What does additionality mean? There’s this idea that the activity needs to add on something to the existing context. This is a big matter in the case of renewable energies as people are speaking against carbon credits or renewable energy certificates that are actually not adding more renewable energy or removing carbon emissions from the atmosphere.
We are trying to create a system where incentives themselves are not blunted or abused. If for example, we introduce incentives to reduce rat infestation by rewarding those who catch rats, then you risk the abuse where people are breeding rats to be killed and submitted for incentives. The result of this unintended condition is that people are taking actions that may be contrary to what the original intent of the incentives were.
The world is trying to shift towards a low carbon world. Incentives ought to be rejigged and aligned towards reducing carbon emissions. Yet if we allow abuses and undermine the credibility of emission reductions, we’re hurting ourselves. If forest land owners are suddenly making new revenue streams for trees they are already protecting, it might be a problem that there is no additionality for the new carbon assets.
We should only be incentivising activities that will reduce the world’s carbon emissions. Or increasing its sequestration. The problem is that is hard to measure and align standards of what really counts.
It can be pretty hard for me not to think about energy. It probably has to do with my job but the topic itself is fascinating. In some sense, ‘energy’ could be a subject itself that draws on science, mathematics, economics, engineering, law and many more disciplines to help us make sense of it. While we learn a lot about it in science, most of those fundamentals just remain where they are in our minds and do not connect with the wonders of modern technology and everything that we are so immersed in.
Electricity of course is the most fascinating of it all. It is the energy form that we have been able to manipulate with great precision and even enable energy to take on so much more new roles in life that it would not have been conceived to take on centuries ago even when electricity was first discovered. Electricity of course is a form of energy manifesting and needs to have various mediums, and the best carrier of electricity remains to be chemical batteries.
There are many other energy carriers as well and typically these are fuels; they are released through combustion. That produces heat energy which then can be transformed into kinetic energy, and in turn that tends to be then transformed into electrical energy with appropriate mechanisms such as some kind of motor and generator.
Carriers of energy are themselves interesting and fascinating because there are losses that results from going through the carriers and the various different forms of them. They also come in different forms, shapes and stability, influencing their functionality. Coal is a solid fuel; oils are liquid while natural gas is gaseous. Their state allows them to be conveyed differently and also affects the cost of transporting them.
Last century, the world was afraid of running out of them. Because they are commonly known as non-renewable energy. We use them faster than we can replenish them. Fossil fuels are created through millions of years. This century however, we begin to realise we will end up changing the climate of the world even before we run out of fossil fuel so we’re in a race to phase it out as quickly as we can. Alright it isn’t actually a race because many countries, organisations, assets are stubbornly using it.
But the point of this piece here is to help us recognise that fossil fuel does not have the monopoly in carrying energy and there can be more ways for us to obtain and use energy. Ways that can lead to sustainability and circularity in the world.
What are negative prices in the market? When you don’t want something and have to pay someone to take it. But why can’t you just “dispose” it somehow? Or “leave it there”? Maybe there are regulations in place. Or maybe there isn’t a place that you can and want to “leave it”
Carbon prices are negative prices; you need to pay someone to take it away. By creating regulations to prevent people from just “leaving it there (in the atmosphere)”, you push the cost of disposal to the polluters and set out the signals and momentum necessary to rewire the system.
Free market doesn’t emerge spontaneously; it requires regulation, boundaries and legal mechanisms to enforce rules, especially explicit ones. Implicit rules are also necessary to keep things together. Question is if we are willing to create a system intellectual property and enforce rights to spark innovation, why aren’t we doing so for climate change?
What constitutes waste for you? Is it when you decide something is useless for you? Or when you throw out something? Where you dispose of them matters because it defines where it goes and it determines what happen to the materials or matter and if it is classified as waste. The overall psyche of our current populace is mostly driven by the out of sight, out of mind approach to waste.
We could change the very idea of waste so that there is better recognition of the value of the material. This helps reduce the waste and encourage reusing.
Or we can make it way easier to recycle. But recycling will have to be different from disposal. And the recycling activity needs to be valued differently.
Huge amounts of subsidies goes into fuel and energy. The companies are not necessarily being the ones subsidised to produce the fuel but rather, domestic markets of net exporters tend to be protected somewhat from international energy prices through subsidies. The notion is to help maintain internal price stability and hence cope with cost of living.
Australia is one of the few markets who are net exporters of natural gas for example and yet do not really “shield” its domestic market from international price impacts. The result is that the recent price spike in natural gas had Australians screaming in pain and for perhaps the first times in decades, businesses and households are seriously considering disconnecting from the grid and electrifying.
But there can be a middle ground. Subsidies can exist for these energy exporters to protect their domestic users given that these exporters stand to gain when the energy price increase. How can they share these windfall with their own economy and the users in local market? The government can subsidise users but make the subsidy transparent. This way, households are not paying the full prices and they are also given information about how much the government is helping to make them affordable. At the same time, it becomes more politically acceptable to pull back on such subsidies for those heavy users who are higher on income brackets and can afford it.
