India’s bold new market-based energy efficiency system

By Saravana Sivasankaran

A large reason why the Clean Development Mechanism (a mandatory process for certifying carbon credits) never really took off was because of the bureaucracy and ambiguity behind the requirements of the process. Project developers never knew with certainty if their projects, whether a clean coal plant, an energy-efficient building or a renewable energy project, would absolutely qualify for credits.

Take the case of India. I worked for a company that manufactured wind turbines for the regional Indian market. The price of the turbines we sold ultimately relied on the project’s IRR which in turn relied primarily on the site’s wind characteristics. However, with intensifying competition, a significant portion of the developer’s return increasingly came from income derived from selling carbon credits. I have seen first hand how the reliance on carbon credits killed deals or gave false hope to developers on risky projects only to be let down during the certification process. To further exacerbate the situation, India offered tax breaks for such projects resulting in many poor projects being funded. This in turn created havoc on the grid’s capacity to handle renewable energy’s erratic supply.

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In the news: Urbanization, Resource Scarcity, Cities, and Political Stalemates

(Updated March 35)

By John Macomber

Once you start tying phenomena together, the topics of our course are in the news everywhere. As we head into the last days of the Q3 term, here are a smattering just from the last week or two. It would be plausible to spring from these into an original post that applies some analysis or frameworks or segmentation to add the “so what” utility. Continue reading

Fighting Climate Change the Intelligent Way

By Saravana Sivasankaran

The issue of climate change has been a tough nut to crack. A major reason behind why it’s so hard to have countries agree on a common solution to bring down greenhouse gas emissions is the insistence of the developed economies (read the United States of America) to have developing countries such as India and China adhere to stricter norms on greenhouse gas emissions.

India and China’s counter argument is that developed economies have enjoyed a long period of industrialization which resulted in the current heightened risk of climate change; to ask developing countries, which are only now enjoying the benefits of rapid economic growth, to bear the extra costs of stricter environmental norms is unfair and hence unacceptable.

The media feverishly followed the climate change conferences including the recent ones in Durban and Doha, as it painted a vivid picture of the consequences of a successful agreement. China eventually shutting down coal power plants and bringing SoEs in line to reduce pollution. India’s much talked about power deficit worsening as a result of a compromise reached. Clearly, a divergent set of polarising opinions rose in this environoment. Continue reading

Smart, Non-Grandiose Entrepreneurship

By Yonatan

In our survey of case studies in the course we encountered several types of entrepreneurial approaches that range from Living PlanIT’s system-level IT solution and Masdar’s top-down support of cutting edge technology to Sarvajal’s business model innovation for clean water delivery to individual rural Indians. These and other examples demonstrate approaches that vary across many dimensions, two of which, I would like to argue, are most important: the degree of technology innovation and the scope of the solution (i.e. room, apartment, building, neighborhood, city; not scope as in size of addressable market). [Maybe “ambition” or “scale” would work on this axis too? – John M]

There are numerous reasons for why these dimensions are particularly important. The degree of technology innovation has vast implications on upfront R&D expenditures, time-to-market, level of customer education and required guarantees on one end and competitive barriers-to-entry, asset intensity and costs of operation on the other. The scope of the solution influences scalability, level of coordination and concentration/fragmentation of the customer base, among other things. Overall, these are chief in determining the go-to-market strategy, profit formula, availability of funding and other elements of the opportunity that impact the probability of success for a new venture[1].

With this in mind, I believe that the middle-ground of these two dimensions are the “sweet spot” for entrepreneurship in the fields we have been discussing, especially for applications in existing cities. The following diagram illustrates my rough evaluation of some of the examples we discussed in class and others [2]:

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A Parched Future

By Anonymous

While questions of slum redevelopment and mass transit dog Indian cities in their quests for modernity, a far more basic concern will make or break said aspirations … water.   Unless solutions are found to India’s rapidly depleting water table, Delhi runs the risk of going the way of Fatehpur Sikri and Babel.

