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11"SMART WATER": FROM COASEAN TRANSACTION TO ITS DYNAMIC VERSION
Yerznkyan B.,
dr. econ., prof., head of lab., CEMI RAS1, Moscow Fontana K. cand. econ., senior researcher, CEMI RAS1, Moscow
Abstract
Subject. Exploring the possibilities of incorporating concepts of market efficiency and social justice into a single dynamic system that takes into account the cultural and historical identity of society in unity with the biosphere to meet the local and long-term challenges of sustainable development, using water reuse as part of a closed-loop economy.
Goal. The main idea of the study is to explore the possibility of transforming negative effects into useful products/resources, as demonstrated by the concept of reuse of treated wastewater. As an illustration of the implementation of the market transaction of Coase in the dynamics are IT platforms, combining the features of the media and processing types of information supply systems for public use.
Methodology. Analytical and logical methods were used, theoretical developments in identifying the problems of water supply of specific quality to users and consumers for different applications, making management decisions aimed at reducing the existing and preventing the projected pressure on water resources using IT platforms and the possibilities of the closed-loop economy
Results. An alternative to local decisions has been proposed, which takes into account the interests of society, including in the future, taking into account the environmental component. The importance of incorporating the concept of market efficiency and social justice as a single dynamic system that takes into account, among other things, cultural and national traditions in unity with the biosphere. It is shown that the implementation of IT platforms, particularly in the water sector, combining the features of media and processing types of information supply systems for public use, is a dynamic alternative to the market transaction of Coase. It is stressed, however, that the opportunities offered by water reuse, as an important element of the closed-loop economy, are still not fully utilized, and the introduction of IT platforms in this area is going slowly. The financing of water projects is considered, taking into account the current realities.
Scope of the results. The results of the study may resonate with the scientific community; the findings can be used at different levels of water management for the implementation of the principles of the closed-loop economy, as well as for the implementation of IT platforms in the water sector to achieve sustainable development goals.
Conclusions. The lack of quality monitoring of water facilities, runoff and water supply systems, along with the slow pace of digital adoption in the environmental sector in general and the water sector in particular, are deterrents to the introduction of closed-loop economy principles in the water sector, including the reuse of treated wastewater, as well as the transition to "smart water".
IT platforms in the water sector should be implemented as open digital communication platforms to disseminate the information needed to make appropriate management decisions; the harmony (albeit relative) of the relevant institutions contributes to the strengthening of the institutional support of IT platforms, and hence the effectiveness of the implementation of the dynamic alternative to Coase's market transaction.
Water RU projects, as well as the overall implementation of the concept of sustainable water management, including the introduction of IT platforms, should be considered in conjunction with their financing, which implies the development of a "financing plan" in parallel with the development of an "action plan". Emphasis is made on the fact that at the state/municipal levels, an assessment of social and environmental benefits in the implementation/non-realization of water RU projects is a prerequisite for management decisions.
Keywords: social justice, environmental component, Coasean transaction, dynamics, water resources, reuse, efficient use, "smart water", sustainable development, IT platforms, monitoring, closed-loop economy, financing.
JEL Classification: F62, F64, O32, P48, Q25, Q32.
Introduction
Coase' theorem offers a market-based alternative to government intervention as a means of solving the problem of negative side effects (external effects). Under certain conditions stipulated by R. Coase, such an alternative can work, but it is important to emphasize, exclusively in static. This is due to the very nature of Coasean economics, although attempts to overcome its
statics have been occasionally made (see, i.e., (Mikami, 2011)).
Another alternative, both to the state and the market, could be an intra-company solution to the problem through a mechanism of social corporate responsibility that could mitigate the problem itself, making state and/or/or market participation redundant. One way or another, but all these players, the state (as an external
1 Central Economics and Mathematics Institute of the Russian Academy of Sciences, Nakhimovsky Ave., 47, 117418 Moscow, Russia
participant), interacting through the market producers and consumers of negativity, the firm as a manufacturer and at the same time potential softener of negative effect for the local community - are aimed at solving the problem of external side effects in the interests of all players involved in the process. By choosing a solution, players can more or less satisfactorily solve their own problems, and the achievement or approximation to Pa-reto-optimum concerns exclusively involved players "here and now." The question that arises is to what extent a locally defined optimum is acceptable for a dynamically developing society as a whole?
