Category Archives: Anecdotes

Who is the polluter?

There was a recent piece on Eco Business about Singapore’s packaging recycling scheme being delayed and how the polluter-pays principle seems to have failed to take hold in this particular situation. It was partly because of a speech by an activist in the recent SG Climate Rally.

The principle of polluter-pays is important because it helps to internalise the social cost of pollution and allows the market to price it in correctly. The result would be that the production and eventual consumption of the relevant goods stays at the level which is socially optimum.

Product packaging is itself a massive problem where it is clear certain social costs of the waste production is not properly internalised. The fact that supply chains are such that buying a new product is cheaper than the refill version, and the fact that massive amounts of materials are used in packaging without producers having to foot the cost of disposal, seems to be an issue. But the situation is also because waste management is not properly priced. Today, in Singapore, the amount of cost you shoulder for waste disposal is based on where you live and the type of dwelling you live in rather than the amount of waste you generate. This in itself is already not exactly adhering to the polluter-pay principle.

Creating a plastic bottle or aluminum can refund scheme would also jack up the cost of the products but sometimes we forget who are actually the polluters. The ultimate polluters are still the consumers and in making our purchase decisions, if we recognise the cost to the environment and decide that accordingly, it changes the dynamics of the situation and allows the producers to ‘suffer’ the cost from the lack of demand despite the low-ish prices. But that still doesn’t produce a very reliable signal in the marketplace. And that’s why it makes sense to properly ‘tax’ the producers or the consumers somehow to get the market back in line.

As it turns out, the identification of the polluter does not matter much. What matters is that the associated product gets the pollution priced in somehow. You can charge even the shops that are stocking the products. The reason is that the cost will reverberate through the supply chain; the higher price will result in less customers buying it, sending a demand signal that reduces the orders and stocking by the shop, who will order less from their suppliers and so on. Eventually, at the default price point the producer will realise the market isn’t taking as much of the product that they are producing hence reducing their production and hopefully the pollution as well.

The tricky issue is pricing the pollution and getting a sense of how much the marginal reduction in production could reduce the pollution. This is tricky because the average pollution per product isn’t the same as the marginal pollution. And indeed you may have to curb consumption/production very drastically in order to reduce a bit of pollution if there is significant non-linearity involved. I won’t go into the mathematics here but suffice to say, there is reluctance to tinker too much with the pricing of more ‘ordinary’ consumer goods in Singapore. And it might be a shame for sustainability.

Electrification tussle

The more I observe the energy transition in Australia, the more I realise that its attempts at balancing many different principles and ideas are at odds with achieving an orderly transition. Too often, we cast the energy transition as a technical or economics problem but more often, it’s a policy and political science problem. At the heart of the debate, is the age-old welfare economics issue around winners and losers. And with lobbying, power plays, risk of job losses, and a mix of various different studies, academic and commercial contributing to various perspectives, it can be incredibly confusing for policymakers.

Having worked on the side of government and alongside policy makers when I first started my career in Singapore, I thought that the volume of noise that exists in Australia around the energy transition is startling. I recalled that there were a lot more ‘no-brainer’ type of policy directions and being in the government was a lot more about trying to steer a large, heavy ship towards the destination that we can more or less agree on. In Australia, it almost feels like the policymakers are simultaneously being pulled in a hundred different directions at the same time and trying to achieve it all.

If, at this point, we are seeing that the policy direction is towards electrification, then the actual effort will have to be looking at what can green the grid and focus on that. So there’s been funding towards more solar and wind, as well as batteries to help balance the load in the system. The next big challenge is grid stability and network capacity. This will require extremely large investments and infrastructure build-up that will take time. This means we cannot electrify everyone at the same time, and this phase-in of various functions being electrified will have to be determined and planned carefully. The risk of not working this out is high – the greatest being continually being held hostage by the coal-fired power capacities and unable to shut them down to green the grid because power demand is climbing faster than we can build the grid and renewable capacities.