Northern India, according to most estimates, will run out of water in the next 15 years.  Like Mexico City, massive urbanization, illegal water tapping, waste and poor government enforcement have exacerbated the problem. Unlike Mexico City, Northern India experiences a routine wet season that, if managed properly could mitigate the alarming depletion of its underlying water table.  However, according to a NASA study, the states of Punjab, Haryana & Delhi and Rajasthan have not developed the catchment programs necessary to reduce over-harvesting and are still withdrawing much more than their groundwater recharge rates [2].  In fact India as a whole runs a yearly 17 cubic mile deficit (18.5 trillion gallons)[3].

Surprisingly, peak water has never been quite as fashionable as peak oil (until Bond’s Quantum of Solace) in spite of its far more fundamental role in human, animal and vegetative survival [1].  Without delving too deep into the theory, there are three types of potable water: underground aquifers that have built up over millennia (non-renewable stock water), surface rivers and lakes (stock of renewable water) and rainfall (flow of renewable water).  As global populations have grown and exploited surface water, they have increasingly drilled deep into the underground aquifers, emptying them faster than rainwater can refill them.  While this is not troubling globally, as the earth has enough water, distributing this plenty to the stressed regional water systems involves prohibitively high cost and difficulty (think of Mexico City’s problems on a much larger scale).  The only equitable and feasible option is better water management.

In India the main causes of Indian water table depletion are:

1)Agriculture                                                                                                                                                    2)Increased urban density

While I am a neophyte in this field, travel in Israel and Singapore (two water-starved nations) shed light on some interesting water management techniques to ameliorate India’s deteriorating water situation [4]:

–          Reclaimed wastewater for agricultural use (52% of agricultural water in Israel is reclaimed)

–          Drip hose irrigation for agriculture (Israeli & Indian companies lead this sector)

–          Rainwater collection on all housing developments for artificial aquifer recharge (separate drainage systems avoid issues of cross-pollution with wastewater)

–          Advanced membrane technology water purification to create potable water

–          Setting realistic water tariffs (agricultural water is currently free!), reducing leakage and pilfering through capital improvement plans (new pipelines)

–          Better trash & sanitation management to avoid pollution of existing surface freshwater

 

[1] a more academic definition of the term: http://www.pnas.org/content/107/25/11155

[2] http://www.nasa.gov/topics/earth/features/india_water.html

[3]http://news.nationalgeographic.co.in/news/2012/12/121218-grabbing-water-from-future-generations/

[4]http://www.water.gov.il/Hebrew/ProfessionalInfoAndData/2012/04-The-State-of-Israel-National-Water-Efficiency-Report.pdf=

 

 

“Removing and Regulating” – Getting Rickshaws Out of Mumbai

By Sachin Desai

In most developing cities, traditional public transit is uncoordinated, unoptimized, and although gets people from place to place, creates a host of social problems doing so.  It starts to “parasite” off the expanding city.  In Bogota, local busses, old and poorly managed, not only starved new city roads and choked Bogota’s air, but also hindered BRT development.  However, “regulating and removing” these busses proved hard politically and economically.

However, can we learn from Mumbai? In a place where coordinated local action seems almost impossible (see Dharavi case), the government has had one success – regulating (and removing) auto-rickshaws.  These three-wheel motorized carts emerged to move people in the old city, but like the busses in Bogota, are today arguably more a nuisance instead of a help.  They do not follow road rules, creating traffic problems affecting all types of vehicles.  They have a high accident and fatality rate.[1] They are also hard to remove, with over 200,000 drivers and multiple unions.[2]

But auto-rickshaws have been successfully “regulated,” forcibly converted to cleaner CNG, something that would seem hard to do in Bogota.[3]  They have also been “removed”  from central Mumbai, limited now to the suburbs.[4]   Mumbai’s government is aggressively scrapping unlicensed rickshaws.[5]  This has helped modern taxis take their place, improving safety, exposure to pollution, and travel times.  Mumbai’s new infrastructure now does not suffer parasitic losses from slow-moving and wirey Rickshaws.