There is an alternative to all local decisions, which takes into account the global, both actuals and futures, interests of society, in the form of taking into account the ecological component, which includes the biome ecosystem, and through it the interests of future generations. This is in line with the ideas of F. List, who proposed in alternative to the political economy of the exchange values of A.Smith the historical political economy, which "quite consciously and clearly puts the tasks of economic life on historical ground" (Bulgakov, 1919, p. 159). Relying on these ideas of List, as well as the concept of the ecological imperative of N.N. Moi-seev (1998), designed to express the idea of the desired state of society and the development of civilization in specific conditions of nature, D.S. Lvov offered his vision of Russia's exit from the reform's emphases and leap into the future. Although Lvov's views go beyond Cowes' institutional but economically static approach, they should be seen not as a opposition to the latter's ideas, but as development by incorporation of the concepts of market efficiency and social justice into a single dynamic system, in principle taking into account the cultural and national identity of society in unity with the biosphere (Lvov, 2002).
The main idea of the study is simple - to transform negative effects into useful products/resources, which is not the case with the implementation of this idea, which we will show on the example of reuse (RU) of treated wastewater (TWW) 2.
At the current stage of development, one of the important policy areas in the water sector is to achieve the sustainability3 of water management by implementing measures to reduce the existing and prevent prognoses stresses on water resources. Among these measures, the use of the opportunities offered by the closed-loop economy, namely, the RU of TWW, is highlighted. In RU, water runoffs are seen not as waste to be disposed of, but as a resource that is involved in the value chain and whose use can contribute to improving environmental conditions and reducing social tensions (especially in water-stress-affected regions).
If RU TWW is built into the system, we can move on to what is commonly referred to as the circular
economy (closed-cycle economy) (CE), whose basic principles on water resources are: the resumption, processing and reuse of water resources (along with the rational use and minimization of discharge into natural reservoirs of dirty drains); accounting for at least two components: technological and institutional. The first includes technological solutions concerning new technological levels, which can be used in the system of urban management, the second - rules, regulations, standards, norms, etc., without which the implementation of technological solutions is impossible. Both of the components involved are subject to management, and interestingly, it is not necessary to wait for negative effects to appear in a situation where they can be prevented. This is what water quality management is designed for, in order to prevent water pollution by reducing the discharge of runoff into natural water bodies, as well as management of water quantities in order to reduce water withdrawal from natural sources by regulating the demand for water through tariff methods and losses reductions during water transportation, as well as RU TWW.
As an example of the implementation of a dynamic alternative to the market transaction of Coase can be cited an IT platform, combining traits of media and process types of information supply systems, in the terminology of G.B. Kleiner (2013), and what is significant, not for official, but for public use.
To understand the institutional features of such platforms, it is important to emphasize that they, as systems, together with object and project-based systems, form a complete (4 elements) set of systems. Such G.B. Kleiner's systemic types can be put in relations with the same 4 element type of institutions like B.A. Yerznky-an's systems. In such a system-institutional plan, the media system corresponds to the "rules of the game" by D. North, determining the state of the game system. In turn, the process system corresponds to the game itself as such, or its representation (play of the game) in the interpretation of O. Williamson.
A prerequisite for the operation of such IT platforms is the organization of a single digital database, the "filling" of which should be carried out through the organization of comprehensive monitoring of water facilities and water systems, as well as information received from water users and other stakeholders whose activities are related to water resources. Currently, many countries, including Russia, face the challenge of obtaining information on the state of water resources and runoff, verification of data, their availability and exchange between ministries and agencies, partly because water management is fragmented regardless of the level of decentralization.
International examples of open inclusive IT platforms are: «Boston City Score»4, «Urban Water Atlas
2 This refers to urban wastewater, excluding sewage, after appropriate treatment until a certain quality is achieved, which is appropriate for a specific application, taking into account legislation, potential risks to public health and the environment.
3 Sustainability is understood in a broad sense, including the
environmental component, which in this context means incorporating into the strategy of water development, along with
socio-economic, technological, cultural and historical requirements, environmental requirements as an essential component.
