In brief
- Environmental thinkers increasingly argue that in order to cut carbon emissions, the world needs to build.
- The problem is that plans to build solutions to carbon emissions often encounter significant local opposition.
- There are solutions: sharing the value created with local communities, and reforming planning and permitting processes.
Introduction
Many groups stand in the way of the net-zero transition. Lobbyists for fossil-fuel firms persuade governments to water down climate change legislation. Politicians, scared of short-term electoral costs, refuse to implement meaningful carbon pricing. Yet there is another group exerting huge ecological damage — which, until recently, almost nobody talked about: NIMBYs. A growing number of people in the corridors of power, from Brussels to Washington, are starting to notice.
Pernicious effects
Housing experts have long lamented the pernicious effects of “Not In My Back Yarders,” a broad definition for people who resist construction of new housing. By reducing supply of housing and thus raising its price, NIMBYs can exert staggering economic damage. According to research by two economists, Chang-Tai Hsieh and Enrico Moretti, removing excessive regulations in just three cities — New York, San Francisco and San Jose — could boost America’s GDP by 9% (or around $2trn) because more people could move to them.1 Global interest in NIMBYs is rising, as shown by data on Google searches:
Figure 1: Global Google search interest in "NIMBY"
*Numbers represent search interest relative to the highest point on the chart for the given region and time. A value of 100 is the peak popularity for the term. A value of 50 means that the term is half as popular. A score of 0 means there was not enough data for this term.
At the same time, more people are starting to recognise that NIMBYism can hurt the planet. Environmental thinkers increasingly argue that in order to cut carbon emissions, the world needs to build.2 It needs to build solar power and wind power — and a lot of it. But it also needs to build new public transport, where suitable. Building denser, walkable cities would also be great for the climate: cities have far lower carbon emissions per person than rural or suburban areas.3
The problem is that these plans often encounter significant local opposition. People say they dislike wind turbines because of the noise (even though they produce very little). Others dislike the look of solar panels on the roofs of people’s houses, saying that it destroys the character of a local area. In isolation these concerns are not necessarily invalid, but as they accumulate they end up causing real damage. In 2021 people in Maine voted against a 145-mile energy-transmission project that would bring clean Canadian hydropower to New England, fearful that it would disrupt the state’s woodlands.4 In many countries, 100% of onshore wind projects are challenged in the courts on the grounds of protecting nature.5 Over the past decade only 2% of South Korean offshore wind-power projects have completed the permitting procedure.6
Ironically enough, many of the people opposing climate change construction do so with the language of environmentalism: building things “destroys” nature, they say. And yes, in some cases a given renewable energy construction project may have more environmental costs than benefits. But this is a matter of trade-offs. We need wind and solar energy capacity that is a massive multiple of what we currently have. So while building it might have a small impact on nature in the short term, not building it is almost certain to have an impact in the long term. Fundamentally, there won’t be any nature left to save if we don’t build.
Research on the costs of climate NIMBYism is starting to pile up. One paper by Stephen Jarvis at the London School of Economics finds that NIMBYism in Britain can raise the cost of wind power by 10-29%.7 A new paper by researchers at MIT identified 53 utility-scale wind, solar and geothermal energy projects that were delayed or blocked between 2008 and 2021.8 One third faced significant delays and difficulties securing permits, while nearly half were cancelled permanently. In the EU there is four times more wind energy trapped in permitting than there is under construction.9 “Right now,” says John Podesta, the White House’s deputy chief of staff, “it’s often easier to permit fossil fuel infrastructure than clean energy infrastructure.”10
Solutions
What can we do to change this? There are some solutions already out there. There has been a requirement in Denmark since 2011 that wind farms be at least 20% community-owned.11 In Germany in 2009 reforms were introduced to ensure that more of the revenues of local wind farms went to the local municipality.12 A similar project is also in force in Scotland. If a solar farm opens in your neighbourhood, you should get some of the value thus created — either in a cheque every month from the provider, or lower energy costs.
More can be done, however. A recent commercial by Vestas, a wind-turbine manufacturer and servicer, was tongue-in-cheek but with a serious message.13 “Bureaucrats must save the world,” it went. “We need to shorten the permitting process.” The skit’s message is simple: shifting the world to net zero is not always glamorous. In many cases it involves the boring processes of local governments and planning commissions. In Britain the boss of National Grid recently made a similar call.14
In some cases national or supranational governments can force through planning applications, over the heads of local objections. In France there are plans to make it easier to build offshore wind farms, reducing the number of hoops through which builders have to jump.15 A lot is changing in Germany. At present, 0.8% of the country’s land area is approved for onshore wind energy, but the federal government will increase this to 1.4% by setting binding targets for the states.16 At the EU’s energy council last December, member states decided that the expansion of renewable energy is in the overriding public interest throughout Europe — and that the expansion has priority in terms of authorisations and planning.17
Spain’s government recently implemented new planning rules which shorten the permitting process for projects of capacity below 150 MW with low or medium impact on the environment.18 America’s Inflation Reduction Act, meanwhile, increases investment in federal permitting agencies in order to increase staff capacity and incorporate new permitting technologies. And recall the transmission line that was rejected in Maine. In April a jury reversed the vote, allowing construction to restart.19 If we truly want net zero, the world is going to have to unleash the builders.
https://www.economist.com/leaders/2023/04/05/the-case-for-an-environmentalism-that-builds
https://apnews.com/article/election-2021-maine-hydropower-line-54dea1a948e9fc57a667280707cddeb7
https://www.vestas.com/en/about/Our-policy-recommendations/permitting
- Jarvis, Stephen. "The economic costs of NIMBYism: evidence from renewable energy projects." (2021)
- https://www.sciencedirect.com/science/article/pii/S0301421522001471?dgcid=rss_sd_all&utm%20_campaign=Daily%20Briefing&utm_content=20220414&utm_medium=email&utm_source=Rev%20ue%20newsletter#!
https://www.vestas.com/en/about/Our-policy-recommendations/permitting
Please note that Vestas is a Generation portfolio company.
https://www.ft.com/content/2f55255a-d39a-4ce9-a07f-37f6f88eda1d
https://www.bundesregierung.de/breg-de/themen/klimaschutz/onshore-wind-energy-act-2060954
Important Information
The ‘Insights 16: How “Climate NIMBYism” Prevents Net Zero — and What Can Be Done About It’ is a report prepared by Generation Investment Management LLP (“Generation”) for discussion purposes only. It reflects the views of Generation as at June 2023. It is not to be reproduced or copied or made available to others without the consent of Generation. The information presented herein is intended to reflect Generation’s present thoughts on sustainable investment and related topics and should not be construed as investment research, advice or the making of any recommendation in respect of any particular company. It is not marketing material or a financial promotion. Certain companies may be referenced as illustrative of a particular field of economic endeavour and will not have been subject to Generation’s investment process. References to any companies must not be construed as a recommendation to buy or sell securities of such companies. To the extent such companies are investments undertaken by Generation, they will form part of a broader portfolio of companies and are discussed solely to be illustrative of Generation’s broader investment thesis. There is no warranty investment in these companies have been profitable or will be profitable. While the data is from sources Generation believes to be reliable, Generation makes no representation as to the completeness or accuracy of the data. We shall not be responsible for amending, correcting, or updating any information or opinions contained herein, and we accept no liability for loss arising from the use of the material.