How is this possible?  Lessons from Mumbai can apply not just in Bogota, but any time an old transit economy has to be swapped in for new.  From my research, here are a few potential reasons Mumbai succeeded:

  • The government has challenged rickshaw economics.   Costs on rickshaws have been slowly ratcheted up.  Drivers complain of new 1-time taxes on rickshaws.[6]  The government aggressively restricts rickshaw rates, limiting profit.[7]  The government aggressively polices these rates.[8]
  • Mumbai created competition.  The government has subsidized taxis, which, unlike busses or metros, can directly compete with rickshaws.[9]
  • Sometimes, one arm of the government funds things while the other tries to stop it.  In Bogota the government appears to still give out concessions to local busses.  The Mumbai government used to give loans for rickshaws, and now they have stopped.[10]
  • Importantly, the government has gone directly on the offensive.  Multiple government reports attack the safety[11] and environmental performance of rickshaws.[12]  Their fare honesty has been challenged, despite the fact that fares are cheap and drivers complain it’s a smear campaign.[13]  Public leaders directly call for bans.[14]  There are strong government efforts to monitor and fine rickshaws, and to promote riders to complain against rickshaws.[15]Rickshaw drivers today believe the people are against them.[16]

Takeaways:  First, maybe the “regulate and remove” system is possible in developing-country democracies.  If Mumbai can win against a large, organized, populist-oriented group, ANYONE can do it.  Second, it may change whether we build a BRT or MRT in Avenida Septima.  If a major policy goal is to remove a damaging but entrenched system, the answer may be direct engagement.  A BRT can compete directly with local busses.  MRTs likely cannot stop as often, and are expensive, allowing local busses to differentiate on price.  It may be better to spend that MRT money on subsidizing the BRTs to price-parity with the local busses, on a PR campaign attacking the safety and pollution record of local busses, aggressively buying/eliminating bus concessions, and on increasing monitoring and complaint mechanisms against local busses.

Desai Rickshaw

Image: Auto-Rickshaw

[1] Mumbai Auto Rickshaws May No Longer Be a Sure Thing, The National (Mar. 13, 2010), http://www.thenational.ae/lifestyle/motoring/mumbai-auto-rickshaws-may-no-longer-be-a-sure-thing.  “However [while other Mumbai drivers have become safer], accidents involving two wheelers and auto rickshaws have shot up. While only 1,477 two-wheeler accidents were reported in 1971, the number crossed the 5,000 mark in 2008.” Mumbaikars Have Become Safer Drivers, Reveals MMRDA Report, DNA India (Mar. 19, 2010), http://www.dnaindia.com/mumbai/report_mumbaikars-have-become-safer-drivers-reveals-mmrda-report_1361081.  See also India Unions Urge Mumbai Rickshaws Makeover, BBC News (May 17, 2011), http://www.bbc.co.uk/news/world-south-asia-13427774.

[2] See BBC News, supra note 1; Proposed Auto Rickshaw Strike Called Off in Mumbai, India Today (Nov 1, 2011), http://indiatoday.intoday.in/story/proposed-auto-rickshaw-strike-called-off-in-mumbai/1/158254.html.

[3] May 31 Deadline for CNG Conversion, Times of India (Apr. 11, 2002), http://articles.timesofindia.indiatimes.com/2002-04-11/mumbai/27143092_1_taxi-unions-three-wheelers-cng.  Given the strike discussed in India Today, supra note 2, it appears that most rickshaws to use CNG today.

[4] Taken from personal experience.  See also Public Transport in Mumbai, Wikipedia, http://en.wikipedia.org/wiki/Public_transport_in_Mumbai#Auto_rickshaws (last visited Feb. 10, 2013).

[5] See Small Four-Wheelers To Replace Three-Wheelers In Mumbai, The Automotive Horizon (Nov. 9, 2010),  http://automotivehorizon.sulekha.com/small-four-wheelers-to-replace-three-wheelers-in-mumbai_11_2010_postedby_jayashankar-menon.

[6] Audi, Move Interviews – Two Auto-Rickshaw Drivers, The Challenges of Navigating Mumbai 3-4 (Jan. 3, 2013), available at http://audi-urban-future-initiative.com/mooove_cms/resources/media/pdf/auto-rickshaw-drivers.pdf.

[7] Id.

[8] 97 Of 150 Rickshaw Meters Tampered With: Andheri RTO, Hindustan Times (Sep. 19, 2011), http://www.hindustantimes.com/India-news/Mumbai/97-of-150-rickshaw-meters-tampered-with-Andheri-RTO/Article1-747445.aspx.