4 City of Boston, City Score, available online: https://www.boston.gov/cityscore.
for Europe»5, «SANePLAN»6, etc., which integrate data on urban water resources, urban infrastructure, treatment plants, information runoff and targets embedded in urban development programs; and allow to forecast resource needs based on environmental safety, population growth, climate change and economic conditions, and to assess the possible impact of new urban projects on existing infrastructure, sanitation and water resources in the medium and long term. Such IT platforms allow local authorities to understand how to act in a situation to achieve sustainable development goals and the "Water-Wise City" recognition.
For example, the Atlas interface, presented by two online tools named "City Blueprint" and "City Amber-print", analyses up to 25 indicators related to quality of life, water, runoff and provides support in determining city development priorities, investment volumes, assesses the city's progress in achieving the "Water-Wise City" goal, taking into account the ecological impact of the city on the environment.
The success of such platforms in the world practice shows the interest of the authorities in implementing "data-based" management methods, which involve maximizing the use of information to improve the efficiency of urban management and inform residents about the results of the implementation of alternative solutions.
At the 9th Nevsky International Environmental Congress (St. Petersburg, June 2021), Deputy Prime Minister V. Abramchenko said: "We have learned to count oil and gas reserves, but we do not know how much drinking water is in the world and for how many years it will last. Our global goal is to create a national monitoring network to assess the quantity and availability of water for human life" and further "should establish a unified accounting system and mechanisms for tight water control.". To date, Russia has developed a "Unified System of State Environmental Monitoring" that covers all key environmental indicators, including water resources, data obtained as a result of monitoring are accumulated in the federal information system ("state fund of environmental monitoring data"7). In fact, we are talking about the implementation of a single IT-based environmental monitoring platform covering the entire country, which is an important step towards "smart water" and intelligent water management systems (Fontana, Yerznkyan, 2021). At the same time, it remains important to ensure the openness of such a platform, rather than the use of its opportunities for "internal use."
Another example of the introduction of IT platforms is the Federal Project "Digital Ob-Irtysh Basin"8 which aims to create a water management system of
Russia's largest river basin, based on Big Data using the technology of "smart digital twins". The use of such a platform will enable federal and executive authorities to have an objective picture of the state of water resources in real time and an idea of the development of the situation in the region when making specifics alternatives management decisions.
However, the Accounts Chamber marked that Russia still lacks high-quality monitoring, including the one on negative impact of discharges on water facilities (as of early 2020, 1,831 treatment plants were not equipped with wastewater metering and control facilities). As a result, incomplete data are being sent to the automated water monitoring information system9.
The low rate of introduction of digital technologies in the field of ecology is remarked also from the Russian Ministry of Construction. According to E. Semenova, coordinator of the "Smart City" project and deputy director of the Russian Ministry of Construction Project Directorate, a small number of digital solutions are being introduced to measure air and water quality online10. Ms. Semenova gave an example from the practice of one of the water channels, where water quality is measured by crayfish, on whose bodies are attached sensors that respond to the well-being of wards. The representative of the Ministry of Construction noted that "when we start to measure water quality not with the help of crustaceans, but with the help of digital technologies, the ecology indicator will move high forward."
The director of the Department of Housing Development of the Ministry of Construction of Russian Federation S.V. Nikonova at the All-Russian Water Congress 2020 also noted that ineffective state monitoring and environmental control, lack of objective information on the state of water bodies hinders the technological and economic development of the water sector and makes difficult to take management decisions and transition to "smart water."
Returning to the issue of RU TWW, we note that while CE capabilities in the water sector have been used in many countries of the world already for decades, scaling such practices faces a number of difficulties. In Russia, they include: the lack of incentives to introduce innovative technologies and water supply methods; unsatisfactory in terms of local conditions and technological decisions institutional support for the process; inadequate, in relation to the substance of RU TWW issue, policy of the authorities, in particular at urban/municipal level, in parallel with the slow pace of digital adoption in the water sector and qualitative automated monitoring (as mentioned above), especially at the regional level. At the same time, back in 2018 at the
5 Urban Water Atlas for Europe. EU publications: Joint Research Center (European Commission), 2018. 168 p.
6 Seoane J. L. S. SANePLAN: Integrating Sanitation and Urban Planning, Fundación Instituto Tecnológico de Galicia // 10th Meeting of the OECD Water Governance Initiative. Draft Agenda. Viena, Austria. October 2017.
