Category Archives: Economic Development

Denmark – A Green Restart?

The Danish election of 2019 was widely seen as an environmental election – it brought to power the Social Democrats with the backing of three other parties that each saw the environment as a key part of their platform. Until the Covid-19 crisis and an effective political truce, this dominated relations between the parties of the “red bloc”. Now, as talk begins to turn to reopening and stimulating the economy, the rhetoric of the environment has returned. Morten Østergaard, leader of Radikale Venstre (literally translated as Radical Left, a social liberal party that is neither radical nor particularly left wing) has pushed the Prime Minister into agreeing that this restart of the economy should be green, and that the Government’s ambitions and promises around the environment must not be victims of Covid-19. She agreed.

Achieving the goals through CO2 taxes

What will that mean in practice? In December 2019 the Danish parliament passed a climate law officially binding the target to reduce CO2 emissions to 70% of their 1990 levels by 2030. How it tackles that target in new political and social conditions is currently under debate.

The Danish Economic Council (ØR) sees CO2 taxes as the most cost-effective way forwards, advising against any state spending on green growth, even given the current crisis.

Their argument is that taxes on CO2 create a positive spiral towards CO2 reduction, making CO2 heavy products more expensive for consumers and CO2 methods of production more expensive for producers.

Boosting consumption

The ØR does argue for a need to increase consumption in order to stimulate the economy. There has been evidence that individual savings in Denmark have markedly increased during the crisis, undoubtably having an impact on the real economy. In order to stimulate the economy in the short term, the ØR suggests lowering the tax on electricity. This would increase the disposable income for consumers, who will increase their consumption which will help get the economy out of the crisis, after which a CO2 tax can be implemented to begin the “positive spiral”. This, they argue, is the most efficient and cost-effective method of achieving both an economic recovery and the 2030 goals.

Back to Green Growth

ØR thinking emerged after Dansk Industri (Confederation of Danish Industry representing approximately 11,000 companies) published their own outline of a green recovery – “Denmark out of crisis – back to green growth”. This suggested a more interventionist approach from the Government, that would see the Government pump around 90 billion DKK (around £10.5.billion) into the economy, particularly directed towards green investments and infrastructure. The report suggested this would contribute around one-quarter of the 2030 CO2 reduction targets, as well as creating and supporting 30,000 jobs.

If various Covid-19 bailouts are included, the total cost to the government under DI’s plans would be around 150 billion DKK.

A multi-strand approach

These costs are spread across 70 different policy interventions, including 2 billion to kickstart infrastructure to support widespread use of hydrogen fuels where electrification is not viable, as well as carbon capture. The plan further suggests expanding the 2018 energy package that set a goal of constructing three new offshore windfarms, capable of generating 3GW by 2030. This ambition would be stretched to 5GW by 2030, and the original limit of 1850 onshore windmills would be lifted, and construction sped up, creating jobs. Beyond direct investments in environmental projects, there are others that have an indirect green effect.

Social Housing

The plan suggests the Government officially approves all 453 renovation projects currently in the queue from the “Landsbyggefonden”, an institution representing social housing organisation. Other than the obvious economic stimulus in the construction and crafts sector, such renovations could also reduce energy use by 30-40% for these residents. It’s also completely free for the Government, as the social housing organisations themselves cover renovations.

Enabling the regions

DI suggests a pool of 100 million DKK be created for the regions and municipalities to carry out their own projects to improve energy efficiency.  A further pool of 200 million DKK should be set aside for the renovation and expansion of the cycle lane network. These are just a few select projects from a deep plan that includes others focused on digitalisation, but also on protecting Denmark’s status as an exporting nation.

Unprecedented scale

DI promotes a vision of developing a proper stimulus package with a green tinge, if not a total green focus. There are other provisions to see funds stimulating public consumption, as the ØR did and infrastructure investments. For comparison, this stimulus would be slightly larger than the one following the 2008/9 economic crisis. The Social Democrats, being a minority Government, will undoubtably work towards pushing their stimulus package in an environmentally friendly direction. Concrete proposals from the red bloc parties are forthcoming and from there a consensus will likely start to emerge.