Gas is a transition fuel for precisely this reason; and it can play its role in the transition in two ways. First, it continues to supply energy to industries that need heat, delaying their need to electrify and hence keeping power demand at bay. Second, it can provide peaking power and supplement or displace coal-fired power in baseload, playing a critical role in taking the most carbon-intensive power source off the grid. Yet this brilliant idea keeps getting drowned out by the fear that once the gas industry is entrenched, it won’t go away. The economic lifespan of combined cycle gas-fired power plants or open cycle ones is about 25 years though their operational life can be extended. This means that they can be introduced immediately and fired up to replace coal-fired power plants and the tail end of their economic life can be more for peaking uses to stabilize the variable renewable energy, deferring investment in batteries that have significant lifecycle carbon emissions themselves.

The earlier we cut coal, the better; by allowing gas-fired power generation, we also defer the need to scale up our network capacity quickly when the electrification drive advances. These actions can mutually reinforce each other and allow battery, wind, and solar capacities to enter the system gradually alongside network upgrades. We observe how energy cost on consumers have increased while trying to green the grid (levellised cost of electricity from solar and wind is not a strong measure given that they are not produced when needed); trying to force the electrification is not going to make things better. Coupled with the strong anti-gas sentiments would only mean costs will keep going up.

Part II of this article continues tomorrow.

Temptation to be an expert

For most of my life, I had wanted to be an expert. I wanted to be looked up upon for specific knowledge or intelligence, or smarts in some area. There were of course, some areas I was more keen on than others. And as I read more, and gravitate towards specific topics, I wanted more and more to be known as an expert in those subject matters. The problem is that I was curious about many other things as well; in things I would not consider myself expert in (yet).

So then my knowledge starts to broaden, and I get to know a lot more about a variety of things. And I begin to see patterns across the domains. And I begin to think of expertise less like a deep hole, and more like a network of connections across disparate bits of knowledge that others might not recognise as fitting together but you, as the expert, can see it. Precisely because of the lots of learning you had to get there – not by hoarding knowledge but by eventually seeing patterns in the knowledge you acquire.

And then you begin to belittle dense knowledge in any single field or narrow buckets of knowledge that serve specific and narrow purposes. You no longer think that an expert is worth becoming; if you were an expert in just one or a few areas, you are losing out so much more of reality worth exploring. Maybe I just need to be reminded that I never was keen on being an expert, just pursuing wisdom more than mere knowledge. And wisdom is truly a more worthwhile pursuit.

Con-tinuing

Despite the bad press for EY in Germany and PwC in Australia; the big four and their sprawling professional services activities continues to grow. Accounting and audit services aside, advisory services appears to be in demand across the international business world. Overall across the economy, as best practices across the industry spreads, companies becomes more competitive and efficiency goes beyond just market prices and matching of customer demands. Innovation takes place as well.

Consultants, through advisory services helps information and knowledge work themselves out in the market. Mariana’s Big Con argument about economic rents however, might still somehow stand in the sense that the fees they attain may be somewhat outsized compared to the value created. And I’m referring more to generic type of business consulting as compared to technical advice or consulting that augments capacity of businesses during special situations such as a transaction or some kind of innovation project.

Yet I would say that the bigger con that is present in the market is the financialisation of our economy and everything that the financial industry abd banking does to generate rents. The issue is that the labour of financial industry keeps serving capital, and capital, with its sustained bargaining power (as pointed out by Thomas Piketty), continues to direct rents towards the financial industry.

The main force that can change this will be the government and regulators; there has to be more research and thinking around the manner we are setting up our economies.

Profitable transition

What does it mean if companies declare that they are committed to the energy transition including committing resources towards it, and massive investments, only to make a U-turn when oil & gas turns out to be way more profitable? It tells you that it had always been about the money it makes rather than the transition. Never mind that the fossil fuels continue to drive up carbon emissions and hurting the climate. In fact, maybe climate change would drive up demand for energy – especially in terms of heating or cooling, or requiring more activities in the economy to deal with and mitigate the impacts.