7 Resolution of Government of Russian Federation 09.08.2013 № 681.
8 Details. available online: https://nticenter.spbstu.ru/arti-
cle/cifrovoj-ob-irtyshskij-bassejn.
9 Data from All-Russian ecological portal on 09.02.2021, available online: https://ecopor-tal.su/news/view/109066.html?utm_source=sub-scribe&utm_medium=email&utm_campaign=week.
10 Data from All-Russian ecological portal on 25.02.2021, available online: https://ecopor-tal.su/news/view/109298.html?utm_source=sub-scribe&utm_medium=email&utm_campaign=week.
All-Russian Water Congress "Russia on the World Water Market: Competitiveness, Competence, Innovation" (Moscow, 06.2018), the Representative of the President of the Russian Federation on environmental, environmental and transport issues Ivanov S.B. said that "one of the most important areas of the circular economy in relation to water is the reuse of treated wastewater".
More active adoption of digital technologies and IT platforms in the water sector could help to solve these problems. At the same time, unlike conventional technology platforms as those for the development and introduction of new technologies, IT platforms in the water sector are thought like communication platforms with an open digital environment, contributing to the access and dissemination of the information necessary for the adoption of appropriate management decisions. As for the institutional provision of IT platforms, it is important to realize that disharmony in the sphere of institutions involved can lead to institutional weakening, up to their undermining, while relative harmony, on the contrary, will contribute to institutional strengthening (Yerznkyan, 2017), and thus to the increase of effectiveness of the searched alternative to Coase's market transactions.
Separately, we would like to focus on the issue of financing projects in the water sector using the possibilities of the CE.
RU TWW projects, as well as in general, the implementation of the concept of sustainable water management, including the introduction of IT platforms, cannot be considered without financial support. In order to understand clearly what sources of funding the objectives will be used to achieve the goals, in parallel with the development of an "action plan" (Yerznkyan, Fontana, 2019) and the feasibility study of projects, in necessary to develop a "financing plan" which primarily involves: the assessment of assets in terms of land use and resources and the possibilities of their effective use (e.g., by optimizing the tax system, introducing "impact fees"); Assessing the effectiveness of financial management at the local level to ensure financial sus-tainability (which will allow, between others, to optimize tariff structure, operating costs and investment requirements through targeted maintenance and improved water resource use11); Assessment of the financial stability of the city (municipality); Determining the priority of capital investments/investments to form a plan of access to the market for long-term financing; consideration of opportunities for mixed investment (e.g. "urban development investment funds," "combined financing»12; "; "green bond" market).
11 Water channels believe that they have been held hostage by
the tariff policy of the state: limiting the growth of tariffs under the formula "inflation minus" turns into an actual drop in
tariffs over the last 5 years by 7%. Legislation assumes that water utilities themselves have to meet their financial needs through the sale of services, but in practice the policy of lowering tariffs leads to a lack of funds even for consumables, the prices of which are formed by the market and are not restrained.. (available online: http://vodanews.info/kontseptsiya-tsifrovoj-vodokanal-v-ramkah-umnogo-goroda-budet-tirazhirovat-sya-po-vsej-strane/). As a result, the policy of maintaining "low tariffs"
Yet the attraction of investment in water RU projects, as in other cases, any water-related projects, is constrained by their low investment attractiveness. It is important that investment needs in RU TWW are targeted together with the overall investment needs in the water sector. Such an approach would ensure that investment needs were consistent and would help move towards water sustainability. Other countries experience has shown that RU TWW projects are more attractive when the existing water supply system is worn out/obsolete and requires capital investment or when capital works to renovate/replace the existing water supply system are already planned; when new water and wastewater infrastructure and network is being implemented for newly built neighbourhoods; when a modern wastewater treatment facility (e.g. near the city) is introduced, which will minimize the cost of improving treatment facilities for water RU.
