I wrote about the conversation I had around biofuels and e-fuels that are produced through power-to-fuel approaches. They have rather different chemical pathways, costs and constraints. I’d really like to see someone consider the resource intensity of these different approaches. The challenge for most studies is that they consider biofuels from a standpoint of resource potential as though the agriculture activities are inert. Of course there’s the whole question of whether land should be used for cultivation of food or energy. I won’t get into that.
But I’d be curious to see if people who can organise the supply chain across the land, the supply of food alongside the supply of feedstock towards the bioenergy plants had done their analysis on resource intensity. A good comparison of the resource intensity from the water-intensity, output logistics standpoint would be really good. It doesn’t have to be a full-fledged lifecycle assessment – back of envelope calculation would be helpful.
There is a view that bioresources are limited by the amount of feedstocks available. There is only this much used cooking oils (UCO) that you can convert to hydrotreated vegetable oils (HVOs) or into biojet fuel (typically via the Hydrotreated Esters and Fatty Acids (HEFA) pathway). And that power-to-liquid is theoretically not limited in terms of resource potential. That is not exactly true because we are still limited in our green options for power generation and green power itself can eat into resources required by other sectors. The conversion process to fuel also requires carbon dioxide feedstock of suitable concentration as well as pure water to be electrolysed to produce hydrogen.
It’s strange to think that we can have unlimited power or that we can easily power the world – remember those times when people actually calculated the amount of solar panels and space on land that is needed to power all the earth? The investment to be made in terms of building lines to distribute power, and the factories to take that power and convert them into the fuel needed would multiply the complexity problem of supplying the world’s energy needs.
In this whole green wave there’s lots of hype and one of the dangers that corporates put themselves is being cast as greenwashers. The challenge is that some corporates might just be doing it unintentionally, without having realised the hypocrisy surrounding their brandishing of green credentials because they did not realise how much harm their business activities have been bringing to the environment.
The initial audit of the business is important from the ESG perspective but it doesn’t stop at just reporting because if the initial audit is all it takes to establish green claims and then allow businesses to carry on, it would have been a waste of opportunity. Corporate leaders need to recognise that subjecting themselves to these audits and scrutiny should not earn them any kudos. So they should not be patting themselves on the back if those reporting metric turns out stellar. Rather, they should be thinking about what approach they have taken to their businesses that enabled that.
And then they should be considering if there are blindspots or areas of their businesses where the right philosophy hasn’t been applied. The hypocrisy can often stem from the fact that executives are too busy gaming the reporting metrics as opposed to genuinely thinking through business processes and activities. That can still be unintentional but they can start making sure that their activities to gear the company towards green can be more intentional.
There’s going to be a new kind of entrepreneurship; not necessarily one that is building businesses with an established revenue stream or for a current market need, but one that bets on the needs of a future that the world wants to be creating. And the upcoming green race might unleash this new breed of entrepreneur more strongly than before. In the post-pandemic era where people might have got sick of government stimulus allowing billions of capital to slosh around the system, risking inflation and simply making the richer rich, fiscal policy might be returning to the center-stage as the new means of keeping the public voting base satisfied.
The green race is going to drive new winners in the economy as entrepreneurs who have positioned themselves to make the critical investments needed for the economy. Especially the ones that going to create the very jobs that politicians plan to trumpet about. Being able to think ahead and consider the kinds of businesses desired both by the public sector in an economy that is highly pro-market will be rewarded. The risk is that the public sector decides to take on the direct investments themselves rather than to ‘incentivise’ the businesses to do so. This is why the pro-market orientation of the government is important.
For the markets where the government have the tendency to perform direct intervention or deem infrastructure investments way too strategic to be left to private sector, the green race may take those economy in a different direction. They may choose to create new state-owned and managed entities to make new direct investments or to use the existing ones. And the green jobs will be created within state-linked enterprises. Civil servants who are savvy in these areas will tend to gain within such systems.
Either way, there are going to be new ways smart people will be gaming the system.
The beauty of the market system emerges when there’s competition along the right dimensions just when we all need them. But competition doesn’t always require a market economy – there’s always limited resources, time and other constraints that requires us to somehow compete. There’s also reputation, attention of people and recognition that drives us to compete. In the 20th century, the space race during the cold war led to phenomenal technical and technological advances which powered the growth over the 21st century.
There was an alignment of political, and public interest. The economic interest was not entirely foreseen and only realised much later. But it seemed that entire economies of Europe, US and Soviet Union were engaged in this mission. It seemed like a conflict and perhaps competition of egos but eventually worked for the good of mankind.
Today we need to shift this mission for space to a mission for mankind on our planet. Developing a green race probably takes a good alignment of the public and political interest, as well as some kind of competitive tensions. We are beginning to observe this with first sound of the trumpet from US with its IRA focus on Clean Energy and climate transition last year; and then Canada followed with its own programme to fund indigenous clean energy projects. Australia’s announcement last week with a highly targeted programme focusing on hydrogen reflects the same sort of tension around the competition to attract the competent hydrogen players to develop required projects in their backyard.