Can the work of accelerating the energy transition be left to the markets? Can profits really motivate companies to support the transition and reduce carbon emissions? Does the market demand understand, appreciate and would be willing to drive and pay for the transition? I don’t think so. Absent regulation, it is unlikely for the markets to drive the emergence of the solution. It is as if we want seat belt manufacturers to drive the messaging around safety and benefits of having seat belts rather than legislate it as a requirement in cars. Or just waiting around for cars to adopt them as the standard feature in a car.

We probably don’t have enough time for all that to make an impact on mitigating climate change. Regulations will be required. To put a price for carbon on the market, to push technologies and options in the market that will reduce emissions. We must also evolve and steer the regulation as our understanding of the technologies and impact on environment advances. We don’t have to get everything right on the first try but we do need to be trying.

Hoarding resources

New York Times just ran an opinion piece about Big Oil and whether the rhetoric about these big international oil companies actually push for the energy transition or not, their contribution to the development was probably not that significant anyways. There is minimal capital redeployment from oil & gas towards renewable energy. The truth is that capital coming into renewable energy is largely from other sources and areas.

The big oil players were in any case just trying to defend their turf when they invest into renewable energy; and in other instances, it was probably just more of a PR exercise. The recent big retreats from the rhetoric around energy transition can only serve to create more climate anxiety amongst the younger ones, and discourage us further about our ability to get the climate transition right. There’s really limited plan B options for us as the human race on earth facing climate change so everyone needs to work together regardless what the big oil is trying to do.

The biggest challenge for the world with the big oil not doing much to withdraw from the fossil fuel business is not about the market, the demand from the energy users but perhaps more about the people who are continuing to work within the big oil’s supply chains and operations. If we are serious about the transition, we need to give oil rig workers something new to work on that can help with the climate transition; we need to get the refinery process engineers to work for some other sort of plants. In general, we need a coordinated effort to transform our economies by making it a mission to do so.

When the world sent people to the moon decades ago, we were creating new industries using taxpayers’ dollars. We were using military spending to drive advancements that would usher in a new era. We could do the same with energy transition. It will take a lot of political will and convincing people but there is enough resources to redirect ourselves from the global warming path that we are on.

Gas in households

When corporates purchase carbon credits and try to ‘offset’ their emissions, environmental groups would accuse them of greenwashing and to a certain extent, tokenism. Yet when Victoria state government bans gas in new homes from 2024, environmental groups were pleased and herald it as some degree or progress and victory.

It is easy to pass this off as a big move. Developers of new homes may have more planning restrictions. Those buying new homes will need to stop using gas. Gas demand growth from households will slow down but gas use in homes are a really tiny fraction of 17% contribution to the state’s emissions by the gas sector.

At the system level, Victoria’s grid emission factor in 2022 is actually such that it emits 4.6 times more carbon dioxide equivalent than combusting piped gas for an equivalent amount of energy. You can easily work that out by consulting the greenhouse emission factors published each year. Of course, I’m probably ignoring some of the emissions associated with the distribution part of things and also with fugitives. The reason for this big difference is the presence of coal-fired power plants on Victoria’s grid. In any case, all renewable energy injected into the grid from wind and solar will be used. Coal-fired power plants provide the baseload and gas-fired power plants usually absorb the additional load demand. What this means is that during the times (early morning or in the evenings) when you’re using electricity for heating or cooking in households, it is quite likely you’re consuming more gas fired power than solar power (whose generation peak in the mid-day).

There are questions on the efficiency of the whole process. Burning gas at power plants and converting them to electricity will result in some energy loss, and then using the electricity to convert it back to heat will mean a bit more losses (less than at the power plant of course); so heat applications for electricity isn’t all that efficient.