With regard to worn/obsolete treatment plants, during the assessment of the modernization's costs of existing plants, the costs of adaptation wastewater treatment plants to RU TWW projects can be incorporated into the overall modernization plan, excluding cross-cost and investments duplication. An example we can bring the experience of the Apulia region (South Italy). In assessing the cost of modernizing treatment plants, a feasibility study was carried out to upgrade the treatment plants for water reuse, followed by the use of the so obtained treated wastewater (TWW) for irrigation. In particular, an analysis of the condition of existing treatment plants and their potential was carried out and an assessment of the additional costs of upgrading treatment plants associated with the adaptation of existing plants for their inclusion in the water RU system; the costs associated with water resource's organization and management at various levels were assessed, as well as methodological aspects of water pricing policies. Experts concluded that the additional costs of implementing a water reuse system in Apulia would be (depending on the type of plant to be modernized, on the amount of wastewater treated and the required quality of secondary water (TWW)) from 0.07 to 1.14 €/m3 (Fresa et al., 2007).
In general, RU TWW projects will be economically attractive when, on the one hand, the cost of producing water in RU systems will pay off, and on the other hand, the cost of such water for the consumer will be lower than the one of high-quality drinking water13.
We need to take into consideration that the financial advantages of RU TWW projects are most im-
and the financing mechanisms of the water sector tend to support the maintenance of existing infrastructure, preventing its modernization. Experts estimate the annual demand of the industry for its stable work and development in investments of 200 billion roubles, of which about 70 billion roubles are actually invested (available online: http://vodanews.info/kontseptsiya-tsifrovoj-vodokanal-v-ramkah-umnogo-goroda-budet-tirazhirovat-sya-po-vsej-strane/).
12 Creating a pool of cities with small infrastructure projects for their subsequent long-term financing.
13 When talking about the financial benefits of RU TWW, it is important to recognize that such water is a resource, and as
portant for private investors, i.e. it is the results of financial analysis that help to decide whether to participate in the project, to develop an investment strategy. But at the state/municipal levels it is also important to assess the social and environmental benefits and risks of implementing/non-realization of water RU projects in order to make decisions on them. In the public sector, decision-making goals should be aimed at improving the quality of life of the population, preserving natural resources and going beyond the notion of income and expenditure. It is therefore important to assess the "nonmonetary value" of RU TWW projects. Thus, Cost/Benefit Analysis, for example, identifies not only the financial benefit of the development, implementation of the RU TWW project and its subsequent operation, but also the non-financial benefits/costs for both the project's immediate location and the surrounding area during the defined planning period (Greywater... , 2005). This takes into account: improving the environment and restoring natural water facilities; reducing the discharge of untreated/partially treated wastewater; reduction of unplanned water RU, which refers to uncontrolled wastewater RU after discharge into natural reservoirs; reducing the use of fresh water (in applications where high-quality drinking water can be replaced by lower quality water), and as a result, the preservation of freshwater resources, etc. The assessment of social benefits takes into account: promoting sustainable development goals; promoting an integrated approach to water management, taking into account the principles of the "water hierarchy" (for different purposes - different water) and possible water options; promoting food security in agriculture; improving the quality of life of the population, etc.
Results and discussion
In order to successfully overcome existing problems in the water sector in the face of increasing water stress and to achieve the sustainable dynamic development of water management, it is necessary to link them with the solution of many other problems, including environmental, investment, technological, institutional problems, with the necessary consideration of the opportunities and needs of water management.
In order to overcome the disunity of the parties involved in the water use and water supply process, measures should be developed to integrate the efforts of state/federal, municipal, private and public organizations into a single system capable of raising water management and planning to a qualitatively new level and achieving the water sector's goals. Such a system needs to be developed with open, inclusive IT platforms that combine the features of the media and processing types of public information supply systems, which in turn is a dynamic alternative to Coasean market transaction. Unlike conventional technology platforms as platforms for the emergence and introduction of new technologies, such IT platforms are thought of as communication platforms with an open digital environment, facilitating the access and dissemination of the information
necessary for making appropriate management decisions.
As for the institutional provision of IT platforms, it is important to realize that disharmony in the institutions involved can lead to institutional weakening to the point of failure, while their relative harmony, on the contrary, will contribute to the institutional strengthening, and thus efficiency of the implementation of the alternative hereby discussed.