As an energy transition consultant, I welcome this. As much as we might think the competition can result in duplicative efforts and inefficiency, it is what we need to align the incentives in the market with the interest of the overall society. Moreover, harnessing the public interest and pressure upon this topic through directing the workforce and human capital towards the low-carbon economy is much needed. The green race should hopefully create the necessary ecosystem we need to drive further changes and ensure the climate transition.
Open dialogues with investors are needed by management of companies emitting lots of carbon dioxide. The investors are pushing for companies to decarbonise, disclose their emissions, create long term roadmaps for decarbonising their businesses. But what about making sure executive compensation is aligned with those goals?
What about the amount of returns they are willing to sacrifice in the short term to build greener supply chains? Must it be quantified in terms of reputational risks and climated-related financial risks? Are we overemphasizing the financial KPIs at the expense of the environmental values we should truly be caring about. Is our people and planet really put before profits? After all, businesses would claim that profits keep them alive to drive the goals of people and planet?
Maybe it is about agreeing on a minimum viable return or profit to keep investors there. Perhaps anything beyond that minimum viable return should be directed towards greater climate ambitions. If we truly believe that the future unit of competition is making a contribution to green rather than profits, we need to start acting as such.
Organisations work in silos and we often talk about breaking silos because it is a real problem. What is interesting is how silos form naturally and what keeps them functioning and feeds the way human behaves. The truth is that majority of people connect well only with a handful of people around them. It’s all they need to survive and even thrive. Organisations are set up for people to do their best work each day rather than over a long time horizon, and rightly so. Silos are natural tendency and efforts to resist them will be inefficient in short term.
The real solution to breaking silos is having superconnectors, being able to identify them in organisations and bring them into roles that allows them to help arbitrate across silos. They ought to be put in charge of coordination problems and given the authority to enable those connections. These people could also take the form of external consultants who have no stakes within the organisation.
Mathematically, clustering is just a natural population, psychological phenomena amongst people. Yet with just a handful of “super nodes” that connects across clusters, the other nodes within clusters can be quickly brought together and average degrees of separation reduced dramatically and really quickly.
Organisations need to recognise the role of these superconnectors that enable silos to continue working alongside in ways that are productive and non-duplicative. They allow everyone to remain efficient even as they ensure that the organisation overall operates strategically in the right direction.
More than 10 years ago, I took a course in microfinance and then spent some time in a village in Ghana’s Central region designing a village savings scheme for the villagers to pool capital in a manner that allowed them to access the mainstream banking system and also to invest in machines that the farmers could share in, and enhance productivity. It was microfinance but applied differently, a model the team created after consulting the people in the village and concerns around creation of debt.
Microfinance was quite popular then and the common belief was that there were productive people with the opportunities to put capital into productive use but did not have access to credit to allow them to do so because traditional finance were not accessible by these folks.
What was missing from the picture was that these people had struggled to save as well because they did not have places to safekeep cash or other asset instruments they had. This could be why the pre-paid mobile credits were popular and important economic enablers in some of these environments. Credit and savings are different sides of a coin and the way these services are valued works differently in different cultural contexts and markets.
The next generation of retail finance will have to start examining these cultures more to develop stronger value propositions. Central banks paying attention to consumer credit and savings behaviour would be wise to appreciate these elements too.
So Singapore’s target for net-zero is 2050, with the public sector aiming to reach the target in 2045. And with coordination being touted as one of the core strengths of the Singapore government, we have a Chief sustainability within the government to manage that. This role in businesses is still very ambiguous and it is not clear whether the person is managing the process of decarbonisation for the the company or to manage the sustainability offering of the firm.
Likewise, it is not entirely clear whether the Chief sustainability in the government of a country should be responsible only for the public sector emissions or taking charge of the reduction of emissions across the entire country. Frankly, the public sector emissions are already very significant. Part of the challenge is that almost all of the wastewater treatment and water supply plants are owned and operated by the government; at the same time, the government also own and operate incineration plants. This is probably why in the business times article, it was stated that Ministry of Sustainability & Environment is itself one of the large emitter.
But Singapore’s approach to decarbonisation is unlikely to be about the government just dealing with its own emissions and then trying to create structures to drive decarbonisation of the private sector. The fact that the Chief sustainability starts talking about costs, value and trade-offs is already a clear sign that the government is probably thinking about abatement cost at a system level. And it is true that the government in Singapore is uniquely positioned to evaluate this. We might have a shot at being able to collectively determine what are the lowest hanging fruit across the society to reduce emissions and then collective work through the curve of diminishing marginal returns. In other words, we can look at the avenues of abatement that incur the lowest costs while making the largest reductions first.