And then there is the question of energy bills. Whether you are consuming gas directly in the house or indirectly through electricity in the system, you are going to bear the cost of the gas that is consumed. In Australia, a large proportion of the cost of energy isn’t really in the energy itself but the share of cost that goes into infrastructure, especially that of distribution. Going full electric in households serves to help decarbonise the system only when the renewable electricity is supplied during the times when household’s demand peak. For solar, this is unlikely to be the case unless the household installs its own battery system to charge when solar generation is peak in mid-day. Batteries, additional distribution network assets to cater to peak renewable generation, are all infrastructure that will add to the cost of electricity.

So let us be honest about it: banning gas in residential use is unlikely to move the needle much in terms of decarbonisation in the electricity system right now. At least not all that much in Victoria. It is going to push the problem upstream where it can potentially be managed better. But a lot more actions will have to be taken. Would it improve indoor air quality for homes? Maybe, if your house is not properly ventilated but I doubt it is a very serious issue. Would it really reduce energy bills across the household? Quite unlikely. What it could accomplish is some degree of tokenism to pacify the groups of people who thinks it is a good idea.

Yet it is probably a setback for decarbonisation because we are narrowing ourselves to decarbonise by using a narrow set of technologies and forgetting about the ability to decarbonise gas through biomethane.

Carbon credits 101

Earlier this year, Guardian released an expose about forest carbon offsets, in particular about a handful of projects and brought a bit of an uproar in the industry. While it created more awareness about carbon credits and concerns around the quality, methodology around calculation of the emissions reductions or how the “offsets” can really be quantified, there seem to be a lot of misconception remaining around carbon markets and how they work.

First, we need to recognise that there are compliance markets and voluntary markets for carbon. And while we may sometimes call them all ‘carbon credits’, the concepts are vastly different. In compliance settings such as the EU Emissions Trading System (EU ETS), the object that is traded are actually permits or allowances. These are regulatory objects that are created arbitrarily by regulators. Basically, when the regulator says the industry is allowed to emit 100 tonnes of carbon dioxide equivalent, this 100 units becomes permits or allowances. Each unit represents the permission to emit a unit of carbon dioxide linked to a time period based on regulation.

On the other hand, there are voluntary markets; and these are where the majority of carbon credits that can constitute conceptually ‘offsets’. Putting that notion aside first, we need to recognise that those ‘credits’ are conceptually different from emission allowances. In reality, those are supposed to be like merit points awarded for good behaviour – of not emitting carbon dioxide. They are given to projects that protects rainforests, improve efficiency, manage waste more carefully, switch fuel from fossil to low-carbon ones and so on.

The manner for calculating these merit points are complex and set by various standard bodies that are structured as non-profits. In and of themselves, the credits when valued in the market encourages more of the activities that generate them. And because they inevitably entail some kind of emission reduction or even carbon removal (through some sort of sequestration), when companies buy and then retire them, they are basically trying to ‘offset’ their own emissions. The calculation of the amount of merit points was essentially what the Guardian article referenced was really criticising.

The projects in and of themselves are voluntary; and those buying the credits are not really forced to buy them by any regulators. That said, companies have been buying them in order to ‘offset’ their actual emissions and then gain the ability to pass of their products as ‘carbon neutral’ – not because they rejigged the supply chains to no longer emit carbon but because they used the credits/merit points off those projects to neutralise the demerit points they had from emitting carbon. The problem is when this is the value of the carbon emission reduction – so that companies have the ability to emit more, we really wonder if that is worthwhile.

Using the market mechanisms to spur production of something tends to be quite easy but to reduce it might be harder. This is why we have the government, public services such as the police and defence force and not leave these things to the market. Otherwise, the police could just offer bounties for anyone to catch the criminals and so on. Carbon markets are interesting but further regulation and a proper understanding of how we want to value emission reductions and count them is vital.

Singaporean aspirations

The former China CEO of McDonald’s Kenneth Chan penned a recent opinion piece in Channel News Asia about Singaporeans not taking on leaderships in global companies. It was written in the “practical” Singaporean way that focused on the steps towards being ‘next-level’ and being ‘bold’ to be a leader. He described personal insecurities and his experiences on the ground to rise up.

