Brandon Donnelly

Daily insights for city builders, delivered every morning at 6 AM ET. I’m Brandon Donnelly — a Toronto-based real estate developer and founder of Globizen. I’ve been writing here since 2013.

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Tag: carbon pricing

  • My predictions for 2022

    As promised, below is a list of some of my predictions for this coming year. I have tried to be both punchier and more precise in my prognostications; because, well, obvious predictions are boring and precision will allow me to better evaluate my thinking at the end of the year. So here goes.

    1. 2022 will be the year that COVID-19 becomes endemic and finally fizzles out to a point where it no longer factors into our decision making in the same way that it has for most people over the last two years or so. I think this will happen by as early as the summer.
    2. As a result, I think the majority of people will be back in their offices by this September at the very latest, with many coming back much earlier. The whole hybrid/flexible work thing won’t completely disappear, but the majority of people who used to work in offices will be back.
    3. Recreational/fringe residential real estate will soften in 2022 as a result of 1) its tremendous run-up during this pandemic and 2) the renewed pull of urban/office life. Conversely, urban apartment rents will continue to rise and eventually surpass their pre-COVID levels. The SF Bay Area could be one exception.
    4. The explosion of travel that I thought was going to happen in 2021, will truly happen this year. The summer will mark its official return, with European travel volumes (to give just one example) returning to their pre-COVID levels.
    5. We will see meaningful efforts to further breakdown the hegemony of single-family zoning throughout many North American cities. This has been building for a number of years and I think we will see some tipping point-like moments in 2022. Specifically, expanded permissions for multi-unit housing and greater densities.
    6. I wish I could say that autonomous vehicles are destined to do something truly remarkable this year, but I think we are still a few years out (2024-2025?) before a large chunk of us are ride-hailing AVs. But on a related note, I do think that Uber will come into its own this year and finally become profitable (and not just with adjusted profits).
    7. Public transit ridership will, unfortunately, remain depressed and below its pre-COVID levels for this entire year. The beneficiaries of this will continue to be cars (not good), bikes, and micro-mobility solutions like e-scooters.
    8. 2021 was a huge year for NFTs and other fun stuff like digital fashion. Given these trends, I believe there will be growing demand from people to better integrate their digital and physical lives through technologies like augmented reality. Snap has been at the forefront of this space for many years and 2022 will be an important year for its Spectacles (AR glasses). But Apple and others will also make major announcements.
    9. Miami’s ascent as an important tech hub will get interrupted by questions surrounding the climate crisis and its own resilience. At the time of writing this post, the price of carbon on the EU’s Emissions Trading System (EU ETS) is about €80 per tonne. I think we will see it break €125 per tonne this year, and possibly go even higher.
    10. Ethereum, Bitcoin, and Solana (in this order) will be the top three cryptocurrencies according to market cap by the end of the year. At the time of writing this post, their market caps are $446 billion, $895 billion, and $55 billion, respectively. I am also expecting some breakout web3 consumer applications that will push, maybe, 40% of Canadians and Americans into the crypto space.

    Photo by Dave Xu on Unsplash

  • Our sustainability goals and the price of carbon

    This is an interesting article talking about the price of carbon and where it will need to go if we are to get to zero carbon emissions by 2050. The current price of carbon on the EU’s Emissions Trading System is around $59 per tonne. But according to the OECD, carbon will need to be closer to $150 per tonne by 2030 to keep the world on track with its sustainability goals. What this means is that if you emit carbon, it will get more expensive to do that.

    The article also suggests that there is talk of a minimum price on carbon that would slowly increase over time. This would provide greater certainty to investors who are buying/trading carbon, while at the same time encouraging a broader push away from carbon emissions. This proposal has been backed by the Net-Zero Asset Owner Alliance, which is a group of companies that collectively represent about $6.6 trillion of assets under management.

    I think it is clear that we are headed in this direction. But it is going to be an expensive transition. Take, for example, the case of new buildings. Many/most cities now have sustainability goals that similarly increase — become more stringent — over time. The thinking is that this gradual transition allows the development industry to incrementally adapt. Makes sense.

    However, there are real challenges. Generally speaking, these new targets increase the cost of building. The result is a set of opposing forces. We want more sustainable buildings, but we also want more affordable housing. The problem is that the former often works against the latter, even though it is the right thing to do. And so it is not only about the industry catching up to new targets, it is also about the market catching up through higher rents and higher sale prices.

    My view is that offsets and subsidies are important to rebalancing some of these forces. Because without them, it is likely that we are doing things that run counter to each other.

  • Climate change gridlock

    I spent this morning reading an article called: How climate change is rapidly taking the planet apart. Here is an excerpt from the introduction: 

    “According to Naomi Oreskes, a great number of climate change scientists (she interviewed most of the top 200 climate change scientists in the US) suffer from some sort of mood imbalance or mild or serious depression. It is easy to understand why: we see the climate change taking the planet apart right in front of our eyes. We also clearly see, right in front of us, what urgently needs to done to stave off global disaster on an unprecedented scale. We need carbon taxes and the reconversion of industry and energy towards zero CO2 emissions systems. This route is without any doubt technically and economically feasible, but politically it seems to be permanently locked. If we do not unlock it, the future looks bleak, not to say hopeless, for humankind.”

    It’s clearly not a positive article. But it is an important read. We know we need to immediately and drastically reduce CO2 emissions (for all the reasons explained in the article), but we simply aren’t doing that.

    Part of the problem, I think, is that it’s easy to lull ourselves into complacency. We read about it and we notice the erratic weather patterns, but for the most part the status quo isn’t all that bad for most of us. Life just goes on.

    There’s evidence that revenue-neutral carbon pricing could actually increase productivity levels. It would force innovation. But it doesn’t yet appear to be 10x better than what we have today – which is often what you need to get people to accept change.

    So instead we hold largely ineffectual climate change conferences, which allow us to tell ourselves that we are, in fact, doing something. But I don’t think we’re being bold enough. And that’s too bad.