At the same time, the lack of quality monitoring of water facilities and water systems, along with the slow pace of digital adoption in the environmental area (including in the water sector), are the deterrents to the introduction of the principles of the closed-loop economy in the water sector, namely RU TWW and the transition to "smart water". Moreover, the lack of objective information on the state of water facilities constrains not only the technological and economic development of the water sector, but also makes it difficult to make management decisions and move to intellectual management systems in the sector.
It is essential to develop a "financing plan" in parallel with the development of an "action plan" in the implementation of the concept of sustainable water development and the transition to a closed-loop economy, including the introduction of IT platforms in the water sector. At the same time, decision-making at the state and municipal levels should be based on social and environmental assessments.
References
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every resource has a value. As an economic benefit, treated wastewater is of value to those who produce such water and
to those who consume it. This understanding of the issue provides an economically viable (in terms of collection, cleaning, storage, transportation) value chain.
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METHODOLOGICAL REGULATION OF MODERN TECHNOLOGIES OF FUNCTIONAL DIAGNOSTICS AND INVESTMENT PORTFOLIO MANAGEMENT OF PROJECTS AND TARGET
PROGRAMS OF BUILDING DEVELOPMENT
Kucherenko O., Orlenko I., Kushnir I.,
Applicants for the Department of Economic and Management
Petrukha S.,
Ph.D., assistant professor of the Department of Management in Construction
Ryzhakova G.
DSc, Professor, Head of the Department of Management in Construction Kyiv National University of Construction and Architecture, Ukraine
Abstract
The article reflects the content of scientific and applied tools, which is presented as a tool to justify preventive remediation measures for the construction stakeholder. The leading innovation of the introduced tools is that it is specially adjusted: to functional and economic features of operational activity of the construction enterprise; on the economic content and regulations of interaction with investors and other project participants; on the content of the life cycle of construction projects that in the process of creating value have transformational effects on the level and structure of operating assets and mutual obligations of the construction company and its business counterparties.
A significant innovation is that the tools are presented in a format that has common features of the forecast feasibility study of the investment and construction project, as well as internal audit and economic controlling of the state of rehabilitation of the enterprise as a business entity. Taking into account the functional and economic subject and object features of the purpose, the toolkit includes separate content-conceptual and calculation-analytical modules.
Keywords: construction stakeholders, real estate management company (REMC), enterprise-stakeholder in construction, dynamic programming tools.
The effectiveness of adaptive responses of any enterprise to changes in the economic situation, its ability to survive or work stably depend on the management of information about its status and prospects, existing and potential problems, alternative development scenarios. In such conditions, diagnostics, which has a pronounced target character, is designed not only to form an information system to support management decisions, which is based on a comprehensive and systematic study of all aspects of financial and economic activities of the enterprise, but also to identify ways to influence operational (economic and organizational). management) parameters of its work. The solution of these problems is especially acute for enterprises of such a strategically important area of the national economy as construction, where the global financial crisis has led to a sharp decline in growth, a significant number of financially insolvent and bankrupt organizations (unable to timely and in time). fully fulfill its obligations to customers, investors and creditors).
In such conditions, each construction company as a stakeholder (according to ISO / IEC 29148: 2011 stakeholder) is operating in a complex, unstable and dynamic external environment, which places new emphasis on the management of the enterprise, leading
to the forefront of its quantitative and qualitative properties in terms of ability to survive and ensure development in the face of destabilizing unpredictable and unpredictable external and internal factors (when businesses face capital loss, payment crisis, decline in production, reduction of production capacity, job losses, which creates economic and social problems of their further activities).
The development of innovative activity of enterprises in the construction industry in Ukraine is at a relatively low level. Organizations engaged in innovative activities make up no more than 10% of their number, at the time when in developed countries this indicator tends to 60%, in Eastern European countries this indicator is 20%.
Innovative development with the subsequent technological renewal of the construction industry is necessary for the formation of competitiveness in a strategic perspective due to increased global competition in the construction services market, the acceleration of innovation and technological development and the reindus-trialization of the world economy [1].
Traditional works in this area [2-4] are devoted to the development of the transition of the industrial and