Balancing priorities

Governance in Denmark is fairly technocratic, with teams of economists likely hard at work in the various ministries forecasting the cost per tonne of CO2 and the outcome of that will likely define the limits within which the Government is willing to act. Covid-19 has shown the lengths that Danish politics is willing to go to tackle a crisis, how they balance Covid-19, economic recovery and CO2 targets will be watched with interest.

Author – Christopher Edgar has been working with Caledonian Economics since 2019. Christopher is currently completing an MSc in Economics at the University of Copenhagen and graduated with an MA in Economics and Politics at the University of Edinburgh. Within the field of Economics, he has particular interest in Economic Development, Growth Economics, Public Finance/Tax policy, and also Game Theory. Other interests lie in Politics and Public policy, the Charitable Sector, and Languages.

Edinburgh Centre for Carbon Innovation – our new home

On 1 February 2019 we will relocate to the Edinburgh Centre for Carbon Innovation.

This move places us within Edinburgh University’s hub of  knowledge and expertise in ‘low carbon’ policy, training and education. We will be working in the first listed building in the UK to achieve the BREEAM (building sustainability) ‘Outstanding’ certification, and we will be sharing this collaborative environment with University start-ups, Masters students and established organisations in the sector.

We are looking forward to developing partnerships where our knowledge of finance and economics in the infrastructure sector can be applied in low carbon initiatives in the UK and around the globe.  We are confident that our growth in Asian markets will be of value, and that our Directors’ personal involvement in community renewable energy schemes and low carbon housing projects will contribute to the wider objectives of ECCI.

From 1 February 2019 our address will be:

Caledonian Economics – Edinburgh Centre for Carbon Innovation – High School Yards – Edinburgh EH1 1LZ – Scotland, UK.

Smart Cities graphic

What can we learn from the best Smart Cities?



In 1950, around 70% of the world lived in rural areas and 30% in cities.  By 2050 these percentages will have reversed (UN World Urbanisation Prospects, 2014). Much of this growth and shift will be in developing economies.  It is said that if everyone on earth lived a typical Western lifestyle, our ecological footprint would be so large that we would need four planets to live on!

As our world’s population grows and becomes more urban, we must become much more efficient and ‘smart’ about how our cities function.

Last week I took part in the 8th edition of the annual Smart City Event in the Hague, Netherlands. The use of smart technology and big data is already evident in the Netherland’s energy, waste and transport systems, health & social care provision and in its prison service.

Delegates and speakers from governments, business, academia and knowledge institutions shared and discussed their perspectives on what makes ‘Smart Cities’ and whether the term is meaningful.

One speaker, Oualid Ali, President of the Futures Cities Council asked a searching question: what is the alternative to being a ‘Smart City’? An ’Intellectually Challenged City’? Ali noted that digital technology and data are nothing without innovation and ideas from people.  His preferred term is “Future Cities” with the focus being on innovation, digital or otherwise.

When the jargon is stripped away we are left with the principles of sustainable development, within which ‘smart’ or digital solutions move cities toward our overarching goal of sustainability.  There are huge opportunities for cities to gather and use data to reveal patterns of use and behaviour in order to improve the efficiency and effectiveness of our buildings, transport and flows (waste, water, energy). Being ‘Smart’ is about making these flows more efficient and sustainable for the benefit of the City’s people.

City development is not a simple topic which can be easily labelled.  As we saw during the conference, the possibilities for innovation are endless.  However, here are the top five questions cities should ask as they strive to become ‘Smarter”:

  1. Do you really understand the needs of business and citizen? There is no single blueprint to make Smart Cities. Does your approach consider challenges facing your particular city (perhaps energy, waste management, mobility, or safety) and understand what your citizens consider to be a ‘good city’ to live? A top down ‘government knows best’ approach rarely works.
  1. Are interests aligned? Are you bringing your public sector, businesses, academia, consultants and civil society together with a goal of knowledge sharing and learning best practices from others? Ingenuity and a culture of openness is needed if you are to move toward a city that is fit for the future.  Organisations such as C40 Cities support this approach at an international level.
  1. Big data means big security – are you ready? The implications of gathering and storing vast quantities of data and the importance of cyber security cannot be an after-thought. Do you understand the levels of risk involved, are they at the fore, how good is your understanding of legal and regulatory frameworks?
  1. How will you get everyone over the digital divide? How will you cater for citizens who cannot access digital data and technology, perhaps because of health, status or poverty? Such citizens risk becoming marginalised, perpetuating urban inequalities.
  1. How will you pay for it? The public sector will be a key enabler, but what blend of public and private financing will be required? How will you structure the blend to fit your context and the initiatives you wish to pursue, minimising risk and maximising benefits?  An element of ‘’spend to save” will usually be needed to realise long term efficiencies and cost savings, and you should reflect appropriate timeframes in your upfront financial analysis.

Interest in ‘Smart Cities’ has grown rapidly and is now central to urban policy, planning and development.  But do ‘Smart’ or ‘Future’ cities’ offer a panacea to development and the challenges our cities face today?

Of course not, but these concepts reflect a direction of travel towards a world where we tackle the challenges of population growth, climate change and resource shortages.  More efficient, sustainable cities will better serve the people who live in them today and in the future.

Written by Lynne-Marie Thom who leads the Smart Cities, infrastructure and local economic development activities at Caledonian Economics.  She has a background in financing and implementing national infrastructure projects.  She worked with Scottish Government to develop the 2015 National Infrastructure Investment Plan including the Digital thematic component, and has helped deliver infrastructure at national, municipal and local levels, using a variety of innovative funding mechanisms to target development of growth-enabling infrastructure.

A transformational education model: e-sgoil review published

The ‘One Year Review’ of e-sgoil, written by our Education Specialist Bruce Robertson and Director Martin Finnigan, has been published by Comhairle nan Eilean Siar, (Western Isles Council).  Our review documents the remarkable success of this initiative which takes Smart Cities concepts and applies them in a rural Smart Islands context.

Careful data gathering and analysis, reliable communications infrastructure and technology-literate teaching staff have opened up new curriculum and pedagogical opportunities throughout the islands.

The potential of this approach to extend from schools into vocational and higher education has been demonstrated, and the impact on Cosnadh (employment), Cánan (language), Cultar (culture) and Coimhearsnachd (community) is clear.

The report assesses progress against the funding objectives, describes the transformational business model, and identifies the current and potential economic impacts.

The e-sgoil model is inexpensive, efficient and scalable.  It is applicable in remote, rural and dispersed communities regardless of location. The report is can be downloaded here.

Colombia Investment Roadshow

This week, on 21 and 22 May 2018, we attended the first Colombia Investment Roadshow in London, a joint event whose organisers included British & Colombian Chamber of Commerce; the British Embassy in Bogotá; the Department of International Trade teams in Colombia and London; The Foreign and Commonwealth Office Andean Desk and the Prosperity Fund Colombia; The Colombian Embassy in London and Procolombia.

The purposes of the event were to present the key infrastructure projects in Colombia, to explain the investment environment and to support joint initiatives to address some of the challenges that are still experienced in the sector and in the country.

A series of speakers explained the economic backdrop and investment outlook in the country, and provided personal perspectives on experiences of developing projects there.  Key projects in rail, rolling stock, Smart Cities, schools, healthcare, waterways, airports and water treatment were described in detail, including explanations of the procurement process and the roles of the main protagonists.

The main points we took from the event were:

  • the prospect of imminent accession to the OECD provides evidence of the rigorous process of reforms, policy and regulatory improvements that have been implemented. Between 2010 and 2017 the economy grew an average of 3.8% a year and it has one of the highest levels of foreign direct investment in the region;
  • the final peace agreement concluded with FARC in December 2016 brought to an end half a century of armed conflict, and saw the start of a 15 year implementation period;
  • improved connectivity and the development of Smart Cities are key to the successful implementation of the peace agreement.  A large transport infrastructure initiative has been launched to tackle infrastructure bottlenecks that are holding back development, especially in rural, conflict-affected areas;
  • in 2017 the Economist Intelligence Unit singled out Colombia as being well-prepared for infrastructure PPPs in the region. Forms of PPP are being used for the Bogotá Metro, renewal/operation of the Transmilenio BRT system, Cauca road network, El Dorado II Airport and to restore navigability of the Magdalena River.  Pilot PPPs are being developed for schools and hospitals in Medellín, Barranquilla and Bogotá.

