Market Failure; The need for policy assessment of urban resilience to climate change and peak oil is first drawn from market failure analysis with regard to negative externalities and common pool resources. For example, Nicholas Stern[1] recently described climate change as the biggest market failure the world has ever seen, as most of our industrial, energy and transport activities have never internalized the costs of green house gas emissions.
Markets will be too slow to avoid negative externalities; Adaptation of urban settlements to the impacts of peak oil and climate change requires long lead in times as structural changes within transport and energy and many industrial systems will be required. However the direct feedbacks to the market to signal the need for change are too delayed. For example climate change impacts have only began to be felt after irreversible climatic changes have occurred.[2] In terms of oil, Hirsch (2005) warned the US Energy Department that a national energy transition would require at least a decade of ‘massive mitigation’[3] before peak production occurs. While rising prices will stimulate market lead solutions, markets alone are not likely to respond in time to ensure smooth and socially equitable transitions[4].
Technological transitions require more than new technology, they require reconfigurations of suppliers, regulations, financial investments, and consumer preferences[5]. This understanding has resulting in the OECD[6] calling for greater government intervention to stimulate and enable market uptake of innovations which help decouple economic growth from energy consumption and C02 emission rates. Similarly CSIRO’s report on Australia’s oil vulnerability[7] predicted that consumers and businesses are unlikely to adequately prepare for fuel scarcity and therefore the report argues for government intervention.
The market failure will negatively impact those least able to respond; Markets will not be adequate on their own to ensure equitable adaptation and risk mitigation across urban communities. For example urban residents on low incomes, with low public transport provision are likely to be affected earlier and harder by oil price rises because fuel will represent a greater proportion of their disposable income and they will have fewer financial resources to adapt.[8] Government policy and coordination is necessary for equitable and rapid adaptation and for ensuring an adequate safety net is in place for those most vulnerable.
Resilience to oil scarcity and climate change is strongly influenced by urban form and public transport provision, which are key responsibilities of local government. Dantas et al (2007) empirically demonstrated the link between different types of urban form, different levels of public transport provision and the decline of transport trips within an energy constrained future. Dantas et al comment that despite peak oil evidence, New Zealand public strategic and long term planning exercises have almost ignored future prospects of energy availability and transport models rarely include energy in their calculations.
Potential for market responses and government intervention to create mal-adaptations and unintended consequences; Holistic assessment needs to be undertaken to ensure that market responses and government interventions do not create unintended consequences. To illustrate, one global market and policy response to peak oil is biofuels. However research indicates that the widespread development of biofuels is likely to aggravate energy and climate change impacts and create water and food production constraints.[9] Therefore coordinated policy assessment across agencies and issues is required to avoid negative externalities. To this end, the resilience assessment framework considers climate change and peak oil impacts together and the assessment covers a broad range of urban functions.
Next section; Resilience as a strategy
[1] Stern N. 2010. Managing the risks of climate change, overcoming world poverty and creating a new era of growth and prosperity: The challenges for global collaboration and rationality“. Sir Douglas Robb Lecture, the University of Auckland.
[2] International Panel on Climate Change (2007). IPCC Fourth Assessment Report: Climate Change 2007 accessed Sept 2010 www.ipcc.ch/publications_and_data/publications_and_data_reports.htm#1
[3] Hirsch, R., Bezdek, R., Wendling, R. (2005) Peaking of World Oil Production: Impacts, Mitigation, & Risk Management. the US Department of Energy report. Microsoft Word – NETL Final Report, 2-05.doc
[4] Peak Oil Task Force 2006 op. sit.
[5] Smith, A., Voss J.P., Grin J. (2010) “Innovation studies and sustainability transitions: The allure of the multi-level perspective and its challenges.” Research Policy 39(4): 435-448.
[6] OECD (2009) Sustainable manufacturing and eco-innovation: framework, practices and measurement: synthesis report. Declassified 2009, OECD.
[7] CSIRO 2008 op. sit
[8] ibid
[9] For example biofuel plantations converted from rainforests in Indonesia and Malaysia have carbon debts of over 400 yrs. Studies have shown that it takes more fossil fuel to produce biofuel than the resultant biofuels can generate. Biofuels require significant quantities of water not to mention already having significant impact on food prices. Finally biofuels can’t fill the oil gap; a study found that if all the solar energy from every bit of plant matter in the US (food crops, lawns, forests) were converted to biofuels, it would still only meet half the 2006 US demand for fuel. (Source, Shiva V. 2008. Soil not oil; Climate change, Peak oil, and food insecurity. Spinifix Press. North Melbourne)