For far too long, we shield the markets from the proper price signals and artificially create false sense of affordability by subsidies, we reduce the resilience of our economies and contribute further to wastage and carbon emissions. Making subsidies transparent is a great first step, towards removing this political gridlock around domestic energy tariffs.
A friend in the finance industry who probably makes more than 150k annually repairs different stuff as a hobby. He volunteers to help people with repairing household appliances like electric fans, water kettle, and he also learnt how to fix bikes.
He has since fixed a few worn and old rusted bike by derusting them, replacing the broken components. And then he sells off the bike to cover the cost of replacement parts. He doesn’t get paid for his time. Yet he is satisfied because he knows he’s doing his part for the earth.
By market forces, his time would have been worth more and can be more productively spent. But he’s not valuing time the way the market does; and he is certainly not valuing the earth the way our market does. He is using the market to satisfy his needs while trying his best to “save his earth” by his individual efforts.
The market does not automatically align incentives for the best outcomes; and if the government doesn’t have the courage to do it. We have severely limited time left to be valued, if at all.
There is always this age-old question of what you’d do if you’re rich. And then you might give an answer of an outcome that is already within your reach so then wanting to be rich is more about the identity that one would like to associate with.
What if you were resource rich? Like having lots of friends, or lots of land, or lots of cars, or collectible figurines? Do you think of those resource or things in terms of money? What if they don’t easily convert to money like friends or time? Does it matter?
How do you steward the resource that you are rich in? Does it matter if you can monetise it? Or whether its benefit is depleted by some actions you undertake? How do you think about it? What does it mean to “cash out” on your resources?
We all have a common resource and that is our atmosphere’s carrying capacity for carbon dioxide before climate goes completely amok and make our planet inhabitable. Sacrificing it could give us some money and maybe some comfort to certain extent. How would we steward it?
Things are happening to me. When we experience that, we lose sight of our agency. We were not consulted, we’re not in control, not any semblance of control. We don’t seem to have a choice. We feel helpless.
Recently, I was attending an investor conference that was focused on the topics around impact, sustainability and ESG (environmental, social, governance). There was a broad spectrum of attendees; some were well-versed in the topic tossing out various acronyms while others were confused, lost, frankly a little unhappy about how the investing industry is taken over by metrics beyond the financial ‘fundamentals’. Personally I think that capital can act differently from a while back and that we have the responsibility to ensure that it is no longer perpetuating the system as it is.
Of course, there would be naysayers who dismiss impact, sustainability and ESG as fluffy, intangibles which are running counter to the money-making that investing is all about. But even the naysayers, confronted with climate science would acknowledge there is a problem we are facing with climate change and all. Naysaying helps them soothe themselves because at least if there’s nothing much they can do, the eventually downfall of the earth is not on them. We choose to be helpless that way; even when we do have a choice.
The better road is towards action. When it comes to the climate challenge, a strong and useful key message is that it is not too late to make that impact and make the change.
Counterfactual thinking is a concept in psychology that involves the human tendency to create possible alternatives to life events that have already occurred. I’ve no doubt this is a sign of intelligence and it is a residue in our ability to project forward into the future. After all, if you can imagine the different possible futures, you could also imagine different possible pasts.
The question is whether the content of your counterfactual thinking is upward or downward. In other words, do you think the reality could have been better or do you think things could have been worse? People could be more positive when they consider that something worse could have happened rather than the actual outcome. In that sense, downward counterfactual thinking is actually a habit or strong mental re-frame that helps improve our well-being.
Nevertheless, the mind tends towards negativity because it sticks more than the positive. What I think is interesting is that different positions we are in can cause us to have inclination towards upwards or downwards counterfactual. It is interesting how being in second place encourages upward counterfactual thinking more than being in third place – just because you only have one person in front of you. So there are some kind of defaults that our counterfactual thinking drifts towards.
That’s not to say you can’t change your defaults. Part of my coaching practice especially around mindset shifts is exactly about that.
Imagine you need a square meter of light, perhaps for a single ’tile’ on the ceiling that emits lights at your building. You’d probably get contractors to make a box with circuits inside that connects to a couple of fluorescent tubes (or if you’re quite rich, a couple of LEDs) and then cover the thing with a translucent white piece of acrylic. The entire structure is bulky and probably quite energy consuming. Now, scientists have found a way to make a ‘sheet’ of LED that would allow you to make that ‘lighted tile’ much more easily and is also much more compact. Essentially, the technology allows you to print a circuit that is wired in a way that acts as a diode, and one that emits light.
The article mentioned about growing organs from scratch and raised the example of bladders being grown from original cells of patients. Essentially the patients are donating organs to themselves; the same applies for the printing of organs. The idea is appealing because there’s nothing artificial about them beside the involvement of doctors in the process of growing the cells and putting them together – ultimately the organ is still organic and from the patients. Perhaps then, Iran’s model for kidney donation won’t be so appealing anymore.
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