the coming decades, and that we have to move away from burning fossil fuels for heating.

The second is specific to an example of the Law of Unintended Consequences. The Montreal Protocol of 1987 led to the phasing out of substances that harmed the ozone layer, with good results. One of those substances was CFCs, used widely in refrigerants. They were replaced with HFCs, which while not harmful to the ozone layer, have often massively higher global warming potential than other greenhouse gases, up to 14,800 times as much as CO2. The Kigali Amendment, defined in a Kigali, Rwanda conference in 2016, phases out most HFCs from use in refrigeration. It became active in 2019. As a note, Project Drawdown has phasing out HFCs as its #1 item on its value-for-money list of climate actions.

What do these have to do with the patchwork of regulations? Well, Canada is signatory to both the Paris Accord and Kigali Amendment, and is showing strong evidence of working to achieve those goals. The United States is currently signatory to neither of the global agreements, however, the leading Democratic candidates for President have an interest in signing both agreements and working to adhere to them in their climate change platforms.

How does this play out? In Canada, the federal government provided $12 million in incentives for a major grocery chain to replace HFCs. This is a direct result of adherence to the Kigali Amendment. It was, of course, attacked by the Conservatives as a wedge campaign issue, just as in the United States it’s ignored at the federal level entirely. That federal incentive is part of the patchwork. Along with federal incentives come federal building standards. As we progress through the next few years, the federal level of standards, codes, incentives, and fines will be transforming, but unevenly. Due to the federal win in 2019 by a party that accepts the science of climate change, Canada will be leading. The United States will see climate change as a major issue in the 2020 elections, with states such as Florida and Texas — along with all of their Electoral College votes — at play due to the impacts of climate change. I’ve projected that the Presidency might very well hinge on acceptance of climate change and credible plans to deal with it.

Similarly, sub-national governments have strongly mixed regulatory frameworks. California, with its strong focus on reducing its carbon emissions, and Texas, are instructive. California has 11 million (70%) more people, $1.2 trillion (60%) higher GDP, yet has about half of the greenhouse gas emissions of Texas. California has much stronger CAFE regulations, efficiency standards, and the like. California has had HFC regulations in force since 2013. Texas has nothing similar. California’s state-level HVAC incentives are strong. Texas has no state level HVAC incentives.

At the urban level, the variance is much higher. Austin, Texas is an outlier in the state, with regulations, incentives and fines that are much more aligned with the actual requirements. But as Neil Dobson, executive director of CleanBC, the provincially mandated decarbonization program, said, no jurisdiction can go it alone. Thankfully, progress prevailed at the federal level in Canada, so BC and Vancouver aren’t adrift in a sea of gray, but that’s far from universal.

As an engineer I’m working with right now points out, Vancouver’s targeted plans make it faster to get climate-aligned initiatives through approvals. The cost and duration of regulation varies substantially from city to city, and as Stantec’s experience shows, what is required varies substantially as well, with different documentation, different processes, and different priorities. Over the next 20 years, virtually every city in the United States and Canada will be in the state that Vancouver is in today.

But they’ll all be there at different times. And incentives programs go away, but typically fines are forever. There is going to be a deeply uneven wave of transformation spiking in different urban areas at different times over the next 20 years within the two countries.

This regulatory patchwork of federal, sub-national and urban regulatory processes, incentives, and fines is dealt with today by local offices, and by hiring local engineers and architects for local efforts so that they can smooth the alignment.

But there are better ways.

A team I’m working with right now is considering open-sourcing a large-scale data repository of urban regulatory frameworks and building standards that are pertinent to climate change. We would apply machine-learning approaches to identifying not only areas of highest opportunity in any given period, but also to assist in regulatory compliance.

Some firms undoubtedly have proprietary versions of this, or are simply tasking their local offices to achieve outcomes regardless of competitive alignment.

Any larger scale firm has to manage this through staffing policy and procedures, but this is challenging. Internal resources are both less expensive and sunk costs, so they are inevitably the ones that firms providing services turn to. But as stated, any firm larger than a breadbox is suffering from widely varying rates of change and a great deal of local competition from small firms and individuals who realize that they can do just fine without the global overhead.

Over the longer timescale, I can see urban areas standardizing on their regulatory framework, regardless of the geographical unit that they happen, by an accident of history, to be a part of. The world will become more efficient, and necessary transformations and economics will be streamlined. It won’t happen in time for the necessary low-carbon transformation, but the lesson of the Kigali Amendment is that further transformations will be required.

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Written By

is Board Observer and Strategist for Agora Energy Technologies a CO2-based redox flow startup, a member of the Advisory Board of ELECTRON Aviation an electric aviation startup, Chief Strategist at TFIE Strategy and co-founder of distnc technologies. He spends his time projecting scenarios for decarbonization 40-80 years into the future, and assisting executives, Boards and investors to pick wisely today. Whether it's refueling aviation, grid storage, vehicle-to-grid, or hydrogen demand, his work is based on fundamentals of physics, economics and human nature, and informed by the decarbonization requirements and innovations of multiple domains. His leadership positions in North America, Asia and Latin America enhanced his global point of view. He publishes regularly in multiple outlets on innovation, business, technology and policy. He is available for Board, strategy advisor and speaking engagements.

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