[9] The Automotive Horizon, supra note 5; Mumbai Not So Cool Cabs Air Conditioned Taxis, Mid-Day.Com (Oct. 2012), http://www.mid-day.com/news/2012/oct/031012-mumbai-Not-so-cool-cabs-air-conditioned-taxis.htm.

[10] Audi, supra note 6, at 5.

[11] See e.g., The Automotive Horizon, supra note 5, DNA India, supra note 1.

[12] The Role of Auto Rickshaws in Modern Indian Cities, The City Fix (Mar. 24, 2010), http://thecityfix.com/blog/the-role-of-auto-rickshaws-in-modern-indian-cities/.

[13] Hindustan Times, supra note 8.

[14] The National, supra note 1. See also Dehli Plans Ban On Autorickshaws, Guardian UK (Mar. 18, 2010), http://www.guardian.co.uk/world/2010/mar/18/delhi-plans-ban-autorickshaws. This forces strikes, which erode public support for rickshaws.  Auto Drivers Face Sena’s Wrath, NDTV (Oct. 5, 2011), http://www.ndtv.com/article/cities/mumbai-auto-drivers-face-sena-s-wrath-138945; Audi, supra note 6, at 4.

[15] Is the Auto Rickshaw strike justified?, The Complete Mumbai Guide, http://www.in-mumbai.com/2011/09/is-auto-rickshaw-strike-justified.html (last visited Feb. 10, 2013).

[16] Audi, supra note 6, at 5.

Rationalizing Private Investment in Slum Redevelopment: A Cost/Benefit Framework for Local Government

By Anonymous

In the Dharavi case, we discussed ethical dilemmas that arise when local governments incentivize private investment in large-scale slum redevelopments at the risk of displacing residents; namely, how do you avoid widespread social disruptions while improving quality of life; or unlocking value in this commercial area for the “public good”? With no first hand experience in Dharavi and limited knowledge of its political and financial dimensions, it is difficult to answer. Yet, in drawing upon a basic “cost/benefit” framework, I would recommend that stakeholders on all sides keep two critical facts in mind about the role of local government.

First, thriving cities require baseline conditions that promote a high quality of life and level of economic vitality, such as sanitation. This has been a longstanding area of service provision for local governments globally, making Mumbai’s case largely uncharacteristic.  Existing conditions in Dharavi, however, represented some of the major public health risks and economic impacts emanating from slums across the city, given that “only 17% of residents in Mumbai slums had access to household toilets” (Iyer et al 2011). From the social perspective, this situation has enormous costs, such as susceptibility to disease, other public health concerns, low quality of life, and barriers to economic and social mobility. From the economic perspective, this creates opportunity costs in the form of lost productivity spent from hours waiting in line for a small number of public toilets, avoided private investment, and driving away prospective tourists and businesses due to highly insanitary conditions. Elevating Mumbai to “world city” status required its local government to address these challenges not just in Dharavi, but in slums citywide; as well as to raise the resources to do so. Private investment therefore represented an opportunity to create long-term public value through redevelopment in the form of subsidized housing, improved sanitation, and (eventually) tax revenue to reinvest in the city more broadly.

Second, sanitation challenges in Dharavi and other Mumbai slums simply could not be addressed without adequate resources. With over 700,000 residents in a commercially attractive location, Dharavi was an “entrepreneurial slum” that likely imposed untenable economic costs on Mumbai’s local government, in terms of informal business activity and previously mentioned impacts depriving it the ability to provide sanitation services citywide. The informal (i.e. “untaxed”) enterprises in Dharavi alone “were estimated to produce goods worth about $600 million annually”, “more than the output of several newly established economic zones” (Iyer et al 2011). This value, if recaptured in the form of taxes and formal businesses, could go a long way towards paying for necessary “quality of life” improvements in slums across the city, such as sanitation. With the right approach, private investment could perhaps be communicated as a necessary catalyst for value-creation that addresses the self-interests of slum residents, even if Dharavi residents were to flee to other slums that were to eventually improve. Other issues aside, reframing the debate in terms of citywide costs versus benefits could provide an understandable context for the local government to act.

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