On December 4, over a thousand mayors from around the world will meet in Paris to accelerate the work of local governments on climate change. Many Ontario mayors attending this event will arrive with a starting advantage: more than 150 local governments in the province already have Sustainable Community Plans (SCP)— plans to achieve environmental, social, and economic goals, developed in collaboration with businesses, NGOs and others. Many of these goals support action on climate change.
While many communities have committed to SCPs, they haven’t had as much success as they’d like in meeting their goals. This gap between planning and implementation represents a lost opportunity for municipalities to reduce the pressure put on the natural environment, while creating economic and social benefits for themselves.
Concurrently, Ontario’s local governments are faced with gaping infrastructure deficits. With limited fiscal powers, and the need to contain their infrastructure spending, how do they meet growing service demands while still living up to the sustainability ambitions expressed in their SCPs?
By using the right tools municipalities can do both. The most important missing piece in solving the urban sustainability puzzle is getting price signals right. This is where market-based instruments, or MBIs come in.
Market-based instruments are tools (such as municipal fees, charges and taxes) that use market prices and other economic variables to provide incentives to landowners, developers, residents, and businesses for environmental protection. They make use of market signals to better incorporate environmental and social costs/benefits into everyday decision-making.
Incorrect pricing that does not reflect full costs, such as the true costs of servicing lower-density neighbourhoods, lies at the root of numerous urban problems. Many environmental goals can be met at a lower cost if local governments implemented MBIs, rather than a “command and control” model. For example, in Nottawasaga Valley, the use of nutrient trading to protect water quality resulted in cost-savings of $10 million compared to mandating reduction to point sources of pollution.
In the past, a municipality’s fees, service charges and taxes have been seen primarily as revenue-generating tools. In reality, they also have strong incentive effects for a municipality’s environmental performance.
For example, a municipality could design development cost charges to encourage density or urban green infrastructure. Municipalities could also introduce new charges such as bag tags for garbage disposal, or storm water user fees.
MBIs may be used to support a municipalities’ other objectives across a range of important sectors, including transportation, water, air quality, and land use, among others.
Bringing effective price signals into local sustainability strategies also complements and reinforces other municipal priorities. It will lead to a more economically efficient use of urban services, reduce demand for new infrastructure spending, and diversify or possibly amplify revenue sources.
Market-based instruments are a valuable tool that may be used by communities of all sizes to close the gap between policy ambition and implementation. They are an effective way to help municipalities meet the goals outlined in their sustainability plans.
— Dr. Amelia Clarke is a professor in the University of Waterloo’s School of Environment, Enterprise, and Development & Stephanie Cairns is the Director of Sustainable Communities at Sustainable Prosperity
For more information on how municipal decision makers can reach their sustainability goals, please read the “Sustainability Alignment Manual”, at http://www.sustainableprosperity.ca/sam