At Caledonian Economics we look forward to building on existing relationships in Colombia and developing new ones, so that we can play our part in the continuing success of this remarkable country and helping create, as one speaker put it, “a piece of the peace”.

Uruguay XXI Event

On 18 May 2018 Martin Finnigan joined around 50 delegates at the Why Uruguay? event at Tower Bridge, London, organised by Uruguay XXI (the National Investment and Export Promotion Agency), the Department for International Trade, and the Embajada Británica Montevideo.

Presentations by representatives from Embassy of Uruguay in London, the British Chamber of Commerce in Uruguay and Uruguay XXI described the key strengths of the Uruguayan economy and explained the many incentives that make it an ideal hub for companies wishing to enter and trade throughout Latin America.

The main points we took from the event were:

• it was the first country in the world to provide laptop computers to all primary and secondary school pupils, and to all teachers. Smart Cities, Smart Towns and Smart Education concepts are at the heart of schooling.  Language skills are good, all teachers have access to English tuition and a significant number of Portuguese speakers helps companies trade with Brazil;

• the country has high standards of transparency, strong institutions and is committed to investment in knowledge: facts I can relate to in my own experiences working in Uruguay;

• income per person is the highest in Latin America and Uruguay’s fifteen straight years of GDP growth far outstrip the performance of its massive neighbours, Brazil and Argentina;

• the country has implemented strategies that make it a very attractive location for companies seeking to establish a hub for goods and services in the region. Examples include excellent internet connectivity, free ports and free airports, no restrictions on repatriation of profits, no discrimination between overseas and domestic investors, unrestricted forex market, single taxation system throughout the country, and slick procedures for setting up a company.

For our part, it is good to see that the Education PPP program, which we helped develop, has recently issued invitations to tender for the fourth bundle of schools.

Perth & Kinross – New Bertha Park High School Financial Close

The procurement of the new Bertha Park High School by Perth & Kinross Council reached financial close on 27 September 2017 . Built to accommodate pupil generated by the rapid expansion of the city, the new school will be developed under a single compact PPP contract between the Council and  hub East Central Scotland.

As the public sector Financial Transaction Adviser on this PPP we supported the Council’s in-house team and were responsible for assessing financial submissions from the private sector partner. This included confirming that returns, margins and fees are in line with the market and consistent with pre-agreed levels.  We worked closed with technical specialists to calibrate the payment mechanism, and supported commercial negotiations.

Stirling City Deal goes forward

The UK Autumn Statement on 23 November 2016 saw Stirling’s City Deal announced by the Chancellor of the Exchequer.

Caledonian Economics supported the Council, alongside Turner and Townsend, in developing their City Deal programme.  The components of the City Deal plan include:

  • a Digital District founded on Smart Cities principles ;
  • further developments on the River Forth as a leisure and tourism resource;
  • a new Civic and Harbour quarter; and,
  • plans for a City Park in the shadow of Stirling Castle.

The Caledonian Economics team worked closely with colleagues at Turner and Townsend and the Council to develop the economic impact assessment for each of the projects.

Government of the Republic of Uruguay

Working with Castalia Strategic Advisers and with support from the Inter-American Development Bank we advised the Government of Uruguay and Corporación Nacional para el Desarrollo (CND) on the development of financial and technical aspects of the Uruguayan early years education PPP programme.  This will create up to 60 kindergartens and family support centres to support the national poverty reduction and social inclusion policy.

Our responsibilities included project  financial modelling, international best practice studies and the development of bespoke technical documentation which drew on our extensive experience of PPP transactions and implementation.