This means that while the government might be able to try to reduce energy use in the desalination plants or secure green electricity, they might not because there may be other industries that can reduce the emissions at lower costs. This sort of system level optimisation may not be possible in bigger countries; but for a small island state where our renewable resources are too scarce, that might be the only way.
Continuing on the theme of business models, hacking the target audience in multiple dimensions, and also incentivisation by government for social objectives. More governments can learn from this but with the clear objective of advancing social good and making sure that the help they render to the populace lands in the right hands. And that people are behaving in the socially desirable direction.
This is different from the typical incentivisation that is driven by cost-benefit calculations of corporates, and enabling companies to cross certain cost hurdles to invest in certain activities in an economy. The sort of incentivisation that we are operating on here deals with longer term, more strategic directions that the government is driving at – not just trying to hit GDP growth targets or stimulating the aggregate demand of the economy.
And these strategies also gets at cultural shifts and change. Done properly, they create a new, better culture that treasures the future. That does not claim the present or the short term at the expense of the future. Parts of this incentivisation could be about a mixture of regulation that creates demand while subsidisation that buffers the costs of compliance. For example, applying a hefty carbon tax while subsidising decarbonisation technologies and programmes.
It’s not about sticks or carrots but sticks and carrots.
In 1819, when Sir Stamford Raffles came to strike a deal that made Singapore a British colony, the population of Singapore is approximately 150. 2 years later, in 1821, the population rose to 5000 mostly as a result of the establishment of the port, providing ready access to population from other centers.
By 1860, however, the resident population ballooned to around 80,800 comprising mainly of “temporary” immigrants coming from India, China as well as from the surrounding islands. In the 1870s, Singapore became the main hub for sorting and export of rubber, a major commodity for global economic development.
By the close of 19th Century, Singapore was a thriving hub in the region. The economy grew eightfold between 1873 and 1913. Before there was the Singapore we know today, the port city was already a major trading hub. This wasn’t purely luck nor a matter of domestic economic policy. So what happened through these years?
Reducing Piracy
Just 5 years after the establishment of Singapore as a free port under British rule, in 1824, the English and the Dutch brokered a deal to exchange Bencoolen (or Bengkulu in Sumatra) for Malacca. This was particularly important; the other port that was controlled by the British in the region was Penang, which the English established since 1790; the location was not that popular since ships from the east will still have to pass through the Straits of Malacca before reaching Penang.
With Penang and Singapore under the control of the British, the rivalry between the English and the Dutch in the region meant that Dutch control of the Straits of Malacca through possession of Malacca was a significant bottleneck. The Anglo-Dutch Treaty of 1824 resolved the rivalry (somewhat) by allocating spheres of influence, opening up the entire chain of territories — Penang, Malacca and Singapore to British control and thus greater incentive for the Royal Navy to maintain the safety of the trading ships passing through the Straits of Malacca.
The Dutch Navy was implicitly given the same responsibility on the side of the straits closer to Indonesia. In fact, the Dutch greatly expanded their presence in the straits. Before that, piracy was extremely rampant along that straits and the numerous islands around provided safe bays for pirate ships. The informal security coordination in these waters gave way to higher flow of trading ships thus facilitating the boom of the port of Singapore.
Injection of Human Capital
By 1825, the population of Singapore went past the 10,000 mark. And in 1826, the British East India Company officially took on Singapore as a colony of the British Empire after John Crawfurd signed a second treaty with the Sultan of Johor and the Temenggong, which extended British control of Singapore over to the entire island instead of just the port.
The formation of the Straits Settlement consisting of Penang, Malacca and Singapore happened in the same year with Penang designated as the capital. In 1830, the capital was shifted to Singapore, further entrenching the important institutions of British governance in Singapore.
The decisions made by British to build up and enhance the value of Singapore and the injection of top civil servants and managerial talents into Singapore due to its designation as capital of the Straits Settlements (and subsequent establishment of the Straits Settlements as a crown colony in 1867) played an extremely important role in shaping the economic, political and administrative environment which proved extremely favourable to Singapore.
Why is this important to us as an individual?
At an individual level, this holds 2 key lessons for us in terms of thinking about jobs and careers:
You want to be very selective in the environment that you subject yourself to if you have enough choice and control. Put yourself in a safe environment where you surround yourself with a friendly support network.
You want to build up your capabilities and be proactive in growing your knowledge and skills relevant to the network you have built up.
Where you find yourself in a hostile or personally unfavourable environment, have no qualms about withdrawing yourself from it. There is no point in spending time and efforts fending off criticisms and attacks with limited resources you have. Better to find a new environment and context where you can be nurtured and grow. Success often begets success as the initial value you develop attracts others to contribute to your development. Just make sure you don’t get so addicted to it that you begin to fear failure.
This is part of a series of republished articles from my Medium page because I am worried about the platform ceasing to be. A previous version of this article was published in here a while back focusing only on the economic history aspects.