Personally, I’ve had a host of regional experience within China, South Asia and Southeast Asia during my time with the Singapore government. At International Enterprise Singapore (IE Singapore, now Enterprise Singapore), I had the chance to work with Singapore companies on their internationalisation plans and follow them to markets you would not even think about as a man-on-the-street. Subsequently, I was in the pioneer team of Infrastructure Asia, engaging regional government bodies on infrastructure projects. That gives me the exposure, the open-mind and also the skills to communicate and manage cross-culturally.

As a Manager at the Sydney office of Blunomy today, I am leading teams of consultants across our Singapore, Hong Kong, Sydney, Melbourne offices. I often have to facilitate exchanges with our European offices as well. Insecurities or perceived inadequacies may hold me back but ultimately, it cannot be the fear of me losing my edge or competitiveness that drives me forward.

And that’s the issue I have with the way the article was framed. The opinions expressed in the article reeks of the same old fear-mongering about Singaporeans being comfortable and losing out. I’m not sure if this works for the new generations of Singaporeans nor if that is the right motivation to begin with. The challenge for Singaporeans is not so much the desire for comfort but the lack of worthwhile aspirations. It used to be that rising up to be a ‘GM’ or a ‘CEO’ was something worth aspiring towards. But that simply isn’t the case today with the new generation.

The ‘boomer’ aspirations are simply not worth fighting for. It is in dealing with the ‘why’ that we find our fuel to move forward. “Success” as is constructed in past generations might not work anymore. Instead of aspiring towards “senior leadership” of global corporations, Singaporeans should be desiring to lead the charge of changing the world. Leading global organisations are means to do this. And then it is no longer about remuneration and the practical barriers of relocation and incentives. Monetary incentives should not be the reason for taking up these positions because they are challenging, stressful and hard. There is only so much money can drive that sort of sacrifice. It is the inspiration and influence that counts.

Think about Kenneth Chan leading McDonald’s – you’ve the chance to change the diets of millions of people by making decisions on the menus of your outlets. By thinking more deeply about the toys and promotions on Happy Meal, you get to reshape the aspirations and fancies of a generation of children. That is why it is worth being the leader of a global company – not because of the recognition or being labeled a ‘talent’.

Likewise, if you’re heading up a technology company, it shouldn’t be about maximising shareholder value or aiming to enable investors to make more money. Those elements are important only to the extent they allow businesses to continue making a difference. It is the ability for the technology to grow, benefit people and shape the future into one that we want their children to be part of. That can tip the scale of our motivation no monetary incentives can.

Are we equipping Singaporeans with the right aspirations? It’s not about skills and all that jazz about leadership. Those are important. And yes, government incentives with relocation or settling back in Singapore after stints overseas can help. But what is it that is worth Singaporeans developing that leadership for? That’s what we should be developing.

Passing of Adrian Tan

Lawyer Adrian Tan, President of Singapore Law Society passed away, having been battling cancer for just over a year. I’ve only once written about him, the thoughts he shared about how his mother manipulated his view of his disenfranchisement. But I think that piece of his writing I shared already reflected his witty brilliance and the manner he examines ideas and the world – with not just his mind, but his heart as well.

Having been from Hwa Chong, I’ve heard of stories of how his time in Hwa Chong gave inspiration for his early teenage novels. While I never had a chance to watch the films or read the book, I could guess from reading Adrian’s writing that his quintessential wacky Singaporean humour would have been extremely entertaining. Yet he grasped the value of entertainment in the manner it could inform and influence – and he used it for the benefit of Singaporeans through his massively accessible musings on Linkedin.

57 years is far too few years for a man in Singapore to live. Yet in those years he gave much to the legal profession, and Singapore’s art and literary scene. He certainly made me proud to be a Singaporean. Goodbye Adrian.