I don’t really remember the last time I dealt with the topic of subsidies. There are huge transfers that takes place in the economy as a result of government interventions through a combination of taxes and subsidies. It is hard to see what the real effects are because the result is always nett of a combination of different forces and programmes. As a result, it is hard to see whether the end result was intentional or not. Often, the end result can be intentional but brought about through a combination of transfers or policies with differing stated intents.
Take for example the whole issue of fuel and energy subsidies. There are explicit and implicit subsidies and they are applied at different levels, to different parts of the value chain, captured by different parties. Of course, the result is to some extent lower cost of energy, but it is also more energy used than otherwise would be. Well, why would you favour wasting energy? Often, it’s because it can help to divert perhaps certain industrial activities that could have downstream impacts such as helping to alleviate poverty, create employment, strengthen social cohesiveness and the list goes on.
After a while, you realised that in the sphere of politics and governance, economics only holds to a certain extent. And competition often can be defined within a single dimension but actually practised over that. What this means is that if you think you’re working hard for school grades, you’d be outcompeted by someone who recognizes that his grades mean little if it is not directed towards getting to a good school or a good job. There is always a greater arena that you are actually competing within.
What this means for renewable energy is that they are not just competing with fossil fuel in terms of adoption and capital for deployment but also consumption and subsidies. Of course there is lots of subsidies going around – for example, for hydrogen. The question is whether it is worthwhile pouring subsidy into that or a more mature energy vector that has the potential to decarbonise (for example, biomethane). However, there are limitations to biomethane or bioenergy because of feedstock limitations, because of the dispersed nature of the feedstock, and the difficulties associated with deployment.
Well, there are also budget limits and land limits. It is strange how people prefer to invest in areas that have more unknowns and uncertainties rather than areas where limits are more ‘known’, but the market could still be sizable. In Australia especially, I think there is incredible upside to taking the long-term view in things because it is a market where sensibilities do tend to eventually prevail.
Originally the intent was to rant about fossil energy subsidies but look where that got me.
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.
Even as we see the levellised cost of solar coming down, and increasing penetration of renewable energy, the electricity coming to us in our grids are increasing in prices. At least it seems to be so in Australia. There’s a lot of cost associated with the transmission and distribution infrastructure that needs to be recovered – partly because the growth of intermittent renewables mean that the grid infrastructure will have to be expanded.
But it is not just that; there’s also more padding required in the margins of electricity retailers because the intermittency results in even more volatile electricity prices in the wholesale market. That means that if the retailers are still providing fixed price tariffs and long contracts to customers, they will have to manage their risks by putting higher profit margins into the retail packages.
There is a huge price to pay by the society to eventually enjoy more renewable energy. If we don’t adapt to the intermittency through more adding more flexible generation leveraging on demand response and integrating EV recharging networks into the network operation optimisation (ie. Vehicle-to-Grid systems), we can only expect higher bills. We had better accelerate the transition or we’re soon losing the patience of energy consumers.
Is the whole notion of ESG disclosure a massive distraction? In 2021, Tariq Fancy of Blackrock called it a distraction for climate action. And I tend to agree because it tries to pass on the responsibility of climate action into the hands of the market, that had continually proved incapable of generating endogenous climate action. Sure, you need the market to scale solutions, and drive the expansion of some of the good things that will benefit the climate. But to think that the market can drive change just purely from the realisation of climate change as a problem is naive.
By leaving the type of climate action and the labelling of what counts as green to the market will simply generate greater confusion and inaction as we have seen from the proliferation of funds that tout sustainability or impact, or both and often still trying to pair that with financial returns, etc. The extra cost that goes into reporting, emissions accounting and massive resources around disclosure standards and all simply drives activities for the big consultancies without diverting energies towards the direction of climate action.
The issue is that greenwashing is real and pretty easy. And that can take the form of superficial disclosures that tosses buzzwords around. Yet there are corporates taking genuine action drowning in this sea of sustainability marketing and PR nonsense, being accused of greenwashing when they are trying to make a difference. If it was all going to boil down to rules, regulations and laws, then there won’t be ESG funds and non-ESG funds or government having to regulate disclosures. There won’t be accusations of greenwashing because you are either green or just illegal/non-compliant.
Regulation is of course a complex topic for another day but it has to be worked on. Regulating disclosure is unlikely to be enough.
As I mentioned about the difficulties of governing Economies and Greenspan’s disclosure on his workings on a paper in defence of his policies, The Economist recently wrote in their column about Greenspan’s recent defence of himself. Those interested might want to access his paper here.
In general, The Economist adopts a rather sarcastic tone when discussing Alan Greenspan’s role in the build up to the Subprime Mortgage Crisis in 2007. They are arguing that central bankers are around to ensure macroeconomic stability and therefore are expected to ‘play safe’ and manage the economy. That is, if reducing short-term interests rates could rein in the housing boom, that should have been applied. Even if Greenspan couldn’t have identified the bubble, and that the house prices are not related to the interest rates that central bankers could influence, the leverage growth in securitised markets might be worth managing:
By looking only at the effect of monetary policy on house prices, Messrs Bernanke and Greenspan also take too narrow a view of the potential effect of low policy rates. Several economists have argued convincingly, for instance, that low policy rates fuelled broader leverage growth in securitised markets.
Of course, having just read Dot.con and Lord of Finance, I do realise that central bankers’ attempts at interfering with specific market booms have often been ineffective or with rather disastrous results and thus choose to focus only on economic fundamentals like price inflation. Greenspan does have a point when he suggests that the central bankers are unable to deal with a global force that are changing the conditions of the economy. Very often, these efforts may create further imbalances that merely postpones a crisis.
Like I say, no one claims monetary policy is easy to conduct – it’s too often more of an art than a science.
This letter was written in early 2008 as an expression of late teenage angst at my high school. Most details have been forgotten and the context is no longer very clear to me. It reflects some of my earlier writings that were expository but driven largely by my intellectual passion in education.
It has been quite a while since something bothered me to the degree this issue of how lousy your department is did. The last time was perhaps when I was in high school, when the rather incompetent humanities department head pioneered some rather disturbing means of assessment (Major Research Papers, as they were known) – that has since been resolved after it was replaced by some more experimentally disastrous modes of assessments, for which I was not subjected to (and therefore I see no issue with that). I shall, in this little letter, outline the faults with your department and offer my suggestions to ‘correct’ these problems.
I begin with the course materials for they are at the forefront of ‘educating’ your students. If anything else, it is the only thing that comes directly in contact with the learners of your subject. The design of your lecture notes have been kindly standardized, which presents organizational ease students would gladly appreciate, but no additional readings are provided (though I would think some students also appreciates this) and it is declared that whatever students need are within the notes issued. Further readings or exploration is discouraged implicitly this way. All notes are arranged in rather logical order that introduces concepts and definitions but it appears that more emphasis is placed on memorizing the definitions than understanding the concepts (this will be elaborated in the pedagogy segment later). Diagrams are poorly annotated and large chunks of text that follows diagram are in prose but ‘bulleted’, making it confusing for student as to whether to take the entire chunk of text as a ‘point’ in the theory or mere elaborations. Blanks are often placed in wrong positions because teachers edit their lecture presentations after sending notes for printing. I therefore suggest that all blanks be scrapped so that lectures can proceed quickly and that more spaces are provided between chunks of text for notes to be written. All conceptual points should be summarized and written in good English (read: good English, not just easily misunderstood English). All diagrams should be well annotated and unnecessary repetition of diagrams removed.
Lecture time are often wasted on administrative matters that demonstrates deep distrust in the student’s desire to learn. To attend a lessons in a premier institution is to expect no time wasted on unnecessary disciplinary remarks made by teachers and that both students and lecturers are on time. There is really no need to mark attendance for lectures or waste time waiting for students who are late. To miss out a part of the lecture should be the punishment in itself – there’s no need to humiliate these students by starting the lecture late on purpose and then claim these late comers responsible for the fast pace of the lecture or worst, the incomplete-ness of the lecture. Incessant nagging about student performance during lectures are not at all appreciated and seen solely as an avenue at which the lecturer lets out his/her steam on the students, achieving practically no effect on the grades or effectiveness of lectures (often even undermining that, as well as respect for the lecturers). There is thus no need for attendance marking during lectures, or the wait for late-comers, or any ‘disciplining sessions’ – lecture time should be left purely for lecture on the subject
Technicalities with course materials and the ways lectures are carried out aside, the pedagogy of teachers reveal a profound misunderstanding in the cognitive abilities of the students as well as the processes by which one acquires academic knowledge of a subject. A social science, or any rather scientific subject, should be taught with the hope that students understand theories and concepts, as well as the implications of them. Next step would be the application of these concepts on the real world, the ability to draw evidence, real world examples to support theoretical concepts and possibly critique the inadequacies of theory. Ideally, we should be producing students capable of explaining the theories and giving examples in his/her own words.
Unfortunately, your department focused all energies on teaching ‘answers’ of potential examination questions to students since day one. There is no appreciation for the knowledge to be acquired, no consideration given to the way concepts are used in the real world (whether it is the predictive or the explanatory value) and absolutely no respect was paid to the history of the subject. Authorities of the subject are rarely introduced – I strongly believe that understanding the settings at which certain theories surrounding particular phenomena are discovered would aid one’s critique of the theory as one would then understand the timing and circumstances for which the concept served a valid explanation for some phenomena. Such ‘assessment-oriented’ approach would be seen as an indication of laziness in part of your department (if not ignorance), perhaps only interested in the results of the students rather than how interested students are in your subject. What could illustrate your distorted ideology towards teaching more than one of the lecturer’s exclamation during one of the paper review sessions: “Please, I urge you to memorize all definitions, the exact wording of each and every definition as given in your lecture notes. Do not use any definitions you picked from elsewhere or constructed yourselves because their wording are often wrong or difficult to interpret and this frustrates the markers. That means they have to waste more time on your paper and you’ll probably be given lower marks for that.”
It is perhaps why I come to realize how some of my peers who were initially curious about the subject were practically put off by it, possibly till this very day. I have no idea if this was your department’s intention but I was lucky my initial passion for the subject (built from the numerous outside readings and a steady supply of magazines on the subject) was never watered down by your horrible approach to teaching. That I went on to pursue tertiary education on this subject could only be attributed to the fact that you and your fellow colleagues have failed to practice the flawed pedagogy to its extreme for you all are still human. Of course, you might try to refute my claims by highlighting the numerous students pursuing further studies on this subject who are from our institution. That I do not deny, for it is the innate allure of the subject and perhaps the demand for knowledge in this field that have drawn this intellects towards the subject. In raising this point as a rebuttal, your department should thank God your screwed approach was not consistently applied (plausibly due to a few rebel lecturers who truly believed in the subject and loved that exploration).
I have, in the course of my education in the institution, approached tutors of the subject (ie. your colleagues) regarding some of the matters I have pointed out above but they all appeared to shrug at them. Replies offered ranged from ‘instructions by the department’ and ‘every tutor in our institution is doing it this way’ to ‘that has been the case all along and we have no problem with it’ and ‘you are a special case, I don’t think other students would think this way’. My friends have suggested I return to teach at my alma mater and clean up the mess I observed in my school days. I hope that this letter will just do that without having me to compromise my future.
